In 1992 we bought our dairy farm in Denmark. The company was in the top 3 of the breeding and control association with around 10,000 kg of 4% milk/cow. The concentrate bill came at the end of the first month. It was bigger than the milk bill. Now the latter came once every 2 weeks, but more than half of the gross income went to the concentrate supplier!!
Modern farming today is complex. Many companies that supply products that contribute to realize the turnover of the dairy farm, additives. They do this for a fee. This amount is skimmed off from the gross operating income of the dairy farm and transferred to the supplier. In plain Dutch; they send a bill that you have to pay.
There are many recurring daily actions; milking, cows in heat, mixing feed, feeding calves. You name it. Many of these recurring activities have their origin in the auxiliary materials that are used to realize the production.
How the production system is set up determines how much work, energy and money is needed to realize the production and how much money is earned with it.
The raison d'être of every company, every business lies in adding value. That value can vary a lot. A livestock dealer adds value through his view of animals, his experience and sales technique. A concentrate supplier adds value by the concentrates that he delivers.
If a company cannot provide added value to its customers, it loses its right to exist.
The farm is originally in the solar energy business.
Using chlorophyll, solar energy is converted into plant energy. Then animals are used to convert green fodder through meat or milk into their bank account as money. The trick is to spend as little money as possible on auxiliary materials.
A few generations ago, banks were set up with the aim of making investments easier for farmers. Concentrates and fertilizers came into use. Dairy factories were set up to improve the value of milk.
All these companies were cooperatives. By farmers, for farmers.
This worked, until a tipping point came and the cooperatives were run commercially. Targets were set for sales, returns and turnover. Not for the farmer but for the cooperative. (the keyword here is “for”)
As a result, the cooperative was no longer the company at the service of the farmer, but the farm became the place for the cooperative to achieve its goals.
Common and organic dairy farms work within the traditional business system. Within this system everything is designed to add value from the supply and processing sector to the end product of the farmer. (so that the added value of the farmer is supplanted)
For example, converting concentrates into milk, see my blog about accounting or milk control: https://www.puregraze.com/nieuws/boekhouding-of-melkcontrole/
This is an important reason why farming has become a rat race, as it reduces the margin of the livestock farmer it decreases due to the law of diminishing returns.
What part of the cake will you get?
Remember that the more value you add yourself, the bigger your slice of the cake becomes! Remember that this is your OWN choice….
To stop the rat race, it is very important to determine/see where your company is in the chain. Once that is clear, steps can be taken to make changes.
It's not about working harder, but smarter. Every business has opportunities to reduce costs to improve profitability and increase margin.
This results in a lower cost price of 5 to 8 cents/kg delivered milk.
Our grazing days give you the opportunity to get acquainted with Pure Graze and get ideas about the impact of grazing on the costs of concentrates, fertilizers, machines, contract work and pesticides. You can register here, see you then!