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Thread: expansions

  1. #1

    Default expansions

    So, we have a milk surpluse, buyers are in the drivers seat, new rules and regulations coming our way on a regular basses, prices going down, down, down, co-ops saying they wont take any more milk, yet larger farms keep building and adding cows. Not just a few, and not just small expansions, it seems like the carpenters cant build barns fast enough to satisfy these operations. Can someone please explain to me the story behind the actions?

    I operate a family farm, we are make very little money, my neighbors say the same thing, are larger operations making good money with these prices?

  2. #2
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    What state are you? Where is all the expansion you talk about? There's no expansion in CA.

  3. #3
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    Let me guess.

    Wisconsin.

  4. #4
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    I agree with you in your thoughts. Processors are at, or near capacity, dropping patrons, not accepting milk, and yet 2 large cafos are in process of trying to build near here. I'm not saying I'm against expansion, but whens enough enough. Maybe by the time these expansions or builds are through, markets will be different. But we're not headed that way at this pace.

  5. #5
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    What happens when one of these large farms being built, moves into a new area, requires 4-5k acres for nutrient management plan and are relying on neighbor contracts, and these contracts go astray? I realize you don't need to own land to farm, but that's a lot of land to have to rely on year after year

  6. #6
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    Quote Originally Posted by cihguy View Post
    What happens when one of these large farms being built, moves into a new area, requires 4-5k acres for nutrient management plan and are relying on neighbor contracts, and these contracts go astray? I realize you don't need to own land to farm, but that's a lot of land to have to rely on year after year
    Cafos are paying nice premiums for land. We got some nice bidding action for our land. Enough of them are well-managed. The marketplace will decide, as always.

  7. #7
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    Ya, but 5,000 acres of land! Unless one other large farm sells to them,( which in our areas case seems to be the suspected plan) you dont pick that up here. That's a lot of 120 acre farms to buy up and land don't change hands very often. I suspect all of us on here are good managers in some respect.

  8. #8

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    Im in New York, hear say is that some lenders have to lower there farms debt per cow and to do that they force the farmer to expand. If larger operators can make milk cheaper than I can, my hat is off and I bow out of the race.

  9. #9
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    It will be like the chickens. This has happened already in another industry. Consolidation. Mostly a few big players and a few little guys here and there. Hopefully, not that extreme. I think box stall robots will keep a lot of small farms alive. I really see them as a huge savior for the small dairyman. It's just economies of scale. Why do you shop at Costco? Buy it in bulk and save money. No different.

  10. #10
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    People expand because the efficiency and scale achieved allows for profit at lower price level. Specialization of workers allows for higher skill in a given area of work. Better accounting, better management, better records, higher production, more milk per worker...just to name a few. Most large farms are profitable.

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    DiederichFarm
    "You are only as good as your next success, not your last" Sir Jock Stirrup

  11. #11
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    Quote Originally Posted by drdiederich View Post
    People expand because the efficiency and scale achieved allows for profit at lower price level. Specialization of workers allows for higher skill in a given area of work. Better accounting, better management, better records, higher production, more milk per worker...just to name a few. Most large farms are profitable.



    Sent from my SM-G930R4 using Tapatalk
    In theory...yes.

    Years ago there was a small equipment dealer in every town. New buildings/shops were built, they consolidated and expanded to gain all these efficiencies that never quite seem to become reality.....I don't see it anyway, parts and labor have skyrocketed.

    Nothing wrong with growth, but it is pretty dangerous to use it as your main business plan IMO. I believe most of these expansions are driven by the need to roll old debt into new loans.

  12. #12
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    So why is everyone worried about the large farms? If the land is not available, the processors won't take the milk, efficiency of consolidation doesn't work, and they are just rolling the debt over so they can lose even more money, then the small farm is the place to be. Just invest $200,000 for every 80 cows in your milking system and you are good to go.

    Dr D is right, economy of scale. Has happened in almost every other industry in the world.

    My favorite farm example for scale of economy is a small farmer takes scraper and pushes feed up to 60 cows in 15 minutes. Large farmer uses machine to push up feed to 2000 cows in 15 minutes.

  13. #13
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    So, the example set by hogs and chickens is the clear ticket for dairy.

    What specific size is optional for efficiency?

  14. #14
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    Quote Originally Posted by always something View Post
    Im in New York, hear say is that some lenders have to lower there farms debt per cow and to do that they force the farmer to expand. If larger operators can make milk cheaper than I can, my hat is off and I bow out of the race.
    What part of NY are you from?

  15. #15
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    Quote Originally Posted by whistle pig View Post
    So, the example set by hogs and chickens is the clear ticket for dairy.

    What specific size is optional for efficiency?
    Depends on location. This will vary from place to place and for different facility designs

  16. #16
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    What is it at your location and why aren't you there? Should be easy to show a banker...,,

    Here, the optimum size seems to be double your current size every 5 years or so.

  17. #17
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    My boss went on a tour with Artex ( local company that builds freestall dividers and headlockers and sells internatiinally) and they toured large dairies in China and Indonesia and all the dairies were owned by the processors. They purchased alot of there feed from the locals who owned 1.5 acres plots. I think the US is headed this direction as well. That way the farm itself doesnt need to make money as long as the bottling plant does.

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  18. #18
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    Quote Originally Posted by CanadianCowMan View Post
    My boss went on a tour with Artex ( local company that builds freestall dividers and headlockers and sells internatiinally) and they toured large dairies in China and Indonesia and all the dairies were owned by the processors. They purchased alot of there feed from the locals who owned 1.5 acres plots. I think the US is headed this direction as well. That way the farm itself doesnt need to make money as long as the bottling plant does.

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    It's not headed that way in California. The processors love buying cheap milk from us producers. Why should they milk cows.

  19. #19
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    Quote Originally Posted by BLOOMFIELD View Post
    It's not headed that way in California. The processors love buying cheap milk from us producers. Why should they milk cows.
    That's right. All we have to do is keep expanding and we can get our profit per cow to a few pennies and still be profitable. The best part is most of us will fight to the death for the right to cut our own throat.

  20. #20
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    Quote Originally Posted by CanadianCowMan View Post
    My boss went on a tour with Artex ( local company that builds freestall dividers and headlockers and sells internatiinally) and they toured large dairies in China and Indonesia and all the dairies were owned by the processors. They purchased alot of there feed from the locals who owned 1.5 acres plots. I think the US is headed this direction as well. That way the farm itself doesnt need to make money as long as the bottling plant does.

    Sent from my SM-G930W8 using Tapatalk
    In the US it goes the other way...farms get big and buy processors. Dairy is to capital intensive for the processor to buy the farms it needs....but it's relatively easy for a farm with 50k cows or more to get the capital to build our buy a plant if they desire to.

    Optimal size? Depends on things but with current technologies the movement of manure is a major issue. Bigger than 4k cows in one spot starts to create extra issues...but some of those are offset by not having extra paperwork and compliance costs is you go bigger. Ideally, with a parlor, you go as big as you can run that thing with 4 people working a shift at a time. This is usually somewhere around 4-5000 cows.

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    DiederichFarm
    "You are only as good as your next success, not your last" Sir Jock Stirrup

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