Recipient Organization
PENNSYLVANIA STATE UNIVERSITY
208 MUELLER LABORATORY
UNIVERSITY PARK,PA 16802
Performing Department
Animal Science
Non Technical Summary
The profitability and sustainability of dairy farming depends vitally on efficient management practices that result in maximizing milk production at a minimum monetary and environmental cost. While practices of managing lactating dairy cattle occupy the greatest share of time, effort, and costs associated with dairy farming, the total costs of raising dairy heifers are the second largest contributor to the annual operating expenses of dairy farms in Pennsylvania. Feed costs represent over 60% of these costs. This large contribution toward operating expenses would indicate that an opportunity exists to reduce whole farm expenses by reducing the expenditures on raising dairy heifers through improving management practices. There is limited information available to dairy producers and consultants on the factors that create a farming operation that raises profitable dairy heifers. However acquiring healthy replacement heifers that calve between 22 and 24 mo of age represents a major expense to dairy operations. Due to the nature of replacement heifer management, a dairy operation must invest feed, labor, and capital for a period of 22 to 24 mo without receiving any realized benefits. Consequently, minimizing or optimizing heifer rearing investments while maintaining the productive integrity of the replacement heifers should be a primary objective of replacement heifer management. Some dairy operations are utilizing specialized services to compliment weaknesses or limitations in management, labor, or capital resources to improve productivity and profitability. Therefore studying contract heifer growers is an important comparison to be made with this study as they may be viable alternatives for dairy farms to use as a source of replacement heifers. Dairy farmers must combine multiple inputs such as facilities, labor, feed, equipment, and management to produce the output of a dairy heifer that may be various ages or size relative to mature herd body size. Farmers are challenged to provide the most efficient combination of inputs to produce the most productive potential output. In this case this output is a well grown heifer that has the production potential to be a highly productive milking cow. A method that is often used for farmers to determine the best practices is to use benchmarks such as age at calving, daily costs of feed, and size of animal. Since these types of measures only partially measure efficiency and when one attempts to address one benchmark alone, it affects others directly or indirectly. Since benchmarks often do not focus on optimization, use of more holistic efficiency measures such as data envelopment analysis have become popular to measure whole farm system efficiency. The DEA technique will provide important information for inefficient farms to become more efficient. The approach also will provide information on benchmarks so that inefficient farms can determine areas of their farm that require different or better inputs. This study will provide goals for inefficient farms to aim for or compare with in an attempt to become more efficient and profitable.
Animal Health Component
55%
Research Effort Categories
Basic
45%
Applied
55%
Developmental
(N/A)
Goals / Objectives
Dairy heifers are the future revenue generating units on a dairy operation. However, during their pre-productive period they represent a significant cost center on every dairy farm business. For about 24 months, from birth until first calving when milk production begins these are not income generating units on the farm. It has been shown that the total costs of raising dairy heifers are the second largest contributor to the annual operating expenses of dairy farms in Pennsylvania. The costs of raising dairy heifers have been shown to represent 15-20% of the total annual expenses of a dairy farm. However, because the annual expenses of raising heifers are included in various other expense categories such a feed, labor and vet, little information has been collected on what the actual costs of raising a replacement is on most dairy farms. Furthermore, few operations realize that the management and care of their dairy heifers throughout this pre-productive period directly influences the productivity and income generating potential of these animals during their first and subsequent lactations. Optimal rates of gain, ages and weights at calving are well documented and allow the producer to set appropriate production goals. In order to determine the factors that contribute to the efficiency of the dairy heifer operation, data will be collected from a sample of Pennsylvania dairy farms to quantify heifer expenses. Data envelopment analysis will be used to estimate the production and management efficiency of heifer raising programs on Pennsylvania dairy farms. Data envelopment analysis is a nonparametric method of calculating the efficiency of individual decision making units such as a dairy farm or heifer enterprise of that farm, in performace measurements and benchmarks. The goal of this project is to identify the most efficient combination of all inputs used to produce well grown potentially profitable dairy heifers in Pennsylvania that combines factors that enhance efficiency in production and business management. Since the dairy heifer enterprise represents the second largest economic component to the production of milk, the outcomes of this study will provide valuable information which Pennsylvania dairy farms can implement to improve their competitive position and remain sustainable in the future.
Project Methods
During the first year of the study, 40 farms will be contacted and visited to collect data. Dairy farms will be selected from around the state from those farms currently involved in a Dairy Profit Team. There are currently approximately 300 Dairy Profit Teams in Pennsylvania that are part of a program sponsored by the Center for Dairy Excellence. Contract heifer growers that do not use Dairy Profit Teams will be contacted separately as will be discussed later. A survey to collect individual line cost data, such as feed, labor and other expenses associated with the heifer rasing cost center of the dairy business will be modified by the project team from a previous study In addition, the PA Dairy Tool, developed by Penn State faculty, extension educators and staff will be modified to collect additional data specific to heifer raising along with key farm data. To ensure that adequate data are available for collection, only farms that have completed team training, use the PA Dairy Tool, use the Income Over Feed Costs (IOFC) Tool, or are in the database of herds that have participated in financial benchmarking, will be invited to participate in this project. The herds will be selected within 4 major dairy categories; <200 milking cows, 200-400 milking cows, >400 milking cows, and contract heifer growers. Since there are no contract heifer growers currently involved in dairy profit teams, these will be located from the National Calf and Heifer Association which provides contact information for these farmers (www.calfandheifer.org/). These farms will then be enrolled in financial portions of the PA Dairy Tool (in applicable sections for replacement animals) to establish their farm database for economic data. Feeds (forages and grains) will be sampled and analyzed to obtain more accurate nutrition and quality data being supplied to the heifers. All feeds and forages fed to heifers will be sampled on each visit to the farm. All management aspects of calves and heifers will be determined so that these numbers can be used in the efficiency analysis. During the second year of the study data will be summarized to determine overall efficiency and profitability of the replacement component of the farms. Summaries will be made at this time and published to provide an accurate representation of the dairy replacement industry in Pennsylvania. These studies will be first published in peer -reviewed journals and immediately followed by Extension mimeos and web based publications. The results indicate which of the participating calf and heifer raising operations and enterprises in Pennsylvania are DEA efficient. DEA will also identify which efficient operation each inefficient enterprises/operations should be benchmarked against thereby allowing us to tell a story about which inputs and outputs affected efficiency and to what degree. This approach will also provide information and benchmarks for dairy producers to use as benchmarks or goals to become more efficient and have better and more economical heifer raising enterprises.