As I was reviewing Valacta’s latest annual report, I noticed that the quota’s margin per kilo was always higher when increasing the average milk production per cow. In the case of a farm with a 50 kg/day quota and a milk production per cow over 10,000 kg, the net profits were over $6,000 compared with an average production of 8,500 kg. Now that’s pretty good!
Presented with this data I am constantly surprised to see producers who, for some time, will focus on productivity and, all of a sudden, will switch their focus and concentrate on cutting costs! I am not saying that you shouldn’t be concerned with costs; they should always be kept under control. But there is a difference between focusing on improving productivity and setting your sights on reducing costs. When viewed as such, it is a proven fact: Higher productivity leads to greater profitability.
And yet the farmers quoted in Valacta’s annual report declared feed expenses per cow that are 11% higher ($5.34 vs. $4.81/cow), this applied to fodder as well as concentrates. In the end, this investment resulted in a better profit margin thanks to the positive relationship between the quantity of milk produced and the cost of feed per hectolitre.
I’ve come up with an example to simply illustrate my point: Compare your herd to employees of a business. In fact, I want to compare the number of heads in a herd to the number of employees in a business. Is it better to have 50 qualified, well-paid employees with good working conditions or 60 minimum-wage (cheap labour) employees who can’t necessarily be counted on since they’ll have to be replaced in the short term? These are two differing philosophies and in reality the 60 employees at $12 per hour cost more than the 50 employees paid $14 per hour. Furthermore, consider the time saved managing 10 fewer employees and all the work that requires. The same applies to the farm: 10 fewer cows to get pregnant, to calve, fewer heifers to raise and more space available for each head in the herd, these are significant factors!
Now is a great opportunity to take action to improve efficiency as much as possible in this period where expansion via massive quota purchases is difficult, and this means doing more (or as much) with less! Productivity rhymes with profitability and producers need to act accordingly rather than focus exclusively on costs. And maybe you’ll be part of the Club Select SYNCHRO 750.