A Northeast dairy farmer wrote of his frustration with advice offered by American Agriculturist’s May Profit Planner panelists. Following are his comments in brief, along with brief responses from the panelists.
“Much to my dismay, all the experts said the question of adding beef genetics via his low-producing dairy cows was misguided, and that he should continue to grow the dairy. In my opinion, they gave this farmer bad advice for the industry overall.
“We cannot wear blinders and operate in a vacuum to the reality there’s more milk in the world than what can be processed. The only ones not making money are the farmers themselves. What’ll it take for people that propagate such assumptions to look at dairy’s macro level, and say we need to put the brakes on expansions for two years?”
Mike Evanish: Will adding 100 cows or decreasing by 100 cows on a given farm change the facts? Nope.
If [the writer] wants to see higher margins, he needs to figure out how to produce and market a product that isn’t a commodity. Most of the time, commodities — from natural gas to iron ore to milk — trade at about the average cost of production.
Dale Johnson: The reader stated, "In my opinion, they have given this farmer bad advice for the industry overall.” But we aren’t giving advice for the industry overall. We are giving advice on what this individual farmer should do.
And agreeing with the farmer to cross-breed for beef production would have been bad advice for the farmer and equally bad advice for the beef industry, which is also in the doldrums.
Unfortunately, logical decisions by individual dairy farmers create our backward sloping supply curve in the short run. In the long run, it’ll put some dairy farmers out of business as the supply eventually corrects to come into equilibrium with demand.
Every year, I send dairy farmers I work with the following quote by Texas A&M ag economist Danny Klinefelter. I tell them to read it carefully. It’s the most succinct explanation of the supply-demand situation for dairy and other ag industries.
“The function of a competitive market is to drive the economic return to the average farmer to break even through supply-and-demand responses in both farm inputs and farm outputs. This means that top farmers are profitable, average farmers barely get along, and bottom farmers are losing money and will go out of business.
“This is the economic reality. It means that your farm success and survival depends on your continuous improvement to stay in the front of the pack. If you don’t constantly improve, then you’ll just barely get along or go out of business.
“You’re in competition with other dairy farms locally, nationally and internationally. You have to improve your management faster than other farmers improve their management to stay in business. Maintaining your status quo will lead to failure.”
George Mueller: If dairy farming were easy, everyone would be doing it, and the price would be much, much worse. Our advice was good advice. If you’re going to compete in the dairy business, you must be efficient. Adding the 100 cows is a way to become more efficient.
Not everyone is entitled to be a dairy farmer. There’s nothing wrong with a system where the most able dairy farmers are the ones that prosper. Our job is to help good operators decide on their best course of action. I think we’re doing OK.
Glenn Rogers: I'll also stick to my advice, too. We all understand where this farmer is coming from. There aren’t any easy answers.
Unfortunately, as George indicated, farming is not easy, and the margins are tough. But it's tough in beef, just as it is in dairy, and it’s tough in other commodities — not just milk production.
The key is to be efficient, sharp and to be on the cutting edge. That takes a lot of work. If that dairy farmer had a high-value market for dairy-beef products, our answers might have been different. But he planned to just sell calves.
I'll not forget a vegetable operator who was constantly changing his produce portfolio. He was always on the cutting edge. He went from a general mix of veggies to having the best melons, to strawberries, to cauliflower, then to another leading crop. He kept staying right on the leading edge of veggie crops. That's where the margins are — if you're efficient, sharp and much more.
Evanish is farm business consultant and business services manager of Pennsylvania Farm Bureau’s Members’ Service Corp. Johnson is Extension farm management specialist at University of Maryland. Mueller is a dairy farmer from Clifton Springs, N.Y. Rogers is an ag consultant and University of Vermont Extension professor emeritus.