Hudsons learned first, purchased later
Dublin, Virginia—When George and Julie Hudson took the Hoard’s Dairyman dairy knowledge test not too long ago, they both failed. Maybe that’s because milking cows is their means to an end, rather than the be-all, end-all of their existence.
“We’re not dairy people,” admits George, who actually did grow up on a confinement dairy. Shortly after high school graduation, at a time when other young men with agricultural backgrounds were studying pick-up trucks or fancy-uddered cows, George was taking classes in accounting and real estate. When others might have been trying to make a go of milking cows or working in town, George was driving a school bus, leasing land, and learning how to make money grazing a commercial cow-calf beef herd.
And in their late 30s, when some others can ace a Hoard’s knowledge test but have trouble paying their bills, George and Julie — just seven years into their cow milking careers — are in position to ride out this year’s dairy storms and maintain a solid position for expansion, new ventures or just about anything else they might choose to pursue.
The end for George and Julie was to raise children and make a comfortable family living from a grazing-based livestock business with a reasonable labor load on land in which they were building equity. The means they employed to achieve this end, while unconventional and perhaps not the most direct, are certainly worth explaining.
George grew up on a dairy, and says the home farm’s transition from traditionally managed pasture to highly mechanized confinement did not leave fond memories. He knew at least two things upon high school graduation. One was that he wanted to someday own land and make a living from agriculture. The other? “I had no desire whatsoever to be in the dairy business,” George says.
He took finance classes and real estate courses. He learned how to value land and how to gain access to land with no money. He even obtained a real estate license, and “figured out how the system worked. I read everything I could about building equity. About personal finances. I really enjoyed my accounting classes. If I hadn’t grown up on a farm, I might not have become a farmer.”
Others employ real estate and finance knowledge to make money on sales commissions, but George went a different direction. He quickly figured out that compared to confinement, “the numbers just made more sense” with managed grazing. At 21, he started leasing western Virginia hill ground and raising beef, beginning with a few bottle-fed calves and a $1,000 annual lease payment.
He and Julie were married. George stayed with the school bus, and Julie worked for a county agency. They lived in a single-wide trailer. “We tried to live as frugally as we could, and put the extra money where it could go to work for us,” George explains. “I feel that’s important, not to overspend when you’re young. That way, you’re ready for any opportunity that comes.”
He did borrow some money for one good set of cows that were selling at the right price, but was always conservative with his spending. All farming expenses were covered by the farming business — not the off-farm jobs.
By 1996, at the age of 25, George owned 48 acres, and was leasing about 350 acres of pasture and hay ground. The beef herd — mainly Angus genetics — grew to 100 cows. In his best year, he weaned 649-pound calves at seven months, and all of the cows bred back for a 45-day spring calving window. George fed hay for a total of nine days, for a total of $18 worth of stored feed per cow.
“I feel we had a very successful beef operation. We were making money with beef cows,” he explains. “But we reached a point where we knew we had done all we could do with beef.”
They were starting a family (daughter Kadie is now nine, son Isaac is eight). George and Julie figured a major expansion of the beef business would be required to achieve their goal of raising a family without off-farm income.
George remains convinced that “if set up right,” per-hour labor returns from a grazing-based cow-calf operation could match what he earns in grass dairy. “But I would have had to triple or more my (operation’s) size to make a full-time living. If I could have found a thousand (lease) acres all in one spot, I would have definitely looked at that.” But the reality of the situation was that George would have been managing closer to 10 separate parcels with many miles of road between.
The Hudsons started thinking dairy as they purchased the 62-acre parcel on which they now live. George spent a year-and-a-half visiting dairies, both grazing and confinement. He soon noticed something: “The graziers were happier, more positive. They saw a brighter future.” At the 2000 Mid-Atlantic Grazing Conference, he met leading dairy graziers such as Gary Burley, Rick and Helen Feete, and Bill Dix and Stacy Hall.
“After that conference, I knew it would work,” George says. He already knew how to manage pasture, and figured he could make the adjustments necessary for dairy cows. His first-service conception rates with artificial breeding in spring-calving beef cows had been very good. He had cattle equity, and it was simply a matter of moving that equity from beef to dairy.
“The only question was whether we could make it work,” he notes. “We went into this as a one-year experiment. We were willing to quit if it didn’t work out.”
They started buying dairy cattle, mostly Jerseys, including some from George’s father. Thirteen baby calves; seven yearling heifers that George synchronized and bred AI; 10 Jersey cows from a confinement farm that required several months to adjust to pasture.
There was no dairy barn on the property, so George set about building a cinder block structure with a milking pit. He scrounged and found an old three-unit, side-opening parlor for one side of the pit. The other side is bounded by a stud wall that provides a separate storage area, plus a place where the kids hung out when they were younger while Julie milked. The pit was sized to accommodate a 10-unit system, and George says that in hindsight he probably should have put one in right away (the side-opener was scrapped four years ago).
But the Hudsons didn’t have to borrow money to buy cows and build the milking barn, which was important for a couple still not sure about milking. With George doing much of the construction and installation, they got into the barn at a cost of just over $25,000, including all milking equipment. “Basically, we spent the cost of a pickup truck,” George notes.
They calved 30 head in the spring of 2002, and by year’s end George and Julie found they had netted $20,000 despite low milk prices and a bad drought.
The experiment was judged a success, so they tried another year of dairy. The herd started expanding through internal growth. Julie had quit her job when the dairy was started, but George stayed with the school bus until 2007. They bought some land from George’s father in 2003, and more land in 2007. While they paid as little as $1,000/acre in the 1990s, the more recent purchases have been in the $3,000/acre range. Now they own just over 200 acres, with about 180 acres open for grazing and haying.
In starting the dairy, their goals were to attain $50,000 annually for family living, and do so while expending little more than 2,000 hours of family labor per year. They met the income goal easily in 2007 and 2008, despite last year milking only 60 cows and shipping 11,200 lbs. of milk per cow. Money went into the bank, and this is probably a good thing, given that 2009 will be tighter.
Assuming a normal rainfall year, the Hudsons intend to milk 75 head this year while boosting grain feeding and targeting 12,000 lbs. of milk per cow. George estimates he will need $7.90 per cwt. to cover variable costs, about $11.00 to meet both variable and fixed costs, and $15.00, plus sales of surplus heifers, to provide the targeted family living.
“We can stand a couple of bad years,” he says. “If we had not had the cash reserve, I’d be worried. I think that with these commodity markets, you have to look at your business over a period of several years. We budget over a 10-year period.”
The labor goal has been pretty much met, too. Julie handles most milkings in the single-sided facility, but the Hudsons budget enough relief milking to allow her a couple of days off in many weeks. Says George, “My wife and I are really only half employed.”
It’s a very simple system. Milking cows last year were fed 12 daily pounds of a grain ration (half corn, with soyhulls, citrus pulp and wheat midds making up about half of the rest) in the milking parlor. With more cows this year, feeding will likely be boosted to 18 lbs. around June 1. George owns a couple of old Deere tractors and some older haying equipment, and hires out about 30-40% of his forage harvest.
With the grazing now more intensive, George is doing more pasture management compared to his beef days. He has taken to renovating pastures by drilling perennial ryegrass with alfalfa instead of clover, as the alfalfa does a better job of withstanding dry summers and not overwhelming the grasses. He also no-tills wheat and annual ryegrass into alfalfa stands to create some very good grazing. George stockpiles tall fescue (mainly Kentucky-31) after an early August application of nitrogen. He’ll also use some N to boost early spring growth, and often a little timed to any mid-summer rain events. He’s experimenting with forage oats and turnips for fall grazing.
George estimates that 4.5 tons of hay equivalent are being harvested from his pastures in a typical year. The dairy herd usually grazes from around March 20 through November 20, with hay supplemented starting around the first of November. Dry stock graze through early January with normal fall weather, and until late January in years with greater fall moisture. Thus, his goal is to feed hay only in February and the first three weeks of March.
George synchronizes and has everything showing heat (heifers included) bred over a three-day period before cleaning up with bulls. Last year the cows achieved a 69% first-service conception rate. First-calving date is March 10, and dry-off happens sometime in December, but always before Christmas.
The seasonal calving and dry period are very important to George and Julie. “If someone told us we couldn’t be seasonal, the cows would be on the truck,” George says. With all stock being outwintered, he feels the business is actually more profitable than it would be with year-round or two-season calving.
Explains George: “Our management is made much better by being able to group the cattle as we do. I feel we manage the cows, the calves and our family life much better.”
Labor requirements and quality of life haven’t been compromised by the move to dairy, he insists. Good hired labor allows Julie to take time off from milking. “Right now it feels like we have a lot of freedom,” George says. “For four months a year we’re stuck here, but the rest of the year is not all that tough.”
The Hudsons built a new house in 2003, but remain committed to frugal living. Their vehicles are in the 17- to 20-year old range. “We’re really happy right now. Things are pretty good for us,” George says. “We feel like we could keep on doing this for 10 to 15 years.” George says his life is about much more than business success. He puts lot of emphasis on family; both his and Julie’s parents have provided emotional support over the years.
Yet the Hudsons also feel they’ve reached a crossroads. Only a third of the 180 acres of pasture is accessible to the dairy herd, with another farm lying between the dairy and the main bloc of land. “We’ve gone about as far as we can here,” George says. That’s a potential problem if he wants to get the next generation going in farming.
“We could go on as we are now, and pay for our retirement and getting our kids through school. But we would have a harder time helping the kids get going in their own farming operations if that’s what they wanted to do.”
So George and Julie are exploring options. They have considered pursuing organic certification, but thus far the prospect of additional income has not been enough to overcome George’s rather modest desire to farm organically. While that view could change, George says right now he’d rather get into direct marketing of his farm’s production.
Then there’s the expansion route. George figures he could go to 100 cows while feeding 10 pounds of hay per day with his current land base, but he would still be looking at strict limits to size and scale while cutting into per-cow margins.
His preferred route would be to acquire adjoining land in amounts that would allow the operation to grow in 50- to 100-cow increments. However, the reality of the situation in his area is that the only larger acreages available are in big blocs advertised at up to $5,000 per acre, and which would require an almost immediate jump to several hundred cows.
“I’m not sure I’m ready for that,” George says. Still, he knows that if a move is to be made, it needs to be made fairly soon. “Now would be a great time to buy cows and build a barn, because the costs of contractors, cows and interest are all down,” he notes. “So we’re weighing a larger expansion a little heavier right now. If we’re going to do it, it’s going to be within the next four or five years, because we’ll need 20 years to pay it off.”
Then again, it’s not like the Hudsons are emotionally wedded to milking cows. After all, they’re the means to an end, not the end itself. Says George, “If we could make the same income (from farming) and not milk cows, we’d do that.”