Economic Potential of Amish Dairy Systems

Penn State Cooperative ExtensionRoland P. Freund Farm Management Agent - Retired

Mary Beth Grove Dairy Agent – Lancaster Co.

In cooperation with

Aaron King, Timothy Fritz – King’s Agriseed

Bruce Kreider – White Oak Mills

Penn State is committed to affirmative action, equal opportunity, and diversity of its workforce. Where trade names appear, no discrimination is intended, and no endorsement by Penn State Cooperative Extension is implied

Purpose of Study

• Compare the economic potential of four Amish dairy production systems.

• Evaluate feasibility of young Amish families getting started in the dairy business.

• Compare findings with other systems research.

Four Systems

Conven Hybrid Intensive Seasonal -tional Grazing Jerseys

Cows 48 48 60 75

Milk Kpounds 24/21 21 21/18 13

Heifers raised 17/15 14 15/13 30

Calv.Int.Mo. 14 13.5 13.5 12.5

Cull Rate% 35/31 29 25/20 25

Horses 6 6 4 2

Four Systems

Conven Hybrid Intensive Seasonal

-tional Grazing Jerseys

Rented Facilities:Barn/stalls Tie/44 CurtTie/44 40x150 BedPack

Milk Parlor NewZeal Swing”6”

See Text for details

Four Systems

Conven Hybrid Intensive Seasonal -tional Grazing Jerseys

Corn Sil. 20ac 15ac Buy No

Ear Corn 5ac

RyeSil.D.C. 20ac 3.7ac

Alfalfa 20ac 10

Sacrif.lot 5ac 1 1 1

Int.Pasture 0 24 49 49

Capital Investment

0

20

40

60

80

100

120

140

$ T

ho

usa

nd

s

Conventnl. Hybrid Int.Grazing Seas.Jersey

Cattle,dairy

Equip,horses

Fence,water

Capital Investment

0

20

40

60

80

100

120

140

160

Conventnl. Hybrid Int.Grazing Seas.Jersey

$ T

ho

usa

nd

s

Fence,water

Equip,horses

Cattle,dairy

Profit with $12 / cwt milk price

111.4 100.7 94.2111.9 104.8 117

5.355.35 5.1

3.93.9

3.430.3

23.7 30.5

46.331.3

34.5

0

20

40

60

80

100

120

140

160

180

Conv24K

Conv21K

Hyb21

K

Int 2

1K

Int 1

8K

S.Jer

s13K

$ T

ho

usa

nd

s

Profit

Depcn

Expens

Profit with $12 / cwt milk price

30.323.7

30.5

46.3

31.3 34.5

0

5

10

15

20

25

30

35

40

45

50

Conv24K

Conv21K

Hyb21

K

Int 2

1K

Int 1

8K

S.Jer

s13K

$ T

ho

usa

nd

s

Profit

Grazing systems focus more on cattle than machinery are more profitable

30.323.7

30.5

46.3

31.3 34.5

0

5

10

15

20

25

30

35

40

45

50

Conv24K

Conv21K

Hyb21

K

Int 2

1K

Int 1

8K

S.Jer

s13K

$ T

ho

usa

nd

s

Profit

Buying corn silage more profitable than growing it.

• Budget figures show:Conventional farms grow silage for $15 / T.Grazers buy it for $27 / T.

• 12 more cows made $22,000 more than growing corn silage.

• Contracting to buy corn silage will be a key to survival of small dairy farms.

Cash Flow $12 milk 100% crops

15.3 15.2 15.4 17.1 15.3 15.4

18.1 18.1 16.4 16.4 16.4 17.8

7.91.5

8.9

21.9

8.610.3

0

10

20

30

40

50

60

Conv24K

Conv21K

Hyb21

K

Int 2

1K

Int 1

8K

S.Jer

s13K

$ T

ho

usa

nd

s

Surplus

DebtPmt

FamLiv

Net Cash Flow $12 milk 100% cropsAll systems pay cattle/machinery in 7yrs.

7.9

1.5

8.9

21.9

8.6 10.3

0

5

10

15

20

25

$ T

ho

usan

ds

Surplus

Maintaining production level is vital in any dairy system

7.9

1.5

8.9

21.9

8.6 10.3

0

5

10

15

20

25

Conv24K

Conv21K

Hyb21

K

Int 2

1K

Int 1

8K

S.Jer

s13K

$ T

ho

usa

nd

s

Surplus

Break-even Milk Price 100% crops

12 12.63 11.9 10.86 11.913.98

11.66

0

2

4

6

8

10

12

14

16

$ p

er

CW

T

$/CWT

Profit per Cow- Return to Labor+Managment

632494

635772

521 460

0100200300400500600700800900

$ p

er

Co

w

$/Cow

Profit per Acre

607475

609

926

625 690

0100200

300400500600700

800900

1000

$ p

er

Acre

$/Acre

Profit per $1 invested

$0.20$0.16

$0.21

$0.32

$0.22 $0.23

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

$0.35

Per

$1 i

nveste

d

Per$1

Milk sold per worker

741 690826

1,015 921732

0

200

400

600

800

1000

1200

Th

ou

san

d #

per

wo

rker

#/Worker

Ending Net Worth – 7 years

195144

193

293

197 220

0

50

100

150

200

250

300

350

$ T

ho

usan

ds

$,000

No system could pay for startup and real estate at the same time.

Even with optimum yields:

• Conventional farms failed to meet cash flow by $23,000 and 29,000 annually.

• Intensive grazing at 21k milk failed by $6,000.

Budget based on Real Estate loan at 5% for 20 years and cattle/machine 5.5% for 7 years.

Farm purchase potential yr.8Buy 52 ac. with house - $500,000, buildings at cost

-21

-32

-17

2

-19-14

-35

-30

-25

-20

-15

-10

-5

0

5

$ T

ho

usan

ds

$,000

Amish may not pay for land at present

prices. Buy 52 ac. with house - $500,000, buildings at cost

-21

-32

-17

2

-19-14

-35

-30

-25

-20

-15

-10

-5

0

5

$ T

ho

usan

ds

$,000

Cash Flow $12 milk 80% crops

0.05

-6.3

0.97

14.4

1.083.3

-10

-5

0

5

10

15

20C

on

v24K

Co

nv2

1K

Hyb

21K

Int

21K

Int

18K

S.J

ers1

3K

$ T

ho

usa

nd

s

Surplus

Break-even Milk Price 80% crops

12 12.63 11.9 10.86 11.913.98

11.66

0

2

4

6

8

10

12

14

16

$ p

er

CW

T

$/CWT

Profit per Cow- DAFOSYM Comparison

632494

319

635772

521 536 460 426

0100200300400500600700800900

$ p

er C

ow

$/Cow

DAFconv

DAFgrz

DAFseas

Conclusion

• Choose the system that best meets your abilities and resources.

• Prepare your own budget before getting started in the dairy business.

• Use conservative crop yields for planning purposes, but aim for the Potential.

“Farm Decisions” (Roland P. Freund) Contact Information

• Phone: 717-245-0479.

• Mail: 382 Petersburg Road

Carlisle, PA 17013

• Email: rpfreund@comcast.net