Tuesday, August 2, 2011

The Dreaded “P” Word - Profitability

Garrett, me, Lad and Jack in the freestall barn
Each day millions of Americans work to earn money to provide for themselves and their family. Businesses across the nation record annual profits and are labeled successful. Hard work is usually rewarded with financial success.

So why are farmers portrayed as villains if they make money raising animals for food production? Why is being profitable equated with poor animal care and irresponsible environmental stewardship? The perception seems to be if farmers are profitable they must be doing it at the expense of their animals, the environment or the consumer.

The opposite is true. As a dairy producer, my business will be more profitable if my animals are comfortable, healthy and well fed. If my animals are content, they will produce more milk. Since 96% of my income is derived from selling milk, it’s extremely important to me that my cows perform. If I take care of them, they will take care of me.

Dairy farming is not a hobby or a non-profit venture. Sustaining the economic viability of our farm is a necessity. This business must be profitable or it can’t exist. If our farm isn’t financially stable, then we can’t produce milk, employ people, buy products and services, support our community and provide for our family.

The dairy business, like many other businesses, has its economic ups and downs. We depend on many variables to be profitable including the price we are paid for our milk and expenses such as feed, labor, interest rates, fuel, veterinary service, maintenance/repairs, taxes, utilities and custom services. When prioritizing expenses, the comfort, health and well-being of the cows come first. We must be consistent with the quality of feed, fresh water, bedding and care our animals receive.

Some will claim “farmers only care about making a profit”. Our goal is to make money each year so we can maintain, improve and potentially grow our business. The idea that we would sacrifice animal care for financial gain is simply false and doesn’t make sense. We know good management practices lead to healthy, productive land and animals.

We enjoy the work we do and the lifestyle living on a farm affords us. I want to provide the same things for my family that you provide yours; a comfortable home, a college education and a family vacation to name a few. As dairy producers, we work hard and are committed to what we do. We deserve to be profitable without being criticized for it. If we are successful, our family, employees, community and cows will benefit.


  1. Thanks Brenda for posting this and is speaks for many. Because we have large equipment and lots of animals the perception is that we are "rich". Farming requires a huge capital investment of land, equipment and livestock. Just like many small businesses we are making mortgage and "tractor" payments. Your post is so relevant as many struggle with the risk of farming. Many like us have had our crops severely damaged due to drought conditions, others flooding. While we carry insurance, it might just cover the cost of planting the crop and NOT the profit we could have gained. One other point to make is the size of many farms today. The profit margins on one dairy cow in one year could be $300 to $500 per cow and the next year due to high feed cost or low milk price be a lost of $300 per cow or more. We milk about 250 to 300 cows and that provides salaries for our families and employees and working capital for our farm. Many farm families work together to share resources and responsibilities. We love what we do but maintaining a constant profitability is a challenge. We always laugh at the kitchen table that if dairy farming made you rich there would be a lot more folks milking cows. I love reading about your farm and family. Have a great Dairy day!

  2. Thank you for the excellent points! I relate to each one of them. I appreciate you taking the time to share your thoughts.

  3. The general public really does not understand. Then you get a city reporter or group who decides we do not take care of our animals and before you know it half the population think we are not treating our animals properly. Most of us even love our animals and only want them to be comfortable and happy. You make great points and wish everyone could read your post. We all would love for general public to realize we are really wonderful caregivers to our animals. I know there have been a few who are not, but they are not representative of most of us...

  4. I like your post and I absolutely agree. I want farmers to make a profit. Producing food is an incredibly important vocation, and one that deserves to be well compensated.

    Some grocery items I can purchase directly from the farmer/rancher at our local farmer's market. I get to know these farmers. Though the products are a bit more expensive, I appreciate their quality and I am glad to know that the farmer recieves the full cost of the item. Milk is harder, because I don't have access to a local producer. What decisions can I make in the dairy aisle that ensure that farmers receive fair compensation?

  5. Thank you for the comments. MJ, I appreciate your support of dairy farmers! The best way for consumers to aid dairy farmers is to purchase dairy products. The price we receive for milk depends on factors such as U.S. milk supply and demand and international milk production and demand. When people here and abroad purchase and consume dairy products or foods containing dairy products, such as pizza and cheeseburgers, that increases the price farmers get paid, especially if milk supply is tight.

    Government policy can also have a huge impact on our bottom line. For example, ethanol has received big support and heavy subsidies from the federal government. Therefore, the price of corn and other commodities we feed our cows has tripled over the last two or three years. Which means our price for cattle feed has tripled – this is devastating for many livestock farmers.

    Milk pricing is determined by a complex formula and is different in every region of the U.S. The milk processor and retailer can price their products to make a profit, but as dairy producers we don't have any control over the price we're paid for our milk. For example, we won’t know the price we’ll receive for our July milk until August 13th. The dairyman's share of the retail milk dollar seems to shrink each year. Most dairy producers don’t make a finished product, so it’s challenging to purchase directly from a dairy farmer to ensure they are receiving their fair share.


    Some of the books I've read lately promote the idea that these ^ sort of practices should change. That farmer's, not middlemen, should be determining prices and recieving the bulk of the profit. That consumer's should actively seek products that fairly compensate the producer. Some authors suggest that by purchasing the cheapest available product, we drive down the amount of profit that farmers are able to make.

    I don't know a lot about the agriculture business but these ideas sound reasonable.

    Are the benefits dairy farmers receive from the processors and the retailers worth the decreased revenue (is there decreased revenue for the farmer with this system)?

    Thank you for answering my questions. I wonder if dairy farmers would be surprised how concerned suburbanites are about creating a fair food system (My neighbors talk about it, my parents, even the preacher from the pulpit and the people at our local schools).


  7. I agree it’s a flawed system where dairy producers shoulder the majority of the risk. Over the last three years, there has been much discussion and several proposals from the dairy community regarding how to reform the milk pricing system. But so far, nothing has been done. It’s very challenging to get the majority of dairy producers to agree on one solution and even more difficult to get that “reform” introduced and passed as federal legislation.

    It’s not true that purchasing a more expensive dairy product equates to dairy producers receiving more money for that product. The price of the product has a lot to do with its packaging, labeling, marketing and perceived value. For example, products labeled “hormone free” or “antibiotic free” receive a premium price. The reality is all milk contains the same tiny quantity of hormones and no milk contains antibiotics. The markup on these perceived premium products usually goes to the middleman, not the producer.

    Regarding your question about benefits we receive from processors and retailers being worth the decreased revenue. As dairy producers, we work with a cooperative or directly with a milk processor to sell our milk. We have little to no relationship with the retail sector. The price we receive for milk in this region is determined by Federal Milk Marketing Order 33 which is based on the Chicago Mercantile Exchange (CME) Class III milk price. The CME is volatile and can change quickly based on speculators in the market, news events, product supply reports, etc. The current milk pricing system has nothing to do with the cost of producing milk. In addition to the Federal Order 33 price, cooperatives and/or processor usually offer a premium to producers in this region because Ohio is a milk deficit state.

    I appreciate that consumers are concerned about fair compensation for dairy farmers.



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