Friday, May 30, 2014

The Reasoning Behind My Micro Dairy Business

In the next 2 months, I'll begin milking a small herd of 15 cows. I'll sell the milk direct to the public. I'll milk my herd on leased lifestyle blocks, using my mobile cowshed.

In my last blog post I outlined 5 points that I wanted to achieve with my new business.
  • Create a truly environmentally sustainable dairy business
  • Create farming opportunities for young people that also provided a great lifestyle
  • Keep control of the value chain
  • Offer real unaltered whole milk to the public
  • Concentrate on building a brand rather than owning land
It's taken a few years of thinking about the issues and I wanted to briefly outline how I have come to settle on my current system.

Question Everything

I started off by questioning every aspect of traditional dairy farming.
I asked:
Why do we do what we currently do? 
Why do we need irrigated land? 
Why do we use ryegrass & clover pastures? 
Why do we milk twice a day? 
Why do we need a big concrete cowshed? 
Do we really need laneways? 
Why are their less small herds around now?

I investigated dairy farm cost structures and profitability.
I asked why do farmers supply dairy companies like Fonterra or Synlait? 
How do people progress in the dairy industry? 
How much money do dairy farmers make?

I questioned what we know about the environmental aspect of farming.
How exactly are water ways affected by farming?
How do nitrates work? 
Where do the nitrates come from? 
Why do we deal with effluent the way we do now? 
What is Phosphate & how does effect our effect the environment?

Environmental System

I started with a blank sheet of paper. The first priority was to design an environmentally sound dairy system. I’d worry about how to make it profitable later.

The research tells us that nitrates are the greatest pollutant caused by dairy farming in New Zealand. Turns out that the cows urine patch is the biggest contributor to nitrate leaching by a long shot. I learnt that the wetter the soil is, the more leaching occurred. Large amounts of nitrate are leached over the winter months. I discovered that plant root systems are the greatest absorbers of nitrates.

I thought, if we forget everything we know about farming and just designed a system that would leach no nitrate.

What would that farm look like?

We’d want to reduce the amount of urine on our paddocks, which means we want a lower stocking rate. We don’t want our cows on wet soils. So wintering cows on crops on a small area of land (as is the usual practice) is not going to work for us. We also want to use un-irrigated land because it leaches much less nitrate. We want plants/crops with deep roots to absorb the nitrate, which means ryegrass & clover pastures probably won’t work for us.

All these points put together basically mean, we would leach very little nitrogen. But more land is needed & that land will produce less because it’s not irrigated. Our wintering & feed costs will be a lot higher too.

It’s pretty clear that this farming system would not work financially, if we supplied Fonterra or another dairy company, we simply would not be profitable.

Make the farm fit around my desired lifestyle 

With the environmental aspects sorted, the second priority was how could we design a dairy farming system that I wanted to work in and that suited the lifestyle I wanted to lead. I assumed that if I could achieve this goal, then it would also be attractive to the best of today’s young people.

There are lots of brilliant young farmers out there, but we need more. Many great people are choosing other occupations and agriculture has to compete for good people.

So again I questioned every aspect of the daily duties on the farm.
Why do we start milking so early in the morning? 
Why do we milk twice a day? 
What activities take the most time?

Milking the cows took the most time and you can easily spend over an hour herding cows to the cowshed each milking.

So milking once a day milking is an attractive option. The research shows that most cows milked once a day were producing 19% less milk, but had less animal health & feed costs. Trading 19% less milk for about 40% less work still feels like a winning situation to me.

But the main attraction to once a day milking, is that dropping the afternoon milking gives you much more options for giving staff (& me) more time off. It allows much greater flexibility on when the jobs get done.

While milking once a day may help with a better lifestyle, the other half of the solution to attracting young people to farming is financial opportunities. This system had to be achievable and in reach of young (& cash poor) people.

Basically it needs to be cheap to set up.

Attainable to young people

I concluded that it needs to be small scale system. It's easier to find the money to buy 20 cows than 200 cows. Also when you have a small herd the amount of equipment needed is greatly reduced.

Land is by far the biggest expense when setting up a farm. The land required for a small 20 cow operation would cost at least $1,000,000. Which is hardly in reach of your average young person.

My solution is to lease land. But you are hardly going to build a small cowshed on land you don’t own. This is where the mobile system becomes important. If I could build a fully contained cowshed that is totally mobile, then milking off leased land becomes an option.

My research into dairy farming financials showed that interest paid on land was one of the biggest expenses on a farm. By leasing land rather than buying it, I could save a lot of money. Which could offset the extra costs & lower production caused by our no nitrate leaching measures.

As I thought about this more, the mobile system looked like it could save a lot of time on farm as well. For instance, I would not have to spend time herding the cows to the cowshed as I’ll milk the cows in the paddock. No concrete yard to clean, which saves time & water. No need for a conventional effluent system, which is one less cost. No need for lane ways or permanent fencing either.

At this point I had a rough idea of how I could farm dairy cows and leach very little nitrate. I worked out that a mobile cowshed could be achieved & the mobile system made it possible to set up a small scale herd on leased land for a relatively low amount of money.

Who will buy the milk?

Now it was time to ask the question, who will buy my milk & how can we make it financially viable?

From my research, it was clear that there are a number of people who would love to buy a sustainable or eco brand of milk. This is a brand that can promise its farming practises do not adversely affect the environment. 

The public are aware of the environmental impacts that dairy farming has on our water ways & a good number of people say they would support a brand that stood for more eco dairy farming practices.

There is also a growing number of people who are concerned about what is happening to our food in these modern times. The whole food movement is growing.

There are clearly people would buy my milk if they had the opportunity.

Could I make it pay though? 

The following thoughts were going through my head; 

All the trends are for farms to get bigger and have greater scale & I’m proposing going smaller!

On farm costs have been increasing which is putting pressure on farm profitability. I’m proposing even higher costs combined with production drops in order to meet my self imposed environmental & lifestyle standards.

A trip to the supermarket showed that 1 litre of Organic milk was retailing for $3.40, 1 litre of Anchor or Meadow fresh blue top sells for $2.45.

If I could receive $2.50/ litre for my milk, then I could make it work financially. I worked out that if I could keep the money that the farmer & the processor get, then I could break even. 

But breaking even is not a very sustainable goal. I would also need to retain the 30-40% margin the the retailer receives in order to make the business viable.

So, I would need to be the farmer, the processor, the delivery man & the retailer in order to be profitable.

In conclusion:

I've just described, very simply the thought process that occurred over a couple of years that has brought me to where I am now.

I hope that I have found a way for us to milk cows sustainably that is attractive & within reach of young people & profitable too.

We’ll see if it works. Stay tuned.


  1. Bravo! What a cool plan. I applaud your initiative, your willingness to think from first principles, and the sheer guts it takes to try something different.

    I'm not sure what your actual land plan is, but it seems to me that getting a long lease is desirable if you want to grow cow food in your own way. I'm not sure if that works against having mobile milking plant - maybe not if you just rotationally graze but take the "shed" to the cows?

    Anyway, I will be following developments with interest.

    1. Cheers for the comment. Ideally I would like to be able to secure a long term lease of land. This will allows us to get our pasture renewed and fertility built up & also plan our crop rotations etc.
      The problem I am currently having, is whenever I approach a land owner & explain "I've got this mobile cowshed & I'd like to milk my 15 cows on your land etc etc". They look at me blankly as if I'm crazy :)

      The plan is that in the short term I will lease land off life style block owners. If I can lease 3 ha of a 4 ha block. I'm assuming I could get about 3 weeks grazing off 3 ha. Then I'll move the cowshed and the cows to the next 3 ha block & spend 3 weeks there. I'm assuming all the blocks will be dryland & I'll be on a 40 day rotation.
      I'm offering lifestylers $1,000/ha/yr to lease their land. For that I will fertilise and regrass the land, if they give me a long lease. I think this is quite attractive, as that land would not return more than $700/yr.
      Thanks for your interest. I enjoy your blog.


    2. Glen,

      I wonder if it is your recent behaviour has put lifestyle block owners off leasing you their land. Dangerous and illegal stubble burns, leaving your neighbours fence still broken and burnt months after burning it, really? Are these the actions of a man that lifestylers trust with their land? Rangiora is a small town.


    3. UPDATED:
      You obviously know me and know my contact details, so I wonder why you wouldn’t just come to me personally?

      The stubble burn was not illegal as you claim. The contractor had asked me to burn it that day, before he reseeded the land. At the time I was working with troubled youth who had major behavioural issues. My job was to try and get them to achieve their NCEA in a practical agriculture setting.

      The stubble burn was a way to engage a handful of these guys. Unfortunately two of the boys breached the rules around the tractor use & I had to deal with a pretty serious incident. I had to deal with the students involved due to some other similar issues earlier in the week. So I made the decision to put the fire out and return the boys back to the college.

      In the 40 minutes it took me to drop the boys off and return, the wind had picked up & restarted the fire, which spread to the neighbour’s tree line.

      I take full responsibility for the fire and the resulting damage to the neighbour’s fence. I don’t blame anyone else for it. I have offered my sincere apologies to all 3 neighbours.

      I have spoken with & visited the farmer next door (with a box of beers) and have arranged to replace 3 fence posts and a short stretch of fencing wire. So I can assure you the fence repair is well under control.

      My wife and I are looking forward to moving back into the country and having good relationships with our neighbours.

      I don’t think a little incident like this, is an indication of how I treat peoples land. If you look at our block, we have already started a biodynamic fertilizer programme to address the significant deficiencies. We have replaced the old weed grasses with new pasture. The stock that grazed the property prior to our arrival, have caused significant pugging damage to the ground. As a result the soil structure is seriously compacted & contains very little organic matter. Our worm count showed 2 worms when healthy soil should contain 25+worms/spade width.

      Fixing these things are expensive and takes years. That’s what looking after land is, and its difficult for people who don’t have a farming background to notice these things.

      So any land that I’m involved with will be better off when we leave it.


    4. Glen, interesting response. So getting advice from a contractor means the fire is legal? I'm sure you now know that you need to contact the fire service and get a permit. This information is on the fire services web. Is teaching your students about illegal fire practices also part of the curriculum?

  2. Glen,

    So your system will return a lower nutrient output because - you will winter on grass and - you wont irrigate. You don't need a mobile milking system to achieve that. Other farmers are doing these things. Additionally some are wintering off grass all together, in wintering sheds, and will have lower nitrate foot print than your system. I'm guess they will consider their milk as more environmentally sustainable than yours. Are you concerned that they could flood your market with cheaper milk?

    Assuming you are Rangiora - How do you manage the drought when feed and land is at a premium?

    "as that land would not return more than $700/yr." Seriously? I know lifestyles that are making who are making $1000 a hectare out of sheep, with a lower nitrate footprint.

    Can you please explain how many 3-4 ha blocks you need for 15 cows? If we assume they only last for 3 weeks as you suggest, that is 17 shifts per annum * 4 hectares = 68 hectares for 15 cows = $68,000 or $4,500 per cow. That will be tough to pay for. I have to assume you are grazing the 3-4 hectare blocks multiple times?

    Mr E

    1. There are many things that contribute to low N leaching. Wintering indoors or on grass is one aspect, as is farming on dryland. But there is much more to it than that (which I'm sure you are aware). Yes, some farmers do already do these things. But if it were common for dairy farmers to farm with N losses of below 20kg N/ha/yr, then there would be no objection to the new N caps.

      The mobile cowshed allows us to be flexible with where we put our cows, which will aid in us being more environmental, but the main reason for the mobile system is it allows farmers to milk off leased land.

      The environmental performance of my system is only a small aspect of the business. People will not buy my milk simply because it has a low footprint. A business needs more than just that to be successful. So, there is always a risk that competitors will emerge. But I'm pretty sure the only dairy farming system that with a lower N footprint than mine will be a 100% indoor system, which is not all attractive to my target market.

      I'm sure many lifestyler's do make good money from their land, but many do nothing with the land or simply lease it to the neighbour who pays the council rates in exchange.

      Ideally leasing a single block of land large enough for my whole herd for the year would be preferred, but I'll take what I can get.

      I'm working on 1 cow per ha stocking rate. 15 cows = 15 Ha, but I'd like to have an extra 5 ha just in case.

  3. I think 20kg/ha is more common than you might think.
    Here are 2 examples one heavy Southland soils wintering on brassica crops.

    I guess I wonder if your main point of difference for selling milk is a genuine point of difference. Have you reviewed the overseer output for your system? If so what is it? If not can you honestly promote being better based on speculation?

    Mr E

    1. It would be great if an eco dairy farm was no longer a point of difference. But I don't think the environmental side of things, is my customers main focus. The main reason people will buy my milk is because it is whole milk that has not being homogenised or standardised. The eco side of things is another point, but not the only one.
      I suppose I will see if people want my milk or not.

      We're in the process of modelling our system in Overseer. I have been waiting until I know my soil types first. I'll blog about our overseer exercise.

  4. Another quick point -

    Your lease cost will be $1000 per cow.
    Let us extrapolate that to a 750 cow farm or 250 hectares- ownership.

    750cows * 1000/cow = 750,000 per annum.
    At a 7.5% interest rate that would pay $10M
    Assuming your cows milk 350kgMS per cow (which I would expect on low quality lifestyle pastures)
    350*750 = 262,500kgMS
    =$38/kgMS the approximate price of buying converted land.

    Add the cost of your trailer per milk cow and milk solid and you are paying more.

    To me your system appears no less capital intensive on a per kilo MS basis (depending on how many kgMS you make per cow).
    Although I will recognise it as an entry pathway. However other alternatives like, lower order contract milking or share milking may make equity progress faster?

    I might be sounding critical but like you I question everything.

    1. Correct this will cost about the same to set up on a kgms basis. But the main point has been how to set up a small scale unit that is economical too. If I am able to sell all my milk then buying land will be an attractive option.

      Which is the whole point of this business. How can young farmers go farming and get ahead.

      I'm not sure but i think my farm working expenses will be double that of traditional dairy farm on a kgms basis.

      Small scale farming is not easy and like all new businesses, the risks are high. But I think I can make it work.

      There are many ways that people do this like lower order etc. But this is a different model. Not better, but a different system that may suit different people.


  5. Very good Glen,
    You system is obviously unique and a curiosity for me.
    What is the councils approach to this system and effluent management?