Monday, July 15, 2013

How A 750 Cow Dairy Farm, Could Make $125,000 More By Employing 2 Extra Staff

The Small Things Make A Difference

Ive been using a 750 cow farm (Canterbury average) as an example. I have been saying that this farm should have 5 employees + the boss, instead of the usual 3 employees + the boss.

2 extra staff @ $35,000 each = $70,000/year extra wages

But if this farmer could:
  • Increase fertility by 7% = extra $32,000
  • Decrease SCC in just 5% of cows = $30,000
  • Increase pasture quality by 10% for just 31 days = $63,000
Thats adds up to an extra $125,000

Subtract the $70,000 in additional wages = $55,000 better off.

By employing 2 extra staff, could this farmer:
  • Train staff better
  • Retain staff for longer
  • Reduce hours worked by each employee
  • Have less stressed staff
  • Have more engaged staff
  • Attract better quality employees
By attracting better people who are more engaged, better trained and generally less fatigued. Farmers are able to make lots of small improvements across the whole business.

The figures used here are examples of average performance being increased slightly. The productivity gain will be much greater foe farmers performing at below average.

6 Week In Calf Rate

"It's really easy to miss one cow on heat or miss a retained membrane after calving etc when staff are tired or rushed or not aware of all the things that contribute to a successful mating"


"Depending on what your cell count is and what the payout is, there's around $20,000 to $40,000 sitting there if you could just work on 5% of your herd"

Pasture Quality

"You don't have to spend any extra money to get that; you're using the pasture you've already got, but we're just assuming you can do it a little bit better for one month of the year"

These figures are just hypothetical and based on assumptions. Before I get jumped on by people claiming I should have used $6/kgms rather than $7/kgms or that fertility figures should be $100/ha rather than $115/ha etc.

I'm just using some data that is easily found to illustrate a point that small gains added up make a big difference. 

Likewise, small losses add up to make a difference too. 

When I read figures showing:

 I'm sure many farms are missing out on profit.

You know, this is the last time I'm going to talk about dairy farm staff, but I just want to make one last point and it's that the small things make a difference, they all add up. And, you know, I've been saying a 750 cow farm really needs an extra two staff, so that's an extra $70,000 a year. So, that's a lot of money, but I think if we just concentrated on three KPI's, or parts of a dairy farm, and if we assume that a farmer was at an average level of performance and they could make a slight increase on each one of those three areas, that they not only could cover their extra $70,000, but they would make an additional $50,000 as well.

                  So, the first thing I want to talk about fertility and the average six week in-calf rate in New Zealand is 65%. So, Lincoln University did some work and they increased the six week in-calf rate by 7%. And they said that was worth an extra $115 per hectare in operating profit. So, if we times that $115 per hectare by 277 hectares, which is what your 750 cow farm is. Then that's an extra $32,000 in profit. And that 7% increase is worked out to be 52 cows. You just need to get an extra 52 cows in calf over that six-week period, which is 42 days. So, that's 1.2 cows in calf and I'm saying if you had those two extra staff, would you be able to train your staff better and would you be able to do that?

                  So, the second thing is mastitis. Now, Livestock Improvement Corporation tell us that 5% f your herd attribute to 50% of your bulk somatic cell count. So, that works out to be 37 cows. And, they tell us if you drop your, or if you have an average cell count of 212,000 and you drop it to 150,000, that works out to be worth an extra $31 per cow. So, times that by 750 cows and that's $23,000. DairyNZ have some slightly different figures and they tell us if you could drop your cell count from 300,000 to 150,000, that's worth an extra 15 cents per kg of milk solids. So, on a 750 cow farm, that works out to be around an extra $45,000. So, depending on what your cell count is and what the payout is, now, there's around $20,000 to $40,000 sitting there if you could just work on 5% of your herd.

                  So pasture quality is the third thing. DairyNZ tell us that if you could get a 10% increase in pasture quality, that correlates to an extra 0.4 kgs of milk solids per cow per day in production. So, times it by 750 cows and that's an extra 300 kgs dry matter, sorry, 300 kgs in milk solids per day. And, let's just assume that you can get that 10% increase for just one month of the year, so 30 days. So, that works out to be an extra 9,000 kgs of milk solids. Times that by $7 payout and you're looking at an extra $63,000. And, you know, you don't have to spend any extra money to get that; you're using the pasture you've already got, but we're just assuming you can do it a little bit better for one month of the year.

                  So, let's add all this up. If you take a 10% increase in pasture quality for just one month of the year, that's worth $63,000. Concentrate on 5% of your herd and drop your cell count down to 150,000, that's worth $30,000 a year. If you can increase your fertility by 7% , that's $32,000 a year. Add that all up and that's $125,000 in additional profit or income. Minus your $70,000 for your two extra staff members, and you're still ahead by $55,000 a year.

So, I'm saying, with those extra two staff, would you be able to have a staff that are more engaged? Would you be able to train them better? Would they, would you be able to retain them? Would you be able to attract even better people to your farm? Because all you need to do, is make, you know, a little adjustment over those three areas, and you make your money back. What if you did over five or six parameters on your dairy farm? So, I think it's a false economy to understaff our farm


  1. Glen.
    My opinion.

    "So, I'm saying, with those extra two staff, would you be able to have a staff that are more engaged?"

    If every dairy farm employs 2 $35,000 workers, I think you would get less engagement. You would likely be employing unskilled, non agricultural and often non engaged people.
    They would require intensive support by other staff on the farm often making their job harder.
    Would they improve somatic cell count, calving rate etc? I think that is highly unlikely. I think it is more likely unskilled would deliver staff discontentment.

    In my opinion a better use of $70,000 to reduce some of the issues you described might include.
    Feed management training for management
    Feed management resources for management
    Animal health recognising technology
    Upgrade of shed equipment
    Improvement of pastures, fertility, species, soil management
    Contracting expertise to identify and advise on wastage issues -Consultant - Mentor
    Management visiting field days on key topics
    Maybe feed concentrates to support poor end stock.

    Small things might make a difference. But $70,000 is not a small thing and in my opinion extra staff is not a pan industry solution to the opportunities your have identified. For many farmers the issues can be better overcome by a smaller more targeted investment.

    And I reiterate. Employing unskilled labour is not cost effective solution for every business to improve performance.

    Mr E

  2. You are missing the point. My point is, by adding more staff to the farm we are reducing the workload on each staff member. From my 20 years in and around the dairy industry, I know that most staff and employers are very busy. The hours of work are long etc.

    If everybody had more time to do their job a bit better then the productivity gains add up.

    So if this farm employed 2 extra junior staff who's main role is to milk the cows. Now the herd manager & manager don't have to be in the cowshed as much. Would that mean the manager & herd manager are able to manage his pasture better, or could they spend more time on mastitis training. With 2 extra staff maybe the whole herd could be tested for sub clinical mastitis every week or so. That is a very time consuming procedure that probably doesn't happen when there are just 3 staff on the farm.

    With the 2 extra staff could the manager & herd manager spend more time training everybody on how to get cows in calf. There are a range of things that contribute to a high conception rate. Winter feeding, calving complications, retained afterbirth, metabolic disorders post calving, heat detection, etc etc.

    You raise a number of good points above and I am in agreement, but the question is what is stopping farmers from improving. Its not a need for more technology etc. It's time.

    Herd fertility rates have been decreasing for the last 20 years, despite all the technology and knowledge we now have. Why is this?

    Too many herd managers and managers are spending most of their time doing the basic jobs, like milking and moving instigators etc, when their time is much better spent concentrating on all these little things which can improve productivity,

    What this looks like simply is no one checks the whole herd for sub clinical mastitis because they are too busy to, pasture management gets done on the fly because theres so many other jobs to do, training is too infrequent and not in depth enough, because everybody has so much to do in a day.

    More staff removes the pressure and allows everybody to do their job better.

    Lastly the dairy industry is filled with inexperienced staff as it is. You make it sound like farmers have the choice to employ experienced staff over inexperienced staff.

    More staff = less hours, more training, better performance and lower turnover of staff = more profit.

  3. Glen,
    Let me make my position 100% clear. You are saying a pan industry solution for improvement is employing more staff. Infact for the average farm - 2.
    I am saying:

    For every farm to employ 2 more unskilled labour units = more hours, more training, poorer performance, higher turnover of staff= more loss.

    Take the analogy and apply it to your school. Every teacher of every school needs to employ 1 person picked randomly from the street and use that person to help their teaching job and improve school financial performance. At what stage could you leave that person alone in the class room and trust them to do a good job? How many people would you have serious employment problems with requirement serious employment management and legal meetings? How much time wasting would you do teaching the individual just so they could teach the kids? Teaching them Math, English, Science etc? How many cases of gross negligence would occur?

    Right now I bet you are saying - Teaching is a lot different from farming. Let me ask this; Take you average person from the street, ask them the following questions.
    What is teat spray?
    Why is it applied?
    Where should it be applied?
    How much should be applied?
    When should it be applied?
    Are there alternatives?
    What happens if you get it wrong?

    Now extrapolate that.
    What is a field tile?
    Describe 3 fencing knots?
    How do you start a quad?
    How do you exit a tractor?
    And the million other bits of info required.....?????

    Our farmhands require an incredible amount of knowledge even at the most basic level. Milking cows is not just cups on cups off. There is a vast amount of knowledge needed for even the most simple tasks on farm. Farms are a risky environment and assuming we can on mass drag in unskilled labour and head off to the office is foolish. Farm cadet training courses take years to complete.

    Your pan industry advice of 'employ 2 more' is wrong, in my view, and I hope farmers realise they need to analyse their individual situation before reading too much into your advice.

    Mr E.

    1. You say "For every farm to employ 2 more unskilled labour units = more hours, more training, poorer performance, higher turnover of staff= more loss."

      Not at all, to employ 2 extra staff unskilled or skilled simply reduces the work load on everybody on the farm. Therefore the more senior staff and the boss have more time to do their job better.

      My whole argument is that much more training needs to be conducted on farm anyway.

      But if you have a problem with bringing on 2 unskilled staff and paying them $35,000/year. Then lets employ 2 extra skilled staff (assuming you can find any) for $50,000/year. The farmer is still ahead financially. But then I'd expect a much better productivity gain than I have used in this post if more skilled staff were employed.


  4. You and I are going to disagree. I can see we are both not making progress in this debate. I am seeing your points I just disagree and your repeated explanations are not convincing me.

    For the sake of my point I have seen the following unskilled examples:
    Pouring diesel in a radiator
    Pouring diesel in a hydraulic oil tank
    Setting a truck on fire
    Significantly damaging $100K tractor - The air conditioning filter is not the air filter
    Shearing the PTO shaft off a mower - do not engage the PTO at 1500revs
    Shearing the PTO shaft off a mower - do not drive through bull holes with the mower
    Ripping both drums off a mower - do not drive a mower through a large puddle whilst going
    Smashing the back of a vehicle with trailer - Couple the trailer to the vehicle not just safety chain.

    Approximate cost of damage? More than the unskilled labour salary. All on one farm. All within a 4 month period.

    But tell me this- If every dairy farm took your advice tomorrow, where would the labour come from? Do you think the average farmer would get skilled labour.You are providing pan industry advice to employ unskilled labour after all.

    Mr E

    1. You raise some good points.

      But those examples you used are a great way of further illustrating my point. The costs you mention just emphasises why the high turnover of staff is so unproductive. It should be farmers number one goal to retain staff because it is so expensive to lose a trained employee.

      Those are all training issues. I have seen it happen so many times.

      The farmer is busy, theres lots to get done, the new employee turns up and gets thrust into the job without any dedicated training.

      I have just spent a full week being trained by my employer on full pay. When I employ a staff member at my business we assume the first 2 weeks are just training and we don't expect to get any positive results from them within the first 3 months.

      How many dairy farmers would spend a full 2 weeks training a new staff member?

      The costs you mention are not an example of why you should not employ junior staff but of why proper training is so important.

      The problem we have now is farmers get the junior staff, they break things and stuff things up (which is also called learning). Then after 12 months of learning on the farmers gear, they leave. The farmer has to do it all again.

      Imagine if the 750 cow farmer employed 2 extra junior staff. Yes they need to be trained and yes there is a cost to that. But imagine if the whole team, (who are now working less hours and are less rushed) stay for a 2nd season.

      The farmer does not have retrain those junior staff in the basics. Its in the 2nd and 3rd years when the real productivity gains start happening. Because the farmer now has a team who have greater knowledge.

      This is not a quick fix, but if dairy farmers employed more staff and made the working conditions better ie less hours worked and more weekends off. We would see the staff turnover rates decrease and over time people will start to see that dairy farming is in fact an attractive vocation.

      I'm not trying to convince you anything, but you raise questions other people will be thinking and the comments allow me expand on some of those points.

  5. Firstly I totally agree almost all dairy farms in NZ are under staffed and I don't think anything is going to change any time in the near future unless the government regulate the amount of hours that should be worked in a day/week as it is in some other countries. Most dairy farm employment contracts I have seen in NZ leave the employee totally open to abuse.

    I would also like to address the previous message. I think it is a bit ignorant to blame an employee for the cost of all these things going wrong when it is pretty obvious that there was very little training given in any of these areas. The employee was probably unskilled but you employed them! May I ask how much you were paying this (probably unskilled) employee? You know what they say "If you pay peanuts.............". Maybe they were tired from working so many hours and lost concentration or didn't care because they were working so many hours for very little!!!!

    I agree more staff would make life easier but I don't think it is fair to say we can just leave these junior staff in the shed milking while the manager , or others, take care of other jobs. Getting the cows and milking are very important to understand what is going on with your cows plus it is very easy to lose motivation if you are the one stuck in the shed all the time. If you want productive and happy staff you need to make sure they feel important regardless of their position and that they can do other jobs apart from milking.

    The other aspect of assuming 1 staff unit costs $35,000 does not take into consideration the cost of creating more accommodation and other related costs, still very worthwhile though!

    1. Thanks for your comment.
      I totally agree with you in regard to making every staff member feel important and not to have just the junior staff in the cowshed. Its important that they do a range of jobs. I used that example to illustrate how the manager could get more productivity by concentrating on other jobs.

      You make a good point that the additional cost of $35,000 does not take into consideration the additional housing costs that the employer will need to fund.


  6. Plus vehicles, safety equipment, clothing, tools, admin support (for wages-accounting-lawyer), etc etc.
    Mr E