Diversifying Revenue Streams in Dairy
In the dairy industry, milk dominates our revenue stream, constituting a substantial portion of our income. We often focus on key aspects of this primary income source, including total milk production per cow, marketing strategies for milk, basis received from milk processors and optimizing the price for our milk. While milk accounts for roughly 80-85% of our gross revenue on dairy farms, there’s untapped potential in diversifying the remaining 15-20% of income streams. The question that arises is, “How can dairy operations maximize income beyond milk?” Here are some strategies to consider for diversifying revenue streams in dairy operations:
Crop and feed sales can supplement your dairy’s income. Consider the following:
If weather conditions and forage inventories allow, can you sell additional acres as cash grain or forages to neighboring dairy operations?
- Assess the cost of producing crops and evaluate selling home-grown grain (e.g., corn/soybeans) and buying other protein needs for your herd based on market conditions.
- Explore opportunities to expand grain production.
- Mitigate risk associated with grain sales through marketing strategies, insurance products and basis evaluation.
Return on Assets – Equipment and Custom Work
Offering custom services to other agricultural businesses can boost your income. Consider these factors:
- Determine if your equipment can accommodate both your needs and potential custom clients.
- Assess whether you have the necessary labor force to operate equipment for custom work.
- Investigate the financial stability and payment capacity of potential clients.
- Account for the impact of additional work on equipment maintenance and repairs, and consider local equipment dealers for support.
Cull Cow and/or Dairy Sales
Monitoring the dynamics of your dairy herd can optimize the income from cull cows and dairy sales. Consider the following:
- Implement metrics for culling decisions, such as reproduction performance, milk production, health events and age/number of lactations.
- Determine the capacity of your dairy facilities, including the number of cows and milk production they can handle.
- Consider the overall herd performance, and collaborate with dairies in need of replacement animals.
Beef on Dairy
Breeding with beef semen on dairy operations has gained popularity due to a favorable beef market. When selling beef calves, ensure the following:
- Establish a well-planned reproduction program to maintain a sufficient number of heifer calves for replacements.
- Evaluate the ability to house beef calves to meet buyer demand.
- Foster a healthy business relationship with your beef calf buyer.
- Explore risk protection options like beef futures or Livestock Revenue Protection (LRP).
As dairy businesses become more data-driven and sophisticated in their planning and analysis, opportunities for diversified revenue streams may emerge. A comprehensive understanding of your dairy business’s cost of production will allow you to identify additional income sources. By analyzing these opportunities, dairy producers can position themselves for financial stability, even during challenging times in the dairy market.