As mentioned in prior posts, capitalism is harsh, but it is also effective for future improvement and success. The dairy industry is changing rapidity, and the changes can be harsh. The U.S. dairy industry is in the process of major changes, and the impact of traditional processes cannot survive. This post will focus on dairy farms. Below is a list of some of the factors that are changings. The is no significance to the order of items listed.
- Herd size
- Cows closer to the locations for processing
- Automated milking systems
- Advanced breeding practices
- Computerized feeding systems
- Genetics
- Nutrition
- Amino acids balancing
- Milking frequency
- Technology implementation
- Lower labor costs with automation
- And many more!
There is always a question of whether to enlarge an existing facility or rebuild. Rebuilding is costly but it allows implementation of many of the items listed above.
One of the most harmful results of smaller and older operations is to “hang in too long” and likely increase debt to stay in business. While old facilities of smaller dairy farms have a minimal value, the land is typically very valuable. When is it time to make a big change? In many cases, there are ties to the history of the dairy farm. Capitalization is harsh but effective is moving forward.
New facilities with many of the items listed above can produce and deliver milk with significant components at half the cost of older facilities.
Today’s low prices of components are forcing changes.
WHY IS THIS CHANCE IMPORTANT?
To be successful, all businesses must satisfy the customer. The customer here is the dairy consumer. Milk and the products that come from milk must be safe, they must be pleasing to consume, they need to provide health benefits and be available at a reasonable price. If dairy does not change, some products will slowly fade away. The good news is that dairy is changing to make the products fit with the changes listed above.
Some countries have implemented “Save the way of life” programs to keep small farms operating. The U.S. has implemented “Dairy Margin Coverage.” Neither has not worked effectively.
The current low prices for dairy components have been criticized in many publications. As supply and demand levels out, the component prices will improve but will not reach the high prices of the past. And, the processes that are occurring will provide a business model that can be sustained and grow.
As an example, fluid milk was dying for decades, until products like Ultrafiltered milk have brought new life to fluid milk. While retail prices of these products are high, competition will reduce retail prices and speed up consumption.
No business can live in the past. Henry Ford would be shocked by the vehicles of today.
Th U.S. must move forward to have a successful dairy business.
