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Are you thinking about expanding your dairy farm to increase profits? Be aware that healthy growth does not necessarily mean the size of the herd.
A dairy herd that produces 20 litres of milk per day could prove more profitable than a herd that produces 30 litres. How can this be?
The prolific cow enigma
Farm A (Prolific Cow), has a 40-kilo milk quota and a herd that produces an average of 19 litres per day, generating net income of $2,867 per kilo.
Farm B (Generous Cow), with 160 kilos and an average of 32 litres per day only generated $651 per kilo.
What’s the key to the enigma?
A key factor is balancing costs incurred and the resulting production. There are three indicators:
- Labour costs;
- Feed costs;
- Veterinary costs.
In Farm A’s case, these three amounts total $2,000 per kilo, whereas in Farm B’s case, they are over $3,600 per kilo.
In both cases, the other expense items, interest and maintenance costs, are almost equivalent.
Naturally, a large efficient farm operation can generate significant earnings, but only if the three parameters are properly controlled.
Growth vs. profitability
If you’re considering growing your business, remember that growth at any cost is not necessarily a good idea. It’s important to undertake an in-depth reflection and ask the right questions before making a major investment.
A farm producer must be an excellent manager and a skilled technician to maximize profitability. Additionally, you should set your priorities:
- Will sales go up and at what cost?
- Will this reduce certain necessary expenses?
- How will this impact my quality of life?
This analysis is an essential prerequisite. Our experienced team can support you in conducting the evaluation and help you strike the right balance.