To Buy a Dairy Farm or Not To?!

Discussion in 'Cattle' started by JElfering, Sep 10, 2005.

  1. JElfering

    JElfering Dairy Dreamer

    Apr 17, 2005
    Looking for opinions. Currently, have a homestead with Jerseys (herd is growing and so is 4H club's need to show). Running out of room although recognize that I don't have to supply the club with animals to show.

    Farmer inquired about us buying his farm. He sold his herd but has acres, barn etc. Old-fashion milking barn with a pipeline. We currently hand-milk. House is somewhat smaller but okay. Folks buying our raw milk. DH has a farmer's itch! Is it infatuation or real inspiration? Don't know. $$ would really set us back. DH has a job three towns away. You know that means DW would run the dairy operation.

    Jerseys have really become our love and organic farming our second love. Is this too big of a jump for us. Six teenagers can help but soon will be off to college. Any thoughts? The land is beautiful and fertile. It is such a temptation but at what cost. Also hate to see this family farm get divided up and sold to as recreational land.

    The Family Farm is becoming extinct. Yet, I don't want to miss the opportunity to enjoy what we have with our family homestead because of a want to save someone's "Family Farm". Thanks for your thoughts. After one jersey, you just can't help to want more.

    Mom of Ten
  2. MissKitty

    MissKitty Mrs. no longer OldGrouch.

    Mar 15, 2005
    When it comes to Jerseys I know what you mean...We love our Jerseys...We bought a registered Jersey cow pregnant with her second calf in May 04...the calf was a heifer and is the queen of our little farm...I wish we had more land..on three acres not much room for our livestock...If we could afford it we would both love to get into raising these brown eyed babies big time...Times being what they are we are afraid of going into debt...also it is just me and hubby...both middle children so no help...but we manage and enjoy our life ...Best of luck...MissKitty

  3. james dilley

    james dilley Well-Known Member Supporter

    Mar 21, 2004
    deep south texas
    Dependg on the prices of everthing , You might want to try to put together A plan and see if it would b doable, I think if it sound like what you want DO IT.
  4. Ken Scharabok

    Ken Scharabok In Remembrance

    May 11, 2002
    If you were thinking going the regular dairy route I would advise not even considering it. However, if the market is there to sell enough raw milk direct to the public then... You are essentially selling retail by the gallon rather what wholesale by the hundred weight.

    How strong is your market for raw milk and calves? Is there a market there for cream, butter or cheese?

    Are you are willing to consider 'old fashion' with a grass-based, seasonal dairy. That is grazing is consider to be the primary feed source with 'store bought' only as a possible supplement. Seasonal is you time calving to where all of the cows freshen in early spring and are then dried off before the 8-10 week coldest period, which may be mid-December to early March.

    Somewhat work backwards. Can you project your total annual expenses. Mortgage would likely be the biggie, but what about property taxes, pasture maintenance, equipment and health health care? How much would it cost to bring the barn and milking parlor up to USDA Class A dairy status? To be on the safe side, double your estimates. Now determine how many gallons of raw milk you would have to sell to break even.

    I'm just pulling numbers out of the air.

    Say total projected annual expenses are $50K, you can expect an average of five gallons of milk per day per cow for 300 days and you can get $2.00 gallon for raw milk. Thus, annual gallons per cow per year is 1,500 gallons or a retail value of $3,000. Here you would need to maintain a milking line of about 17 cows. Now not only is that manageable, but is there a market in your area for some 10,500 gallons of milk (or about 35 gallons a day for 300 days)?

    This also leaves out other possible profit centers. You know you can sell some 4-H calves, but what about first freshing heifers? If you were to produce cheese on a regular basis, that opens the possibility of raising feeder pigs for sale to your customers with their being delivered to the processor by you, but the buyer pays all processing fees. If you have customers coming to the farm on a regular basis for milk, are they also a potential market for free-range eggs? This can perhaps be on an annual all-in, all-out basis to where you buy chicks in the early spring, sell the egg production and then sell the hens as stewing hens to your egg customers. They buy live and you process for free.

    Essentially boils down to how much would you have to produce AND is there a continuing viable local market for your output.

    Also keep in mind what happens when the kids to go off on their own. These days reliable labor is very, very hard to find. I know of a dairy in TN which went out of the business not because the dairy wasn't making a decent living for them, but they simply couldn't keep reliable help.
  5. milkstoolcowboy

    milkstoolcowboy Farmer

    Sep 13, 2003
    Unless you can write a check today with no financial pain to your family, buying any kind of farm just to save a family farm is stupid. With the amounts of money you are most likely talking about, this is an investment and it has to support a large family.

    The land is driving the value of the purchase, not a now empty dairy-barn with a pipeline setup. (There's nothing old-fashioned about pipelines, thousands of farmers still use them.) If you're serious about buying the farm, get the soil maps for it, ask to see any recent soil tests the farmer has done, find out whether he has certified his acres with FSA and what his base acres and yields are. More important, what is happening to the price of farm land and cash rents in your area?

    Not trying to be confrontational, but hand-milking a couple homestead cows is a completely different enterprise than commercial dairying. You probably don't know right off the top of your head what your feed costs are per lb. of milk produced and what your net revenue is per lb. of milk produced. I know there are people that dairy and work off the farm, but I guarantee you that some corners are getting cut on the farm.

    There are farms here in the upper Midwest that use some form of MIG (managed intensive grazing). This has some set-up costs (fencing, providing water near grazing areas) and there's a fairly steep learning curve. It takes some experience and practice to manage this effectively. What you are doing with this vs. conventional dairying is lowering your input costs (hopefully enough) so that even with the slightly lower production, your net per 100 lb. of milk will be higher. You have to do quite a bit of research on this before you jump in. Once you go with this type of grazing dairy operation, your rules for mating and selecting replacements change vs. conventional dairying. Most of the current genetics for commercial dairy animals, Jerseys included, were not selected for this ranginess and thriftiness on grazing. Given the current prices of feed grains, you might want to think about whether it is actually more profitable to graze or feed some sort of least-cost ration year-round.

    For example, up here we can have hellish winter with 1-2 feet of snow on the ground from mid-November through the end of March. Your viable pasture months are late May through early October, and maybe you can stretch that a month or so by gleaning fields. If you have all of your cows freshening at the same time, you have to build the calf-raising facilities to handle them and means that you'll be awful busy for a couple months.

    See, there are so many regional variations in feed costs and livestock prices you have to take everything said here with a grain of salt. The first thing I'd do is find out what the mail box price is for milk per cwt at the local creameries, and find out component premiums, quality premiums (low SCC) and hauling costs. Might just as well check the organic market as well, but there's a fair amount of work to becoming certified organic. Then, I'd look at the barn and see what infrastructure is there (pipeline and vacuum line, bulk tank, compressor, receiving jar. If it's a pipeline, there is no milking parlor, but you'll most likely need a barn cleaner in the barn. If you have Jerseys, you might think about the dimensions of the stanchions or tie stalls. If built for Holsteins, you'll be scraping a lot of manure back into the gutters. What about hay storage? any silos? feed storage (e.g. granary or commodity shed)? Dairying is infrastructure intensive, even with grazing, you'll either need to buy your feed and build storage for it or have the farm equipment to put up hay and possibly sileage.

    If you are currently selling raw milk from the farm, then you know the WI laws allowing only incidental on-farm sales. I take this to mean that any sort of advertising or marketing is a legal no-no. If you have 20 cows and they average 5 gallons/day, then you have 700 gallons a week. If your average customer buys two gallons/week, then you need 350 customers, if four gallons, you stilll need 175 customers. And, the average is meaningless when you tell them to buy elsewhere for 60-90 days and then figure that you ramp up to peak production and then fall off over the course of a lactation. You've got to figure your time costs for managing this large customer base and how you're going to build it.

    Call me crazy, but trying to claim selling Jersey heifer calves to 4Hers in WI -- I'd hate to live off that profit. What will you do with your bull calves? I guarantee that you aren't going to find a big market for day-old Jersey bull calves like you would for Holsteins. Will you breed the cows to a beef bull like an Angus and feed out the calves. Springing heifers, again the biggest demand is for Holsteins, and unless you're raising top-line registereds, you won't make a real killing selling springing heifers.

    If you plan on feeding out pigs with the milk from the Jerseys, I'd pencil it out first on your acquisition costs of feeders, feed costs, processing costs vs. what you can sell them for. I don't know what hog prices are in WI, but you wouldn't touch a 40 lb. pig year -- especially if you just wanted to purchase a small number -- for under $50-55.

    Yes, the smaller family-owned dairies are disappearing because the sons aren't their to take over the Dad's operation. I'm a perfect example of this. But, there are still tens of thousands of family operations in the upper Midwest, particularly in MN and WI. In my area, there have been a half-dozen or so 30-50 cow operations that started up in the past 18 months. You can make money at it, and you can do it selling bulk milk. That's a far cry from saying it's easy.

    This is way too big of a decision to make based on emotion, and I wouldn't put much stock in the applicability or wisdom of the advice any of us is offering, there's simply too much we don't know about the property and the local market conditions.
  6. dosthouhavemilk

    dosthouhavemilk Well-Known Member Supporter

    Oct 28, 2004
    SE Ohio
    "Yes, the smaller family-owned dairies are disappearing because the sons aren't their to take over the Dad's operation."

    *tsk tsk* :nana:

    Good advice from everyone....

    *sayeth the daughter strongly considering taking over the family farm*
  7. uncle Will in In.

    uncle Will in In. Well-Known Member Supporter

    May 11, 2002
    If your husbands paycheck can support the family and make the mortgage payments, go for it. It would take a long time to get the place running with thousands of dollars worth of equipment and with a herd built up large enough to show a profit. If you can make the payments till that time you might get to where you'd like to be.
  8. RdoubleD

    RdoubleD Active Member

    Oct 11, 2004
    N.W. Washington
    I am a real estate agent in Washington state. I do not know how your market is but in our area the farms are disapearing, the need for home grown food is growing, if you love to farm, I would say go for it. I think that organic foods and products will become more and more popular and the only way to grow them right is on good ground so in the long run it should be a good investment.

    You should talk to your local real estate agent to see what the market is doing in your area. I would not tell them about the land that you want to purchase but try to see what farms are selling for and if there has been an increase intrest on purchaseing them.
  9. Ken Scharabok

    Ken Scharabok In Remembrance

    May 11, 2002
    Keep in mind our advice is worth exactly what you are paying for it. Also it is your money/future involved, not ours.

    My observation is dairies have never been cash cows. With a lot of work a family could make a living at it, but not get rich off of it per se. Hogs on dairies were called mortgage lifters for a reason. Where dairy famers have done well is with land appreciation. Many are retiring quite well off by selling the land to developers.