When it comes to something like your favorite dessert, of course bigger is better! But what about when it comes to the size of your herd?
In the April 10, 2018 issue of Hoard’s Dairyman, Larry Tranel, a dairy field specialist with Iowa State University Extension and Outreach, describes his 2016 study comparing the profitability of small versus large herd size.
Here is what Tranel found (please note that the farms used for this study were organic, and the four large herds averaged 365 cows while the six small herds averaged 104 cows):
Milk sold per cow was higher for the larger herds. So was the total cash income per cow and total cash expense per cow. After the expenses were subtracted from the income and inventory changes were adjusted, there was a $345 difference per cow favoring the smaller herd size.
Tranel made his comparison by looking at the expenses and debt of the two different herd sizes. By taking the return to unpaid labor and management and adding that to the hired labor expense then divided by total hours worked, the return to all labor was 9.7 percent higher for the smaller herds. The smaller herds also had a return on assets of 11.75% compared to the 6.97% of the larger herds. Tranel also documented that the pounds of milk sold per full-time labor equivalent (FTE) was 636,900 with 41 cows per FTE and a labor cost of $1,010 per cow for the smaller herd compared to 606,600 pounds of milk per FTE, 37 cows per FTE, and a labor cost of $1,233 for the larger herds. This study shows that the smaller herds may not always have the advantage in labor or capital efficiency, but may have the profit advantage.
As for our area, one of the biggest challenges is maintaining a small farm; it is hard to maintain a market and cover transportation costs while still making a profit. Please know that we understand that this study is two years old and based off of organic dairy farms in the Midwest. However, there is always something to take away from the information and data of different studies.
Everything in this blog post came directly from the article. You can read the full version at: www.extension.iastate.edu/dairyteam under the financial management link.
