Can OAD and no grain combine to create wealth and happiness?

Chambersburg, Pennsylvania—Let’s talk about radical change and alternative dairy economics. A dozen years ago, Cliff Hawbaker was milking cows three times a day, housing them in freestalls, earning and burning a lot of cash, and just starting to think about getting his cows out on pasture for a few hours each day between milkings.

Today, Cliff has completed his third year of owning and helping to manage an entirely spring-calved, 120-cow satellite herd that was milked just once a day (OAD) in each of those three seasons, and which last year was fed no grain during lactation. In 2008, Cliff transitioned the 300-head home farm over to OAD, with the only grain for a herd dominated by large Holsteins coming from seven dry matter pounds of corn silage per day.

None of this is based on tapping value-added markets, not even organic. The OAD/no-grain combination here is basically going two steps beyond advanced grass dairy thinking, which is based on creating wealth by slashing spending and labor requirements, and placing less emphasis on per-cow milk production while building herd numbers through reduced culling rates. Cliff has simply cut out one of the daily milking sessions and almost all of the grain.

“Milk is not wealth,” Cliff says often, and with great emphasis. “Milk income over expenses is not profitability.”

The wealth-creating ability of OAD/no-grain while selling to conventional milk markets has yet to be fully determined for this business, especially at the Hamilton Heights home farm. There, the Holsteins that had been on corn silage and two or three pounds of daily molasses since spring freshening definitely could have used some additional body condition when Graze visited in October. The spring-freshening portion of the herd was milking at just over 23 lbs. per day. “I’m in transition here, and it certainly isn’t pretty,” Cliff acknowledged.

But there was certainly promise showing through at the Emerald Valley satellite farm near Newville, with its crossbred herd that had been milked OAD since early 2006. Here, in a relatively wet year with excellent forage growth, the herd was milking at just under 30 lbs./day in early October on the way to shipping 8,300 lbs. per cow (averaging 273 days in milk) on an all-forage diet. Minerals and about 5 lbs. of molasses/cow per day (free choice in lick tanks) were the only supplements. Managed by Cliff’s nephew, Dan Lehman, the farm shipped 997,000 lbs. of 4.22% butterfat and 3.30% protein milk in 2008. In October, these cows looked sleek and well fed, the annual SCC average was headed toward 210,000, and 82% of them were later confirmed pregnant for a nine-week spring calving window.

Cliff figures an all-forage OAD system requires two acres per cow and her replacement at four tons of grazing and hay harvest per acre. So the economics of 4,000 pounds of milk per acre at the $4,500/acre that Cliff paid for the Newville farm can certainly be debated.

Cliff believes that he needs to target 10,000 lbs. of 4.5% butterfat and 3.5% protein milk from a 1,100-pound cow at that stocking rate. While saying that no-grain fits well with both OAD and Emerald Valley’s mission statement (“to produce quality grass-based livestock with a focus on low-cost feeding and wealth accumulation”), Cliff isn’t quite sure if he and Dan currently possess the skills to pull it off on relatively droughty soils through years of varying precipitation.

Cliff says the OAD/no-grain combo “probably takes more management than any other kind of management. Forage is king and queen both.” For instance, in a very dry 2007, Cliff and Dan opted to feed grain and corn silage as their developing soils dried up and the developing sods shriveled. Even with the supplement, Emerald Valley produced just 970,000 lbs. of milk from the 133 cows that were milked there that year, largely because the operators were unable to provide enough quality forages.

Cliff says that in tough conditions the choices are to dry off early and cull heavily, or else bring in feed, and that it might just pay to be able to bring in grain-based commodity feeds if they are cheaper than imported forages. He may add an in-parlor feeding system to provide some low-cost flexibility in that regard.

Still, in Cliff’s line of economic thinking, no-grain fits extremely well with OAD, and he is willing to sacrifice a relatively substantial amount of milk to achieve his economic goals.

“I don’t want to downplay milk, because it’s very important,” he explains. “But milk is not wealth accumulation. The cow is wealth accumulation, so the cow trumps her milk.”

Such thinking wasn’t in Cliff’s mind when he milked three times a day and had a rolling herd average above 21,000 pounds. But he started realizing that he was working too hard to churn a lot of cash for the amount of equity he was creating. He could see a day when the “bubble would burst” on his operation. In 1998 he started getting the cows out on grass for three or four hours a day between milkings.

The next year he cut one milking out of the equation and started doing more grazing. Culling rates declined, and Cliff started seeing the advantages of going further down the road he was traveling. But the home farm was overstocked for the amount of grazing Cliff wanted to do and the amount of nutrients the regulators wanted on his acreage.

He looked to rent more ground, but decided the 380-acre property available for sale near Newville fit better with the goals for producing better lifestyles and greater wealth (as opposed to cash income) that Cliff and his wife, Maggie, had established as they evolved from confinement to pasture.

When Cliff talks wealth, he’s not thinking of a high cash income — the kind that gets taxed at the higher brackets. He figures he needs just enough income from the dairies to cover family living and variable production expenses, including interest payments.

In contrast, true wealth emanates from the accumulation of livestock that can either be sold to pay a property mortgage, or employed as collateral to finance more land. Either way, this wealth is being taxed at a lower capital gains rate compared to cash income.

Cliff says his goal is to never sell a cow or heifer to buy feed for remaining stock, because that is not wealth accumulation. If cows do get sold because of a feed shortage, he wants them to be viable dairy animals that may not be within his seasonal calving window. And the purpose of these sales will be to bring his herd size in line with near- to intermediate-term feed supplies while depending on growing heifers for future milk income.

Cliff figures he needs to accumulate the value of four cows per acre to pay for $4,000/acre land like the Emerald Valley property — a goal he thinks is very attainable. It’s mainly a matter of producing the cash flow required to keep the operation running and the family sound in mind and body.

Others think this way, of course. Cliff is unusual among U.S. milk producers in thinking that OAD and, at least potentially, no grain for milking cows may well be the best way to achieve such goals. Hundreds of New Zealand farmers are doing this, but their cattle prices are lower, feed costs are higher, and pasture quality is on average better than in the U.S. Can it work here for a dairy selling to conventional markets?

At Emerald Valley, goals for milk production have not been met thus far. Cliff originally targeted 12,000 lbs. of milk per 1,100-pound cow with no grain, but now concedes that 10,000 lbs. in a 280-day lactation is the more realistic goal. The satellite farm was started with Holsteins from the home farm, and was crossed first with Jersey, and later with Finnish Ayrshire genetics. The milk cows remain somewhat larger than the 1,100-pound average that Cliff wants to eventually see.

He agrees with research pointing to a 25% decline in milk volumes for OAD vs. twice-daily milking. While changes in cattle genetics and other factors muddy the waters a bit, Cliff estimates that the switch to OAD and no grain is reducing milk volume by no more than 40% compared to when he milked twice daily and fed corn silage and a few pounds of grain along with pasture.

At the same time, total milk solids percentages at the Hamilton Heights home farm, which has about the same genetics as before the change to OAD and just corn silage, are now about nine points higher. At average historic market values, Cliff figures a point of butterfat/protein is equal to about two pounds of milk, with the ratio climbing to closer to three pounds when commodity prices were very high in 2007.

“So we’re at the equivalent of close to 50 pounds of milk with once-a-day milking,” he says. Cliff estimates that dry matter intakes peaked at just over 40 lbs. per cow.

At Emerald Valley, the milk curve in 2008 seemed to be more a function of forage quality than any major effects created by OAD. The herd peaked in June at 51 lbs./day before quality in the permanent swards (mainly orchardgrass, bluegrass, perennial ryegrass, tall fescue and clovers) declined. Cliff says that he and Dan need to continue to build soils — this was a relatively poor farm when Cliff bought it — and do a better job of keeping clovers in the swards through interseeding and calcium applications. “Clovers are the oil of our operation,” he asserts.

Overall, though, many of the supposed production bugaboos of OAD have not posed major challenges at Emerald Valley. He says only a couple of animals dry up early each season. “They’re the ones that just get fat, and the highest percentage have been first-calf heifers,” Cliff notes. “I don’t think the drop-off from peak (milk) is any worse with once-a-day, although I will say that we make half our profit in the first 90 days.”

He says the involuntary culling rate has been near 15%, although he does have the option of bringing off-cycle cows back to the Hamilton Heights fall-calving herd. Cliff says he needs to pare about 100 head in the near term, as the 804 total head of cattle between the two farms is taxing his ability to meet nutrient loading limits while requiring too much purchased feed.

SCC at Emerald Valley ranged between 200,000 and 300,000 in 2007 after Cliff and Dan chose not to dry treat. Dry cows are outwintered. They did treat last winter, and the average 2008 cell counts dropped to 210,000, with a peak of 320,000.

Cliff claims not to have had any unusual levels of mastitis throughout. Dan works to attain complete milk-out (especially during the first 90 days). The pre-milking routine is to wipe the dry udder with a damp cloth, strip, and attach units. He does not post dip. Dan needs about an hour and a half to milk 120 cows through the swing-12 parlor during the summer months

“Milking time is at least 15-20% longer with once-a-day,” Cliff says. Dan usually milks around 1 p.m., but Cliff figures anytime during the heat of the day is just fine.

Beyond that, there are some feeding concerns. There are of course limits to how much milk an udder can hold, yet Cliff says cows at Emerald Valley have peaked at 75-80 pounds and bred back fairly well, although not quite as well as those that peaked lower.

His concerns are more about avoiding large “slugs” of grain if it is fed just once a day. However, Cliff feels he can meet the modest milk production goals while feeding relatively little — or hopefully no — grain. From the production side at Emerald Valley, the forage quality/quantity challenge is far greater than anything posed by how the cows themselves react to OAD.

Hamilton Heights, which is much earlier in the transition, is posing more serious problems right now. “I’m struggling with corn silage and no grain. I don’t know if it is what we should be doing there,” Cliff acknowledges.

Probably the largest challenges are coming from the financial side of the equation. While no one is getting shorted on family living, the business did come up a bit short of its financial goals last year — largely because cattle sales did not match projections for various reasons, including the transition problems at Hamilton Heights.

“I’m used to cash flow, and this once-a-day milking takes that away. That adjustment is harsh,” Cliff acknowledges. “My lender is OK with this and understands my goals and objectives, but my accountant doesn’t like the cash flow situation. Even on an accrual basis, I’m not quite there. But I can feel it, taste it and see it.”

Already the labor and lifestyle benefits of OAD/no-grain are showing through. “My paid labor is 50% of what it would be with twice-a-day,” Cliff says. He employs two men who work a total of 80 hours a week at the home farm, Dan averages 50-55 hours/week at Emerald Valley, and Cliff shuttles between the two operations.

And then there are the non-monetary benefits. Cliff likes how OAD allows he and his employees to focus more intently on calving, breeding, haying and other tasks of the day. “You tend to get better at what you’re doing,” he offers. “And we all have families and activities, so this fits with those things.”

He relates how his wife, Maggie, noted how easy OAD/no-grain would be if they did not have any debt. “But if this is going to work,” Cliff says, “it has to work as an operating business, not just a way to go into retirement.” He figures the minimum herd size for OAD is in the 75-100 range, and OAD farms need to have enough land to provide the great majority of feed needs.

“You can stay at the same herd size when you go once a day, but only if you reduce your operating costs enough. Going to once-a-day while keeping your costs the same just doesn’t cut it,” Cliff adds. “But I would rather milk 100 cows once a day than 50 twice a day. I would go back to grain feeding before I went back to milking twice a day.”

“Once-a-day is not a golden egg, but when coupled with the rest of what we’ve developed in our farm management, it becomes an option that works here,” he asserts. “It will be fun over the next five to 10 years to find out what will happen.”