An American View of the Ukrainian Dairy Industry
T.P. Tylutki PhD
President DNCS LLC
The best way to start this article is by introducing myself. I grew up on a 65-cow tie-stall dairy operation in New York State.
The 'family farm' had a pipeline system installed in the mid-1960s and when I left for University, the cows were averaging
25 liters milk per day. You may wonder about cows in New York State. New York State is the fourth largest dairy state in the
USA with nearly 650,000 cows. Our farms range in size from 20 to over 4,000 cows. The top 15% of farms average over
300-cows and over 33 liters milk per cow per day. I left the family farm to attend University (Cornell University) where
I obtained three degrees (BSc, MSc, and PhD) all with a focus on cattle nutrition. I also worked for Cornell University
for several years both as a researcher and in extension (public funded consulting and adult education). During my PhD,
I worked closely with a 650-cow farm and implemented many industrial level quality control principles in management and production.
This work crossed financial, crop, and herd management issues. The results were so positive that the farms owners decided
to offer me minority ownership in the herd to keep me in the geographical area! In 2005, three of us left Cornell University
and started a business to commercialize an advanced cattle nutrition model. Additionally, we started offering nutritional
technical support to consultants and feed companies globally. For more information about this company, please see http://www.agmodelsystems.com
. Early in 2008, we formed a joint venture with a Ukrainian firm to begin offering American style consulting to the dairy industry in Ukraine. This company is Dairy Nutrition Consulting Services, LLC (DNCS) where I serve as president.
So, what do I see in the Ukrainian dairy industry and why did we start this joint venture? The second question is easy to answer. We started the joint venture because of what we saw and knowing what is possible in the dairy industry. The Ukrainian dairy industry has the potential to be a large player in the global dairy industry. With excellent land resources, access to a large domestic and export market, affordable feeds, and the obvious desire to increase profitability, the future is very bright. So bright, that if I personally had the capital, I would start building 2-3,000 cow dairy units all over the country. This actually is a risk that the current farm owners must face. Western Europeans, Australians, New Zealanders, and others from around the world can easily find the potential of Ukraine and move here. Western Europeans especially, can, and will move. If we look at a dairyman in the Netherlands as an example, they are controlled by environmental policy, animal welfare standards, limited land availability (and price of land), and milk quota. None of which exist in the Ukraine! In 2002, several of us visited the Netherlands and learned that a 120-cow dairy could easily sell land, quota, cows, and equipment, pay off debt, move to the USA, and begin a 500-cow dairy from scratch all out of cash. These farmers moving to the Ukraine would bring with them the latest technology, genetics, and philosophy to average over 35 liters milk per cow with good components, and low somatic cell counts. So, the question must become how can the Ukrainian owned dairy compete and take advantage of the same opportunities? We know there are conflicting reports floating around Ukraine in regards to what American and Western European dairies do to achieve high levels of production. We also know that many farm general managers have visited farms internationally to observe what others are doing. What is reported and observed however; typically can not be directly applied to your dairy. Every farm is unique and it must be determined if the concepts can be applied, and then how they are applied. There are some general areas that are applicable. Let's start with these.
Genetics. It is true that a cow can only produce to her genetic potential. In the USA and Western Europe, genetic potential has not been met as it is typically limited by other management constraints. A good example of this was a recent study in Spain where over 30 farms were all purchasing the same total mixed ration from a central feed center. The range in milk production across these herds was over 12 liters per cow per day. These were all the same breed and similar genetics! Given historical feeding history in Ukraine, especially with heifers, I do not believe we know the true genetic potential for milk production in the average Ukrainian herd. True, as breeding decisions are made now, the genetically best sires should be used. But, I believe we can improve milk production today with current genetics.
Forage quality. Internationally, forage quality is one of the main limitations on milk production. The most profitable dairy farms have several things in common. The biggest is high quality forage. Many people think of forage quality as maximizing dry matter yield per unit land. As a dairy producer, this is wrong as we do not sell forage, rather we sell milk. Thus, as an intermediate step, we should begin looking at liters milk / mt forage. This is based upon a mathematical prediction and chemical analysis of the forage. There is a balance between maximizing milk yield per ha and crop profitability. Goals for forage quality that we promote are based upon this balance. This is one of the largest opportunities for the Ukrainian dairy industry!
Cow health and reproduction. If we were to focus all of our energy on one area, it would be cows from -40 to +40 of calving. This period determines the entire lactation performance, cow survival, and reproduction. Did you know that a cow that has metritis will produce up to 1,500 liters LESS milk in the next lactation? Or that the same cow will end up with more days open? This can be mostly controlled by diet and management during this -40 to +40 time period. Yet how many cows are not grouped to allow adequate nutrition and care during this time? Grouping strategies, cow comfort, and cow management need to be primary focus areas on any farm.
Level of milk production related to profitability. In countries without a milk quota, it is generally accepted that increased milk production per cow results in increased profit. Let's look at this concept this way. Let's say you buy a new tractor for $100,000 USD and we are going to depreciate it over 10 years, so $10,000 per year. If we use that tractor 100 hours per year, depreciation costs us $100 per hour. However, if we use it 1,000 hours per year, depreciation drops to $10 per hour. Depreciation is a fixed cost so the more we use the asset, the fixed cost is diluted over more hours. From a cow's perspective, about 45 MJ energy are required every day just to keep her alive (maintenance). For a cow producing 10 liters of milk, that means that 4.5 MJ per liter are required just for maintenance. Going to 20 liters, we drop this to 2.25 MJ per liter. Again, a dilution of fixed costs (maintenance). Generally speaking, for every kilogram of a balanced grain (energy and protein) we feed, we should see between 2 and 3 liters milk. If grain costs $350 per mt, and milk is valued at $0.35 per liter, that means we spend $0.35 and gross $0.70 to $1.05 per cow, a 2-3 : 1 return on investment. The key here is that the grain must be balanced correctly. You will hear of farms around the world state "we make more money at lower levels of production". This is generally false. On farms where this is true (and there are some), management has failed in other areas. Even dairy farms in New Zealand are beginning to feed more grain as they have realized they are leaving money on the table! A myth we here more and more is that additional minerals and vitamins are not needed and/or are not fed in the USA. As an American nutritionist, I can assure you that greater than 95% of American dairy farms DO feed minerals and vitamins. Typically, we overfeed minerals and vitamins to ensure that we are never deficient. Historically, when we find a farm that is not feeding minerals and vitamins, they are doing so purely because they are near bankruptcy and trying to reduce costs in an effort to survive. Even at low levels of production, minerals and vitamins have been proven to improve reproduction, cow health, foot health, and in some cases, milk production.
An interesting difference observed is in management structure and responsibilities. On most American dairy farms, the managers at all levels are also part of the normal labor team. But, American dairy farms differ by geographical region. Western USA farms (Idaho, California, Arizona as examples) typically only have a dairy herd. They will purchase all their feeds (forages and grains) and many have contracts with heifer growers to raise their heifers. Central US and the Northeast US dairies typically raise their own forages. Some grains may be grown by these farms as well and would primarily be maize either to be dried or stored as high moisture. If we look at a typical 650-cow dairy in New York (the one I'm a minority owner in), we have the following:
650-cows (about 85% of these milking with the rest dry)
640-heifers (with an average age of first calving of 22 months)
260 ha maize (of which about 200 is for silage and the rest for high moisture grain)
160 ha lucerne (all for hay silage), and
150 ha grass (for hay silage and bedding)
Our management structure
(I'm included as an outside source as you'll see) is as follows:
1. General manager
a. Oversees entire operation
b. Also is the crop manager
c. Daily involved with maintenance and other tasks
d. Spends less than 1 hour per day in office. Rest of time is part of labor force
2. Herd manager
a. Responsible for entire herd and oversees two assistant herd managers
b. Daily involved with working with cattle
c. Responsible for herd record keeping (Alpro system plus DairyComp305)
3. Crop manager
a. Responsible for making cropping and manure management decisions
b. Works with crop consultant on hybrid selection and nutrient management planning
c. Works with nutritional consultant (me) and herd manager on harvest schedule
4. Assistant herd managers
a. One for cows
i. Responsible for treatments, moving cattle, vaccinations, etc.
b. One for heifers
i. Responsible for
1. feeding calves
2. Calf care
3. Heifer health program
5. Estrous detection
5. Financial manager
a. Responsible for
i. accounting and book-keeping
ii. Developing budgets
iii. Quarterly financial reports
Outside expertise farm works with
1. Crop consultant
2. Nutritional and herd management consultant (me)
3. Financial consultant
6. Artificial inseminator
The above outside expertise people are paid by the farm either on an hourly, contractual, or flat monthly fee. The veterinarian is used for pregnancy checking, surgeries, and occasional sick cow treatment. All other treatments are done by herd and assistant herd managers. The veterinarian typically is on-farm once per week for 3-4 hours. The artificial inseminator is on the farm one to two times per day only to inseminate cows and heifers.
On-farm, including labor performed by managers (not including the financial managers or outside expertise), there are 12 employees. During crop season, 1-3 temporary people may be hired to drive truck part-time. Typically, farms of this size that grow crops have a goal of 50 cows per full time employee (fte). Anything greater than 50-cows per fte shows good labor efficiency and few farms achieve this (most are 40-45 cows per fte).
Between forage quality, herd health, and other areas, we truly believe the Ukrainian dairy industry can double production within five years, and triple within seven to ten. In many cases, we believe the time frame to be even shorter. There are no 'magic potions' in this business. In the US, Western Europ, and other parts of the world, consultants are viewed as 'part of the farms management team'. These are long-term relationships where the success of both parties (consultant and farm) is clearly visible for all to observe. It is about change, learning, and implementing technology and knowledge. Thus the creation of DNCS LLC. It is our objective to form these long-term relationships to begin achieving higher production and profitability of Ukrainian dairy farms. We'll begin looking at some other specifics in future articles.