One of the measures we at Albert Goodman use when looking at dairy farm efficiency is the cost of getting the milk out of the cows. We measure this as the labour plus power and machinery costs including contracting, divided by the number of litres produced on a farm. After feed costs, it is the largest cost on most dairy farms.
This cost varies between under 6 pence per litre (ppl) for the very best farms, up to more than 14 ppl for the least efficient, and averages about 11ppl.
I was looking at a set of farm accounts recently where the cost of getting milk out of the cows was high at 14ppl, with 4 ppl as labour and 10 ppl in power and machinery costs. It struck me that there was a lot of tractors and telehandlers for 500 cows as there was 14 of these machines.
This sparked my interest. After all does a dairy farm need one tractor per worker; or two tractors; or more? Is it more cost efficient leaving some tractors attached to specific machines, or is this an expensive luxury? Should dairy farmers use contractors or do the work themselves?
I carried out some research using the accounts of dairy farmers plus details of their milk production and tractor and telehandler ownership, and there were some interesting results.
From my sample of dairy farms it was striking that efficient farms had 55 cows for each tractor compared to the less efficient farms which only managed 30 cows for each tractor.
For a 220 cow dairy, the efficient milk producer would have four tractors, whereas a less efficient producer would have seven. This is a huge difference. I have not looked at whether the efficient farm uses more contractors, or why there is this difference, never the less it seems to me that this is significant.
Not only did the efficient farms have fewer tractors, but the tractors they had were smaller. The efficient farms had an average tractor size of 92 horse power, whereas the less efficient farms had tractors averaging 112 horse power. That is a big difference with the more efficient farms having tractors 20% smaller on average.
Another way of looking at this is the number of horse power per dairy cow. The most efficient farms had 1.7 horse power per cow and the least efficient 3.7 horse power, so going back to the 220 cow example, the most profitable farms would have 374 horse power in the holding, the least efficient 814 horse power.
So, what can we learn from this?
It seems to me that there is a direct relationship between the number of tractors on a farm and the efficiency with which they get milk out of cows. This is not really a big surprise, but the difference between the best and poorest is remarkable.
One farmer once told me, that they had milked 500 cows from Friday night until Monday morning without starting a tractor. OK, it was the summer, but his enthusiasm for cheap milk production was infectious. How many dairy farms can do this?
To survive and prosper dairying, farm businesses need to become more efficient, but how do you do this? A starting point would be to calculate how many tractors and telehandlers you have, and compare it to the above figures.
If you are not close to the best figures, then there is room to improve. Remember that doing the same thing again this year will give you the same result as last year, so some change will be needed if you want to improve.
Try selling a tractor and not replacing it, then use a contractor for the operations that you then cannot do yourself. There may be some inconvenience with having fewer tractors, however does the expense justify having the tractor? If it works once, could you sell another tractor without replacing it?
For successful businesses reducing machinery costs is an ongoing theme. Often it is not wholesale change that is needed, but incremental improvements over many years. Constant attention to costs and always focussing on how to reduce the number of operations and the amount of owned machinery is essential.
If you require any further assistance or would like more information then please get in touch with Iain McVicar.