Pasture Profitability - Putting your cows on grass offers a money-making alternative

Many of you are gearing up your hay or haylage equipment for second cut this time of year. If you used Managed Intensive Rotational Grazing (MIRG) for your dairy herd, your cows could be harvesting it for you-and making you money.

Conventional thinking suggests you can't run a profitable dairy farm with grazing, or at least not as profitable as you can with a more conventional confinement operation. However, an ongoing study has found that dairy graziers do make money and are highly satisfied with the grazing lifestyle while doing it.

The Great Lakes Grazing Dairy Financial Summary project has been collecting financial and production records for three years from dairy graziers using MIRG. Ontario and 10 U.S. states have been co-operating to create a database of actual farm financial and production data. The aim has been to provide grazing dairy financial benchmarks. To be considered a dairy farm for the study, the operation must get 85 per cent or more of its gross income from milk sales, or 90 per cent of gross income typically from dairy livestock sales plus milk sales. Additionally, to be considered a grazier for the study, the farm must harvest more than 30 per cent of grazing season forage needs by grazing. It also must provide fresh pasture at least once every three days.

Thirteen Ontario dairy grazing farms have been part of the study and have provided three years of information from 2000 to 2002. These dairy graziers:

  • averaged 14 years grazing experience;
  • used a management style primarily emphasizing low input as opposed to high production;
  • typically relied on pasture to provide 85 per cent of forage dry matter intake to their cows during grazing season with individuals ranging between 30 and 100 per cent;
  • averaged 160 days on pasture;
  • used rotational grazing, generally moving cows about every 36 hours.

The Ontario grazing farms were compared with other Ontario dairy farms in the Ontario Farm Management Analysis Program (OFMAP) over the same three-year time span. OFMAP averaged 182 dairy farms in the group each year. For both groups, a three-year average was calculated to smooth out some of the year-to-year variation. When you look at the financial and production information between the two groups, a few items stand out.

There were some differences in farm size. The average grazier milked 12 fewer cows and worked 56 fewer acres than the average OFMAP farm. The two groups basically had the same asset levels at just over $34,000 per cow invested, but how they paid for those assets sharply differed. The OFMAP farms used more debt financing and had close to $1,500 more debt per cow than the average grazier. That trickled down to the expense columns-OFMAP farms paid $100 per cow more in interest than the graziers.

Because Canadian winters don't allow year-round pasture, graziers still have to invest in field machinery. In total, each OFMAP farm averaged $32,466 more invested in field machinery than the average grazier. What's interesting, however, is that graziers actually invested $10 more per tillable acre in field machinery than OFMAP herds. From that perspective, any cost savings the graziers gained didn't come as result of a decreased equipment investment.

One concern with relying heavily on summer pasture is a drop in milk production. The graziers experienced a lower per-cow yield of 332 litres annually. That translates into production four per cent lower per cow than that of OFMAP herds. The difference ranged from two to six per cent over three years. This decreased production did reflect on the income statement. Graziers earned $240 less per cow in milk sales than the OFMAP group.

But what the graziers lost in income they made up in cost control for feed, hired labour and, as previously noted, interest payments. Their total cost advantage was $447 per cow. Feed contributed the most, representing 50 per cent of the $447.

Graziers cut costs with cheaper homegrown feed through pasturing, but they also spent around $90 less per cow on purchased feeds. Although they had slightly more invested in field equipment, graziers seemed to use it more efficiently. Even with the increased investment level, graziers managed to come out ahead in feed production costs.

Graziers used slightly less total labour than the OFMAP group, but that doesn't seem to completely explain decreased labour costs. This could mean they depend more on unpaid family labour than OFMAP herds. To remove the question of unpaid versus paid labour, net farm income per cow was compared with the hired labour expense taken out. The result was no significant difference in net farm income per cow between the two groups.

Offsetting the graziers' disadvantage in income and production per cow was their control of operating expenses and debt. Average graziers were as profitable as their OFMAP counterparts.

This project's goal was to find out whether grazing was economically viable for dairy producers-not to prove that grazing dairy cows intensively was more profitable than other feeding systems. Study results indicate grazing is an option that can work for dairy farms. Graziers and conventional operators can both make money in the dairy business.

This article first appeared in the Milk Producer magazine, July 2004.

For more information:
Toll Free: 1-877-424-1300
Author: Jack Kyle - Grazier Specialist/OMAFRA; John Molenhuis - Business Analysis & Cost of Production Program Lead/OMAFRA
Creation Date: 01 July 2004
Last Reviewed: 01 November 2011