Getting the business right to capitalise on dairy expansion

Monday 26 September 2011

Cumbria's first dairy herd expansion conference in Penrith on Thursday (September 22nd) was attended by more than 100 milk producers from the region who learned some of the issues to be tackled from key industry speakers.

The catalyst to the conference, chaired by Cumbria farmer Kevin Beaty, was the Livestock Programme's Cumbria dairy monitor farm, Hesket Farm, Dacre, near Penrith, where farmers Matt and Sue Bland are doubling cow numbers to 300 in a flying herd, working with SAC dairy consultant Jimmy Goldie, whose talk from the day can be seen below.

With the majority of committed UK milk producers expanding either in cow numbers, yield or both, the conference, organised by Cumbria Farmer Network on behalf of the RDPE North West Livestock Programme, looked at the opportunities for growth, animal health and feeding, buildings as well as first hand farmer experience of expansion.

Opportunities for primary producers and the industry for growth were outlined by John Allen, of Kite Consulting, but he emphasised being big didn’t necessarily make the business better. Strong businesses were best placed to grow.

“In the UK in 2010 there were 14,700 dairy herds, by 2020 we’re projecting fewer dairy farms but bigger herds with the average herd size rising from 125 to 200-plus cows. Yields will also go up,” he said.

“But UK dairy farmers need to be competitive at world market prices and it is important that farmers match their cost base and production system with the market,” he added.

He stressed the need for a diversity of businesses for the future and that producers should not knock each other’s systems.

Mr Allen said average operators in 2010-11 generated retained profits of 1ppl after drawings while the top 25 per cent generated 5ppl.

Rob Hitch, of accountants Dodd & Co, said while the best performing herds were generally those with more cows because they were run by farmers good at making money out of dairy cows, it was quite easy to expand and do a bad job of it.

“Probably our most profitable farmers are very much grass-based but to expand you have got to acquire land but if you are paying around £8,000 an acre you have to equate these costs to the amount of concentrate you can buy.

“Investing in cows, buildings and infrastructure can make tax relief a lot easier. There is a lot of incentive to keep expanding but it’s not the panacea. You have got to be good at being a dairy farmer before you start expanding,” he said.

Getting the health right of the existing cows in the herd involving the farm vet was vital before expanding numbers, Karen Lancaster, of DairyCo, told the conference.

“Adopt a protocol in dealing with infectious diseases, worms, mastitis and lameness. If you have existing problems with mastitis and lameness and you buy in other cows you are exposing them to all the same risk factors and amplify these problems,” she said.

She advised matching the health status of the existing cows with those being bought in and test for BVD, leptospirosis and IBR, but Johnes posed a more difficult threat because testing did not always pick up the subclinincal disease.

“When purchasing cows, get your vet to talk to their vet and ask questions and do not simply rely on a bulk milk test which if negative could still mean up to 20 per cent of animals are infected. Have 30 cow screens or whole herd testing,” she said.

Vet Victor Oudhuis explained some of the precautions taken at Hesket Farm to minimise health risk. Prior to expansion, the existing cows were vaccinated against BVD, Lepto and IBR. Bought-in cows were isolated and vaccinated.

He advised aggressive treatment of any bought-in cows with mastitis and footbathing for the first week against digital dermatitis and the treatment of lame cows. Fresh cows should be closely monitored.

Jennifer Picken, nutritionist with Keenan who sponsored the conference along with NWF Agriculture, urged introducing protocols for staff feeding large herds to ensure consistency and better utilisation of feed which for a 300 cow herd could cost around £1,200 a day.

As well as management of the silage clamp, the feeder wagon and trough space, expanding producers should monitor feed conversion efficiency which in the UK averaged 1.2 litres of milk for every 1kg of feed while the lowest production was 0.7 litres.

Jamie Robertson, of Livestock Management Systems, said new buildings were equally bad at contributing to herd health problems because of inadequate ventilation. Moisture management, fresh air and air speed were the critical factors in controlling disease, viruses and mastitis.

A hole in the roof and walls up to animal height created natural thermal dynamics in a building and good productivity from livestock. Stocking the building too densely would also cause problems.

People / Staff Management

Derbyshire dairy farmer Andrew Mycock’s operation has expanded to 330 cows run on 450 acres with four full time and one part time member of staff.

He described how his expansion reached a critical point in 2006 when the herd had a 42 per cent culling rate when staffing was a key issue.

“It’s critical to get the staff right. It can all go very wrong if you are not careful. When you get to a herd size of around 300 cows you have to become a people manager rather than a cow manager and a lot of us find we are out of our comfort zone,” said Mr Mycock, who as a Nuffield Scholar in 2009 visited the USA, Australia, New Zealand and Denmark studying family farms which had expanded.

Just being big is not going to make you more profitable, it’s how you manage that farm business, using the best vet and accountant,” - Andrew Mycock

He advised working with a partner, keeping comprehensive records and writing staff protocols as well as developing skills to deal with personnel. Most importantly he said to beware of increasing cow numbers faster than your management skills.

Getting the right staff, which meant involvement, team work and staff taking ‘herd ownership’ was re-iterated by Ian Lindsay, of LKL Staff Services.

SAC dairy specialist Jimmy Goldie highlighted what producers should be aware of and the action taken by the Blands, when expanding the dairy herd (see video at top of page).

At Hesket Farm there is sufficient acreage to supply forage for the increased flying herd and the installation of a new milking parlour, upgrading dry cow accommodation and extra cubicle housing for milking cows has paved the way for the arrival of new cows. With the help of their Promar consultant, the Blands have developed their business plan.

Mr Goldie said reasons to expand were to grow the business turnover, improve profit and grow the business net worth - not to cram in a few more cows!

Planning before expansion needs to include:

Cow numbers
Replacement heifers
Cow accommodation
Milking parlour capacity
Labour
Machinery
Land/forage production
Slurry/nutrient management

When calculating the timescale, from financing the expansion to employing tradesmen, Mr Goldie said to factor in a further six months.

A difficult decision was what to do first - whether to buy cows, install a new parlour or increase accommodation. “The banks rely on your cashflow, your cashflow relies on the milk cheque and getting the milk sales to match expectations is a challenge,” he said.

After the initial excitement, planning and action, often followed by despair, there is success with the result that milking is faster in the new parlour, cows are more comfortable in the new cubicles, yield per cow increased with more space and better environment and ther is more time to look after cows.

Kevin Beaty concluded the conference by inviting dairy farmers to the next Dairy Monitor Farm Open day at Hesket Farm on Tuesday, October 11. (NOW POSTPONED UNTIL FURTHER NOTICE - NEW DATE WILL BE POSTED ON WEBSITE ONCE KNOWN)

“The open day is an opportunity to find out what has been going on at the farm and catch up with the specialists who have helped the Blands make progress with their herd management and expansion over the past two years. In particular, the open day will cover the progress made on improving lameness through the Bland’s involvement in the Healthy Feet Programme with the help of their vet,” he said.

Further information on the Cumbria Dairy Monitor Farm, updates from the farm and future plans, can be found on the farm's blog page>>

Report by freelance journalist Jennifer MacKenzie, whose Stackyard news site can be found at the link below