Wednesday, January 2, 2013

Low energy farming: Grass fed dairy

I've been looking very seriously at dairy as a possible expansion of my farm.   The pig business is stable and profitable, and 6 years into it,  I'm pretty confident that it will continue to be profitable.  It's got enough income that it can support 2 part time workers, which has allowed me some time off the farm and some time to look at expansion plans.  

One of my $5 calves.  She may be a freemartin, though. 
What would make your humble farmers life easier though, is land that is off the flood plain, so that I didn't have to do the annual flood drill, and better infrastructure; barns aren't so much for the animals as they are for the farmer.  They make the working conditions of the farmer easier. 

The look at dairy isn't an impulsive decision; I've been looking in that direction for 3 years now,  but it got more concrete when I started raising my own dairy heifer in April of 2012.  She's due to calve in July of 2013, right at 24 months of age. 

The basic reason that dairy is interesting is that an old dairy farm usually has everything that I'd like to have in a property; a house near the animals, barns, water, and electricity in most or all of the buildings, so I kind of came at the idea backwards; I kept looking at these nice dairy farms that went out of business from my pig farm perspective.     First the buildings to make my life easier, but then the land, because I like to put the pigs out on pasture and give them plenty of space; for my pig venture I'd like 10 to 15 acres of very nice pasture, but these dairy farms are basically giving away 50 acres or more free with every purchase...  so if I were to buy one of them, I'd be getting a bunch of acres. 

In fact, with most of these properties, you get everything you need for a dairy, custom-built to do dairy.  But there's a big red warning sign on these properties:  Every one of them is someones bankruptcy.   

But there are dairies that are doing just fine right now, and in fact, there are farmers who are expanding, and one of those expansion groups that is closest to my own farming preferences is the grass fed dairy.  I've visited 4 of them in this area in person. 

So while the pig business will likely pay the mortgage, I find myself looking at all of this dairy infrastructure and honestly, it appeals to my contrarian leanings.   I was buying real estate in 2008 when people thought that  real estate was the absolute worst investment ever created.  Whenever people run screaming in mobs, I take that as my clue that I should look for an opportunity.  The real estate I purchased in 2008 is worth an average of 60% more than the price I purchased it at.   

Dairy farming seems to be that sort of thing right now.   If you talk to dairy farmers about entering the dairy business now they honestly thing you're absolutely insane.  "You're kidding, right?  You want to start a dairy farm?  Now? "   Yes, feed prices are high, but so are milk prices.  Dairy cows are selling at 50% off.  Dairy farms are selling at 50% off.  If it was profitable the prices of these farms wouldn't be anywhere near where they are now. 

The biggest single cost of a dairy farm is the feed.  Dairies that are raising most or all of their own forage are actually doing pretty well, all things considered.  Sure, they use diesel and equipment to produce their hay, but for several dairies I've looked at they're feeding their cows mostly off of grazing for more than half the year. 

And consumers are willing to pay a premium for grass-fed products, including milk, butter and cheese. 

So:  Use fewer cows than a conventional operator does; limit your herd size to the carrying capacity of your land.  Ideally, only have as many cows as your acres can supply with food, even though this may mean a very small number of cows compared to a conventional dairy.   Conventional dairies that purchase their feed expose their farm to commodity prices and conditions that they have no control over at all.

 When commodity prices are low, milk prices are low too.  The system is rigged so that a farm based on commodity prices is, in my view, inherently unstable.  Yes, I could try my hand in grain futures or other hedge mechanisms, but that's not really what I want to do with my farming venture.  Many farmers do trade in commodities in a sort of "how the cat learned to swim" sort of way -- they're forced to, in self defense.  But how about the alternate view -- just opt out of that game. 

I think that the stock market and commodities markets are rigged, personally.  They are designed to make the people who run the trading board a profit.  Commodity trading centers are started with the idea that it will benefit producers and users of the commodity, but what has happened time and again is that it provides speculators the ability to create wide price swings that are unrelated to the commodity in question. 

The cows walk to the forage.  The forage is managed appropriately so that there is always plenty for the cows.  They walk back to the barn to be milked, and then back out to the field for their food. 

In the winter, the cows go into the barn, to save wear-and-tear on the fields, and are fed forage that's produced on the farm.   The whole process is managed with the intention of limiting the number of off-farm inputs as much as possible. 

Your fields provide the food, the cost of production is controlled by you, and you can better plan your life and farm and future. 

Initially the output from the farm goes into a local dairy cooperative, but the long-term goal is to find a direct-to-consumer route for the output of the herd, to bring as many dollars back to the farm as possible.    The coop provides a ready market for any milk not consumed by the direct from the farm venture. 

If you'd like more information on grass fed dairies, here's some links: 

Grass fed dairy - low input, high value - youtube video

Grass to milk case study - pdf file

Low input farming - BBC documentary


brentcu said...

I'm glad you're posting all this - we're wondering about going a similar route at some point since we're building up the direct customer base already.

You are years ahead of us, so I don't have much to add. I'm from a family of dairy farmers, which has to be worth something. :-)

BTW I've been reading this guy's dairy manual, which he just posted:

Also F. W. Owen's site is just amazing. He's switched to grass-fed dairying decades ago.

brentcu said...

Looks like Frank has changed the page:

Unknown said...

As soon as I heard the news snippet say there was a story coming up about an Everett pig farmer looking to grow pot I knew it was you :)