/^t *'!%^ Division of Agricultural Sciences I \ \l UNIVERSITY OF CALIFORNIA \h%Q . CALIFORNIA AGRICULTURAL Experiment Station Extension Service CIRCULAR 417 REVISED CALIFORNIA DAIR] A dairy farm in California is an intensive enterprise, existing on high-priced land, with high capital investment, and high operating costs unless good management practices are applied consistently. This circular describes good management practices in all the phases of dairy farming that determine profit. It summarizes the latest findings of research and the experiences of many successful dairies throughout the state. Its information will be of value to the established dairyman as well as to the man who intends to go into dairy farming. dairying as a business 3 California's six dairy regions 7 the dairy-farm business 11 the milking herd 13 profit in the milking herd 16 getting maximum returns from your feed costs ... 29 the replacement heifer-raising enterprise .... 40 the forage-crop enterprises 43 planning the dairy-farm business 45 starting a new dairy-farm business 52 dairy-farm records 58 JANUARY, 1963 The Authors: Arthur Shultis is Agriculturist Emeritus, Agricultural Extension, Berkeley; Olan D. Forker is Associate Agriculturist, Agricultural Extension, Berke- ley; and Robert D. Appleman is Associate Agriculturist, Agricultural Extension, Davis. [2] A, ARTHUR SHULTIS, OLAN D. FORKER, AND ROBERT D. APPLEMAN FARM MANAGEMENT DAIRYING AS A BUSINESS Dairying, in value of its products, is one of the most important single agricultural enterprises in California. In 1959, milk was the major source of income for about 8,045 farms. The California Crop and Livestock Reporting Service estimated that during 1961 an average of 813,000 cows were milked, producing 8,236 mil- lion pounds of milk. Cash receipts from farm marketings of dairy products were $391,048,000, or 12 per cent of the total cash receipts from farm marketings (see table on page 4). In addition, dairy- men, in maintaining their herds, pro- duced and sold a substantial number of cattle and calves for beef and veal. MARKET AND MANUFACTURING MILK Milk in California is produced as either market (or Grade-A) milk or manufac- turing milk. Market milk All milk sold as fluid milk and cream must be produced as market milk, that is, under strict sanitary requirements of state and city laws and regulations. Market milk can also be sold for the manufacture of milk products. According to its uses, market milk is classified into Class I — milk sold as fluid milk, cream, and related fluid products ; Class II — milk used in products not otherwise defined as Class I or III, principally cottage cheese and ice cream ; Class III — milk used for the manufac- ture of butter, cheese, and nonfat dry milk. In 1961, 75 per cent of the market milk produced in California was used as Class I; of the remaining 25 per cent, most was used in the manufacture of cottage cheese, ice cream, and frozen desserts. During certain parts of the year, a large quantity was also used for butter and nonfat dry milk. Market milk, generally, brings a higher price than manufacturing milk, but re- quires better buildings and more equip- ment for cooling and handling. A dairy so equipped, and selling the major part of its milk for this purpose, is called a market-milk or Grade-A dairy. Minimum prices to producers are deter- mined for each class of market milk by the Bureau of Milk Stabilization of the State Department of Agriculture. Market milk is sold to distributors under a con- tract specifying the quantity of milk to be paid for at Class-I prices. The contract specifications, and thus the average price received, vary widely for individual dairymen. Minimum prices currently in effect are reported in the "Dairy Informa- tion Bulletin" published by the California Crop and Livestock Reporting Service. 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OS « 03 SO NORTH COAST Dairying here is largely the production of manufacturing milk from the hay, pasture, and silage in coastal valleys and along the coastal bench. Rainfall is higher than in any other part of the state, begin- ning earlier in the fall and extending later into the spring, so that natural pas- ture and hay meadows are very produc- tive. Winters, although mild, are so wet or cold that many fields cannot be pas- tured. It is usual, therefore, to freshen most of the cows in the spring, making it a highly seasonal production. The prac- tice of irrigating, now increasing, pro- longs the green-feed season through late summer and early fall. Most of the hay used and some silage are produced in this area, although some additional hay is brought in from the outside. Between 1955 and 1960, milk produc- tion declined in the North Coast region by 6 per cent. There was a continuing shift from manufacturing to market milk, which increased from 22 to 33 per cent of the total. Most of this shift took place in Mendocino County, where in 1960 market milk accounted for 84 per cent of total production. Market-milk production in- creased slightly in Humboldt County, but a further increase is not expected because of the limited local outlets open to local producers and a lack of outside marketing opportunities. CENTRAL COAST This long region extends from Sonoma and Lake counties on the north to San Luis Obispo on the south. It includes 13 counties, seven of which are on the coast. Hence this area has a range of climatic conditions from coastal to interior and a wide range in annual rainfall. It contains several irrigated valleys such as Santa Clara and Salinas. Some of the dairy farms in this region are similar to those in the San Joaquin Valley, with irrigated forage crops; others are nonirrigated farms with dry-farmed forage crops and natural pasture. This is an old and well-developed dairy region, with a considerable shift in recent decades from manufacturing to market milk. Eighty-six per cent of total produc- tion is now market milk, largely for the San Francisco Bay metropolitan area. Dairying is being crowded out by urbani- zation in some metropolitan fringe areas and also by high-value crop production in the Santa Clara and Salinas valleys. Dairy farms and number of cows continue to decline in the area as a whole, but total milk production has increased by 8 per cent in the last five years. The two leading Central Coast counties in milk production are Marin and Sonoma just north of the Bay, where production increased 15 per cent in the last five years. Herds have in- creased in size and have become more dependent on alfalfa hay produced in the interior valleys. SOUTHERN CALIFORNIA This large region of eight counties and several climatic subregions contains 58 per cent of California's total population. Hence dairying here is almost entirely market milk for this large and growing population, but production is only 43 per cent of the state total, so additional milk is shipped in from the San Joaquin Val- ley. Despite the declining land area avail- able for dairying and forage production near Los Angeles, total milk production is increasing in the region as a whole faster than in any other region of the state, with a 20 per cent increase in the last five years and a 33 per cent increase in the previous five years. Total dairy farms were about the same in number for the region in 1959 as in 1954, but the number of cows has increased about 14 per cent. Produc- tion per cow is higher than in any other region. Forage requirements are met mostly by hay transported from areas of alfalfa production. In the entire southern California coastal area from Santa Barbara to San Diego counties, farm land with irrigation water is limited and declining because of [9] the growth of cities and suburban resi- dential and industrial areas. Land values are high because of urbanization, high- value fruit and vegetable crops, and other competing uses. Dairying that remains in Los Angeles and Orange counties is now largely concentrated in areas zoned for this purpose. These are entirely drylot or corral dairies, where a large number of cows are fed hay in corrals where they are held between milkings. Replacement cows are purchased from other regions and other states, or heifers are transported elsewhere to be raised and returned later. This great development of milk factories in an urban fringe area continues to be profitable because of its good local market and high percentage of milk paid for at Class-I prices. Services to dairymen in labor, feed, replacement cows, equipment and credit are highly developed and com- petitive and, in part, contribute to the high level of efficiency attained. In the last five years milk production declined slightly in Los Angeles County, with the movement of some dairies further out from the city of Los Angeles into western Riverside and San Ber- nardino counties, where the greatest in- creases took place. All the other counties had small increases, except Imperial County. Hay for this great concentration of 30 per cent of the state's dairy cows comes largely from the irrigated farming areas across mountains; from the Imperial Val- ley, the Palo Verde Valley in eastern Riverside County, the Antelope Valley in northeastern Los Angeles County, and the San Joaquin Valley. SACRAMENTO VALLEY Market-milk production increased slightly in all of the nine Sacramento Val- ley counties over the past five years, but manufacturing-milk production dropped, so that the region experienced an over-all decrease of 4 per cent in total milk pro- duction. The Sacramento Valley has an adequate supply of irrigation water and some land yet to be developed and irri- gated. Some of this land is shallow and better adapted to irrigated pasture and ' dairying than to higher-value field and truck crops. Hence this is an area where dairying would be expected to increase. < Manufacturing milk production was 64 per cent of the total in 1950 and increased 17 per cent in the five years to 1955, but during the next five years declined 21 per cent, and is now lower than it was 10 years ago. This indicates that production of manufacturing milk was not as profit- able as other alternatives. The number of dairy farms, as shown by the U. S. Census of Agriculture, declined from 1,973 in 1954 to 1,226 in 1959. SAN JOAQUIN VALLEY The San Joaquin Valley is the most im- portant dairy region in the state; it con- tains 41 per cent of the cows and produces 40 per cent of the total milk fat. From 1955 to 1960, market-milk production increased 51 per cent and manufacturing milk production declined 36 per cent, with the result that total production in- < creased by 8 per cent. Market-milk pro- duction increased from 50 to 70 per cent. The San Joaquin Valley is an area with a large surplus of market milk and great variations in producer contracts, result- ing from many recent shifts from manu- facturing to market milk production. Census classification shows a decline in dairy farms from 6,855 in 1954 to 3,991 in 1959. Both census and crop-reporting- * service figures show a decline in number of cows. These facts along with observed rapid increases in herd size and a sub- , stantial increase in total production and an even greater increase in production per cow, indicate adjustments that are taking place in the battle for survival. Market-milk production here is not only for local centers of population such as Fresno, but also for large shipments to the Los Angeles and San Francisco areas. . Although there is currently a considerable surplus of market milk seeking an outlet, - [10] it is probable that additional shifting from manufacturing-milk production will > take place in the future as opportunities occur. Dairying in this region is well adapted to the many irrigated farms which can produce excellent yields of alfalfa, silage and pasturage. Most of the forage needed can be produced on the dairy farms. The San Joaquin Valley is also a large surplus alfalfa-hay producing region, with local prices of excellent baled hay about $6 a ton below the price of the same hay at Petaluma and Los Angeles. This commer- cial hay is produced on field and vege- table farms by large-scale machinery and methods, and is available to local dairy- men at reasonable prices. Dairymen in 1 this area usually raise their own replace- ment heifers, and some farmers raise dairy heifers for sale or on a custom basis for others. The San Joaquin Valley is also the greatest farming region of the state with a large variety of high-value field crops, vegetables, and fruits that are well adapted to the many smaller areas where they are most successfully grown. Most of these crops are more profitable than forage crops, so land values and rents are more than dairymen can afford. Although some of these competing crops also have their surplus and price problems, they still continue to displace some dairying. There are, however, many areas of less desirable lands where dairying can con- | tinue and to which it can move if crowded out elsewhere. There is also a consider- able shift to corral dairying on hay pur- chased from nearby field-crop farmers. Most of the small number of dairies re- maining in Kern County are of this type. There has been a large increase in the feeding of beef cattle in this region in the last 15 years. Dairying, with its higher returns to labor and management, can compete favorably with this business. So, although dairying has its problems in the San Joaquin Valley, it will continue and probably increase as more of its milk can be sold for Class-I uses. Manufacturing- milk production, formerly the main type and still important in the northern coun- ties, will continue to decline here as more profitable alternatives become available and producers go out of business because of low earnings. MOUNTAIN AND NORTHEASTERN REGION This large area is mostly mountainous and not adapted to farming. Beef cattle dominate in the use of the forage har- vested in the valleys and the seasonal grazing in the desert and mountains. There are a few small dairies producing market milk for local use throughout the area. Market-milk production increased 23 per cent in this varied region of 17 counties from 1955 to 1960 when it was 74 per cent of the total. A shift from dairying or going out of business by manufacturing-milk producers is also shown in this area by a decline of 158 dairy farms and 51 per cent decline in manufacturing-milk production. Most of the creameries making butter from churning cream in mountain valleys 20 years or more ago, are now gone. No significant change in current trends is ex- pected for the future. THE DAIRY-FARM BUSINESS Management of the dairy-farm business, or its analysis and planning, is best ap- proached through the separate enter- prises of which it is composed. An enter- prise is a single crop or kind of livestock grown to produce a profit. The total dairy farm business is composed of one or more of the following enterprises : [in • The milking herd. • The raising of heifers for replace- ment and other dairy stock for sale. • The production of forage for feeding the dairy stock: Alfalfa for hay or green chopped for- age and some pasture. Silage such as corn, sorghum, or oats and vetch. Irrigated pasture. Natural or nonirrigated pasture or range. • Sometimes, a crop produced for sale — sugar beets, cotton, vegetables, etc. Total dairy-farm businesses are seldom comparable with one another because the proportions of the above enterprises vary. Hence, no standard, or typical budget, or statement of income and costs can be presented for the total farm business for which the major source of income is from milk and dairy cattle — classified as dairy farms. The corral dairy, where all feed and re- placements are purchased, is composed of a single enterprise — the milking herd. This is the prevalent type of dairy farm in southern California and is increasing in the San Joaquin Valley and the metro- politan fringes. Some corral dairies raise their own re- placements partly in their own corrals and partly by placing their calves out on rented pasture or on other farms where care and feeding is paid for. Such dairy farms may then be considered as having two enterprises — the milking herd and raising of replacements. Most dairy farms in the United States produce much of the forage used by the milking herd and stock raising enter- prises and sometimes part of the grain. In California, many dairy farmers started out with a dairy herd, cows and young stock, small enough to use the forage pro- duction of the farm in hay, silage, and pasture. To increase net income, they in- creased the number of cows to the point where much of the forage had to be pur- chased off the farm, largely as baled alfalfa hay. But purchased hay costs more than the farm value of hay grown right on the farm. And pasture, often the cheapest form of nutrients, is obtainable only on the farm where produced. On many California farms highest profit is still available from dairying where the milking herd is fed from low- cost forage grown in feed-crop enter- prises in the same farm business. Feed production on dairy farms may take place in one or several enterprises, depending on location and competing cash crops. For this reason there is in some areas, such as southern California, little forage production on dairy farms. Land values and taxes are high, and pur- chased hay can be trucked in from lower- cost areas for less than it can be grown locally. Crop production, in such areas of high land values, taxes, and irrigation- The Dairy Enterprise — a changing concept The dairy enterprise has long been considered as a separate part of the dairy- farm business in California. Dairy management or cost studies were conducted and published from 1925 to 1955, occasional surveys have been made, and sample schedules of inputs and costs have been issued. In the past, most of these schedules have been for the total dairy enterprise as composed of the milking herd plus the raising of replacements. In recent years, however, the number of single-enterprise corral dairies has been increasing, and a growing number of dairy farmers have been figuring their costs on the milking herd separately from the heifer raising. [12] water costs, is limited to high-value crops such as fruits, vegetables, and other horti- cultural specialties; hence, the prevalence of corral dairies which buy all their feed. In parts of the San Joaquin Valley and in metropolitan fringes the competition for land favors buying hay rather than pro- ducing it on local dairy farms. In some parts of California, a profit- able type of farming is still dairying with most of the forage for the dairy herd produced in feed-crop enterprises on the farm such as alfalfa, silage crops, and irrigated and natural pasture. Manufac- turing-milk production with its lower milk price is profitable only in such areas. Management will be aided if each feed crop is considered a separate enterprise with a known production cost. Such products are charged to the dairy enter- prises — milking herd and stock raising- — at farm value. Farm value, the local price at which the product can be sold on the farm, may also be considered as local market price less marketing cost. For ex- ample, alfalfa hay stacked on the farm, if salable there for $20 a ton, would be chargeable to the dairy herd at this price per ton. If purchased and delivered from a near-by farm, it would probably cost $22.50 or more per ton. The table on page 46 presents a sample schedule of inputs and costs per acre for typical forage enter- prises on dairy farms. Enterprise accounting (see page 59) helps you to know the cost, income, and profit of the several enterprises in a dairy farm. Such information assists you in making important managerial decisions as to future courses of action — how much and what feed crops to grow, whether to enlarge or reduce the number of cows in the milking herd, and what to do to re- duce costs or improve income in each enterprise in the dairy-farm business. The table on page 60 presents a summary of five enterprises and the total farm busi- ness for a 150-cow dairy farm. THE MILKING HERD The milking herd is the only enterprise now common to and comparable among all dairy farms. It is therefore possible to present sample budgets on the milking herd only. The tables on pages 14 and 15 present such a schedule of inputs, costs, and potential income for specific situa- tions. The tables provide a standard to which you can compare your own milking herd. Income to the milking herd consists of milk sales and sale of cull cows, the sale of calves and the value of heifer calves transferred to the heifer raising enter- prise, and manure sales or credit for manure hauled to crop fields. In this cir- cular, we show income from calves and manure as miscellaneous income which may also be deducted from total costs to show the net cost of the milk sold. Income from cull cows sold is deducted from the cost of replacements added, to show the net replacement cost. In private account- ing, there would also be an increase or decrease in inventory value of cows on hand with changes in number during the year. The schedules in the tables on pages 14 and 15 assume no inventory change. To make a milking-herd enterprise statement and analysis, you need to know the applicable costs. Purchased feed is charged at cost. Farm-produced feed must be known as to quantity and charged at farm value per ton or per animal unit month of pasture as defined on page 30. Labor and other costs charged to the milking herd should be just the applica- ble portion of each category of total farm expenses. The milking herd as an enter- prise includes the cows both dry and milk- ing, but not the raising of replacements or production and delivery of feed crops to the dairy. 13] The cost items and potential income in the table below are based on current informa- tion from several market-milk dairies in the San Joaquin Valley. They are not average cost figures but represent those for a well-managed enterprise of 150 cows, assuming an annual sale of 12,500 lbs of milk and 450 lbs of fat per cow. SAMPLE BUDGET FOR A 150-COW GRADE-A MILKING HERD Cost items Quantity Cost in dollars Unit Total Per cow Price Total Per cow Per cwt Tons Tons Tons Tons 195 465 555 1,125 1.3 3.1 3.7 7.5 60.00 24.00 9.00 6.00 11,700 11,160 4,995 6,750 78.00 74.40 33.30 45.00 230.70 80.00 10.00 76.00 33.60 .63 .59 .27 .36 34,605 12,000 1,500 11,400 5,040 1.85 .64 .08 Hours Hours Heads Heads 6,000 750 38 36 40 5 .26 .24 2.00 2.00 300.00 140.00 6,360 1,155 450 1,080 600 660 870 2,700 1,500 3,000 2,710 42.40 7.70 3.00 7.20 4.00 4.40 5.80 18.00 10.00 20.00 18.06 .34 .06 .02 .06 .03 .04 .05 .14 .08 .16 .14 Number Hours 165 300 1.10 2 7.00 1.50 Taxes (cows $585 facilities $495) Cow testing, DHIA Insurance compens. $460, soc. sec. $374, fire $135 69,190 4,314 461.26 28.76 3.69 .23 Interest on investment at 6 per cent, see page 53 73,504 1,275 1,380 600 490.02 8.50 9.20 4.00 3.92 .7 .7 .3 Less miscellaneous income : Head Head Tons 85 46 600 .57 .31 4 15.00 30.00 1.00 3,255 70,249 21.70 468.32 .17 3.75 Income (two alternatives) Income, ir l dollars First alternative: 70,249 88,124 468.32 587.49 3.75 4.70 Total milk income at 75 per cent Class I, cwt 18,750 125 4.70 Management income or profit 17,875 4,500 4,314 119.17 30.00 28.76 .95 .24 .23 Add operator's labor and management Interest on investment Operator's net farm income at milk sales 75 per 26,689 70,249 78,750 177.93 468.32 525.00 1.42 3.75 4.20 Second alternative : (Net cost, from above) Total milk income at 50 per cent Class I, cwt 18,750 125 4.20 Management income or profit 8,501 4,500 4,314 56.68 30.00 28.76 .45 .24 .23 Add operator's labor and management Interest on investment Operator's net farm income at milk sales 50 per cent Class I, rest other 17,816 115. U .91 The table on page 14 illustrates the difference in net farm income for two different con- ditions: one, in which 75 per cent of the milk produced is sold as Class I ; the other, in which 50 per cent of the milk is sold as Class I. You can recalculate your own po- tential income for your particular circumstances. The cost items and potential income below are based on current information from manufacturing milk dairies in the Sacramento Valley. These are not average cost figures but they represent those for a good commercial manufacturing-milk herd with above-average production per cow. Assumed is an annual sale of 10,000 lbs of manu- facturing milk per cow. SAMPLE BUDGET FOR A 50-COW MILKING HEED (Manufacturing-milk production) Cost, income Quantity Cost in dollars Unit Total Per cow Price Total Per cow Per cwt Cost: Concentrates Tons Tons AUM 50 135 400 1.0 2.7 8.0 60.00 20.00 7.50 3,000 2,700 3,000 60.00 54.00 60.00 .60 Alfalfa hay .54 Irrigated pasture .60 Total feed cost 8,700 3,938 3,300 1,485 174.00 78.76 66.00 27.90 36.30 7.70 1.50 5.00 4.00 3.50 .60 8.00 5.00 9.38 1 74 Hours Head Head 2,250 12 11 45.0 .24 .22 1.75 275.00 135.00 .79 1,815 385 75 250 200 175 30 400 250 469 36 Number Hours 55 50 1.10 1.00 7.00 1.50 08 Tractor and pickup work .01 05 04 04 Fire insurance for building, equipment, feed . . 01 08 05 09 16,687 1,046 333.74 20.92 3 34 Interest on investment at 6 per cent, see 21 Total cost of production 17,733 340 350 150 840 16,893 16,500 -393 3,938 1,046 354.66 6.80 7.00 3.00 3 55 Less miscellaneous income: Head Head Tons 34 14 150 .68 .28 3 10.00 25.00 1.00 07 Heifer calves transferred 07 03 Total nonmilk income 16.80 337.86 330.00 -7.86 78.76 20.92 17 Net cost of milk sold 3 38 Income: Milk sales at $3.30 cwt 5,000 100 3.30 3 30 Management income - 08 Add operator's labor and management 79 Interest on investment 21 4,591 91.82 92 The table shows the difficulty of making much profit or paying good wages and feed prices with the low price of manufacturing milk. MEASURES OF PROFIT Profit may be figured differently by individual dairymen. In private account- ing the inventory value of stock and feed on hand may or may not be considered. The value of the operator's labor and interest on investment are not usually in- cluded as costs, although interest paid on indebtedness would be. Net profit is there- fore considered as the profit figure ar- rived at in private accounting with whatever cost groupings or accounting method used. In budgets and in making comparisons between farms and years, a comparable profit figure should be used. A change in the stock inventory can be eliminated by assuming the number of head of stock on hand to be the same at the beginning and end of the year and by adjusting stock purchases, sales, and transfers to this basis. The inventory of feed on hand is eliminated by charging the feed actually used in the year. The value of the opera- tor's and family labor should be included in expenses. Interest on the current or average investment in stock and produc- tion facilities should also be included. The difference between income and costs figured in this manner is called manage- ment income — the net income available to reimburse the operator for his manage- ment. Net farm income is the earning figure where the value of the operator's labor and interest on investment are not included as costs. It is obtained in the tables on pages 14 and 15 by adding these items to management income. Net farm income, in other words, is the com- bined earnings of the operator for his labor, management and all invested capi- tal. It is a significant figure for the smaller dairy farms since it approximates the net profit as figured in private ac- counting and income-tax reporting. For larger dairies with considerable hired labor and a large investment, the capital income is a useful figure in com- paring earnings and figuring the rate of return on invested capital. It is computed by including any operator labor and usually an allowance for or the cost of management in costs, but no interest on investment. It is not shown in tables on pages 14 and 15 but appears in the table on page 60. PROFIT IN THE MILKING HERD The main factors that determine profit are: • Pounds of milk sold per cow. • Price per hundredweight received for milk. • Total cost per cow. • Miscellaneous income from stock and manure transfers or sales. PRODUCTION PER COW Increase the average production of your cows, and your profit is likely to go up. Among the principal means of in- creasing milk production are improved feeding, breeding, and culling, and good management practices. To take the guess- work out of these improvement methods, [16] use records. Dairy herd improvement associations provide testing programs in all important dairying counties. Knowing each cow's production enables you to gradually eliminate poor cows and re- place them with better ones. California's great number of cows "on test" has resulted in improved production efficiency. In 1960, cows on test averaged 11,956 pounds of milk and 460 pounds of fat. Cows not on test produced only about 70 per cent of these figures — 8,693 pounds of milk and 312 pounds of fat. Feeding according to records Each cow has a hereditary maximum production capacity. Assuming good management, the extent to which her pro- duction reaches this capacity is deter- mined by the quantity and quality of the feed received. Many cows are unprofit- able producers simply because they are not given as much feed as they could con- vert into milk. Feed accounts for 45 to 65 per cent of the cost of milk production on most California dairies. Price and cost considerations often influence the opti- mum feeding level. These include price received for milk, cost of grain and cost of roughage (hay, silage, green feed and pasture) . If, for example, grain is expensive and the price of milk relatively low, it may be profitable to feed less grain and to depend more on economical roughages even though less milk is obtained. If the price of milk is high and feed costs are rela- tively low, it usually is profitable to feed grain at a heavier rate. Whatever the ratio of feed cost and milk price, farm records properly interpreted will help you find the level of feeding that must be fol- lowed to obtain the maximum return from each cow in the herd. The subject of feeding and costs is discussed more fully on pages 29 to 40 under "Getting Maximum Return from Feed Costs." Breeding according to records The main objective of a breeding pro- gram is to improve the genetic ability of your herd. Breeding for improved ability is normally accomplished by saving heifer calves from outstanding cows that were mated to superior bulls. Breeding with sires that have proved to transmit this ability is the surest way to attain higher production per cow in the future. In 1961, 370,000 dairy cows, or 41 per cent of the California dairy cow population, were bred artifically. The influence of the sire cannot be overemphasized. It often is said, "The bull is half the herd." In California, from 20 to 40 per cent of the cows in a herd are removed each year and replaced by first-calf heifers or pur- chased cows. In this way, only 2% to 5 years is required to obtain a herd largely composed of new animals. Selecting a herd sire that will improve the herd is not simple. The California dairyman basically has three choices: he can take semen available at two coopera- tive artificial services and five private bull services, all but two of which have the sires located in California; he may use his own sire; or he may combine these possibilities. Choosing sources of bull semen for use in artificial breeding requires careful thought. Some considerations are: ° Reliability of service in terms of properly trained technicians and de- pendable semen supply. • Conception rate — getting the herd in calf with minimum number of repeat breedings. • Opportunity to select sires wanted. • Information available on sires, in- cluding Number of daughter-and-dam comparisons and level of produc- duction. Evaluation of type of daughters through type appraisal or official classification. Pedigrees of young sires with records and other information on the performance of parents and grandparents. [17] • A long-range program of the semen source giving assurance of continued availability of high-quality sires, and of breeding better sires through a scientific, selective mating system. • Precautions taken to control com- municable diseases that might be transmitted in the semen. • The extent to which a dairyman may help direct the policies of the organi- zation which he patronizes and share in its success, if he wishes to do so. • The net cost of service. Culling according to records The removal of low-producing cows from the herd increases average produc- tion of the remaining herd. For intelligent culling, the testing of cows for produc- tion is a must. It is difficult to give any definite production level at which a cow should be eliminated, but as a general rule any cow whose annual production does not pay direct feed and labor costs, and whose disposal therefore would re- sult in a greater net income, should be removed at once. It is important that the herd size, feed supply and labor force be kept in balance. Within this frame- work, any cow that can be replaced with a more productive cow should be re- placed. Several factors influence culling for production. One of them is the age of the animal. A first-lactation heifer is expected to produce about 75 to 80 per cent as much as a six-year-old, mature cow. A second-lactation heifer normally produces above 90 per cent as much as she will when mature. Other considerations for culling include: expected length of dry period, health and injuries, milking quali- ties, disposition, and type or conforma- tion. Some of these factors are discussed below. A more complete discussion on "culling and factors affecting the deci- sion" is found in leaflet AXT-11, "A Guide to Culling Dairy Cows," available from your local Farm Advisor or from Public Service, Room 131 University Hall, University of California, Berkeley 4, California. Managing according to records While high production often results from improved breeding and good feed- ing, other abilities also need constant study. Two of these are reproductive effi- ciency, particularly the proper calving interval; and the control of mastitis and other diseases. Calving interval, or time between calvings, greatly affects the individual cow's lifetime record. Allowing only 10 or 11 months between calves reduces an- nual production by as much as 1,200 and 500 pounds of milk, respectively. On the other hand, if 14 or more months elapse between calves, the current record will be larger but probably the lifetime produc- tion will be less. Certainly there will be fewer calves born than if a 12- to 13- month calving interval can be main- tained. Long calving intervals suggest breeding troubles caused by poor man- agement or disease. Well-managed herds normally have 85 per cent or more of their cows freshening with a calving in- terval of ll 1 /^ to 14 months. Season of freshening has considerable effect on production per cow in many parts of the United States, but in Cali- fornia the effect of this does not seem large or consistent among farms. How- ever, there are conditions where dairy- men may wish to adjust their season of freshening to the demand for their milk or to a climatic feed situation that influ- ences costs of production. This is dis- cussed more fully on page 21 under "Season and price." Mastitis, either chronic or acute, con- tinues to cause dairymen great financial losses because of lowered milk produc- tion, poorer milk quality, shorter herd life of animals, and high drug and anti- biotic bills. California dairymen, how- ever, are taking steps to reduce the inci- dence of mastitis, including a check of the milking equipment, improvements in 18 1 the managed milking procedures and, most importantly, sound prevention and treatment programs. The California Mas- titis Test constitutes a valuable screening to detect the disease. During 1961, ap- proximately 540 herds comprising more than 84,000 cows cooperated with the University of California on a mastitis control project. This project has gone into all phases of dairying, and involves the dairyman, herdsman, milkers, and veteri- narian; and in some cases the distributor, health department and banker. Other disease problems not yet completely controlled or eradicated in- clude vibriosis, leptospirosis, calf-rearing ailments, ketosis, milk fever, bloat, and "hardware troubles." It is best to prevent these diseases possibly with the help of your local veterinarian, rather than to cure them. Many of the larger California dairies employ contract veterinarians who spend from one day per month to full time (depending on size of operation) on that dairy, advising on prevention prac- tices as well as treating. Prevention pro- grams have three principal aims: keeping down breeding troubles by giving the cow two examinations — one 30 days after refreshening, the second 40 days follow- ing breeding; sound mastitis prevention and treatment; and preventing outbreaks of other diseases. The usual contract is based on an annual fee with extra, but smaller than usual, charges for emergency trips and drugs. The herd sire The bull has two functions in the herd : to breed the cows for calves and milk; and to produce replacement heifers that will increase average production per cow. The cost of service from an owned bull is usually an unsegregated part of dairy- enterprise expenses. Dairy bulls are nor- mally kept in individual pens and, al- though they may receive some pasture, are fed largely on hay. Because of rela- tively high labor costs for feeding, clean- ing the pen, and other tasks, annual maintenance costs usually approach $220. Ownership costs of depreciation, taxes and interest on investment vary widely with purchase and selling price of bulls, but probably average about $100 per year. These two costs combined total $320 per year. Records from a California bull stud indicate that annual maintenance costs total $280. Allowing $100 per year for replacement cost and assuming that each bull services 38 cows, the cost of natural service would be $10 per head. The artificial insemination program as a means of herd improvement is now used on some 41 per cent of the cow popula- tion and probably more than half of the herds. Insemination services were re- ported in 47 California counties during 1960 by some 250 technicians and 50 veterinarians. During 1960, 2,460 sires were used as bull studs in the United States. The aver- age number of cows inseminated per sire was 2,816. Some of the better-proved sires, particularly in studs using frozen semen, accounted for 20,000 first services per sire. The advantages are obvious; the use of superior sires is greatly extended since by natural service a bull seldom is mated to more than 50 cows per year. Artificial insemination allows a good bull to be used on more cows within a herd and in more herds. In most herds the cost of artificial breeding is less than the cost of natural service, particularly in the smaller herds. The average inseminating fee is $7 and will include one repeat service if neces- sary. As the use of frozen semen is ex- panded, dairymen have greater choice of bulls and can select their matings. Con- ception rates continue to improve and records of some studs indicate that con- ception is exceeding 70 per cent, which compares favorably with the conception rate of natural service. Other advantages of artificial insemi- nation are: infertile bulls are more quickly detected; disease control is helped; bulls are proven more reliably [19] and quickly; the danger of handling bulls is eliminated ; the problem of using heavy bulls on heifers is eliminated; and the use of a superior bull may be extended. PRICE OF MILK PER HUNDREDWEIGHT Milk prices, in general, are largely de- termined by circumstances over which the individual dairyman has little or no control. The minimum prices of milk used for fluid milk and cream (Class I) are set by a state agency; and the price of manufacturing milk and market milk for other than Class-I usages are deter- mined by supply and demand conditions off the farm and by price-support activi- ties of the federal government. Market-milk prices The average price paid for all market milk produced in California depends on how much of it is used in the various classes, on the minimum price established for Class-I usage in the various market- ing areas, and on the price of manufac- turing milk. The Class-Ill price is based on how much is paid for manufacturing milk at various California creameries; the Class-II price is some specified value (quite often 20<|• per hundredweight) above the Class-Ill price. The average price received by all pro- ducers for all market milk produced in California then is a blend price. The aver- age or blend price received by an indi- vidual producer will vary from the state's blend price depending upon his location, the distributor to whom he delivers his milk, the distributor's usage pattern and, most important, the terms of the pro- ducer-distributor contract. The milk-control law of California, as it appears in the California Agricultural Code, requires a written contract for all market milk purchased by dealers. The contract will normally specify the quan- tities of fluid milk to be purchased for some specified period, the quantity of such milk to be paid for as Class I, the date and method of payment, and the transportation charge if hauled by the distributor. The terms of the contract are usually determined by private negotia- tions between a field man of the dairy plant and each individual producer. The terms vary widely from distributor to distributor and from marketing area to marketing area. A producer in southern California might have a contract specify- ing that 80 to 90 per cent of his contract quantity be paid for at a Class-I price. Another producer located in the San Joa- quin Valley might have a contract speci- fying a 10 per cent Class-I guarantee. These are minimums, however, and dis- " tributors pay for as much as they need to meet their Class-I requirements. The sale contract can be the Grade-A dairy- man's most important price- and profit- determining factor. To obtain and retain a market-milk contract, he must produce high-quality milk and he must maintain the production level specified. From 1956 to March 31, 1962 the mini- mum price for Class-I milk was specified in terms of a value for fat and a value for skim. Currently, minimum Class-I prices are specified in terms of a sepa- rate value for the fat, solids-not-fat, and fluid components of milk. The price for other classes is generally in terms of a hundredweight of milk adjusted for but- terfat content through the use of butterfat differentials, but may vary from proces- sor to processor. In 1961, the established minimum -* price for 3.8 per cent milk used for Class- I products in the Kings-Tulare Market- ing Area was $5.06 per hundred pounds from April through August and $5.52 during the other months. Of the impor- tant marketing areas this was the lowest established minimum price. Effective April 1, 1962, the seasonal adjustment was eliminated in all marketing areas and the minimum Kings-Tulare price was set at $5.29. However, the average or blend price received by producers for market- milk production, as reported by the Cali- -' [20] fornia Crop and Livestock Reporting Service, was about $4.72 per hundred pounds. The average (or blend) price received by an individual producer for his total production is determined by the level of the minimum price established for Class-I milk, the going market price for manu- facturing milk, and the relative propor- tions of milk that receive these prices as determined by his contract. Effect of herd size on price and net income. Dairymen selling market milk sometimes increase herd size con- siderably beyond what they need to meet their marketing contracts. They do this to raise their net income or to utilize available labor more fully; and in the hope of obtaining an increased quota; in other cases they may have raised surplus heifers which they were unable to sell, and add them to their milking herd. But if they are unable to obtain a larger market-milk quota, they must ship their increased surplus to manufacturing-milk plants at a low net price, thus reducing their blend price and perhaps their net incomes. In such a case a budget test, as shown in the table on page 22, will help you judge the situation. Manufacturing-milk prices Presently, manufacturing-milk prices are determined by national rather than local conditions. Basically, the prices paid for manufacturing milk reflect the value received by creameries for the manufac- tured dairy products produced. The price a manufacturing-milk producer receives at his farm may vary slightly with his choice of plant to which he sells. The price will also vary seasonally, being lower in the summer than in the fall and winter. With a large quantity of market milk available for manufacturing purposes, more emphasis is being placed on the pro- duction of high-quality manufacturing milk; and premiums are being paid to manufacturing-milk producers for milk stored in refrigerated bulk tanks. Manufacturing-milk prices have been slightly above or below $3.25 since 1954, with an average price of $3.20 in 1960. Since the price received for manufac- turing milk is $1.50 to $2 below the minimum price for Class-I milk, manu- facturing-milk producers have a strong incentive to shift to Grade-A milk produc- tion. However, shifts from manufactur- ing-milk to market-milk production are limited by the difficulty of obtaining mar- ket-milk contracts. Season and price For every region and every type of product there is a seasonal production pattern that best fits local feed and mar- keting conditions and results in the great- est profit. The market-milk producer must main- tain a specified production throughout the year to avoid a reduction in his contract. He can improve his average price by ad- justing level of production through the year to market demand, thereby avoiding excessive seasonal surpluses to be sold at the lower manufactured-milk price. Manufacturing-milk producers gener- ally follow a pattern of freshening cows and seasonality of production that fits their seasonal supply of forage, even though prices of their product are usually higher in fall and winter than in spring and summer. Some could improve net in- come by a study of prices and costs at different seasons and changing to a pro- duction pattern that will result in highest profit. Seasonal production may bring feeding problems which the dairyman must con- sider when determining the most profit- able policy for his farm. Fresh, high- producing cows require almost twice as much feed as dry cows. Spring produces a high surplus of natural pasture, so this is the time to have the herd milking heav- ily. Some market-milk producers may find it profitable to have a spring surplus, even though this excess production over a base quota brings a manufacturing-milk price. This is an individual problem, requiring careful analysis. This sample budget was drawn for an actual case: The herd had been increased to where 40 per cent of the milk was bringing $3.10 net per cwt. The herd was about the right size for the home-grown supply of forage. The farm was in an area where surplus hay could be sold locally, or cash crops could be grown on land not needed for a smaller herd. The question arose: DOES IT PAY TO REDUCE THE HERD OF 92 COWS TO 71? Income, cost Income: Class-I sales 80 per cent of contract at $5.15 Other milk sales at $3.10 Total milk income, average price $4.32, $4.62 Stock sales — cull cows, 27 per cent at $140 Calves sold and transferred at $20 Manure hauled to fields at $1 a ton Total income. Cost: Concentrates bought at $64 a ton . Alfalfa hay at $25 a ton Barley hay at $23 a ton Green chopped alfalfa at $6 a ton . Corn silage at $8 a ton Total feed cost. Labor and management, operator's Cows transferred in, replacement at $300. Breeding fees Tractor and truck work Rent dairy buildings and equipment Taxes Unit cwt cwt cwt Animals Animals Tons Tons Tons Tons Tons Tons Hours Animals Number 92 Cows Quantity 6,906 4,594 11,500 24 82 460 115.4 200 90 1,200 198 6,400 25 100 Cow testing dues Electricity and fuel Miscellaneous repairs, vet., dairy supplies. . . . Other and general expenses Depreciation on owned equipment Interest on investment cattle and equipment. Total costs. Net Profit Farm Income, including labor and interest. Cost Dollars 35,566 14,241 49,807 3,360 1,640 460 55,267 7,386 5,000 2,070 7,200 1,584 23,240 9,600 7,500 770 300 2,400 450 360 780 1 . 600 500 700 1,980 50 J SO 5,087 16,667 71 Cows Quantity 2,294 9,200 19 64 355 93. 200 950 200 5.200 20 78 Cost Dollars 35,565 7,111 42,676 2,660 1,280 355 46,971 5,497 5,000 5,700 1,600 17.797 9,100 6,000 546 280 2,400 400 300 750 1.550 490 700 1,680 41 , 993 4,978 15,758 The above budget test shows that, with rent staying the same and most other costs reduced little, there would be a reduction in net income, but close enough to suggest consideration of other factors such as less work for the two partners and other uses for the land not used for the smaller herd. TOTAL COST PER COW In determining profit in the milking herd, total cost per cow is almost as im- portant as income. Some dairymen fail to attain a potential profit because costs are higher than necessary. On the other hand, some may practice false economies, such as inadequate feeding, resulting in low production and income. 22] In general, it is profitable to provide all the feed, labor, and facilities essential to high production, but to do it in the most economical manner possible. Milk production requires inputs — - cows, feed, labor, supplies, buildings, and equipment. Expenses are a result of these items and their prices. Prices or values of these inputs, the kinds and quantities used, and the way they are utilized vary widely from farm to farm. The dairyman has some opportunity for economy in ob- taining and using inputs. He should know costs in detail, analyze each item and compare it from year to year and to pub- lished schedules. In the following cost dis- cussion, figures are given a per-cow basis — the cost per average cow in the milking herd for a year, which would in- clude dry or non-milking time. Feed is the major cost — usually about 50 per cent or more of the total cost. It is here that, by skillful management, you can obtain the greatest cost reduction or increase your profit by making your pro- duction more economical. For a more detailed discussion on the expenses of feeding, see pages 29 to 40. Cow replacement cost The cow, the most essential input, rep- resents a considerable investment. Usable on the average for four or five years, she must be replaced by the purchase of a new cow or a transfer from the heifer- raising enterprise. A transfer is charged to the milking herd at local farm value for such a heifer which is usually not far from the cost of purchased cows. Whether you will raise replacements or buy them is an important decision: it not only af- fects replacement cost but also the future productivity of the herd. Knowing the cost of raising replacements in a separate heifer-raising enterprise will help you in this decision. Cows are culled for several reasons, such as low production, breeding troubles, disease. They are usually sold for beef at a price per pound much below the initial cost of purchase or raising. If a new cow costs $300 and you receive $140 for the cull, your replacement cost for that cow would be $160. Replacement percentage in a herd va- ries with the dairyman's policy as to replacement age of his cows and his de- sire to increase the herd average produc- tion per cow. In a good healthy herd, using first-calf heifer replacements of good breeding, production per cow has been maintained with a replacement per cent as low as 20 per cent. On the other hand, with some purchase of older cows and the need to improve production per cow, some herds replace up to one-third or more of the cows in a year. A good standard in herds being maintained by adding their own artificially sired heifers is around 25 per cent. Death losses must also be absorbed in replacement costs. Normally these are only from 1 to 2 per cent a year. If, in a 100-cow herd, 2 cows died, 23 cows were sold as culls and 25 new heifers were added at the prices mentioned above, re- placement cost would be figured as fol- lows: $7,500 for the new cows less 23 culls sold for $3,220 for a total herd re- placement cost of $4,280, or $42.80 per cow. Prices paid for cows or value of heifers raised and prices received for culls sold also influence net replacement cost. Rais- ing heifers at cost less than the farm value, at which they are charged to the milking herd, will increase total farm profit, but in the heifer-raising enterprise, not in the milking herd. The heifer- raising enterprise is discussed on page 40. Depreciation on cows may be included as an expense in private accounting, also profit or loss between book value and sell- ing prices as cows are sold. Such depre- ciation would be equivalent to the net replacement cost as figured here, and therefore is not included in the cost sched- ules shown. In any herd, there is some increase or decrease in number of cows during the year, so increase or decrease [23 in inventory value of cows on hand will affect the net replacement cost as figured in private accounting. A herd being in- creased in size or one in which abnor- mally heavy culling is done to increase average milk production per cow will have higher stock or net replacement costs per cow. However, figures in the tables on pages 14 and 15 are based on no change in size of herd, and it is assumed that culled and dead cows are replaced by new cows. Achieving the lowest possible net re- placement cost per cow and maintaining or improving average production per cow requires good management in maintain- ing good health and condition of cows to reduce death losses and culling for dis- ease. It also requires a good selection and careful buying of replacement cows or a good breeding program and selection of heifers to raise for replacement. A soundly planned replacement program, to have the best number of cows for your particular farm and milk-marketing con- tract, is important to future profits. Breeding cost The proper breeding of cows is impor- tant for two reasons. First, to obtain reg- ular lactation periods of proper length; second, to transmit high production and other desired characteristics to the calf that may be saved and raised for replace- ment purposes. Artificial insemination is now availa- ble at a reasonable cost in most California dairy areas. With cows coming and go- ing during the year, there are about 1.1 services or more to pay for per average cow. Costs vary around $7.00 per cow served, so breeding cost is around $7.70 to $9.00 per average cow with this method. The sires available through this method are generally better than can be provided on individual farms in natural breeding. Cost of natural breeding with owned bulls is usually greater than for artificial insemination, as discussed on page 19. In figuring costs in the milking herd using owned bulls, substitute calculated cost for the year for the breeding charge. Labor costs In recent years, higher outputs per dairy worker have been obtained because of better equipment and facilities, larger herds, and higher production per cow. Large dairies with hired milkers are han- dling up to 100 cows per milker. This has helped to keep labor cost per hun- dredweight of milk from increasing de- spite higher wage rates. Detailed one-day labor input surveys were made in the Los Angeles area in 1951 and again in 1959. Studied were mostly corral dairies with forage pur- chased and replacements raised else- where. Striking reductions in labor use were noted. A few selected items, as re- ported in "Dairy Labor Use in Southern California/' by H. Fisk Phelps, Univer- sity of California, Riverside, are shown in the table below. Dairy Labor in the San Joaquin Valley. A survey of labor use and costs was made in five counties in the San Joa- Items 1951 1959 Number of dairies 111 168 13.5 6.2 4.5 10.2 62.0 38.0 4.9 123 Average number of cows milked per dairy on day of visit 201 Dairies with pipeline milkers (per cent) 47.2 Dairies with "walk through" milking barns (per cent) 10.6 Average number of total workers per dairy 3.3 Total worker minutes daily per cow in herd 6.8 Calculated hours per cow year 41.0 Pounds of milk per cow milked, day of visit 46.0 Hours of milking and helper labor per 1,000 lbs of milk 2.7 [24 quin Valley in 1958 by local dairy farm advisors. The information was summar- ized by B. B. Burlingame but has not been published. On the 18 dairies covered, labor input was 45.6 hours per cow per year exclusive of care for young stock. Average hourly labor cost was $1.70 per hour which resulted in a labor cost per cow in the milking herd of $77.46 per cow. Average size of these dairies was 153 cows and annual production per cow was 10,339 pounds of milk and 423 pounds of milk fat. Several types of milking barns were observed with capacities of from 4 to 60 cows stanchioned at one time. Four- teen dairies, or 78 per cent, were using pipeline milkers. Hours of man labor per cow per year in good-sized commercial dairies vary be- tween 40 and 60. Fifty hours may be a good standard. Wage rates also vary con- siderably: from $400 to $500 a month or $1.75 to $2.00 an hour for milkers, and $1.25 to $1.50 for laborers used in feeding and other tasks. Our sample budget or standard for the 150-cow mar- ket-milk dairy on page 14 shows 45 hours per cow at $2.00 an hour for a total labor cost of $90 per cow which is 11 per cent of the total of all costs. Compared with other regions of the United States, California, with its mild climate, large-scale, and specialized-type dairying has a lower labor requirement per cow. But, labor is still a major input in milk production. It ranges between 10 and 25 per cent of the total cost of milk production in different milking herds. In production-cost estimates for market-milk dairies by the Bureau of Milk Stabiliza- tion, it was 16 per cent in 1961. A cost of this magnitude offers oppor- tunities for important savings. They are being made through better buildings and equipment, and arrangement of lanes, corrals, and feed bunks, with more me- chanical and self-feeding. Pipeline milk- ers have reduced milking time by up to 20 per cent as compared to the bucket- type machines. The smaller walk-through barn or milking parlor, with cows washed before entering, requires less labor than the older stanchion barn. By a system of gates and ramps, cows come to elevated stalls around the milker in some of the modern milking parlors, thus saving milker time and reducing the area to be cleaned. Good labor relations help obtain and hold competent workers that are so essen- tial to economical milk production. A study of labor-management relations on 40 market-milk dairies in Fresno County in 1952 (Giannini Foundation Mimeo Report 140) showed a rather high rate of turnover of employees: the average tenure was only 12 months for the 80 em- ployees interviewed. Rates of pay, work performed, and other matters varied widely among individual farms. Main reason given by employees for changing jobs was "lack of sufficient time off." The confining nature of dairy work prompted workers to change jobs to obtain a vaca- tion even without pay. Since this study, some 10 years ago, in- creased herd sizes and other technical developments have made the interest, in- dustriousness, and competence of dairy employees of greater importance to suc- cess and profit in dairy business. Good employer-employee relationships, ade- quate time off, and satisfactory working and living conditions and pay are essen- tial to the high efficiency of milk produc- tion on large commercial dairy farms. Management Costs The management function of planning, the making and carrying out of business decisions, was previously considered an input by the owner-operator to be com- pensated for from profit or earnings over and above all other production costs. If the operator's management was good, he made a profit; if not, he failed to recover his costs. With current trends to larger dairies, however, management is becom- ing an important input over and above the labor and capital provided by the [25 operator. On some large dairies, manage- ment is hired. The manager of the dairy provides a high type of service. His function consists of organizing the business ; obtaining the capital ; selecting and obtaining the land, equipment, and cows; and making the many administrative decisions in running the dairy and marketing the milk. The managerial and administrative functions, including office and accounting expenses, may lie between 5 and 10 per cent of other costs — up to $50 a cow. Although good management is an essential input in dairying for which there must be ade- quate compensation, this compensation can be earned by the higher profits re- sulting from its use. We do, however, in- clude it in our budget of inputs and costs. Management is recognized as a produc- tion cost in the surveys by the Bureau of Milk Stabilization at about 5 per cent of the total cost of milk production. In the sample budget on page 14, management is listed as $20 per cow, or 4 per cent of total cost. Miscellaneous Costs This group of expenses contains all others not covered elsewhere — property taxes on cows and facilities, insurance, veterinary services, dairy supplies, re- pairs, electricity, fuel, production testing of cows, and truck and tractor work. This group, excluding breeding fees, may total from $40 to $70 a cow. These costs are mostly essential and beyond the control of the dairyman, but can often be reduced by good buying of the essentials only. However, skimping on needed supplies, disease control, adequate sanitation and refrigeration, and testing of cows would be false economy which might reduce in- come more than costs. Some relatively fixed costs for the dairy herd as a whole can be reduced per cow by increasing the number of cows. Other costs fixed on a per-cow basis can be re- duced in terms of cost per hundredweight of milk by getting more milk per cow. Cost savings in this group will come through wise buying of essentials and us- ing facilities to full capacity. Many dairymen are using rented facili- ties, and hence have a different cost grouping than the owner-operator. Rent paid for dairy lots and buildings would replace some taxes, repairs, and part of the depreciation and interest on invest- ment mentioned below. Since rent usually approximates the annual cost of such fa- cilities to the owner-operator, total cost per cow is about the same for a renter. Sample budgets shown on pages 14 and 15 are on the basis of the owner-operator. Rent is discussed more fully on page 57. Depreciation This is the portion of the original cost of buildings and equipment that should be charged to each year of use, to recover the original cost by the time each item must be replaced. Of several ways to esti- mate depreciation for each item, the com- monest is the straight-line method: ulti- mate salvage value is deducted from the original cost, and the remainder is di- vided by the estimated years of useful life for each item. Total depreciation chargeable to the milking herd is the sum of the depreciation for all the items used by the milking-herd enterprise — the milk- ing barn and milk house, hay and feed- storage barns, corrals with fences and paving, milking machine, milk storage and refrigeration equipment, and miscel- laneous other items. Calf- and heifer- raising facilities should be charged to the heifer-raising enterprise and not the milk- ing herd. Some buildings may need to be divided between the two enterprises for accurate cost determination. Depreciation on cows, although taken on purchased cows in some private ac- counting, is not included here since it is covered in figuring the net replacement cost. Interest on Investment Dairying requires a considerable in- [26] vestment of capital. This input of capital has its cost in the form of interest on investment. Part of the capital is bor- rowed and interest is paid for its use. An- other part is furnished by the operator and interest is his compensation for its use. This properly is figured at a rate he could obtain elsewhere in an investment with similar hazards. For simplicity, we figure interest here on all invested capital at the average rates currently paid on borrowed funds secured by real estate and cows — about 6 per cent. The tables on pages 53 and 54 show a typical cur- rent investment and depreciation for two sizes and types of dairies and in sections for the milking herd, heifer-raising enter- prise and forage production or farming enterprises. Since buildings and equipment depre- ciate in value throughout their useful lives from cost to salvage value, we have assumed an average lifetime value, in order to figure interest on investment. This average value is a little more than half the original cost. For cows, it is about midway between cost and salvage value. In private accounting, interest on debts is a current cash expense. But interest on the operator's investment is seldom figured as a cost. However, the dairyman would do well to figure his investment and the rate of return he receives for its use. From his profit, he deducts a proper allowance for his own labor and manage- ment and considers the balance a return on his capital. He may find it anywhere from a loss to a gain up to 15 per cent of his invested capital. If it is a loss, he will want to do something about it — im- prove his business to make a fair return or sell out and invest his capital else- where and obtain other employment for his labor and managerial services. Aver- age returns to capital invested in land have been from 3 to 5 per cent in recent years. Management in dairy farming must probably be above average to ob- tain a return of 5 per cent or more on invested capital. STOCK AND MISCELLANEOUS INCOME In the usual commercial milking-herd enterprise, this income is usually small and not important in determining profit. It must, however, be included for ac- curacy in enterprise statements and anal- ysis. Calves sold or transferred to a heifer- or stock-raising enterprise are credited to the enterprise for the amount received or their farm value at the time of transfer. Their farm value consists in their price, less the cost of selling. The manure from the barns and dairy lots also is income to the dairy as sold or at farm value as picked up in the lots to be hauled to crop enterprises. Cull cows, as mentioned, are deducted from cows bought, to obtain the net re- placement cost (see page 23). Bull pur- chases and sales are handled in the breed- ing cost (page 24), thus are seldom an item of income. Some dairymen raise additional bull or heifer calves for sale as breeding ani- mals or for veal or beef. These are best handled in the heifer-raising enterprise and not as part of the milking herd. Milk used in starting calves is usually ignored and not credited to the milking herd and charged to the calves, but it should be if it is considerable. True veal is pro- duced mainly on whole milk with about 10 pounds of milk to a pound of gain. Hence, only calves with high birth weight justify this high-cost feeding and only when veal prices are high in relation to the farm value of milk. Feeding for veal production Whole milk alone, without supplements of grain or hay, is most satisfactory for producing the best grade of veal. Con- siderable experience is required for pro- ducing the most rapid growth without causing the calf to go off feed. As a rule, the one- to two-week-old calf will take ap- proximately 1 pound of milk per day for each 10 pounds of body weight. Later the [27] amount of milk should be increased grad- ually according to the judgment of the feeder. Calves raised by nurse cows usu- ally grow faster, with fewer digestive dis- turbances, than bucket-fed calves. About 10 pounds of milk per pound of gain is required and daily gains of 2.0 to 2.7 pounds can be expected. Most veal calves are marketed between four and eight weeks of age. They are first classified according to weight and later according to conformation, finish, or smoothness of fleshing. Calves of 110 pounds or less are referred to as light weight, those of 110 to 180 pounds as medium weight, and those of more than 180 pounds as heavy weight. Well finished vealers weighing 140 to 155 pounds and occasionally up to 180 pounds, which are marketed at six to eight weeks of age, bring higher prices. The quality of the veal is the most impor- tant factor in determining the price the producer will get for his calf. With milk for manufacturing purposes or surplus grade-A milk worth about $3.30 per hundredweight, feed costs for 70 pounds of gain would approximate $21. Add to this $20 for the value of a calf and $4 for labor and other expenses, and the total costs will be around $45 at marketing time — more than 30f!' per pound. Dairy steers for beef It rarely pays a dairyman to raise steers for beef. Feed and facilities on a dairy farm are usually more profitably employed in milk production and for raising heifers for replacement purposes. According to one recent study (Circ. 23, University of Nevada, 1959), to bring a dairy steer to 1,100-pound market weight requires $195 for feed, labor and purchase price of calf if hay is valued at $25 per ton. Where a dairy farm has surplus low-cost pasture for feed, it may pay to raise a few surplus male calves for beef. Holstein steers make economical gains on pasture, and although they bring less per pound, they cost less to start with than a beef calf. Raising registered cattle The dairyman with registered dairy cattle is both a producer of milk and a supplier of seed-stock cattle for the im- provement of the breed. Milk is still the major part of the income on such farms. Either production per cow must be higher than in grade commercial herds to justify the expenses of the breeding, registration, "official" testing and type improvement programs, or considerable income must be received from sale of stock. The influence of the registered cattle breeder on the dairy cattle industry is considerable. It is true that the increased use of artificial breeding has reduced the market for purebred bulls; but this only places a greater responsibility on those "breeders" that do supply artificial studs with replacement bulls. In 1961, an esti- mated 125 bulls were used on the 370,000 dairy cows bred artificially in California. Also, many commercial dairymen try to improve their herds through a construc- tive breeding program by purchasing high-quality registered bulls from the breeder. The breeder is always confronted with the problem of selling his stock at a profit. Many breeders sell by auction; others by private agreement. In either case, sales- manship is most important, and a breeder lacking this quality often finds it difficult to reap the rewards his superior breeding animals justify. In California during 1961, registered herds averaged 21 pounds more butter- fat per cow than grade herds. This dif- ference could be even greater were it not for the fact that the breeder, hoping to get one more valuable offspring, often keeps cows longer than the commercial dairyman can justify. [28] GETTING MAXIMUM RETURN FROM YOUR FEED COSTS Feed represents 45 to 65 per cent of the total cost of milk production. Sound economy or wasteful extravagance can influence this cost considerably. Most dairymen have some opportunity to in- crease their net profit either by reducing feed costs without reducing income or by increasing income without greatly in- creasing feed costs. For terms used in analyzing costs and feeding practices, see box on page 30. THE FIVE MAIN TYPES OF FEED Concentrates are relatively high in energy and low in crude fiber. They may contain large amounts of protein (i.e., cottonseed meal) or carbohydrates (i.e., barley) . Some concentrate feedstuff s may contain up to twice as much energy per pound of dry matter as forages. Concen- trate mixtures probably average about 70 mcal/cwt, but range from about 65 to 75 mcal/cwt. Concentrate mixtures contain- ing 12 or more per cent crude fiber are generally considered low-quality mix- tures. There are exceptions, however; for example, beet pulp contains about 75 mcal/cwt (high in energy) but has a rela- tively high crude-fiber content (about 15 per cent) . Concentrates must be fed to meet the total energy requirements of high-producing cows, even though ample good forage is available. In addition, con- centrate mixtures are formulated to sup- ply protein, minerals and vitamins as they are needed to supplement the forage con- sumed and to insure balanced rations. Hay is the main source of forage for California dairy cows. Most of it is al- falfa, which is or can be highly palatable, and is adequate to meet most protein and mineral needs. Cows may consume from 2.5 to 3 pounds of alfalfa per 100 pounds of body weight depending on quality and amount of concentrate eaten. Most hays contain around 40 meal of net energy per cwt. Hay quality is influenced especially by stage of maturity and extent of leaf shatter. Both result in higher crude fiber, and as crude fiber increases, hay quality The net energy content of hay and other feed types varies with their moisture and fiber content. This table shows energy contents and costs typical of the San Joaquin Valley. You may use it to calculate your feed needs and costs. If obtainable, substitute energy contents and prices applicable to your particular situation. HOW TO CALCULATE FEED NEEDS AND COSTS Unit Mega- calories Quantity equivalent to 1 ton average hay Sample cost per AUM or ton Cost per Feed 100 mega- calories ton hay equivalent AUM AUM AUM Tons Tons Tons Tons Tons Tons 320 320 320 880 800 700 210 267 1400 2.5 2.5 2.5 .9 1.0 1.1 4.0 3.0 .6 Dollars Pasture 4.00 8.50 7.50 24.00 22.50 21.00 5.80 9.00 60.00 1.25 2.62 2.35 2.72 2.81 3.00 2.76 3.37 4.29 10 00 Irrigated — on crop land 21.25 18 75 Alfalfa hay-producing areas Good — 23 per cent crude fiber* Average — 27 per cent crude fiber 21.60 22.50 23 10 Green chopped alfalfa Corn silage Usual dairy concentrate mixture 22.10 27.00 36.00 Crude fiber on a 10 per cent moisture basis. [29] Terms Used in Analyzing Feed Costs and Feeding Practices Net Energy (NE) is the net portion of the feed available for production. For practical purposes, body maintenance and milk production are the main considerations for rations of lactating cows. Net energy, expressed as megacalories 1 per hundredweight ( mcal/cwt ) is more accurate than total digest- ible nutrients (TDN) for comparing the relative energy values of roughages and concentrates. This is because net energy accounts for gaseous losses, urinary energy losses and heat losses, in addition to fecal energy losses. This circular uses net energy because it discusses relative values of different classes of feeds and not details on feeding standards. 1 A megacalorie is a term used to measure heat and its use is preferable to that of "therm." Both terms indicate 1,000,000 small calories. Animal Unit Month (AUM) is the amount of feed required by one mature head of cattle for one month. It is equivalent in nutrients to 0.4 tons of average hay, or 320 meal of energy. Feeds are measured and sold by weight in pounds or tons. For convenience, we use tons. An exception is pasturage eaten by an animal which is not weighed but is rented or sold at a certain price per head per month. Animals of different size vary in the amount of feed they eat, so a standard unit of measure — AUM — is used. Hay Equivalent (HE), another convenient expression for total nutrients, means the energy equivalent of 1 ton of hay which, on the average, contains 800 meal of net energy. With an AUM being equivalent to 320 meal of net energy, 2.5 AUM are required to furnish the same amount of energy as 1 ton of hay. The table on page 29 shows hay-equivalent factors for the other type feeds. To convert a given number of AUM's of pasture to hay equivalent, divide that number by 2.5 or multiply by 0.4. These relationships are useful in dairy farm management when adding up all feed used to see how this compares with the feed probably needed, and in breaking down the annual feed needs into the most economical proportions of types of feed, both home-grown and purchased. Fat-Corrected Milk (FCM) is a term used to express milks of different composition on a standard-energy basis. Four per cent FCM is calculated by multiplying the actual milk yield by 0.4, and then adding to this product the actual fat yield multiplied by 15. For example, suppose a cow produces 60 pounds of milk containing 3.5 per cent fat (60 x 3.5 per cent) or 2.1 pounds fat. Fat-corrected-milk production, then, is (60 x .4) plus (2.1x15), or 55.5 pounds of 4 per cent milk. The table on page 32 indicates expected change in milk yield as daily grain levels are increased. These changes are in terms of 4 per cent milk. If your cows test only 3.5 per cent butterfat, the expected change would be about 8 per cent greater. If your bulk milk contains 5.0 per cent butterfat, the expected change would be about 15 per cent less than indi- cated. [30] decreases. The University of California has developed a simple, reliable chemical test for determining alfalfa hay quality. The value and the use of this test are dis- cussed on page 38. Modern methods of mechanized har- vesting have made hay production pos- sible in areas where it is a profitable crop, and from which it may be transported for use in other areas. Thus, its availabil- ity the year around makes it a basic dairy feed. Even stock on irrigated pasture or green feed need and usually receive some hay for greater total consumption and higher energy intake. Silage can be made from several crops, but corn and sorghum are used most often. Some silage from alfalfa, and mix- tures such as oats and vetch or grasses and clovers, are being made and used successfully. Silage is fed where it can be grown and stored more economically than hay, and substitutes for much of the hay. Some dairymen use it in the belief that added succulence to an otherwise dry ration improves production. Tests and ex- perience have shown, however, that satis- factory results can be obtained with or without silage or other succulent feeds. Because of moisture differences, silages are compared with hay on a dry-matter or hay-equivalent basis. Usually, about 3 pounds of silage are considered equal to 1 pound of hay. The energy content usu- ally varies around 13.4 mcal/cwt. Corn silage from well-eared corn is an excel- lent feed for dairy cows if supplemented with additional protein. Grass and legume silages are usually higher in protein but may be lower in energy than corn silage. Sorghum silage usually contains less en- ergy than corn silage but is a satisfactory feed. Green feed, freshly chopped from al- falfa or grass and legume mixtures, is often used as a replacement to pasture and instead of silage during the growing season of approximately eight months. Green feeding has the disadvantage that a crop may not always be available at the proper stage of maturity so that qual- ity is not uniform. During peak produc- tion periods, there is usually an excess which may be put up as hay or silage. The feeding value of chopped green al- falfa is about 10.5 mcal/cwt, but may be considerably less depending on stage of maturity and moisture content. The amount of green chop equivalent to 1 pound of good quality alfalfa hay may vary from 3.8 to 4.0 pounds. Before go- ing into a green-feed program, a dairy- man should make careful calculations of the probable costs in relation to alterna- tive programs. Pasture quality varies considerably and is affected greatly by grazing prac- tices and management. When land has alternative uses such as for alfalfa or row- crop production, irrigated pastures gen- erally require annual yields of at least 12 AUMs before they are economically feasi- ble. Few dairymen do this well in their pasture management and many will find their pasture costs almost as high as that of hay. Lower-cost irrigated pasture will be found on shallower soils unsuited to alfalfa and other crops. Natural pasture is cheaper than irri- gated pasture and other feeds. It is widely used for heifers and dry stock and, to a considerable extent, for milking herds in the coastal counties. It is the main feed in seasonal manufacturing milk produc- tion in nonirrigated areas. However, the natural feed is good for only about four months, so considerable hay and silage must be depended upon during the re- mainder of the year. GOOD MANAGEMENT IN FEEDING The composition of diets for milking cows can be flexible, allowing several al- ternatives in combining feedstuffs to achieve an economical feeding program. Feed costs may be regulated by manipu- lating the relative amounts and types of ingredients in the ration to be fed. Experimental evidence and practical [31 experience clearly show that economical levels of milk production are not usually obtained on all-roughage diets. The main reason for this is that the cow has only a limited capacity and cannot consume suf- ficient energy by roughage alone. U. S. Department of Agriculture researchers found that cows fed an all-forage ration produce about 30 per cent less milk than cows fed grain in average amounts. To obtain even this production, the forage must be of good to excellent quality. An all-concentrate or very high-concen- trate diet, on the other hand, may have undesirable consequences. When the con- sumption of coarse roughage is below 5 or 6 pounds per day, the percentage of butterfat in the milk may become low. To date no control for this response is known, other than including at least some coarse roughage in the diet. The prevalent practice on most Cali- fornia dairy farms is to feed a given amount of concentrate per cow, letting the cow eat as much roughage as she wants. To determine how much concen- trate you should add to make the ration most profitable, follow this rule of thumb : Keep increasing the level of grain as long as the added returns from the milk more than offset the cost of the added feed. Recent research on this matter was con- ducted by the University of California and published in the proceedings, 14th Annual California Animal Industry Con- ference, 1961. The research, estimating input-output relationships with dairy cows, reached the following conclusions: • When grain intake increases, hay in- take decreases at an increasing rate. • Maximum feed consumption, when good quality alfalfa hay is fed, is usu- ally reached when the grain con- sumption is about 16 pounds daily per cow. • Maximum energy intake is not ap- proached until cows receive more than 20 pounds of grain daily. • Increased grain intakes at high grain-feeding levels result in less added milk than same amounts of added grain at the low grain-feeding levels. • Cows with high inherent productive capacity show greater response to grain feeding than cows of lower ability. Therefore, higher levels of concentrate feeding are justified for the cows of high ability. • The response of high-concentrate feeding is less in cows in late lacta- tion than in early lactation. If a feed- ing program is based on predicted milk response, the ability of cows to meet the theoretical conditions can be used as a guide for culling. • The economic levels of concentrate feeding are higher when common- EFFECT OF INCREASED GRAIN FEEDING LEVELS ON HAY CONSUMPTION AND MILK PRODUCTION Increasing daily grain from Per cow Change in monthly grain Change in monthly hay intake Change in monthly fat- corrected milk yield Pounds 6 to 8 8 to 10 10 to 12 12 to 14 14 to 16 16 to 18 18 to 20 +60 -36 +75 +60 -39 +63 +60 -45 +57 +60 -54 +45 +60 -60 +33 +60 -69 +27 +60 -75 + 18 [32] quality roughage is fed than when good-quality roughage is offered. The higher the quality of roughage, the less the increase in milk production when grain feeding is increased. The data from which some of the above conclusions were drawn are summarized in the table on page 32. The following three examples demon- strate the economic principle and show that different situations may yield quite different answers. These data may not ap- ply to cows in the late stages of lactation where the expected milk production re- sponse is less than that expressed in the table on page 32. Example 1 : Market-milk producer, Los Angeles Area In this example we assume a milk price of $5.00 per cwt, with grain at $62.00 and alfalfa hay at $32.00 per ton. By in- creasing daily grain from 18 to 20 pounds, monthly income over feed cost would increase 24 cents per cow. At this level of grain feeding, response in milk yield would be 18 lb per month or 0.6 lb per day. This small increase — worth only 24 cents — indicates that, on a herd basis, still more grain would result in little, if any, additional response. If grain mix- tures cost $70.00 per ton instead of $62.00 as in our example, the 20 lb daily grain schedule would be optimum. Example 2: Market-milk producer, San Joaquin Valley This example assumes that the Valley dairyman obtains his concentrate mix- tures for $66.00 per ton, buys hay for $26.00 per ton and receives $4.50 per cwt for his milk. In this case, 18 pounds of grain mixture is the most profitable feed- ing level — addition of another 2 pounds would increase costs more than returns. EFFECTS OF INCREASED GRAIN FEEDING ON MONTHLY INCOME (Los Angeles market-milk conditions) Increase daily grain from Per cow per month Net added cost of hay and grain Value of added milk produced Change in net income Pounds Dollars 14 to 16 .90 .76 .66 1.65 1.35 .90 + 75 16 to 18 + 59 18 to 20 + 24 EFFECT OF INCREASED GRAIN FEEDING ON MONTHLY INCOME (San Joaquin market-milk dairy) Increase daily grain from Per cow per month Net added cost of hay and grain Value of added milk produced Change in net income Pounds Dollars 12 to 14 1.28 1.20 1.08 1.00 2.03 1.49 1.22 .81 + .95 + .29 + .14 — 19 14 to 16 16 to 18 18 to 20 [33] Example 3: Manufacturing-milk producer Consider the situation of a dairyman producing milk for manufacturing pur- poses. Allow a similar concentrate price of $66.00 per ton, but assume that rea- sonably good roughage is fed for a hay equivalent price of $20.00 per ton and that he receives $3.25 per cwt for his milk. Under these conditions, 14 pounds of grain mixture daily is the optimum level. If good native pasture is available and its hay equivalent cost is $16.00 per ton, 12 pounds of grain would be the maximum profitable level. While the three examples indicate the general principle to follow in selecting profitable rations, there are several com- plicating factors. The methods discussed here apply only to herd-average feeding schedules. The dairyman may vary the exact amount considerably from cow to cow, according to cow ability, stage of lactation, and individual response to con- centrate feeding. Furthermore, it is known that when poor roughage is fed, economic levels of grain feeding are considerably higher. Complicating this, however, is the fact that when grain consumption increases and roughage consumption is lowered, the grain mixture may need protein sup- plementation. In this event, the cost of the added protein needed should be included in determining the most profitable ration. Feeding according to production The amount of grain mixture needed by the individual cow depends not only on her yield of milk and fat but also on the amount and quality of the roughage she eats. A number of rules of thumb are in common use, but few of them are ap- propriate under all conditions. One di- vides daily milk by a factor of 3 or 4, and a second divides monthly butterfat pro- duction by 5. Both of these tend to over- feed the low producers. A third method is to subtract 25 from the pounds of monthly butterfat produced and divide the remainder by 2. This system tends to overfeed the high producers. Most other systems are rather awkward to use and many of them fail to recognize the fact that as grain consumption is increased, roughage consumption is decreased. The suggested grain feeding schedule found below is based on the table on top of page 35. • Roughage consumption decreases as the amount of concentrate offered is increased. • Cows producing more than 75 lbs of butterfat per month probably are on an energy-deficient diet. A portion of the energy required for this high pro- duction is supplied by body reserves. • Cows producing 30 lbs or less butter- fat monthly probably require no con- centrate if the roughage contains at least 40 meal of energy in each 100 EFFECT OF INCREASED LEVEL OF GRAIN FEEDING ON MONTHLY INCOME (Manufacturing-milk dairy) Increase daily grain from Per cow per month Net added cost of hay and grain Value of added milk produced Change in net income J'uunds Dollars S to 10 1.59 1.53 1.44 1.38 2.05 1.85 1.46 1.07 + .46 10 to 12 + .32 L2 to 11 + .02 14 to 16 -.31 [34 SUGGESTED GRAIN-FEEDING LEVELS FOE INDIVIDUAL COWS WHEN HIGH-QUALITY ROUGHAGE IS FED FREE CHOICE Monthly butteifat Daily fat-corrected milk Daily grain mixture per cow Probable hay equivalent consumption Pounds lb/ cwt of animal 2* 4* 6 10 15 19 23 28 3 35 40 50 60 29 33 42 50 58 2.9 2.8 2.7 2.6 70 2.5 80 67 2.4 90 or more 75 or more 2.3 Additional grain may be desirable for proper conditioning of the cow. lbs of hay equivalent. However, some grain may be desired to condition the cow for the next lactation. Feed use per head Checking feed use against a standard or average may be helpful in analyzing a feeding program for overfeeding and waste, or underfeeding. The table on page 29 is presented as a suggested standard for comparison of feed use by dairy stock. These figures are calculated for herds comprising mainly the larger dairy breeds (Holsteins and Brown Swiss). Feed use in herds with smaller cattle will be slightly less. To make a comparison to these stan- dards, you need a fairly accurate account- ing of the following factors: • Average number of cows for the year — count once a month or obtain from DHIA records. STANDARD FOR COMPARING FEED USE BY DAIRY STOCK Period fed Net energy Quantity for period Average per day Total for period Concen- trate Forage Months 2 10 12 4 12 12 12 12 12 12 12 Meal Tons .04 .43 .09 .09 .61 .70 1.27 1.83 2.40 Tons HE Calves to 2 mo., not inch milk or milk replacer .7 5.6 8.0 13.0 11.0 13.2 15.6 16.0 18.1 20.1 22.1 40 1,700 2,920 1,560 4,000 4,800 5,690 5,850 6,600 7,340 8,080 .01 1 38 3 50 Heifers 2 to 2 1/3 years 1 79 5 00 Bulls 6 00 Average production of cows Milk (FCM) Butterfat 7,500 8,000 10,250 12,500 14,750 300 400 450 500 550 6.05 6.09 6.04 5.97 5.90 [35] • Number of bulls and young stock fed through the year — from occasional counts or inventory records. • Total quantity of each type of feed used during the year: Concentrates — add up feed tags. Hay — record hay grown plus hay bought corrected by inventory of hay on hand at beginning and end of year. Silage or green feed — tons grown or purchased corrected by inventory of silage on hand at beginning and end of year. May be measured by count- ing loads. Pasture — record of actual use by age groups for each kind of pasture each month. • Pounds of butterfat produced — from DHIA record or figured from sales. The feed use shown here is typical of dairy animals of the larger breeds and somewhat above Morrison standards, to allow for a little waste. Feed shown for calves is in addition to milk or milk re- placer. The last section shows total feed for the period as usually divided between concentrates and forages, with the latter expressed in tons of hay equivalent. Illustration of a check on annual feed use: A herd with 69.5 average cows for the year and raising calves and heifers had this total year's feed use. CONCEN- AUM HAY FEED TRATES, PASTURE EQUIV., TONS TONS Calf meal 1.2 Concentrates 106.8 Hay, all bought 475.8 Irrigated pasture. . . 94 37.6 Rented pasture for heifers 335 134.0 Total 108.0 674.4 Here are the feed requirements for all animals in the herd during the year as computed from the previous standard. STOCK CONCEN- HAY TRATES, EQUIV., TONS TONS Calves 0-2 months, 24 head, through this 2-month pe- riod, 24 times .04 T concen- trates and .01 T hay equiva- lent 96 .24 Calves 2 mo. to 1 year, 15.6 head, through this 10-month period, 15.6 times .43 T con- centrates and 1.38 T hay equivalent 6.71 21.53 Heifers 1 to 2, 17 head times .09 T concentrates and 3.50 T hay equivalent 1.53 59.50 Heifers over 2, 6 average for year at 5.0 T hay equivalent 30.00 Subtotal, young stock .. . 9.20 111.27 Subtracting above young stock use from total leaves proba- ble feed used for cows 98.80 563.13 Standard for 69.5 cows, aver- age production 12,500 lbs 4% milk, at 1.83 T concen- trates, and 5.97 T of total hay equivalent 127.19 414.92 Difference -28.38 148.21 Concentrates fed were 22 per cent be- low the standard. The surplus of 148.21 tons of total hay equivalent in hay and pasture was not all used by cows, since 111 tons was the need for the heifers, but 134 was in the rented pasture for heifers. Deducting this 23 tons of surplus hay equivalent to heifers leaves 125.21 of sur- plus to the cows, about 30 per cent above the standard requirement. The 28.4 tons of concentrate shortage converts to 47.3 tons of hay equivalent which would re- duce the surplus of hay equivalent to 96.8 tons. This would still be excessive and in- dicates poor quality and considerable waste. Obviously this information would result in the operator increasing the con- centrate feeding to cows and more atten- tion to forage quality and the quantity used. [36] Selecting and purchasing concentrates Wise buying of feed will help insure a profit in dairying. Mixed concentrates in bulk by truck loads are usually bought at current market prices. There is little op- portunity to take advantage of seasonal "lows" in grain prices by buying single ingredients to be stored for feeding later unless the operation is sufficiently large to justify storage, grinding and mixing fa- cilities. You may, however, save money by taking advantage of competitive prices for concentrates of the quality and kind required. Concentrates in dairy rations are mainly needed to supply adequate en- ergy; under certain conditions also to balance the protein and, in rare cases, vitamin A. When alfalfa hay or green feed is the primary source of roughage, concentrates are needed only for energy. However, salt (mineral) should be pro- vided either in the concentrate or offered free choice in the corral. Under California regulations the feed tag must list the names of the ingredients in the order of decreasing amounts pres- ent; minimum amounts of crude protein and crude fat; and maximum amounts of crude fiber and ash. From these basic requirements, a stu- dent of feeding programs can estimate with reasonable accuracy the relative amounts of energy and digestible protein contained in a concentrate mixture. Gen- erally, about 75 per cent of the crude pro- tein is digestible and actually used by the cow. The energy content is estimated by determining the relative amounts of each feed ingredient and by the crude fiber content. Usually feeds high in crude fiber contain less energy than feeds containing lower amounts of crude fiber. Beet pulp is an exception since its fiber is more highly digestible than the fiber in most feeds. Unless beet pulp is near the top of the list of ingredients, one can usually assume that feeds containing more than 12 per cent crude fiber are relatively low in net energy (below 66 mcal/cwt) . Feeds containing 10 to 12 per cent crude fiber are usually medium-energy feeds (66 to 70 mcal/cwt), and feeds contain- ing less than 10 per cent crude fiber and comprising mainly high-energy ingredi- ents probably contain from 70 to 75 meal of net energy in each 100 pounds. Before ordering a concentrate mixture determine how much protein is needed to supplement the roughage. This is impor- tant because high-protein feeds are often the most expensive component of the con- centrate mixture. When plenty of good legume forage is offered, a crude-protein content of not more than 12 per cent in the grain mixture is usually adequate. However, do not restrict the amount of protein for a high-producing cow, since protein is not effectively stored in the cow's body. A shortage of protein will result in lower production, regardless of the feed's energy content. Good forage at low cost Forages furnish most of the feed used in the dairy enterprise, and its cost can greatly influence profit. Whether to pro- duce milk largely with purchased hay, as in a corral dairy, or have more land and grow one's own forage is an important question that each dairyman must answer. Several factors influence this decision. Location of land available may be the controlling factor. A corral dairy in a metropolitan area is usually limited to hay brought from distant producing areas. Farther out, where there are some farming possibilities, some of these dairies may use a little green feed or si- lage to supplement purchased hay, even though its production may result in nutrient costs as high as in the hay that is bought. Alternative use of the land is a major factor in many areas. In farming regions with good soil adapted to a wide range of crops, high land values, taxes, irrigation water and other costs may result in forage production costs too high to offer any [37] advantage over purchased hay. Also, the same land may be of greater value for producing cash crops such as cotton or vegetables and thus not be desirable for pasture or silage production even though such feed could be produced more cheaply than purchased hay. The size of the herd is another contrib- uting factor. Dairymen managing rela- tively small herds may not be able to justify expensive green-chop equipment while irrigated pastures may be rather easily managed. On the other hand, it may be difficult for dairymen with large herds to manage properly a pasture program, while the investment necessary for a green feed or silage program may be quite profitable. Ask your Farm Advisor for help in analyzing your farm business and in developing your most profitable forage program. The cost of hay, green feed, silage and/or pasture per unit of energy should be considered in choosing the type of roughage to be used. Unless reliable esti- mates of the energy content are available from specific analyses, use the data in the table on page 29 for determining relative values. For alfalfa hay, a rapid and ac- curate chemical test is available for de- termining its energy value (see below). The feeding value of hay varies with stage of maturity and extent of leaf shat- ter. Both affect the level of crude fiber. To be of high quality, hay must have a low crude-fiber content; as fiber increases, hay quality decreases. Digestible protein is also closely related to the crude- fiber content. Consequently, only two analyses are needed to evaluate alfalfa hay — a dry-matter determination and a crude- fiber determination. These values will indicate net energy and digestible protein. Baled alfalfa hay will usually dry out to about 90 per cent dry matter in the barn. Hay purchased or fed at lower dry matter levels contains more water and less energy than 90 per cent hay. On the aver- age, each 1 per cent decrease in dry mat- ter reduces feeding value of alfalfa hay by approximately 1 per cent. According to Marin County field observations, dry- matter content of tested hay varies from about 78 to 90 per cent. This means that a pound of the hay with the lower dry matter has only seven-eighths as much per unit of weight as the dryer hay if both have the same quality in other respects. The crude-fiber content of the hay is equally as important as the dry matter. Experience indicates that there is nearly a 25 per cent variation in the energy content of alfalfa hay as indicated by differences in the crude-fiber content. Of course, there are other important points, some of which can be judged by visual inspection ; the chemical test will serve to supplement these observations. A chemical analysis is of no use unless the sample analyzed truly represents the hay being considered. A hay sampler is available at most Farm Advisor offices and should be used on a minimum of 19 bales from a single lot of hay. A "lot" of hay is defined as one cutting of hay from the same field. The samples collected must be kept in airtight cartons so the moisture content will not change from that of the hay. Your Farm Advisor can provide a list of laboratories equipped to perform the modified crude-fiber laboratory tests. The dry-matter results may be valid for only a few days since the moisture content of hay shifts rapidly with changes in weather. Crude fiber, however, is valid for a long time but needs to be recalcu- lated on an adjusted dry-matter basis if the moisture content shifts. To convert to a 90 per cent dry-matter basis, use the following conversion factors : If the laboratory M iltiply cnulc reports show fiber by: Per cent DM. 80 1.13 82 1.10 84 1.07 86 1.04 88 1.02 [38] Prevent contamination of milk from pesticide residues It is illegal to sell milk foreign substances which include residues resulting from feeding contaminated feeds, the use of pesticides on the animals, or residues resulting from the use of anti- biotics. The tolerance for these materials in milk is ZERO. Insecticide contamina- tion of milk is most likely to come from feeds (primarily roughage), and from pest control measures. Animals exposed to certain pesticides in their feed or water, or through skin absorption, may store these materials in their body fat or other tissues. Some of these chemicals (chlori- nated hydrocarbons such as DDT) are cumulative — the amount stored in the animals can increase with repeated ex- posures. Research work done to date indicates that when such chemicals are stored in an animal's body, they are released into the milk even after the animal is no longer exposed to or receiving insecticides in her feed. This makes the problem more serious because it could take from several weeks to several months for the milk to become free of these residues if they are stored in large amounts in the cow's body. Select feeds carefully Do not feed vegetable by-products such as sweet corn, pea vines, or lima bean vines unless you are certain they are free from pesticides which can appear as a residue in milk. Sweet corn is particularly risky because DDT is used frequently in large amounts for the control of corn ear- worm. Silage made from these crops is as hazardous as the fresh forage. The feeding of vegetable packing-house trimmings is also risky because a wide variety of insecticides is used in the pro- When you know the crude-fiber content at the 90 per cent dry-matter level, the follow- ing table will give you the energy content and comparative value of the hay at various market prices. Also included are comparative values of silage, fresh green feed and irrigated pasture. This knowledge of relative costs and feeding value will enable you to plan a forage program which will provide adequate amounts of high-quality feed at low cost. HOW TO JUDGE WHICH FEED IS A GOOD BUY Alfalfa hay, 90 per cent D.M. Comparative value, if market value of average alfalfa is Quality Crude fiber content Net energy $20 per ton $25 per ton $30 per ton $35 per ton per cent Less than 21 22-24 25-27 28-30 mcal/cwt 47.4 44.3 41.4 39.0 35.2 $22.90 21.40 20.00 18.84 17.00 6.67 5.26 8.00 $28.62 26.75 25.00 23.55 21.26 8.33 6.58 10.00 $34.35 32.10 30.00 28.26 25.51 10.00 7.89 12.00 $40 07 37 45 35 00 Fair 32 97 29 76 Silage, value per ton 11.67 9 21 14 00 To determine which feed is the best buy, use the following procedure: If the market value of good hay is $30.00 per ton, hay of excellent quality is a good buy if it can be purchased for less than $34.35. On the other hand, green chop must be delivered to the cows for less than $7.89 per ton before it can be considered the more economical feed. [39] duction of fresh vegetables, many of which will accumulate in the fat of the animals and be secreted in the milk. Watch alfalfa seed or clover seed threshings very carefully — as chlorinated hydrocarbon insecticides are widely used in commercial production of these seed crops. Be careful of fruit by-products such as almond hulls and apple pulp or pomace — these and other fruits are usually treated with insecticides during the growing season. Do not use DDT or similar insecticides on forage that is to be pastured or fed. Ordinarily, phosphate insecticides of short residual nature such as parathion, malathion, Systox, Dylox, Phosdrin and others are used for insect control on hay crops; however, Sevin and Methoxychlor can be used on forage crops providing the directions for use are followed. Even though DDT and other chlori- nated hydrocarbon insecticides are not applied to alfalfa in California, contami- nation of this crop may result from drift of these chemicals into alfalfa when neighboring crops are being treated. When in doubt whether your hay is contaminated, arrange for tests to deter- mine the amount and kind of insecticide present. Be sure the sample tested is represen- tative of your entire lot of hay. For further information regarding *< approved materials for use around the dairy or on feeds and how to use them, consult your Farm Advisor. THE REPLACEMENT HEIFER-RAISING ENTERPRISE Most dairymen prefer to raise their own replacement heifers from calves they have selected from their better cows. They feel they can improve their herd faster in this manner than by buying cows of less dependable productive capacity. Hence they may be willing to raise re- placements at a higher cost per head than that for which they could be purchased. Heifers can be raised more cheaply in natural pasture for part of each year in areas where forage costs are lower. Some dairymen rent pasturage for their grow- ing heifers off the farm, or put them out to be raised on other farms at a head- month or pound-of-gain basis. But supply and demand determine current prices of springer heifers or cows for replacement purposes — not costs of growing them. The heifer raising, considered as a separate enterprise, would cover all costs of raising replacements from the newly dropped calf to the springer ready to drop her first calf. Consideration of heifer raising as a separate enterprise requires records or estimates of the feed, labor, and other items separately from those for the milking herd. The heifer calves selected to be raised would be charged to the heifer enterprise at a farm value at that time and credited to the milking herd. When mature and transferred to the milking herd, each would be charged to the milking herd and credited to the heifer-raising enterprise at current farm values. Current values have recently been around $30 for heifer calves of good breeding and $275 to $300 for the two- to two-and-a-half-year-old heifer ready to freshen. The value of the heifers raised provides the income to this enterprise. Costs of the calves, feed, labor, and mis- cellaneous items are deducted to learn whether the heifer-raising enterprise is conducted at a profit or a loss. Over a year's time, there will be many new calves The table on page 41 lists the cost of raising Holstein heifers from calves worth $30 apiece through two years under conditions of the San Joaquin Valley. It is based on a study by farm advisors in the San Joaquin Valley for 1961 : [40] HOW MUCH IT COSTS TO RAISE DAIRY HEIFERS (San Joaquin Valley, 1961) Cost items by age periods to 2 months: Weight 90 to 148 lbs Milk substitute 60 days except first 3 ; 45 lbs at 16 cents/lb Calf concentrate 10 lbs first month and 70 lbs second month, 80 lbs at $3.75 cwt. Alfalfa hay, 75 lbs at $25 a ton Total feed cost to 2 months Original cost or value of calf Labor Veterinarian and veterinary supplies Bedding Buildings, pens and equipment Death loss at 5 per cent Miscellaneous, including interest (43 cents). Total cost to 2 months . 2 to 6 months: Weight 148 to 355 lbs Calf concentrate: 400 lbs at $3.75 cwt. Hay : 600 lbs at $25 a ton Total feed cost 2 to 6 months . Labor Bedding Miscellaneous, including interest ($1.40). Total cost 2 to 6 months Accumulated total cost to 6 months. 6 to 12 months: Weight 355 to 632 lbs Concentrates : 450 lbs at $60 per ton . Hay: 2,160 lbs at $25 per ton Total feed cost 6 to 12 months. Labor Miscellaneous, including interest ($3.30). Total cost 6 to 12 months Accumulated total cost to 12 months. 12 to 24 months: Weight 632 to 1,069 lbs Hay and other forage, 4 tons of hay equivalent at $22. Labor, figured on some pasturing Breeding Miscellaneous, taxes, etc Interest at 6 per cent Total cost 12 to 24 months Accumulated total cost to 24 months. Cost per heifer Dollars 7.20 3.00 .94 11.14 30.00 5.50 3.00 1.50 1.50 2.35 2.00 56.99 15.00 7.50 22.50 3.30 1.00 3.50 30.30 87.29 13.50 27.00 40.50 5.00 6.40 51.90 139.19 88.00 7.00 6.00 11.58 119.18 258.37 The list shows that it costs $258.37 to raise a heifer calf through 24 months under the conditions that prevailed in the San Joaquin Valley in 1961. The feeding schedule is based largely on hay as the main forage, and on the assumption that pasture would cost almost as much as hay for an equivalent amount of feed. Many Holstein heifers are not ready to freshen at two years of age, so a few months at $10 a month would bring total cost for a 28-month heifer to about $300. [41] entering the enterprise and springer heifers leaving, with animals of all ages being fed and cared for continuously. Costs per springer raised can be obtained by dividing total costs in the enterprise for a year by the number sold and trans- ferred out during the year. There are a few farms in California that have no commercial milking herd as such, but specialize in raising dairy The table below presents a sam,ple budget for an enterprise that would turn out 38 springers at the age of 28 months annually — enough to provide replacements for the 150-cow milking herd whose sample budget is given on page 14. The costs of heifer raising are based on the feed and labor use shown by periods on page 41, with a period added from 24 to 28 months, and lower-cost irrigated pasture substituted for half the hay used to grow the heifers. In the budget listed below, it is assumed that 46 calves would be started each year, four would die, and four unpromising animals would be sold, to provide the 38 head of 28-month-old heifers needed. Death loss is covered by dropping animals, so is not shown as a cost. HOW MUCH DOES IT COST TO RAISE 38 SPRINGERS AS REPLACEMENTS FOR A 150-HEAD MILKING HERD? Age period through which each heifer Months in period Number entering each period annually Usual number on hand at all times. . . . Cost items to 2 2 to 6 6 months 1 to 2 2 years to 28 months Total enter- prise months months to 1 year years 2 4 6 12 4 46 44 42 40 39 44 under one year 40 13 97 Dalian Cost per *. . heifer "( ut" Inputs and costs Milk substitute 2,000 lbs at 16 cents Calf concentrates 10. 4T at $75 Concentrates 9T at $60 Alfalfa hay, 37T at $24 per T Other forage-Hay equiv. HOT at $24 Irrigated and other pasture 382 AUM at $7.50.. 320 134 Total feed cost Value of calves in, 46 at $30 per head Labor 475 his (1.3 per day) at $2.00 Miscellaneous costs, taxes, medicines, etc Breeding fees 40 at $7.00 Depreciation calf barn and equipment Interest on investment at 6 per cent, table page 41 495 1,380 250 Total all costs Less heifers culled and sold — 4 total 30 646 317 963 140 40 540 530 420 1,490 210 80 1,896 1,490 3,386 260 280 744 580 1,324 90 200 Net cost 28 mo. heifers raised Value of heifers transferred out 38 at $300. Management income or true profit 3:0 780 540 888 2,640 2.490 7,658 1,3£0 9£0 3F0 2S0 143 712 11,503 350 11,153 11,400 247 8.42 20.53 14.21 23.37 69.47 65.53 201.53 36.21 25.00 10.00 7.37 3.76 18.74 302.71 9.21 293.50 300.00 6.50 The annual costs cover the 97 head of the ages shown in line 3 above. Each heifer turned out as a springer remained in this enterprise 2% years. Net cost was almost per springer raised. [42] heifers for dairymen in the congested r corral dairy area. They may buy the calves and sell back the springers when ready to freshen or take calves in to raise for a charge per time period or pound of gain. This dairy-stock-raising enterprise is usually in an area where lower-cost for- / age is available from natural range and other forages. No sample budgets for such an enterprise are available. Profit factors, however, would be high efficiency in the form of good growth from available low- cost feeds and a good margin between calf costs and selling prices of springers or a good fee for raising the heifers. FORAGE-CROP ENTERPRISES Many California dairy farmers pro- duce part or all of the forage needed by the milking herd and heifers raised on the farm. This forage is properly charged to the dairy at farm value — what it would bring if sold on the farm. Hence, it is usually of lower cost to the dairy enter- prise than feed purchased and trans- ported from neighboring or distant farms. Where feed can be raised at a profit when credited to the feed-crop enterprises at farm value, dairying can be more profit- able on farm-grown feed than on pur- chased feed. The dairy enterprises get forage at less than it would cost if bought, and the feed-crop enterprises get as much for the feed grown as it would bring if sold. Transportation and dealing margins are avoided. This dairying on farm- grown forage, however, is limited to areas where forage-crop growing can be profit- able, where costs are not too high as a result of competition for land and water with higher-value field, vegetable and fruit crops or other land uses such as in metropolitan fringe areas. There are, however, many large areas in California where — because of soil, climate, or distance from markets — for- age crops are one of the more profitable land uses. There are also large farms in areas where higher-income crops are grown but where it is still considered good farm management to include alfalfa and irrigated pasture in the rotation to maintain good soil condition and produc- tivity. Hence, dairy-feed crops are grown in many areas. Feeds have been discussed in detail in a previous section. Sample schedules of inputs and costs in detail of these feed crops are obtainable from the farm advisors in many of the counties where they are grown. See page 46 for summary schedules for some of these feeds. A variety of forage crops are usable by dairy enterprises, so in any area there are some available for a particular dairy farm. In nonirrigated areas with good seasonal rainfall, oat and vetch hay, dry- farmed silage, and improved or natural pasture are available. On shallow hard- pan soils with irrigation available, irri- gated pasture is a suitable forage crop. On good deep soils with adequate irriga- tion water, alfalfa, irrigated pasture and corn silage are usually raised on dairy farms, with some use made of a variety of other crops and crop residues. Alfalfa is the main dairy forage crop in California. It is widely grown in our warmer irrigated valleys to be used locally and transported to dairies in other areas as baled hay. It is more largely used as hay but is also field chopped and fed green, pastured, and, in rare cases, made into silage. In foggy areas on the coast, where curing hay is difficult, it may be entirely fed as green chop. Alfalfa does, however, require a fairly deep soil and adequate irrigation for good yields of 6 to 10 tons per acre annually in five or six cuttings. An alfalfa enterprise on a dairy farm may be on a smaller scale than on large field-crop farms where newer self- [43] propelled machines for swathing, baling, and hauling are justified. Knowing your production cost will tell you whether it is more economical to buy than to grow your own hay. Costs shown on page 46 are computed for the size and equipment used on a dairy farm of around 200 acres or less, so equipment use was not to ca- pacity and resulted in higher overhead costs of depreciation and interest on in- vestment. Costs shown for hay and green chop are about the same for equivalent feed value. A single alfalfa enterprise could provide both as needed. Several crops may be grown for silage. Oats, or oats and vetch, may be grown as a winter crop and ensiloed in the spring. Then a summer crop of corn or sorghum can be grown on the same land and en- siloed in the fall. Each crop would be a separate enterprise and share the costs of land used. Yield per acre of the second crop, however, is usually less than that of a single crop planted earlier in the spring. The costs shown for corn silage on page 46 are for a single crop. The silo for storage is considered part of the milking- herd investment and is shown on page 53. Silage-enterprise costs end with harvest- ing, packing and covering the silage in the silo. Storing and feeding are dairy- enterprise costs. Irrigated pasture has its use problems on a large dairy farm and usually costs more as a feed than is generally recog- nized in prevailing farm values of pastur- age and rents. The cost comparison on page 46 shows two sets of production costs — one for the better crop lands of higher land values and taxes, and the other for the poorer shallower soils where irrigated pasture does not have to com- pete with more profitable crops. Although costs are $8.60 and $7.50 per AUM re- spectively, such feed is still cheaper than harvested forages. Although irrigated- pasture enterprises show little profit as compared to other forages, they do, through cheaper feed, make dairying more profitable. Large commercial dairy farms need to know costs, returns and profits in their forage-crop enterprises. This requires enterprise accounting discussed on page 59. A summary of enterprise statements for a 150-cow, 182-acre dairy farm is shown on page 60. PLANNING THE DAIRY-FARM BUSINESS Profitable farming requires a balance among all factors of production: land, improvements and equipment, labor, live- stock, operating capital, and manage- ment. A surplus or deficiency of one factor reduces potential earnings. Maxi- mum profit in dairying requires that the number of cows be optimum for the pro- duction facilities, the forage produced, the workers supported the year around and within the managerial capacity of the operator. The owner-operator, through analysis of his business and its component enterprises, has the opportunity to dis- cover changes that offer a good chance of improving profit. Forward planning can then be done to make these changes and achieve a larger net income. Alternative plans can be budgeted as to probable in- come, costs and profit, and the best plan selected. A good business with sound for- ward plans and budgets will find it easier to obtain the additional capital and credit required. SIZE OF HERD The number of cows should be enough to utilize the dairy labor available to comfortable capacity. In increasing the size of herd it may be necessary to do so in steps to fit the number of milkers needed — one man 75 cows, two men 150, and three men 225 cows. Milking-barn capacities, whether walk-through or con- [44] ventional stanchion barns with multiple turn-ins, are no longer much of a limita- * tion to a moderate increase in number of cows milked if space and milking- machine units are adequate for the num- ber of men working. Only a large increase in herd size might require new buildings for milking, shelter, and feed storage. Herd size will largely depend on forage production of a farm where most of the forage must be produced on the farm, as in the case of a manufacturing-milk herd. The adjustment of herd size to a Grade-A- milk marketing contract was discussed on page 21. Small sizes of herds fall into several natural sized groups described below. Minimum sized side line A small milking herd on a general farm is almost a thing of the past in these times of specialization. A herd of 10 cows is about the smallest that could justify a milking machine and place to milk. Only where a small farmer had some feed and free time that could not otherwise be sold or gainfully employed and he could properly care for the milk and sell it in cans, would such an enterprise be feasi- ble. Even then, returns to labor and feed would be below those in commercial herd sizes. The one-man dairy farm A specialized dairy farm for the sup- port of a single family with one worker would need to be from 30 to 80 cows. Where both pasture and hay are pro- duced and the operator would do most of the farming and all the dairy work, around 30 to 50 cows would be all he could handle. Even so, he would be handi- capped by too small a business to justify the farming equipment needed, and might have to custom hire some work such as making hay. He would be very busy all the year round. He would seldom have an opportunity to sell market milk. The 50-cow 75-acre example in the tables on pages 15, 48, 51, and 54 is of this size. Many of our manufacturing-milk dairies in the San Joaquin and Sacramento val- leys and in Humboldt County are in this size group. A corral dairy of this size is rare, but with no forage production could be up to 80 cows. The two-family dairy farm A farm justifying the full-time services of two men can usually earn more than twice the profit from a one-man farm and is less confining. The nature of the work practically requires two men for some jobs and one can relieve the other in ill- ness, vacations and days off. Forage pro- duction would be on a large enough scale so minimum equipment for hay and silage harvesting could be owned, and employment of outside seasonal labor avoided. One man could do the milking with a bucket-type milking machine for 60 to 80 cows, or with a pipeline milker for up to 100 cows. The other man could do the field work and assist and substitute in the dairy. The milker could also assist in field work. A dairy farm of this size is large enough to obtain and hold a Grade-A con- tract, or would have a better net-income potential even as a manufacturing-milk dairy than the above one-man farm. The two-family dairy should provide a living for the two workers and their families. The two workers can be partners, a father and son, or an owner-operator and hired man. This size is suggested as the minimum goal for all dairy farmers. It is big enough to provide an overlap of father and son and for an easy transfer of the farm as a going concern from one generation to the next. Larger farms A larger size than the two-man farm offers cost-saving opportunities through fuller use of larger-scale dairy and crop equipment. It also offers an opportunity for the employment of more capital and managerial ability. The 150-cow 180-acre dairy farm illus- [45] Every feed crop is best considered a separate enterprise conducted for profit. To be profitable it must be well adapted to the soil, climate, and water supply of your farm. The table below will help you decide what of rage crop among those you are consider- ing may be most pro fit able. COST COMPARISON OF FORAGE CROPS Yield, cost Yield, tons per acre of main crop. AUM of pasture ( 'i>sts per acre Cultural labor and field power. . . Harvesting labor and field power Total labor and field powerf. Irrigation water and power Fertilizer, seed, sprays, wire and miscellaneous Total labor and material cost General expense, insurance, repairs. County taxes, land and equipment. Total cash costs Depreciation: — On stand, alf. and ir. past.. Buildings, fences, irrigation system Tillage, harvesting and misc. equipment. Tractors and trucks Total depreciation . Interest on investment — stand Buildings, fences, irrigation system Tillage, harvesting and misc. equipment. Tractors and trucks Land Total interest on investment at 6 per cent. Total costs of production . Less value of pasture. . . Net cost of main crop Cost per ton or A I M of forage Cost per 100 megacalories of net energy , Nonirrigated Natural pasture 2.0 Oat and vetch hay 3.0 Low-cost irrigated pasture 12.0 Good irrigated valley land Irrigated pasture 14 Alfalfa Baled hay 7.0 1.0 Green chop 30 1.0 Dollars CO til) 50 1.10 .40 1.00 2.50 .40 .20 .50 1.10 .25 .10 .25 3.60 4.20 7.80 3.90 1.22 15.00 10.00 25.00 14.00 39.00 3.00 2.00 44 00 2.00 5.00 4.00 11.00 1.50 4.00 2.00 9.00 16.50 71.50 2.50 69.00 23.00 2.88 18.00 18.00 34.00 3.00 5.00 42.00 8.00 7.00 1.50 1.50 18.00 1.50 3.00 1.00 .50 24.00 30.00 90.00 90.00 7.50 2.35 20.00 20.00 12.50 10.00 42.50 4.00 8.00 54.50 8.00 9.00 1.80 2.00 20.80 1.50 5.80 1.10 1.00 36.00 45.40 120.70 120.70 8.60 2.70 22.00 27.60 49.60 11.25 19.00 79.85 8.00 8.00 95.85 12.00 9.00 5.00 6.00 32.00 1.00 5.80 3.85 3.00 36.00 49.65 177.50 8.60 168.90 24.10 3.00 22.00 41.20 63 20 11.25 12.00 86.45 103.45 12.00 9.00 4.00 6.00 31.00 1.00 5.80 2.90 3.00 36.00 48.70 183.15 8.60 174.55 5.80 3.10 * Silage yield and costs are based on 12 per cent loss or 22 tons fed from 25 tons put in silo. Cost of silo is not in- cluded but cost of a cover is. t Labor and field power costs were computed at the following hourly rates: man labor $1.40, 30-h.p. tractor $1.10. 40-h.p. tractor $1.40, 2 T truck $2, baler and chopper engines $1.00— cash costs only. [46 trated in tables on pages 14, 53, and 60 is a typical size being attained by many successful Grade-A dairymen. It gainfully employs four men the year around — the operator who devotes most of his time to management but performs some labor, two milkers, and one farm hand. Extra help or contract work would be needed in silo filling. Most of the economies of larger-scale operations are attainable in this size of business. Milking herds of this size and larger are usually corral fed with harvested forage — hay, green chop, and silage. Pasturing becomes less convenient because of distance, lanes and fences, and the time needed for driving cows to and from the pasture. The 24-acre irrigated pasture shown for our sample farm on page 60 is only for the heifer-raising enterprise. In herd sizes beyond approximately 150 cows, additional economies are not large. Managerial problems increase with greater dependence on hired labor and sometimes hired management. As herds become larger, most of the economies of farm-produced forage are lost with the in- creased dependence on purchased forage. There are, however, many herds with more than 300 cows. Some of these are on very large farms where most of the forage is produced along with field and vegetable crops. Many of the corral dairies in the metropolitan fringe areas around Los Angeles are quite large — up to 1,500 cows. FORAGE BALANCE Where dairy farms must depend largely on farm-grown forage to feed the herd, the balance between feed produced and needed becomes very important. Suc- cessful dairymen naturally tend to enlarge their herds and face the problems of buy- ing additional forage or enlarging farm- ing operations through buying or renting additional land. Several steps or alterna- tives are available. First, hay produced can be replaced by purchased hay and thereby production of green chop, si!ae;e [ and pasturage can be increased. Next the use of pasture by the milking herd is reduced or discontinued, with more green chop and silage produced for corral feed- ing. Finally, pasture may be entirely eliminated, with heifers grazed elsewhere. Even silage and green chop is sometimes purchased. But an adequate supply of high-quality forage at reasonable costs is so important to profit in the milking herd that careful planning of forage production and purchases is essential. Manufacturing milk dairies because of the low price re- ceived for milk cannot stand the cost of much purchased forage. THE CROPPING PLAN The first step in planning the forage supply is to make a forage crop plan to fit the land available. List fields by acre- age, and select the best adapted forage crops for each. Grow natural pasture on nontillable land, and hay, silage, and im- proved or irrigated permanent pasture on the better fields, proportioned to about fit the herd need for feed of each type. Esti- mate yields per acre in tons of crop and AUM of pasturage, multiply by field acreages, and add the resulting total pro- duction to obtain the forage capacity of your farm. Figure the optimum require- ment for each forage type for the milking herd and heifer raising, and compare the two total quantities. Adjust crop acreages or number of cows to obtain the desired balance. To illustrate this procedure, a forage plan for 73 acres of irrigated land on which alfalfa and irrigated pasture are feasible is shown on page 48. Plan for maximum pasture Pasture is usually the cheapest dairy feed, as shown in tables on pages 29 and 46. It saves the cost of harvesting, storing and feeding in corrals. But pasture cannot be stored and is not available in even quality or quantity throughout the year. Generally, its quality and quantity is high in spring, but there is little available by 47 ] late fall, and almost nothing during the winter. Careful planning and the use of several kinds of pasture can, however, extend the season of pasture use some- what. Better cultural care in fertilization and irrigation coupled with better graz- ing management can considerably im- prove irrigated-pasture yields. The daily ration system or strip grazing of irrigated pasture increases feed production and at the same time maintains more uniform production from day to day in milking herds. The table on page 49 shows the AUM of pasturage normally obtainable by months for several crops and areas. Pro- duction will, of course', vary considerably in many areas from that shown because of climate or weather, soils and cultural care. Use of growing pasturage may be deferred a short time for later use. Winter grazing of alfalfa fields, irrigated pas- tures, barley and other fields is usually limited to periods when the soil is dry enough. A spring surplus of pasturage is usual but can be reduced by making a cutting of hay in enough fields to balance production to that needed. Natural pas- ture in the coast counties produces excel- lent pasturage usable by the milking herd for about four months, from March to June. The natural dry feed after that time may also be used, if properly supple- mented, for dry stock and heifers, with resulting lower feed costs than if these animals were corral fed with harvested forage. How much pasture? Pasture is seldom expected to serve as the sole forage for a milking herd even in the spring when it is in surplus. High- producing cows may not be able to con- sume enough for maximum milk produc- tion, so are usually given a little hay as well as the concentrates fed at milking time. Analysis of feed inputs has shown large cows to take as much as 1.2 AUM of pasturage per month, but this is un- usual. For management purposes, we sug- To check if available land will produce enough forage for your herd, make your own forage plan. Here is an example: FORAGE PLAN FOR 73 ACRES OF IRRIGATED LAND (Will it satisfy the needs of a 50 -cow milking- herd?) Field No. Crop or land use Acres Yield per acre Hay tons Pasture AUM Total production Hay tons Pasture AUM Tons hay equivalent Alfalfa, 1st year Alfalfa, 2nd year Alfalfa, 4th year Irrigation Pasture, 1st year . Irrigation Pasture, 3rd year . Irrigation Pasture, 5th year. Irrigation Pasture, 6th year. Irrigation Pasture, 9th year . Calf Pasture, 10th year Total production Need for year For 50-cow milking herd, table, page 15 For heifer raising — 14 26-month heifers per year. Total need . Difference 73 5.0 7.0 6.0 1.0 1.0 1.0 1.0 8.0 12.0 13.0 12.0 10.0 12.0 170 135 25 160 10 10 9 8 72 120 143 96 60 24 542 400 127 527 15 54.0 66.6 51.2 37.8 48.0 57.2 38.4 24.0 386.8 295.0 75.8 370.8 16.0 The result shows a comfortable surplus to meet feed needs — advisable to cover waste or poorer yields. k. a ii a •K> k, a ^ P .g O 1— 1 ^ « to < | > O « a £ o O ^ 1— 1 to H «4J U ii P feJO Q a o O fin «o A ^ < -o P a £ 1) £ pa <1 fcx cv. o w gn 05 H a, <5D a k. k. «C a •x ki« a -a a © CO a a S k. a a o &3 a OOOtNOOOO US CM CO ■— 1 i-H CM CO CO H d tD (N CO Q >* ^H CO 00 '"" I _^ ■* 00 • • • *a i-H O 1-1 . • • • "■* a M N • O CO CO a> w. CM CO • ■* • i-H O •"* CO i-H iH • CM 1-1 *-5 3 Tf CO -if • <-H US t— CO > CO O CM . i-h US -US CO § l-H CM 1—1 a < t- CM O • CO ■* CO l-H 1— 1 l-H " C US GO r^ • CM CO CO § l-H 1-1 ■8 if e • h w l-H 1—1 o3 1-5 CD i-H US if -i-H US c £ * 03 S ,A| 03 -S £ ai 1 s -C 3 -O a & 3 >^ 03 T3 O 3 3 cS 03 03 i_ 0) H. £3 a * , -^ — i ■1- \ C C Qj p y <*j +3 t D (H a | | 5 g s S -a 1 9 § | "g a s -a i ® * P w» fl o> « 0- aa^^ojMcoo- T)T) O O ^ « g £ .2r .Sr ^ m +> t3 -c 0) CP OS o3 a> PC a: y c oc X CC <^l w ~c i*H ■*w OS a "* a a a <5) k. to .3 •O) HO CD «FO s.g e CO ^ a (u a il « a « ° a ° a ^ ^ a ^ O ik "O ^ a § a § a ^ ^ i gest figuring on 1 AUM per milking cow per month, with the balance of the cow's feed furnished from hay and concen- trates. The heifer-raising enterprise would call for another third of an AUM for each cow in the herd. Hence we show on page 49 a need of 1.3 AUM per month per cow. Recognizing the lower level of pasture available in the winter, an annual maximum is about 13 AUM per cow for both the milking herd and heifer-raising enterprises. If more than enough heifers to maintain the herd were being raised, this could be 1.5 AUM per cow monthly or 15 AUM per year where irrigated pas- ture is the main source of pasturage. In a nonirrigated or natural pasture area, total use of pasturage by cows in milk is about 4 AUM, and a little more during a dry period. This, plus about 3 or 4 AUM for young stock, comes to a total of 8 or 9 AUM per cow. In some areas along the North Coast, this might be a little higher. Where less is available, harvested forage can make up the deficit. Some dairymen, with inadequate pasture for the milking herd, still pasture their cows for a short period once a day. Making a pasture plan A pasture plan lists the fields and crops that can be pastured and shows the months when pasturage is available and can be taken for best results. You would ordinarily start with the land and crops as in a cropping plan, and figure the total pasturage obtainable in AUM each month. This would show how many cows could obtain an optimum quantity of pasture at 13 AUM per cow with irriga- tion, or 9 with natural grazing. Or a start could be made to plan maximum usual pasture for a given number of cows. In this case, pasture crops would take prior- ity over harvested crops such as hay which could be purchased. The table on page 51 illustrates such a pasture plan using the fields and crops shown on page 48. The small surpluses or shortages by months show a reasonably good fit of pro- duction to optimum needs. If it were desirable to have more pasturage for a small increase in milking herd, additional fields of pasture could replace alfalfa-hay production. If the entire 73 acres were in irrigated pasture, a herd of 73 cows plus the usual young stock could receive about optimum pasture. Hay would be pur- chased from off the farm. Every change in size of herd, acres of land farmed, forage crops grown requires a different plan. These plans should be made in advance and budgets prepared to forecast probable changes in costs, in- come and profit. STARTING A NEW DAIRY-FARM BUSINESS Starting a new dairy-farm business — the buying or renting of a farm, the buy- ing of equipment and cows — requires a considerable capital outlay. Careful plan- ning is essential to success. The invest- ment necessary, including overhead and living costs during the development period before income begins, must be foreseen and provided for. Most experienced or potential dairy- men with adequate capital normally prefer to buy a farm and have the facili- ties they want. This gives them a wider choice of suitable places. With limited capital, however, renting offers a better opportunity to operate a business of ade- quate size to make a living and get ahead financially. MARKET FOR MILK The first consideration in establishing a dairy-farm business is an assured outlet for the milk. A manufacturing-milk dairy would need to be within a pickup route of one or more creameries or manufactur- ing plants or within a reasonable hauling or shipping distance to a plant receiving milk in cans. A new market-milk dairy [50] e fc o.*^. a ^ CjJ !> 8 ^ P ^ i*. 8 "8 =3 S o o ^ o ^ ^ ^10 g. * <*i k. k © a - t: - B 8 O QJ Tti o r^ cm -»ti 1 M< o t- CO o ■* 1- < ir 1 d CD • Oi i-i co oo ec cm >- * O O o( 3 O! D CM Q CO CM c- 1 i O •§ t— 030 w * f ' l ^ > C£ CC 5 OS 3 i-H 3, | ^ • 00 Ohm O) ID f 1 OS O CC ) CC 3 t^ o »o >o i- 4 CC 1 ^ a N CO CO 5 | s 5 CC 3 ■* o> CC > | m 3 i-i co •* o co c 1 iC O cc > CC 3 ^H o CC 3 ^H J2 P O O cc CO "5 i- > CC > CO > c3 3 >> c8 CO id t- ■* OO (Y ) CO O CC CC 3 CO £ CD Id y- CC 1 CM ft • (M ■* ■* CC > "* I <3 1 o • O < 1 « 3 i 3 ' 3 a 1 f c 3 3 2 c l 5 year, year (-1 (-C <- <» s t 'J z > c CD bo 1 C 3, > >> >> > I 5 +» T3 ,C $ $ a a o . f ai (< +; i- T3 J3 CQ C ) ||| l-H CO »rt CB CB 1 to a c = CD ,x5 5 M (h !- (-1 (H 4, B O p'Sj 3 3? 3 u P SP CD cq rt -^ -^ -P -tJ +» -»3 fl 3 J3 H M ^ cq cd ce ft ft C Irrig. pas Irrig. pas Calf Dast 1 O 11 1 a 3 Alfalf Alfalf Alfalf Irrig. Irrig. Irrie. ' H 8 3 o > 3 I o 3 >* IS 3 o aj •3 9 S a. would need a contract with a distributor to assure a market for the milk. New con- tracts are extremely difficult to obtain in most areas in California, so it is usually necessary to buy an established herd and have the contract or shipping rights transferred to the new owner. SIZE OF BUSINESS The next step in organizing a new farm business is to decide on the size of herd to start with and perhaps an ultimate goal allowing for some growth. It is a mistake to start too small, particularly with a heavy debt, with only a hope of making a living, paying off debts, and then in- creasing the size of the business to make a more adequate income. As you begin to search for a suitable place and learn about purchase costs or rentals, the avail- able capital plus the probable credit ob- tainable will somewhat determine the size of herd that you can safely finance. INVESTMENT REQUIRED The capital investment required is determined by the size and type of dairy farm. The tables on pages 53 and 54 present sample investments for a 150- cow, Grade-A, and a 50-cow, manufac- turing-milk dairy complete with all facili- ties and land and equipment for forage production. These tables, drawn up for two assumed situations, can be used as a guide in preparing similar schedules for the specific farm you are considering, and after you know the local land values and prices of buildings and equipment. You will have to make, of course, the appro- priate changes and adjustments. You will have to figure an investment schedule for the size of farm under consideration, for the number of cows, for the buildings, equipment, and other items needed. A dwelling will be needed in addition to the items shown in the sample schedule. Buildings on an existing farm would have to be checked for adequacy, condi- tion, and cost of rehabilitation to suitable condition. The time and cost of making the move, getting the buildings and equipment ready, assembling a herd and getting into operation may add consider- <- ably to the investment shown or expected, and must be allowed for. In the case of new construction, unforeseen costs and changes are probable. A renter moving his herd from another farm must also estimate the new capital required by the move and perhaps to en- large his herd and add new equipment. Before closing any purchase or lease, determine the investment or capital re- quired and make certain that it is within your capital and credit limitations. Draw up a budget to show that the net income potential is adequate to furnish a living and to make the required payments on debts. MAKING A BUDGET A budget is an estimate made in ad- vance of expected production, prices, income, costs, and net income. Making such forecasts of production, yields, prices and costs is not easy ; but it can be done intelligently enough to forecast a chance of success or failure. A budget can be prepared only after a plan is adopted for a particular farm. With several farms and plans under consideration, prepare budgets for each plan on the same price and other assumptions to show which plan is the most profitable. In this manner you can choose the most profitable alternative and prevent the serious mistake of going ahead on a plan doomed to failure. CREDIT The dairy business is stable, with a regular monthly cash income that does not fluctuate very much. Credit is avail- able to the good dairymen for most sound purposes. Long-term credit for buying and enlarging dairy farms is available up to a considerable percentage of the ap- praised value of the real estate mortgaged to secure the loan from national farm-loan associations, insurance companies, banks, and individuals. Shorter-term credit is [52] // you intend to buy a market-milk dairy, this sample investment will help you figure the investment needed for the farm you are considering. Adjust this sample to your particular situation: WHAT INVESTMENT IS NEEDED FOE A 150-COW MAEKET-MILK DALEY? Investment Original cost (1961 prices) Milking Herd Enterprise Land in dairy buildings and lots, 5 acres Milking barn and milk house 8-stall Feed and shelter barns and miscellaneous buildings Fences, feed bunks, water troughs Paving, 7,000 sq ft Bunker silo, 700-T capacity Water and liquid waste disposal systems Employees cottages, two Total, buildings and improvements Milking machine, pipeline 6-units Milk tank and refrigeration 1,000 gal Miscellaneous other dairy equipment Half investment— feed wagon, tractor, and loader. . Total, equipment 150 cows, $300 cost, average value $225 Usual feed and supplies on hand Total, milking-herd enterprise Heifer-Raising Enterprise Land for barn and pens, \ acre Calf barn, sheds and equipment Heifers, average 100 head all ages Total, heifer-raising enterprise Total, milking-herd and heifer-raising enterprises Forage Enterprises Land, 174-acre crops, 2 other Irrigation system, buildings, fences Tillage and harvesting equipment Tractor, pickup and truck Half cost, feed wagon, tractor, loader Total, forage enterprises Total dairy-farm investment Dollars 3,000 10,000 12,000 3,000 2,400 4.000 3.000 8.000 42,400 6,000 5,400 2,500 3,200 17,100 45,000 4,650 112,150 300 3,000 10,000 13,300 125,450 105,600 35,200 12,600 10,800 3,200 167,400 292,850 Life expect- ancy Years 20 Annual deprecia- tion* Average valuef Dollars 392 472 150 96 160 140 260 1,670 285 255 250 250 1,040 2,710 143 143 2,853 1,624 820 680 250 3,374 6,227 3.000 5,100 6,100 1,500 1,200 2,000 1,550 4,100 21,550 3,150 2,850 1,250 1,700 8,950 33,750 4,650 71.900 300 1,575 10,000 11,875 83,775 105,600 17,610 6,450 6,000 1,700 137,360 221,135 Per cow 20.00 143.67 59.67 225.00 31.00 479.34 79.16 558.50 915.74 1,474.24 * Calculated with salvage value, if appropriate, by the straight-line method for the years of life shown. t Depreciable items estimated at an average of original cost and salvage value. This sample shows that, at 1961 prices, with land assumed to cost $600 per acre (which is low for many areas), the total investment for a 150 -cow market-milk dairy, not including operator s dwelling, would be $292,850. [53] // you are considering a manufacturing-milk dairy, this sample investment will help you figure investment needed for the farm you have in mind. Adjust the sample to your particular situation. WHAT INVESTMENT IS NEEDED TOE 50-COW MANUFACTURING-MILK DAIRY? Investment Original cost Life expect- ancy Annual deprecia- tion Average value Per cow Milking Herd Enterprise Land in dairy buildings and lots 1 acre. Milking barn and milk house 8-stall Feed and shelter barns and other buildings. Corral fences, feed bunks, etc Water system — dairy share Total, buildings and improvements. Milking machine, bucket type 3 units. Milk cooling and holding tank, 500 gal. Other dairy equipment Total, dairy equipment. Cows 50, average value $200 Average feed and supplies on hand. Total, milking herd Heifer-Raising Enterprise Land .2 acre Calf barn, pens, equipment Stock on hand 29 average at $90. Total investment, heifer enterprise Total, milking-herd and heifer-raising enterprises. Forage Production Enterprises Land, 72-acre crops, 1 other. Irrigation system Buildings, fences, etc Farming equipment Tractor and pickup Total, forage enterprises Total dairy farm investment. Dollars 400 2,000 2,000 500 500 5,000 900 3,250 300 4,450 13,750 2,000 25,600 80 1,000 2,610 3,690 29,290 29,200 9,000 2,700 5,600 5,600 52,100 81,390 Years 20 239 50 150 30 230 469 45 45 514 435 115 342 360 1,252 1,766 Dollars 400 1,050 1,050 250 260 2,610 525 1,750 150 2,425 10,000 2,000 17,435 29,200 4,650 1,350 2,955 2,900 41,055 61,730 1.00 52.20 48.50 200.00 40.00 348.70 413.50 821.10 1,234.60 This sample shows a minimum investment of $81,390 (not including operator's dwelling) for a 50-cow dairy in an area of low land values of $400 an acre. [54] available from commercial banks, loan associations, individuals and dealers for purchase of cows and equipment which become chattel mortgage collateral to se- cure the loan. Additional operating credit may be obtainable for volume purchases of feed where the financial status of the borrower and a forward budget show it will enable him to improve his income and repay the loan. The potential bor- rower receives from credit organizations some safeguards against borrowing too much. But, it is also the borrower's re- sponsibility to safeguard himself by the budget test discussed above. He must be reasonably sure he can live and make the payments required. It is well to reserve some additional borrowing capacity to care for unpredictable financial setbacks and accidents. Certainly the dairy farmer with adequate records who makes for- ward plans and budgets improves his chances of success and also the ease with which he can obtain needed credit. RENTING Many California dairy farms are rented. The landlord usually furnishes land, buildings, irrigation facilities, and some nonmovable equipment. The tenant usually furnishes cows, movable equip- ment, and labor. It is generally accepted that, in renting, the income should be divided between landlord and tenant in proportion to their contributions, or what they furnish and the costs they pay. The landlord's con- tribution is largely the use of his capital invested in land and buildings. This is converted into an annual charge by figur- ing interest at an appropriate rate (usually 5 or 6 per cent) on the current valuation. Depreciation on the facilities furnished by each party may be readily estimated; so can the labor and manage- ment furnished by the tenant. Other costs can be determined from past records, or may be estimated from available local information. The amount contributed by each party may then be totaled to show their costs. A "Work Sheet for Estimating Rent or Shares" is available from your Farm Advisor. To illustrate this process of calculating the division of costs between a landlord and tenant, an example of the usual divi- sion for the 75-acre, 50-cow manufactur- ing-milk dairy is shown on page 56. Costs are divided for the entire farm business — ■ the milking herd, the heifer-raising enter- prise, and forage production. Obtaining or estimating these costs will not be easy for a new undertaking since a former tenant may not be available or willing to furnish his costs for a previous year. It is usually best for landlord and tenant to get together and fill out this work sheet, perhaps with some help from a local Farm Advisor who may have enterprise data sheets to supply some of the costs needed. FORMS OF RENT Rent can usually be paid in one of three forms: cash, share, or quantity of product. Cash rent A fixed annual or monthly cash rent, agreed upon in advance for the period of the lease, is probably the commonest form of dairy-farm rental in California. If set fairly and recognized as an average for changing price-and-production conditions over a period of years in which the tenant carries most of the risk, it is a simple, satisfactory method. It sometimes breaks down in years of low price or low produc- tion on the farm when the tenant finds it impossible to pay the rent. Cash rent should be a little lower than rent paid under a more flexible system where the landlord shares in production and price fluctuations. Cash rents may also be varied with the price of milk. This is sometimes called the sliding-scale cash rent. Provision is made in the lease for the rent to change when a specified official price quotation has changed. Particularly in long-term leases, this would adjust the rent to retain a fair [55] // you plan to rent a dairy farm, this sample will help you calculate a fair division of costs between landlord and tenant. Adjust it to your particular situation. SAMPLE FOR A 75-ACRE, 50-COW MANUFACTURING-MILK DAIRY FARM Investment, cost, income Furnished by Tenant Landlord Total farm business Capital invested (page 54) Land, 75 acres, at $400 Farm buildings, fences, irrigation system Dwelling Dairy equipment Farming equipment Dairy stock and feed on hand Total investment Depreciation Farm buildings, fences, irrigation system Dwelling Dairy equipment Farming equipment Total depreciation Cash costs Hired labor Concentrates bought County taxes Insurance Dairy supplies, breeding, electricity, etc Repairs — improvements and equipment Irrigation district tax and water charge Tractor and pickup operating costs Machine rent and contract work Fertilizers, seed and crop supplies Subtotal cash costs Labor and management Depreciation, from above Interest on investment at 6 per cent Total all costs Less stock sales, all to tenant Net cost of milk sold Per cen t each party Sample rent at 125 cwt of milk a month Milk sales, 5,000 cwt at $3.30 Stock sales Income Net income over total costs above Net income over all costs but interest Net farm income over all costs but labor and management 2,425 5,855 20.045 28,325 230 702 932 Dollars 30,000 9,240 5,000 44,240 789 250 1,039 340 340 3,400 3,400 400 630 1,030 30 60 90 1,250 1,250 200 150 350 750 750 700 700 240 240 500 500 7,060 1,590 8,650 4,800 100 4,900 932 1,039 1,971 1,700 2,654 4,354 14,492 5,383 19,875 1,825 1,825 12,667 5,383 18,050 70.2 29.8 100.0 11,500 4,950 16,500 1,825 1,825 13,375 4,950 18,325 -1,117 -433 -1,550 583 2,221 2,804 5,383 2,321 7,704 30.000 9.240 5,000 2,425 5,855 20,045 72.565 789 250 230 702 1,971 [56 In this case (page 56) the tenant incurred about 70 per cent of the total net cost oj the milk produced, and the landlord 30 per cent. This does not mean they should agree on a share rent with the landlord receiving 30 per cent of the value of the milk sold. But this information, made to fit the circumstances of each case, will help you find the amount or form of rent fair to both parties. In some cases, the landlord may furnish the cows and all equipment, and both parties would split the income 50-50 from both milk and young stock raised. If the calculation in the particular case shows that such a division would not be fair, some expenses could be split differently to maintain the fairness of the 50 per cent split of income. division of the earning power of the total dairy-farm business. Share rent Rent as a specified share of the milk income would, on first thought, seem fairer than cash rent, since it divides the risk of price and production variations. On dairies which are largely dependent upon rainfall for farm hay and pasture production, there are wide differences in feed production and in the cost of hay that must be bought. Where the farm fur- nishes the forage, one-third of the milk is a common share rent; this may go up to one-half where the landlord furnishes the cattle and perhaps pays part of certain costs. The drawback to a straight share rent where the tenant owns the cattle is that the landlord, without making any contri- bution, shares in the additional income from high production, heavier feeding, and better management. And he suffers when management is poor, when the ani- mals are underfed, and the farm is under- stocked. For share renting to be fair to the tenant, the landlord should share in the purchased feed costs, perhaps in the same proportion that he shares in the value of milk produced. In the sample on page 56, the landlord furnishes about 30 per cent of the net costs of the milk produced and would, therefore, be entitled to 30 per cent of the milk. Yet, the tenant stands all the costs of obtaining high production, such as furnishing superior cows and paying for all the concentrates. If the landlord paid for 50 per cent of the concentrates, it would raise his share to 39 per cent. Shifts of certain expenditures from one to the other can adjust the share to some desira- ble common level, such as one-third or one-half. It is not usual for the landlord to share the stock raised, where the tenant owns the stock. Quantity of product Another but less common form of rent, prevalent in Humboldt County, is the rent based on the value of a certain quantity of milk. The farm is rated according to its capacity for a certain number of cows, and cows are assumed to have a certain standard of production. This is the rated capacity of the farm in milk. A certain proportion of this capacity, usually about one-third, is considered the annual rent, and is paid monthly or in eleven monthly installments at the price of milk for that month omitting a winter month when most cows are dry. Under this system, it matters little to the landlord whether his tenant has high- or low-producing cows. If the tenant buys extra feed and has high production per cow or carries more cows, he does not have to share the extra income with the landlord. This system permits the rent to vary with variations in price of product, but not with variations in production due either to management or to climatic con- ditions. The plan is probably the most satisfactory to both tenant and landlord in a region where feed production on the farm varies little from year to year. But the rating of the farm and the determin- [57 ing of the quantity of milk to be paid as rent must be fair to both. In the example on page 56, where about 30 per cent of the milk produced was found to be a fair rent, the total milk sale was expected to be 5,000 cwt for the year. The farm produced enough forage for that quantity of milk, and the landlord should expect any good tenant to obtain this total production. Thirty per cent of that quantity is 1,500 cwt a year — a fair standing rent. It would be 125 cwt a month. This would be a simple rent to administer. They could instruct the creamery to pay the landlord each month for 125 cwt of milk at the current price for that month. Hence, both parties would share in the variations in income due to price fluctuations, but the tenant would stand all the variations in production up and down, which are admittedly due to his management. Profit sharing Among other special arrangements of paying rent are partnerships and profit- sharing agreements — a division of gross or net income on the basis of the inputs of each party. In some cases, a wage or bonus is given to a foreman or herdsman in terms of income or profit. In a few instances, the milkers or barn crew have been paid from 12 to 20 per cent of the milk check. Where workers are paid in this manner, they may be tempted to overfeed concentrates if they are not supervised carefully or made to pay an equivalent share of the concentrate cost. A calculation similar to that on page 56 is useful in arriving at actual shares, or at an agreement for the future. If gross in- come is shared, the person receiving that share should also share in some of the costs necessary to obtain high production. DAIRY-FARM RECORDS In these days of intensive and highly specialized commercial farming with nar- row margins between income and costs, it is becoming increasingly difficult to make a profit. Good records are needed on the farm business as a whole for re- porting income, costs and net income, and capital gains or losses for federal and state income tax returns. Additional special records are required for Social Security and disability-insurance deduc- tions for employees. Other records and business papers are required in obtaining refunds of gasoline taxes on the gasoline used within the farm. But, even more and better records are needed for manage- ment purposes — to discover changes that can be made and to furnish valid infor- mation for the many administrative deci- sions that must be made. To obtain high and efficient produc- tion, the dairyman needs production records on each individual cow for guid- ance in culling, breeding, and feeding concentrates. These are obtainable for a small monthly charge per cow from the local Dairy Herd Improvement Associa- tion. Breeding records are needed to in- sure that cows and heifers are bred when necessary to obtain proper lactation pe- riods and avoid unnecessarily long dry periods. Feed use should be available to check against probable needs to assure adequate feeding without overfeeding — particularly of higher-cost concentrates. Feed bills should be added and the quan- tity checked to current optimum practices to avoid wasteful overfeeding. Milk-sales statements should be kept and analyzed as to prices received frequently, and the percentage paid for at Class-I prices for market milk should be determined. Annual inventories of stock and feed on hand are essential to figuring a true profit for farm operation for each year, even though not used if income-tax re- porting is on the "cash basis." Stock on hand by age groups should be known to [58] More detailed information on the subject of farm accounting and management records can be obtained in these three publications: Manual 31, Farm Enterprise Accounting and Management, $1.00. Explains enterprise accounting by the two principal methods. Illustrations of forms, records, work sheets. Circular 460, Financial Records for California Farmers, free. Explains record needs in general. Will help you select the best way to obtain records and needed information. The California Farm Record Book, $1.00. Records of cash incomes and expenditures by kind, capital and depreciation records, inventories, net-worth statements and profit statements on both the cash and inventory basis for income-tax and management purposes. Write to Agricultural Publications, Room 207 University Hall, 2200 University- Avenue, Berkeley 4, California. check on feed use and costs. Feed on hand must be known to figure total feed use and check against probable feed require- ments and for planning an economical feed supply for the future. A capital and depreciation record is essential to figur- ing depreciation correctly and to show current remaining values of all assets. These facilitate the preparation of accu- rate net-worth or financial statements to know whether and how fast you are get- ting ahead financially. Dairy farmers who keep their own rec- ords will find that the California Farm Record Book (see box) will meet most of their record needs. Larger dairy-farm businesses may need a full accounting system involving com- mercial bookkeeping methods. Such an accounting system, with its many ledger accounts on the farm business as a whole, plus certain supplemental records, is the minimum needed by an individual with large complicated business affairs. It is also essential where more than one family is involved in the ownership and profits of the farm business. ENTERPRISE ACCOUNTING This is a system of accounting that sup- plements accounting for the farm busi- ness as a whole by providing a profit state- ment and cost analysis for each crop and livestock enterprise in the farm business. These statements furnish valuable man- agement information leading to a more profitable selection and balance of enter- prises. The analysis of each enterprise indicates changes to make it more profit- able. Management of a large dairy farm would be greatly helped with detailed input and cost information on the milking herd, the heifer-raising enterprise, and each forage crop. Enterprise statements, as shown in the samples on pages 14, 15, 42, and 46, would be made for compari- son from year to year and to published standards or sample-cost schedules. Page 60 presents a sample summary of the en- terprises on a 180-acre dairy farm. Enterprise accounting requires the al- location of all farm costs and income to the individual enterprises. Labor costs are allocated by time cards and a payroll rec- ord, which distributes the labor cost to enterprise columns. Farm-machinery costs are handled through a farm-machinery service unit by charging work done for enterprises at appropriate hourly rates. Other costs are allocated on some appro- priate basis monthly or at the end of the year by work sheets or supplementary enterprise cost sheets or accounts. Records of farm-grown forage are used to charge [59] it to the milking herd and heifer-raising enterprises and credit it to the crop enter- prises at farm value. There are two main methods of doing enterprise accounting. The first is by work sheets with allocations usually com- pleted at the end of the year. This method is best suited to the farmer who keeps his own records as in the California Farm Record Book and makes his own alloca- tions and statements. The other method is by a supplementary ledger of enterprise and service unit accounts in a full ac- counting system on the farm business as a whole. In this method, accounts are gen- erally brought up to date at the end of each month. Both methods would require labor and farm-machinery records and Enterprise accounting provides profit statements and cost analyses for each enterprise on your farm and enables you to make profitable shifts and changes. Adjust sample below to your particular situation. WHERE IS YOUR PROFIT? SAMPLE ENTERPRISE ACCOUNTING FOR A 180-ACRE, 150-COW IRRIGATED DAIRY FARM Income, expense, profit Alfalfa 120 acres Irrigated pasture 24 acres Corn silage 30 acres Total forage enter- prises 174 acres Heifer raising 100 head Milking herd 150-cow Grade A Total farm business cash basis Dollars Income Milk sold 13,272 6,750 2,822 6,588 13,272 6,750 6,588 2,822 250 11,400 88,124 6,315 1,380 600 88,124 6,565 Alfalfa hay @ $24 20,022 2,822 6,588 29,432 11,650 96,419 94,6^9 2,800 2,551 1.350 1,400 200 1,032 960 3,800 347 40 300 144 100 96 192 499 970 1,005 225 570 300 321 240 750 4,117 3,596 1,875 2,114 600 1,449 1,392 5,049 1,380 6,527 1,640 450 30 12 100 125 293 143 11,400 22,905 11,700 12,000 450 420 2,370 1,080 4,695 2,710 Concentrates bought Hired labor 13,340 16,567 Operating costs, tractors, trucks Electric power 4,076 2,307 2,114 Repairs, miscellaneous, general expenses 3,919 2,597 4,988 Depreciation (including stands) 7,902 Subtotal Operator's labor and mgt. $7,200 14,093 1,534 1,718 156 4,381 410 20,192 2.100 10,700 600 69,730 4,500 57.810 7.200 Total expense 15,627 4,395 98,667 1,874 948 18,168 4,791 1,79? 24,600 22,292 7J40 141,435 11,300 350 11,875 74,230 22,189 71,900 65.010 29,679 225,210 Rate earned on investment (per cent) 4.5 5.2 7.3 5 1 2.9 30.9 13.2 [60] records of crop harvesting, pasture use, precise administration and management irrigation-water use, fertilizer hauled out, made possible usually improves net in- etc. come enough to more than pay the cost. This more valuable accounting for For any farm for which enterprise ac- management purposes requires additional counting is desired, there are ways of do- work by the farm staff and bookkeeper, ing or hiring it at a reasonable cost, and costs more in most cases. The more In order that the information in our publications may be more intelligible, it is sometimes necessary to use trade names of products and equipment rather than complicated descriptive or chemical identifications. In so doing, it is unavoidable in some cases that similar products which are on the market under other trade names may not be cited. No endorsement of named prod- ucts is intended nor is criticism implied of similar products which are not mentioned. Co-operative Extension work in Agriculture and Home Economics, College of Agriculture, University of California, and United States Department of Agriculture cooperating. Distributed in furtherance of the Acts of Congress of May 8, and June 30, 1914. George B. Alcorn, Director, California Agricultural Extension Service. 15m-3,'63(D3523s) [61] 4 1 'I- ' '.*. *, ** How to do it . . .in photos New (and sometimes old) techniques are described and illustrated for better understanding of , at times, complicated subjects. The rule is, "If it can't be described, use a photo; if a photo won't do, draw a picture." Some Systems Work; Some Don't Scientists at the University of California are constantly trying new plant varie- ties, new growing techniques, new machinery, in an effort to Improve the State's agriculture. Their findings are reported and, when possible, illustrated in tech- nical, semi-technical, and popular publications that are available to anyone. Perhaps the answer to your farming problem is in one or more of these pub- lications. For a catalog, write to: AGRICULTURAL PUBLICATIONS University of California • 207 University Hall Berkeley 4 ! »