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I would be interested in Altfrid's response but like so many things with
statistical analyses, you have to be careful you don't interject your own
beliefs and hopes into what is really being measured.
Anyone who is involved in our region at a serious business level of dairy
farming, knows that there are definite correlations with many management
practices and farm profitability. One of those management practices is, in
fact, cow production. While not a guarantee of success, it does tend to
correlate with success as measured in terms of profitability.
For example, in the past, there have been absurd beliefs that it does not
even matter how much a given cow produces, you just treat the herd as a
group and not worry about individual performance. Needless to say, this kind
of naive belief has been the downfall of some. It really does make a
difference which cows are producing results and which ones are taking up
space in our region of the world.
It is not unlike the belief that larger confinement farms "burn out" cows
prematurely and are forced to cull at levels well above small farms. While
it makes the smaller farms feel good to hear such beliefs, the truth is a
bit more mundane and is related primarily to the business decisions of the
larger farms. If you can bring in genetics that increase profits compared to
keeping existing individuals who do not perform as well, you weigh the cost
of new springers to what you have. And if it makes business sense, you may
decide to bring in those genetics.
Rick W.
-----Original Message-----
From: graze-l-admin@witt.ac.nz [mailto:graze-l-admin@witt.ac.nz]On Behalf
Of Russ Thompson
Sent: Thursday, April 28, 2005 11:18 PM
To: graze-l@witt.ac.nz
Subject: [Graze-l] milk production as an INDICATOR or profitability
*** A few days ago I made this statement:
"While production per cow IS important and is the best indicator of
farm profitability it is only one of many important things."
*** Altfrid Krusenbaum took issue and responded with this statement:
"By now it is well documented, i.e Tom Kriegel's research on comparing
financial performance of grazing and confinement herds, that there is
absolutely no correlation between per cow production and farm
profitability."
*** I asked Tom Kriegel to respond to both statement on the main grazing
list and have forwarded his responce below.
Again Im a late responder to a repeat discussion issue.
On the connection between milk sold per cow and profit, Russ and Altfrid
are both right. Gary Frank used regression analysis on three years
(1993-1995) of farm financial data from the same 345 Wisconsin dairy
farms.
Cornell often publishes a chart the shows the same results.
He showed statistically that no single cost factor, variable or practice
alone explained a very big piece of the profit picture. This doesnt mean
that various practices or factors are unimportant. It means that no
single
factor is so important that nothing else matters.
A farm is a sufficiently complex business for which no single factor will
guarantee success. No single financial measure or benchmark tells the
whole story. The factor that is most influential in achieving
profitability is management ability- a factor, which is difficult to
recognize, judge, measure, or even see. That said, my observation of
numerous studies about the factors influencing dairy farm profitability
(including the Wisconsin Grazing Dairy Profitability Analysis) is that
when
most other factors are held constant, selling more lbs milk per cow
usually
enhances profitability. Wisconsin grazers in the WGDPA are more
profitable
than the average Wisconsin confinement farm despite producing fewer lbs of
milk- not because of producing fewer pounds of milk. In my research, most
of the participants who frequently appear in the top 20% herds based on
NFIFO/Cow and per CWT EQ sell many more lbs of milk per cow than those
with
lower financial performance. A short way of saying all of this is
production does not guarantee profitability---low production is less of a
guarantee of profitability.
Feeding Grain
Another recent discussion seems to be revolving around economics of
feeding
grain to grazing dairy cows. Ive had several conversations with Dr. Combs
about this. The substitution rate between grain and forage has been
researched thoroughly. Speaking on a practical basis, Dr. Combs says that
very few cows in grazing herds have intake levels such that feeding a
reasonable amount of grain or corn silage will displace very much quality
pasture under reasonable management conditions. That physical relationship
makes the economics fairly simple. Under most circumstances, feeding some
supplemental grain or corn silage will enhance profitability in grazing
dairy cows in most if not all North America. That said, it is a challenge
to determine the economic optimum amount ahead of time at any point in
time .
Every production process has a point of diminishing marginal returns. In
other words, a point at which the next increment of inputs produces less
value than the previous incremental input. Then as more inputs are
subsequently added, the resulting incremental value continues to decline.
Eventually the value of the last increment produced is equal to or less
than the added cost of producing it.
Until the point at which the next increment of inputs costs more than then
value it produces, total value is increased. The optimal profit maximizing
point is when the value of the last increment produced is equal to the
added cost of producing it.
What is more difficult to determine is exactly where that point is in
advance because it changes as often as prices, genetics, weather and other
factors change. It can also be influenced by management ability. So not
only is that point different for every farm, it is different for every
cow. Despite those differences, a lot of guidance has been provided by
cattle nutrition research for the point of diminishing marginal returns of
supplamental feed. I dont believe very many Northern U. S. grazers are on
the verge of going beyond the point of diminishing marginal returns in
terms of milk produced per cow for all the cows in their herds.
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