The current inflation of costs and the reluctance of milk buyers to increase milk price in line with them is producing a tremendous squeeze on margins and cashflow. It is times like this when it is important for farmers and consultants alike to re-evaluate what we are doing and how we are doing it. Marginal cows at this present time come to the fore.
Marginal cows are those that are on the margin of justifying their place in your herd, so rather than contributing to your bottom line profit they are actually reducing it. They still incur similar costs to all the other cows in your herd, but do not give you the return because their contribution to milk sales is poor due to being either:
- Genetically inferior
- Sub fertile - so spend long times at the end of a lactation curve rather than at the beginning of it
- Are prone to mastitis/lameness/disease
So how do you work out which are your marginal cows?
The first thing to do is to work out the daily cost of keeping a cow in your herd. This can be done by looking at the following elements:
This is particularly important with current feed prices. Calculate the total cost of the diet you feed outside, excluding the top up of cake from parlour and out of parlour feeders (as most marginal cows should not be getting this because they are not giving the milk to justify it). The cost of all feeds needs to be included in this; silage, concentrates, fat, minerals etc.
An example is shown here:
For herds that house all year round, these costs will be the same all year. But obviously for those who graze in the summer, these costs will be significantly less over the summer months.
Most units doing a good job are operating at around 80 cows per man employed. Very big herds with brand new well designed units may be getting closer to 100 cows per man employed, and extensively grazed low yielding herds are probably closer to 150 cows per man employed. But for the purposes of this exercise, we will focus on the former.
At 80 cows per man working an average 50 hours per week (dream on I hear many of you say!!) at an average hourly rate of £15/hr equates to £1.34 per cow per day.
Everybody’s labour cost will be different so this needs to be calculated for your farm in your circumstances – but please don’t put yourselves in too cheap!
Work out how much you spend on bedding the milking cows each day. If you house all year then this will be a set figure, but if you graze in the summer you will have a cost in the winter but not in summer. Bedding costs usually equate to around 28-33p per cow per day housed, but they can vary considerably from farm to farm.
Dairy Sundry Costs
Dairy Sundry costs include a variety of costs some which will vary depending upon how many cows you are milking (such as liners, teat disinfection) and others which do not (circulation cleaning chemicals, milking gloves).
The easiest way is to average your dairy sundry costs over the number of cows in your herd and work out a daily cost. Those who are keen and have good records can take out the latter and work out a more accurate cost.
Dairy sundry costs do vary a lot but on the whole many are in the region of 23-28p per cow per day.
Vet & Med Costs
This is a difficult one in that it depends whether yield or health is the reason for your marginal cow.
If we are looking at yield, then average vet and med costs per cow per day can be used. If your total vet cost is say £120/cow then this equates to 33p/cow/day.
But if your records on Interherd/Uniform are really good, you can actually look at the individual drug cost of cows within the herd rather than using this average figure for the whole herd, which is a much more accurate way of looking at the worst cows in your herd.
The final cost to consider is the cost of hauling the slurry out. A cow will produce 1.92 m3/cow/month. At £1.40/tonne to spread, this equates to a cost of around 9p/cow/day for a fully housed herd.
Of course this does not take into account the N, P and K benefit of spreading the slurry, but there is also no allowance made for the capital cost of storing the slurry either. The purpose of this exercise is to just look at the cost of having those last few marginal cows still on your farm.
By adding all these costs together you end up with an average cost of keeping each cow on your farm. You can then use this total value to work out which cows can justify a place on your farm.
As an example, we recently calculated for a client that the cost of keeping a cow at the moment was £6.15 per day. His current milk price is 31ppl and therefore his cows have to produce over 20 litres per day to be making a positive contribution to profit. So, his cull cows which are destined to leave the herd anyway are now being culled when they reach 20 litres rather than being held onto until they dry off.
Cull prices are starting to ease back, so the argument of keeping stale cows to fatten them up is unlikely to stack up, particularly with current feed cost and overall price inflation.
These figures can also be used to look at the lowest yielding cows in your herd. If your annual average cost of keeping your cow is say £5.50 per day, this equates to £2,007/cow/year. Add onto this say a cost of £60 to get your cow back in calf and this means that at 30ppl your cows needs to be producing more than 6,890 litres to justify her place. You may think this sounds low, but we often see cows at this level in many herds which are kept because they may do better next time, or it just hasn’t been picked up that they are performing at this level.
Of course in extended grazing herds the cost of keeping a cow per day is much lower, and therefore you can still make a profit at lower yields. But the sums still need to be done to see what your breakeven yield is.
With cows with persistent mastitis or health issues it is worth looking at drug costs and adding these onto the overall costs above, to see if they can still justify their place.
And for those looking to realise some capital, then selling marginal cows may be a better bet than selling youngstock.
Of course, care needs to be taken. When you take out marginal cows you are reducing the number of litres to spread your fixed costs over. If you take out a lot of marginal cows then you need to ensure that fixed costs such as labour, rent etc are reduced accordingly, unless of course the cow place is going to be filled by another animal.
Looking at your marginal cows is an interesting and eye opening thing to do. You can often get rid of marginal cows and not affect the bottom line profit at all. And even if you milk your own cows and won’t make any savings on labour, you will be able to finish work that bit sooner and put your feet up!