Estimation and analysis of cow-level cumulative lifetime break-even on financial resiliency

Abstract

A dairy farm's ability to generate positive profit is dependent on the cow's response to management decisions made in conjunction with input cost management. Therefore, farm managers consider a multifaceted set of choices, managing their herd not as a homogeneous group of animals, but justifying the influence of individual cows on the farm's financial performance. We combined cow-level performance records from Minnesota DHIA and farm-level financials from the University of Minnesota Center for Farm Financial Management database FINBIN (https://finbin.umn.edu/) from 2012 to 2018 to evaluate farm- and cow-level profitability. The objective of this study was to evaluate individual cow performance matched with farm-level input expenses allocated to the cow level to measure a dairy farm's ability to be profitable over time, considering input and milk price fluctuations. Conventional Minnesota dairy farms were divided into 2 groups-financially resilient and non-resilient-based on their adjusted net farm income ratio over time. Yearly farm-level expenses and revenues were allocated to cows based on performance measures provided in monthly DHIA test data, and a cumulative lifetime break-even was calculated for all cows with consecutive farm data from 2012 to 2018. Herd-level and cow-level characteristics were analyzed to test for statistical difference between resilient and non-resilient farms as well as cows who achieved their break-even versus those that did not for resilient and non-resilient farms. Results showed that resilient farms had statistically different and lower expenses than non-resilient farms, with lower heifer raising expenses ($1,839.32 vs. $1,886.20), lifetime feed expenses ($4,197.07 vs. $4,975.39), and lifetime non-feed expenses ($2,761.63 vs. $4,502.67). Resilient farms had 38.3% of cows reach break-even, whereas non-resilient farms had 25.2% of cows break even. On average, cows who achieved their break-even remained in the herd for approximately 1 yr longer for both resilient farms (1,011 d for cows who break even and 627 d for those that do not) and non-resilient farms (1,033 d for cows who break even and 683 d for those that do not). Cows on resilient farms who achieved their lifetime break-even had an average lifetime profit of $1,613.48, which was $3,095.10 higher than the lifetime profit of -$1,481.62 of cows who never reach their break-even. Cows who reached their break-even on non-resilient farms had a lifetime profit of $1,270.51, which was $3,854.11 higher than the lifetime profit of -$2,583.60 for those who did not break even. Therefore, financially resilient dairy farms were utilizing a low-input, low-output model that proved to be successful and resulted in maintained profitability across volatile and fluctuating commodity prices.