By Jean Caspers-Simmet
DUBUQUE, Iowa -- Larry; Tranel, Iowa State University Extension field specialist for dairy, calls them "millionaire model dairy farms."
The five dairy farms are part of his Model Farms Program. He has tracked their financial performance for three to 12 years. The farms started with little.
The Iowa and Wisconsin farmers closely resemble a low-cost, modified seasonal, labor efficient, profitable grazing model designed by Tranel in 1991. The model continues to be fine-tuned, but the goal has been to create millionaire dairy producers within 20 years to 26 years.
The farms are cost-conscious relative to income and they all analyze their financial records once or twice a year through the Dairy TRANS 4.0 computerized financial analysis, developed by Tranel.
The base business of the model farms is one person milking 80 cows on 80 acres using a low-cost parlor and free-stalls, modified seasonal calving, crossbred dairy cattle and rotational grazing. The farms have expanded cows and acreages with many variations of the base. Sizes now range from 68 to 150 cows and 70 to 330 acres. The 80 cows on 80 acres base model begins in a cash rent-buy feed arrangement that uses corn silage purchase contracts and rents dairy facilities and land at going rates, Tranel said. The dairy operation generates enough income to pay for family living but also generates a good return on assets and equity after labor expenses.
The base dairy operation must garner $30,000 of net worth from labor or another arrangement such as share-milking prior to operating in order to obtain a loan.
"During a 20 to 30 year time frame, the net worth of the base operation exceeds the $1 million mark, creating a dairy millionaire family," Tranel said. "By that time, the producer begins looking for ways to transition that farm on to the next generation."
Tranel said three of the model farms have or will attain the $1 million net worth mark within the early 15 to 20 year range due to land, cattle and other investment decisions over and above the base dairy business.
All the model farms agree that the milking parlor is an important due to labor efficiency, Tranel said. This, along with the labor efficiencies of the grazing system, allows the average model farm to handle 70 to 80 cows per full time-labor equivalent.
All five model farms are serious rotational graziers -- meaning that cows see fresh, high quality pasture after each milking. A University of Wisconsin Extension study found that rotationally grazed pastures can be the cheapest way to get high quality feed into cows. All the farms feed a small supplemental ration of corn silage, dry hay, haylage or baleage. In 2004, a high milk price year, each dairy farm reaped profits ranging from $83,379 return to labor for the start-up farm completing its second year to $244,141 for a seasonal dairy grazing herd.
"The consistent and profitable success of these model dairy grazing farms serve as a source of learning and inspiration for those new and transitioning dairy producers who want to achieve their farming dream for profit and quality of life in a dairy production center,'' Tranel said.