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.