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milked and cases of mastitis can be reduced, then the overall effect on unit cost can be positive.
Understanding your costs is the cornerstone of business planning that is essential to gauging your business’ success in a volatile market and should be undertaken at the earliest opportunity. Expansion can mean many things. It can be keeping a few more cows, possibly by converting a redundant building for dry cows or youngstock to allow more milking cows. It might be putting an extra bay on an existing building or a totally new unit. Whatever might be contemplated, the basic process is similar.
What is the long-term plan? Any thoughts of expansion need to fit in with the objectives of the business and family. What do the key stakeholders want from the business? Does the business have to grow to meet increasing demands from it from, for example, returning family members? What if family members want to quit the business?
Do you need to expand at all? This has to be the next question asked.
A long term strategic plan must be based on a sound understanding of your total cost of production
Are there other ways that farm profitability could be increased that are lower risk, lower cost and probably
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lower stress? In many cases the answer will be yes and we find many businesses have made good progress by focussing on getting better before they get bigger, focussing on driving technical performance from the existing herd size. Expansion is not the only way forward. The graph is based on data from herds costed through the Milkminder dairy costing service and plots milk yield against concentrate costs which is generally accepted as a good indicator of technical performance. It compares the average and top 20% ranked on margin over purchased feed per cow.
A simple interpretation is that if your performance is above the top 20% line you are already getting good performance per cow and increasing herd size should be the considered option. If, however, you are below the average line then the probable best course of action will be to review your current system to identify how performance per cow can be improved. This might mean increasing yields per cow or using feed more efficiently, producing the same yield from less purchased feed.
All too often you hear of farmers who have expanded the herd in the expectation that performance per cow will also increase. In many cases this will not happen and a better option would have been to drive performance from the existing herd first.
Start with the market in mind
It is a good idea to discuss any possible expansion plans with your milk buyer before you go ahead with them. Milk buyers have to find a home for all the milk they buy and may not want any more. Increased global production is one of the reasons that prices have fallen back.
Assuming they do want more milk, discussing how much they
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