T he ever changing dairy market we operate in today requires producers to adopt a consistent business strategy and employ

effective management strategies to remain profitable in the industry. The majority of producers will adopt a competition based strategy that is focused on price and requires a low cost production. Other producers will attempt to differentiate and target customer focused niche markets such as organic or DHA milk that often increase costs but also increase revenues. Producers can no longer be “stuck in the middle” trying to be all things to all people. The key for farmers is to decide on one strategy and then shape your operation to help drive your business towards greater profitability.

Being a competition focused low cost production system does not mean focusing entirely on reducing input costs. Producers must produce high quality products and adopt technologies that can either lower costs or increase revenues. Investments of technology with a high return (ROI) increase the gap between cost and revenue. Additionally, these producers need to have excellent asset utilization within their whole farm enterprise (milk cows, replacements, crops, cull animals) and should try

VOL 18 ISSUE 1 | SPRING 2016

GRAND VALLEY FORTIFIERS LTD.PO Box 726 Cambridge ON N1R 5W6 1-800-567-4400 www.grandvalley.com

Ian Ross, President | Jim Ross, ChairmanClarke Walker, VP & COO Mark Bowman/Jeff Keunen/Amy Sova, Ruminant NutritionistsDavid Ross/Patti Bobier, Publishers

Dear Friends, It’s hard to believe that winter is almost over. With many mild winter days and reduced snowfall it’s getting quite easy to believe the distinct possibility that we may have to contend with an early, warm and dry planting season. The spring edition of our Dairy Grist is now ready to be delivered to your mailbox. A number of our Dairy Staff have put together interesting articles which we know you will appreciate. Enjoy Margaret Currie’s thoughts on evaluating feed costs. Erik Zieleman answers some questions regarding finances in your dairy operations. As I review this latest edition of the Dairy Grist, once again I am reminded of how privileged and blessed we are at Grand Valley Fortifiers to have a Dairy Team with so much expertise and practical knowledge to share with our dairy clientele. The number of producers we serve continues to grow and we are excited about the positive results we are experiencing with many of the producers across the province. Thank you for the privilege of working with you.

Wishing you good farming this spring. Sincerely, Jim Ross, Founder & Chairman

DAIRY PRODUCTION AND MANAGEMENT STRATEGY by: DR. ROB BELLCEO, Bio Agri Mix

to maximize economies of scale on their operation to lower fixed costs. Successful producers are adaptable to change, know their competition and consistently set goals that drive their operations forward.

Let’s look at what can drive profitability on your farm. What separates the top 10% from the bottom 10%? To investigate further we need to consider key input and output variables. Three key input variables driving dairy profitability are: 1) managerial skills 2) technology adoption and 3) resource optimization.

Managerial skills: You need to invest in yourself and your workforce through educational courses and continued skills development. Be clear about expectations and vision to keep your workforce aligned and productive. Develop a team around you with technical expertise to help manage all the data that is received and turn the important information into knowledge for making profitable decisions.

Technology adoption: There is an overwhelming amount of new technology and products out there. It can be a challenge to decide which ones to adopt and which ones to avoid. Invest in those technologies/products/ideas that have a proven ROI of at least 2:1. Being the last to adopt a technology usually means you have lost the competitive advantage it provides.

Resource optimization: You need to understand your business. Not only are you managing your livestock, but also your quota, land base and people that may work for you. Making the most of these resources and leveraging the capital that comes from these correctly will help you manage debt, increase profitability and set you up to invest in future

Jim Ross, Chairman

A P E R I O D I C N E W S L E T T E R P R O D U C E D B Y G R A N D V A L L E Y F O R T I F I E R S L T D .

high ROI opportunities.Dairy profitability is also clearly driven by the outputs we produce.

There are five key output variables in the milking operation that determine this: 1) Dry matter intake (DMI) 2) Milk and component production and persistency 3) Health performance (fertility, udder health, lameness) 4) Involuntary culls 5) Labour efficiency.

Dry matter intake: Maximizing return over feed is key to driving profitability on a dairy operation. Making top quality forages is the best way for you to accomplish this. Tracking DMI on the farm regularly and calculating your feed costs (homegrown and purchased) per litre can help producers measure changes that have been made to rations.

Milk and component production and persistency: What percentage of milk produced on farm is actually shipped out the lane? How close are you to 100%? Are you filling all your quota and doing so with optimum components for an improved milk price? Are you able to fill incentives when they are available? The most profitable operations will be the ones that take advantage of these opportunities.

Health performance: Improving reproductive performance, udder health and lameness in your herd will increase your profitability. Increasing your 21 day pregnancy rate has the potential to add $20–65 profit per cow for every percentage increase in your herd. There is a diminishing rate of return on this the closer you get to 30%. Additionally, what percentage of heifers do you have pregnant by 15 months of age? Improving your SCC and udder health can result in $500 per cow due to lost milk yield potential, lost milk sales and treatment costs. Minimizing lameness in your herd will pay back with improved DMI, higher milk yields, and improved reproduction.

Involuntary culls: The majority of cull cows still leave the herd involuntarily before 60 days in milk (DIM), greatly reducing a dairy’s profitability. This is due to transition issues resulting in cows underperforming in their lactation, costing the producer money due to treatment costs, lost milk income, and lower return over feed because producers must now keep another animal who may have otherwise been dried off or voluntarily culled. These early lactation diseases have not only a toll on early lactation culling, but also force cows to leave after a full lactation as well. Cows with one or more disease issues are 2–3x more likely to leave the herd at the end of lactation than those with no issues. For many producers a cows’ breakeven cost to pay for herself is 18–21 litres. Have a look at your production data and see how many cows are currently costing you money.

Labour efficiency: This can be easily summarised on the dairy enterprise by calculating how many litres of milk are shipped for every full time equivalent (50 hr work week) employee the dairy operation employs. More profitable operations will have a higher volume shipped compared to their less profitable counterparts. This may be due to a combination of factors, such as; milk production per cow, milkings per day, farm size, level of automation and degree of labour efficiency.

Dairy profitability spreadsheets have been developed to show the economic impact post-calving disorders can have on dairy operations. Comparing provincial averages of disease occurrences to the the performance of the top 10% of producers reveals a huge potential for increased profitability within a dairy. Those in the top performing herds are realizing nearly $500 per cow per lactation compared to the average. Optimizing your transition cow program can easily pay back huge dividends and justify the investment costs you may incur while successfully transitioning your cows from the dry to milking state. These healthy cows will be more likely to breed back successfully and allow for

the operation to maintain an optimum days in milk that will drive the dairy’s profitability forward (Figure 1).

These key input and output variables of dairy farming have proven themselves to consistently add profitability to the producers who choose to embrace them, measure them, learn from them and implement any necessary changes on their operations. You too can start improving profitability on your dairy operation by working with your team to set future goals and to start planning the needed steps towards achieving them. n

EVALUATING FEED COSTS

Feed costs are the most frequently discussed expenditure on the modern day dairy farm and to no surprise, one of the largest.

With an ever changing milk industry and lower milk prices, tracking feed costs is increasingly important for dairy producers to remain competitive and profitable.

It is common for all of us to look at a feed company invoice and say “that feed is expensive”, but how expensive is it really? Have we taken into account feeding rates? A value of our homegrown feeds in addition to purchased feeds? What about our costs per day or per litre of milk? Simply put, how do we get more milk with a lower feed bill?” These are the in depth questions we need to be asking ourselves when it comes to looking at feed costs. Using a simple, but well created Excel spreadsheet can help us understand our feed bills and potential opportunities for improvement. For example, improving forage quality may drastically change the ration, reduce purchased feed costs and increase milk production, resulting in lower feed costs on a production basis.

The ‘Feed Cost Calculator’ is an Excel spreadsheet tool that allows GVF Dairy Specialists to put each and every farm on a level playing field. The ration can be broken down using feeding rates on per cow per day basis as well as costs based on homegrown and purchased feeds. Keep in mind all homegrown feeds are priced based on quality so every farm’s feeds will differ. In less than 5 minutes we are able to break down a ration to give us very key numbers to look at. These include total cost for purchased and homegrown feeds and total ration cost. Cost/ litre is calculated based on milk produced in the bulk tank. We can easily see how our feed costs are divided and how an increase or decrease in milk

SceneHerd&

by: MARGARET CURRIEDairy Specialist, Grand Valley Fortifiers

Figure 1: Dairy Cow Profitiablilty Curve

Dairy Grist

grandvalley.com

can quickly change our feed costs. In the chart below you will see Feed Cost Calculator Files that have been

compiled into one average chart as well as the minimum and maximum values for each given output. This chart takes into account robot, commodity, supplement and complete feed based rations. See how your herd compares.

Homegrown Purchased Total Feed Costs Feed Costs Feed Costs % feed Milk costs (L/c/d) $/cow/d $/litre/d $/cow/d $/litre/d $/cow/d $/litre/d purchased

Average 33.6 $2.69 $0.08 $2.92 $0.09 $5.61 $0.17 51.24%

Minimum* 24 $1.43 $0.04 $1.17 $0.035 $3.59 $0.13 22.12%

Maximum* 45 $4.25 $0.12 $5.30 $0.15 $7.11 $0.20 78.15%*Minimum and maximum values indicate the range in outputs for each category

Surprised? We are seeing an average of $5.61/ cow /day total feed costs which works out to a $0.17/litre/day. This program and chart simplifies our feed costs and can easily put all feed companies on the same playing field when it comes to your production and most importantly, your feed bill. Feed costs are something we can all discuss and grumble about, but if we are not giving it the in-depth evaluation it deserves we are not doing our operations any favours. If you’re interested in running your farm’s numbers through a feed cost calculator to see how they measure up, contact your GVF Dairy Specialist today. n

Q: In general, what are good financial benchmark numbers on my dairy farm, and what are four main things I can do to improve my bottom line?

A: The difference in milk price from 2014–2015 has not gone unnoticed by dairy producers and their financial advisors. Many producers have seen their milk price drop approximately 7–8%. However, the extra incentive days and quota increases helped offset the lower milk price. Producing extra milk at a potentially lower price does present its challenges along the way. Many dairy farms are starting to outgrow their current facilities, which has made it hard for some producers to fill these incentives to offset the lower milk price. That’s what brings us to this important topic about financial benchmarking. With healthy financial numbers we can show the bank that we can borrow money for a new facility or improvements to cow comfort, labour efficiency, new technology or cow health to potentially lower cost and remain viable.

Erik’s tips for improving dairy profitability: Feed Cost and Quality: This is the highest cash expense on a dairy farm and varies significantly from farm to farm. Making top quality forages is key and can save you a pile of money by allowing you to feed more homegrown feeds and decreasing purchased feed costs. Utilize

QA&with ERIK ZIELEMAN Grand Valley FortifiersDairy Specialist

Years of Service: 6Hometown: BrusselsEmail: erikzieleman@grandvalley.com

your land to get the most out of it (especially where land prices are sky high). Fertility/Reproduction: Make sure you have enough fresh cows every month. For every 10 days in milk you can bring down your herd average, you should gain at least 1 liter of milk for the herd average. Getting cows pregnant in good time after calving, will lead to less fresh cow issues in the next lactation, which means less time visiting with the vet and more time to get more work done. Look at all the benefits! Good reproduction simply means good milk production. Cow Comfort: An easy way to improve milk production is by improving cow comfort. This will also improve fertility, increase herd longevity, enhance udder health, and allow for smoother transition periods. The list of benefits could go on and on. We keep paying University professors to tell us this!! Heifer Raising: The goal should be to get her in the milking herd as soon as possible. What percent of your replacements are pregnant by 15 months? The more the better. We can accomplish this with good nutrition, which will also lead to more milk in her first lactation. Remember, every day she isn’t pregnant is another day that she is depleting our feed inventory without the potential to start paying us back. There are a few financial benchmarks that you can look at and discuss with your financial advisory team, including EBITDA per kg of Butterfat (generally ranging from less than $3000 to over $4000 EBITDA per kg of Butterfat), Operating Expense Ratio (from 45–50% for very profitable dairies to 60–65% for the less profitable farms), and Debt/kg of Butterfat. Understanding your financial statements is very important, and many accountants or banks will have spreadsheets indicating where the average financial benchmark numbers should be with high and low ranges depending on your herd size. From there you can start bringing it down to a practical hands-on level to see why certain numbers are good or bad on your farm and what you can do about it. Focusing on the four management areas mentioned above will go a long way to improving your profitability. Every herd has different goals and is in a different situation, so make sure that everyone who works with you, understands your operational goals so you can work together to improve your bottom line. n

COMMODITY OUTLOOKby: STEVE MCGUFFIN

The March USDA Supply and Demand report showed a slight increase in US projected soybean ending stocks due to reduced crush but

world ending stocks were projected lower and below expectations. We are still dealing with a large supply however, so it will take new crop production weather scares to put any sustained bounce in this market. On March 31st the USDA will release the US Planting Intentions Report. Processor crush margins have deteriorated so we are seeing some re-duction in crush leading to a tightening in supply from one Ontario supplier. Also, we will see downtime in June at one of the processors for maintenance, so planning ahead for needs now through to the end of June would be best. . If you have any commodity questions or would like to make some commodity purchases don’t hesitate to call Alexa Main or I directly at 1-877-743-4412. We are happy to serve you. n

It’s Easter – a time to remember God’s great love for us, that through the death of His Son we are able to experience forgiveness of our sins and eternal life.

What amazing love! What a Saviour! Happy Easter!

“For God so loved the world that He gave His one and only Son, that whoever believes in Him shall not perish but have eternal life.”

– John 3:16

Stay connected to find out about upcoming events, new products & exciting promotions.

/grandvalleyfortifiers @GVFdairy /gvftv

A CHANCE TO WIN 250 HOURS ONKUBOTA POWER EQUIPMENT OF YOUR CHOICE.

PUT KUBOTA TO THE TEST ON YOUR DAIRY!

A CHANCE TO WIN 250 HOURS ONKUBOTA POWER EQUIPMENT OF YOUR CHOICE.

PUT KUBOTA TO THE TEST ON YOUR DAIRY!

EMAIL & POSTAL CODE REQUIRED FOR REDEMPTION:EMAIL & POSTAL CODE REQUIRED FOR REDEMPTION:

EMAILEMAIL POSTAL CODEPOSTAL CODE

$5.00 OFF ADMISSION COUPON

20% OFF20% OFFCOMPLIMENTS OF:

$20 ADULT ADMISSION WITH THIS COUPON

TERMS FOR $5 OFF USAGE/KUBOTA POWER EQUIPMENT OPPORTUNITY. You must provide email and postal code to qualify for $5.00 off admission and/or 250 hrs with Kubota Power Equipment. This email will only be used for monthly

Stratford Rotary Complex, 353 McCarthy Rd., Stratford, ON

dairyxpo.ca | info@dairyxpo.caOne t ime use only, one per adult admin, val id through Apri l 6-7, 2016.Not to be used in conjunction with any other CDX admission of fers.

C

M

Y

CM

MY

CY

CMY

K

Grand Valley Coupon.pdf 1 16-03-08 12:11 PM

On February 16th and 17th of this year we were privileged to host just over 100 young dairy producers from across Ontario at our biennial

Young Dairy Producer Workshop. This event was hosted in two separate locations to enable as many young dairy producers to join us as pos-sible. The first day took place in Stratford with the second day taking place in Millbrook.

We were privileged to have Dr. Rob Bell of Bio Agri Mix speak on the topic of Dairy Management Benchmarking. At the beginning of his talk Dr. Bell encouraged young producers to decide which business

strategy they were going to follow. He shared how there are two types of strategy that any business can follow. A business can either choose a Price Strategy or a Differentiation Strategy. Most dairy producers choose the price strategy and while this is not a bad thing, Dr. Bell encouraged those who choose this strategy not to associate it with focusing on finding low cost inputs. He cautioned that producers following this strategy must still produce a quality product very well and they must be willing to invest or adopt technologies that lower costs or increase revenues. He explained that this strategy is all about excellent asset utilisation. For those producers who choose the Differentiation Strategy, Dr. Bell identified that while they are in the minority, producing a product for a niche, customer focused market is also a very legitimate strategy to follow. Those following this strategy include dairy farmers

who produce organic milk or omega-3 enriched milk or even those producing a breed specific milk such as Guernsey Milk.

Later in the morning we heard from Richard Ballantyne and Brian Van Hooydonk from TD Canada Trust at Stratford and their counterpart Paula Cornish in Millbrook. The Team from TD Canada Trust encouraged young dairy producers to take the time to understand the finances of their dairy and run their farm’s numbers through some key financial ratios, which all banks use to evaluate a farms financial stability. The TD representatives also suggested that using extra cash to pay down farm debt is not a bad idea as paying down debt now will allow for additional options in the future if additional money is needed for growth or expansion.

We want to thank our guest speakers who helped make this event a success and we also thank all of the young producers who took time out of their busy schedule to spend a day with us. Stay tuned for our next Young Dairy Producer event that will likely take place in early 2018. n

YOUNG DAIRY PRODUCER WORKSHOP RECAP

Young dairy producers in Stratford ON.

Paula Cornish of TD Bank speaking to young dairy producers in Millbrook ON.