Letter from the Land-May 3, 2004

Time to Update Our View of
Dairy Farming Profit

By George Boody

LEWISTON, Minn.—It’s time to update our view of what makes dairy farming profitable. Let’s start by tossing out the assumption that “productivity” automatically equals “profitability.” If a farmer is losing money on 100 pounds of milk, producing more of that milk isn’t necessarily going to turn a profit—in fact it may just put that farmer out of business at a faster pace.

An increasing number of dairy farmers are realizing that deriving more net profit from each acre of land is better than playing the volume game. These farmers are using sophisticated methods to cut costs and increase efficiencies. For example, dairy farmers who use management intensive rotational grazing in Wisconsin and New York are more profitable than their counterparts who are using confinement systems, according to ongoing research being conducted at the University of Wisconsin’s Center for Dairy Profitability. Because of their lower operating expenses, these grazing operations are financially outperforming the large-scale confinements, although the graziers generally produce less milk per cow and have smaller herds.

In some cases, the difference in profitability is significant. In 2000, the net farm income of the average Wisconsin grazing operation taking part in the study was double that of the average confinement operation that was analyzed. Innovative, low-cost methods are not only viable on smaller farms. Farmers who have converted to management intensive rotational grazing are able to milk more cows without having to increase their land and labor base, according to research conducted by the University of Wisconsin’s Program on Agricultural Technology Studies.

Is rotational grazing a silver bullet answer to dairy farming’s problems? No. But it’s a good example of how farmers can use their management creativity with livestock to spawn economic activity. The key to surviving in today’s farming environment is flexibility. Jumping on the “vertically coordinated” high volume express only narrows such opportunities in the long term, condemning us to taking part in an old-fashioned race to the bottom.

Unfortunately, some people and institutions are still wed to the antiquated, inflexible notion that all-out productivity automatically equals profitability. That philosophy drives promoters of mega-sized dairy operations, such as the 3,000-cow operation being proposed for Minnesota’s Dodge County by the East Coast-based Zaitz Trust. Ben Zaitz says he has to milk at least a couple of thousand cows to stay viable. But according to the Minnesota Farm Business Management Program database, in 2002 dairy operations with 51 to 100 cows had an average net return of $141 per cow, while the 500 cow-plus operations lost $44 per cow on average (the 101- to 200-cow herds averaged $122 net return, and the 201- to 500-cow herds averaged $124).

Keep in mind these figures are for 2002 only, a year when farmers received very low prices for their milk. And let’s be honest: a net income of $14,000 on a 100-cow herd does not provide a living wage for a farm family. But the point is we can’t always assume more milk production means more positive economic activity in a community.

We need a new, more inclusive vision for creating a competitive agriculture here in the Midwest. And that vision needs to be structured around a few basic facts: 1) we have some of the most innovative entrepreneurial farmers in the world; and 2) our land/climate is perfectly suited to producing livestock using low-cost methods. A fresh vision based on these principles could help create opportunities for more farmers to produce crops and livestock successfully on the land.

For example, since it was launched seven years ago, the Land Stewardship Project’s Farm Beginnings™ program has provided participants an opportunity to learn firsthand about low-cost, sustainable methods of farming. To date, 185 beginning farmers have participated in Farm Beginnings™ in southeast and western Minnesota. Sixty percent of those participants are actively farming today. These are real farmers who are having positive economic impacts in their local communities and are proving that the entrepreneurial spirit is alive and well. Some of the program’s participants are brand new to agriculture, while others are farmers who are looking to transition into systems that offer the potential for more profit and a better quality of life.

Farm Beginnings™ provides people an opportunity to unleash their creativity and explore many different cost-effective, viable farming enterprises. Such creativity benefits agriculture, as well as the rural communities that rely on this critical economic engine for survival.

George Boody is the Executive Director of the Land Stewardship Project. He can be reached at gboody@landstewardshipproject.org.