The US dairy industry has a long tradition of managing milk price volatility and growing or downsizing depending on the prevailing economic factors. Milk quotas have not limited growth in the US and currently over 50% of the milk there is produced on farms with over 1,000 cows. Some might say that’s a very different business model to milk production in Ireland, but from talking to Andrew Skidmore this week it is clear there are some very clear comparisons between Ireland and the US.

Andrew started off by explaining that the first step in any expansion process is to evaluate and validate the reasons for expansion. He said: “For many US producers the key reasons are bringing family members into the business to allow other family members have time off, increasing profitability, ego and empire building or simply to keep up with the neighbours.”

To expand, you are going to need more stock and feed, so Andrew said the first thing to do is evaluate your resources. He said: “List each item in your inventory: stock, equipment, buildings, labour, water supply, and your ability to manage staff. As you increase herd size you need to employ more people so you may have to give up what you like to do.”

The other important factor in the US is that all partners and all family members must be 100% behind the expansion plan. “If family support is not 10 out of 10, family discord that may be simmering will only explode during or shortly after the expansion process,” Andrew said.

How the expansion is going to stack up financially is probably the most important factor in any business development and in the US Andrew said that you need to measure debt, assets, and cash surpluses in recent years to see if the current business is performing because, if it’s not working at the moment, there is a chance it won’t work after expansion.

He said: “There may be under-utilised resources so all owners should look at production per unit and per worker, the herd cull rate, the ability to raise quality replacements and see if barns and bunker silos are full.”

Andrew said all farmers considering expansion should visit as many dairy farms as possible that have expanded. “Go to farms of similar size as your future herd, study the facility, look for labour savers, study management, and talk to employees and owners.”

Andrew went on to explain what he sees as the fundamental rules of expansion and there are strong comparisons with the lessons we have heard from Irish farmers who have expanded. Andrew’s 10 fundamental steps are listed below – while all are not directly applicable and comparable to Ireland, they give a very good guideline for those considering expansion. The feed situation is obviously very different in the US, where most feed is brought into cows 365 days a year, compared to Ireland where mainly only winter feed is conserved.

Skidmore’s 10 steps on expansion:

  • 1. Grow by steps, but grow.
  • 2. Secure several profitable years where income taxes are paid, inventories are built, and you are financially strong.
  • 3. Learn to raise a lot of calves well.
  • 4. Overload existing free stall barns by 25%.
  • 5. Have six months of extra silage in storage before expansion starts.
  • 6. Use excess crops to feed purchased open heifers.
  • 7. Have a crop plan in place one crop year ahead of expansion.
  • 8. Prove to yourself that you can handle the debt, management, changes and pressure before expanding.
  • 9. Start early – the process takes a tremendous amount of time and energy.
  • 10. Hire new employees at least one month before construction starts. It is difficult to manage a major construction project and the business at the same time.
  • Next week Andrew Skidmore, ruminant global technical director on reproduction and parasite control, is in Ireland to discuss what US dairy farmers have learned from expansion. Andrew has worked with milk producers from Kansas, Wisconsin, Cornell and Michigan to improve reproductive herd health and business goals. He will speak at an MSD-organised event in the Silver Springs Hotel in Cork city next Tuesday, 25 November at 7.30pm.