New Zealand entrepreneurs show that pasture-based dairy is profitable
by contributing reporter Kathleen Sprouse, posted March 19, 2010
Lining up like children at a carnival, hundreds of cows wait for their ride around the milking carousel. Fifty cows quietly ride side-by-side around the concrete platform at Focal Dairies in Harwood, Mo. The carousel mechanically milks the cows for eight minutes. The milking machine is a sophisticated, mesmerizing New Zealand creation.
Kevin van der Poel shipped the carousel from his native New Zealand to Missouri in the fall of 2005. Van der Poel, a co-owner of Focal Dairies, began an intensive, pasture-based business with a new spin on old dairy traditions. The business is not about producing the most milk. The New Zealander’s method is focused on efficiency, management and reduced costs. Pasture-based operations, like Focal Dairies, are becoming less foreign to Missouri as they prove to be a profitable trend.
“Pasture-based dairying, for everyone, is not a religion and not a philosophy,” said Jackie Klippenstein, vice president for industry and legislative affairs at Dairy Farmers of America in Jefferson City, Mo. “It is a profitable way of producing high-quality and safe milk.”
Van der Poel grew up helping on his family’s dairy farm in New Zealand. He continued his dairy career for 15 years. Van der Poel and his wife, Cherie, owned a 600-cow herd before leaving New Zealand. Growing their operation using the pasture-based method proved profitable. But, when van der Poel wanted to expand, New Zealand’s high land prices forced him to look for a new opportunity.
With New Zealand land selling for almost $20,000 an acre, van der Poel, his brother and Spectrum Investment Group formed Focal Dairies, an equity partnership. Quickly, the group began searching for land outside New Zealand to start a pasture-based business.
Van der Poel traveled to Australia, Chile, the Southeastern United States and Missouri, searching for land with similar climate and soil to New Zealand. The dairy investors may have New Zealand accents, but after traveling to other countries, they realized speaking their native language, English, made the United States more appealing. A DFA tour led the foreigners to Missouri.
Global search leads to Missouri
Missouri dairy specialists Joe Horner, Stacey Hamilton and Barry Steevens greeted van der Poel at the airport in Springfield, Mo. Van der Poel wanted to see a pasture-based operation similar to the one he operated in New Zealand. The specialists drove van der Poel to MU Extension’s Southwest Center in Mount Vernon, Mo., where research on pasture-based dairies is done.
“They saw that we had a seasonal grass-based dairy at Southwest Center for several years, so they could see the concept there,” Horner said. “They wanted some place where they could raise perennial rye grass, because it was a species they had used in dairy in New Zealand. And, they wanted to be assured there was a milk market.”
Missouri was the last stop on the New Zealander’s tour. Van der Poel’s visit to Missouri showed the investors a pasture-based system functioning with techniques, crossbred cows and grasses similar to New Zealand farms. After the investors visited Missouri, van der Poel knew the business had a future.
In February 2005, the investors bought a 3,000-acre farm in Harwood. Three months later, van der Poel and his family arrived in Missouri. They started milking in March 2006.
Focal Dairies now employs 30 local workers to operate their 3,700-cow dairy business. The staff works in two shifts of five to seven workers. The two shifts start at 2 a.m. and 8 a.m. and everyone finishes around 7 p.m. Two workers manage the carousel while a third employee herds the cattle to the carousel. All employees work six days on and one day off and receive vacation, health benefits, sick leave and are paid hourly.
Focal Dairies’ intensive pasture-grazing method requires employees to have strong management skills. With one to two people showing up daily at Focal Dairies looking for work, van der Poel said ambition in individuals is more important than dairy experience. The New Zealanders want to teach people with positive attitudes how to manage a dairy operation.
“We need American people to become involved so the business can move forward,” he said.
Dairy offers opportunities for individual growth
People who have an interest in dairy farming can earn more than a wage when working at Focal Dairies. Employees who show potential as a manager can earn a stake in the company. The enticement encourages employees to be efficient managers and eliminates a conflict of interest, knowing their dedication and effort will benefit them personally in the future.
Young farmers, like many in New Zealand, can find success working as a sharemilker. Sharemilking allows people to work on someone’s dairy farm, paying for some expenses, while also receiving a share of the milk check. According to Horner, in 1880 Scotland introduced New Zealand to sharemilking, helping workers gain experience in the dairy industry by first working at small dairies and growing to larger dairies. The method allows youth, without a dairy background or equity, to enter the industry and gain experience without gaining debt.
“It creates a very motivated employee and it aligns the interest of the owner and the sharemilker very well,” Horner said. “They brought that concept to Missouri and it is in the process right now of being validated in our system.”
Focal’s business model encourages sharemilking. Sharemilkers usually work for a few years as a hourly employee learning about the industry and dairy management. After being in the dairy industry for a few years, a person can move to a low order sharemilker, where the employee uses the dairy owner’s land, facilities, equipment and milking herd, but shares the profit and some of the operating costs with the owner. After gaining experience as a low order sharemilker, a worker can earn sometimes 50 percent of the milk check and will own the cattle and equipment, but still use the owner’s land and facilities. Many young New Zealanders, including van der Poel, embark on a sharemilking career path.
Horner said pasture-based dairies hold tremendous promise for the dairy industry because they solve two major issues. Retired dairy farmers do not want to reinvest in facilities, and young people do not have a way to get started.
“I like to say it is going to work perfectly in Missouri,” Horner said. “But, quite honestly, we have to prove it for a few years to see how well it is going to work, but that is ongoing right now.”
Focal Dairies is a business dedicated to reducing costs and improving efficiency. Employees move cattle to different pastures, measure grass and operate the milking carousels.
Feeding more grass leads to higher profits
Focal’s intensive grazing method moves the cows every 12 hours to a new field. At times the dairy cows’ diets are 90 percent grass, but annually the cows’ diets are 60 percent grass. Van der Poel said with increasing genetics he is confident cows’ diet will be 75 percent grass. Feeding the cows more grass cuts down on the cost of feed.
“We don’t make as much milk, but our profits are higher,” van der Poel said.
Van der Poel and Tony Coltman, an employee and investor in Focal Dairies, did not invent pasture-based dairying, but their entrepreneurial spirits led them to profitable success in Missouri.
“We are here to make money, have a sustainable business and have fun,” Coltman said.
Coltman said people call him and van der Poel pioneers in the dairy industry, but Coltman said he’s just happy to be self-employed.
“They are a group of individual farmers who put capital together as a dairy equity partnership to get to that scale, and there is nothing magical about being a New Zealander that allows you to do that,” Horner said. “It can be done by farmers anywhere.”
The carousel milks 250 to 300 cows an hour. Each cow is milked twice a day, producing an average 46 pounds a day. Larger carousels are available but demand more workers and bigger facilities.
Focal’s two milking sheds, each with a 50-cow carousel, are different than many in New Zealand. Missouri’s hot summers demand tall ceilings in the sheds to keep the facilities cool. In New Zealand, most of the milking sheds are open, but with Missouri’s cold winters, the barn needs to be enclosed.
Focal Dairies’ carousels require two employees to operate. One local worker has 12 seconds to slip the milking sleeves on the cow’s udders and check each cow’s health. After the cow finishes its eight minutes on the carousel, another employee takes off the milking sleeves and sprays the cow’s udders with iodine to prevent a potential infection.
Van der Poel said Focal’s cows are healthier than cows in confinement dairies. Cows in pasture-based operations experience less stress than confinement cows. The cows are not only milked less, they walk and graze more, which increases their life expectancy and fertility. Focal replaces 10 to 15 percent of its cow herd each year, compared with a confinement operation, which replaces about 30 percent of its herd annually.
Cows in pasture-based operations can produce milk for five or six years, compared with three years in most confinement operations. At Focal, most of the heifers are 5-year-old crossbred Holstein and Jersey cows. Crossbreeding creates a cow that can better handle the walking and foraging that pasture-based operations demand. Focal cows not only live longer, but they have a 75 percent fertility rate, compared with 30 percent in confinement.
Flies buzz everywhere. Four-foot-tall pins are full of brown, black and white one-day-old baby calves. Some of the young calves are curled up on the golden crisp hay while others try to stand and walk. About 20 calves are in each of the four 25 by 15 foot pens so Focal workers can monitor them.
During the fall calving season, more than 60 calves are born each day at Focal Dairies. In the spring, about 100 calves are born each day, keeping the farmers busy. Focal’s “mega mom” is a milk tank of fresh milk from the carousel that efficiently feeds the baby calves with teats on the sides of the tank. The milk provides the calves all the nutrients they need for the first two weeks. After that the calves are fed grain in the field. When the cows are 12 weeks old, they begin eating grass, too. Once the cows are two years old, Focal Dairies begins milking them.
System requires intense management
Van der Poel and Coltman keep especially busy during calving season, but most of their work is managing the grass. The New Zealander’s intensive pasture-based method requires more management than traditional dairies. Moving the cows to different pastures so the grass is eaten at a vegetative state before it ever goes to seed.
Focal Dairies includes two 1,250-acre farms with 1,500 cows on each. Horner said the cows should be grazing on pasture that looks like an overgrown yard, not a hay field. Horner described why the cows are consistently moved to new fields.
“It’s like you go to a fresh buffet every 12 hours,” Horner said. “Rather than eating the same buffet that has been picked over.”
Horner said MU Extension specialists suggested to Focal Dairies to plant more species of grass than perennial rye. The New Zealanders first planted only perennial rye grass on their Missouri farm, but after three frustrating seasons of it consistently going dormant, the farmers looked for help.
MU dairy specialists help maximize Focal’s grass production. Horner said most dairies worldwide grow perennial rye grass, but with Missouri’s climate, the grass goes dormant in the summer and winter. Van der Poel now plants summer crops that the cows can harvest themselves and grows corn silage to feed the cows through the winter.
Growing grass is a precise science at Focal Dairies. Employees measure the density and height of the grass weekly by dragging a computerized instrument behind their ATV. The computer converts the data into a variety of graphs and charts, showing farmers their feed situation for the next week. The data indicates if cows should be fed more and how much corn silage and bailed grass is needed. The data also shows farmers if more nitrogen fertilizer is needed or if certain paddocks should be taken out of rotation for hay.
The information from the grass is key in pasture-based dairies. Focal Dairies’ grass data and feed budgeting techniques help their operation maximize the energy and nutrient levels from their grass for optimum milk production.
“We have had one heck of a good year in grass management,” Hamilton said.
Cows fertilize the grass and reduce dairy managers’ work by distributing their own waste. The added benefit requires less labor, equipment, and is more environmentally friendly than traditional, confinement operations. Van der Poel said people like to see free-range cows. Driving by Focal Dairies, the cows graze in open fields, but after talking to van der Poel, the land is the product of a sophisticated, scientific and cost-effective management team.
Research at the Southwest Center shows pasture-based operations cost farmers less per cow. Comparing the total operating costs, a 700-cow confinement operation costs $14.52 per 100 pounds of milk and a 600-cow pasture-based operation costs $14.08 pounds.
Horner said, “A bigger difference is reflected in the return on assets, because the grazing dairy tends to have a high percentage of the capital invested in purchases that appreciate and reproduce rather than rust, rot and depreciate.”
Focal Dairies’ owners hope to expand their operation in the future, but for now they are focused on reducing costs, becoming more efficient and increasing profits. As milk prices continue to decline in this economic downturn, dairy specialists, MU Extension and the DFA are encouraging and educating farmers to add more pasture-based techniques in their operations.
“We really have hit rock bottom in the dairy sector for prices this year,” DFA’s Klippenstein said. “Whether you do it as an intensive style, rotational pasture-based operation or whether you just bring in some pasture into your feeding operation, it is going to save you money or make you money.”
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