With an innovative approach, extension agent walks his talk
Kieler, Wisconsin—There are lots of people within the grazing community who talk about the need to help young people get into the game. Larry Tranel happens to be one of those who matched that talk with his own money, and his own sweat.
Tranel, dairy field specialist for Iowa State University Extension, has employed a series of innovative ideas in converting 70 acres of good Southwest Wisconsin prairie ground into a productive starter grass dairy. Last year Eric and Amanda Gaul, both in their 20s, registered more than $90,000 in net farm income and $83,000 in returns to labor – along with an eye-popping 51% return on assets. (As renters, they had just $1,593/cow in assets, including an average of $1,100 in each cow.)
This was in the second year of a five-year lease agreement that requires them to pay $120/acre for the pasture/hay ground, plus $6,000 for the dairy facilities (farmhouse rent is separate).
Granted, 2004 was an exceptional year that saw this dairy average $18.35/cwt. from a largely crossbred, non-organic herd. But Tranel, a numbers guy who developed a financial analysis program dubbed “Dairy TRANS,” notes that even at $13.25 milk, and despite unexpected death losses due to purchases of Johne’s-infected cattle, the operation would have provided labor returns close to the budget envisioned at the start of the lease agreement.
Tranel is giving the Gauls a $30-$50/acre break on prevailing local cash rents, which amounts to $2,100-$3,500 annually that the young couple has been able bank or use to buy equipment in preparation for the next step in their farming career. And with new renovations to the milking and cattle housing, facilities rent is now slightly below the going rate. But in return, Eric and Amanda have provided money and “sweat equity” for farm improvements that will make this operation into a better opportunity for both themselves, and the next operators.
Most of all, though, this situation benefits from the fact that this particular landlord wants to prove something, and actually knows what he’s doing. Tranel spent 10 years developing this property to keep at least a cow per acre with relatively small amounts of purchased feed. He employed his extensive alternative dairy and economics knowledge to spend just $35,000 in renovating the capital structure of a conventional, 32-cow dairy to a grass farm capable of housing and milking up to 90 cows with a minimum of cost and labor.
Tranel, who is an ordained Catholic deacon in addition to his extension and family duties, feels it is important to actually develop and prove a farming model that he has been talking about for so many years.
“I’ve devoted a lot of my career to getting young people started,” Tranel explains. “I’ve worked for 15 years in extension trying to sell this concept, and people still don’t get it. They still don’t believe it. That’s why I’m setting up the concept of a model farm. It’s a natural fit with the job I do.”
When he bought this farm in 1994, Tranel, then a Wisconsin county agent, almost quit extension to milk cows. Instead he stayed with extension and rented the place out to two different operators. When the second one left in 1997, leaving behind two big bags of corn silage, Tranel milked 36 cows here for more than a year while still working for extension. Along the way he had developed his Dairy TRANS program, using it in working with a small group of dairy graziers as a financial analysis and decision-making tool.
Two of them are brothers Dale and Jerome Gaul, who milk cows on separate farms in Northeast Iowa. Dale’s low culling rate was creating surplus mouths on his place, so Tranel agreed to graze Dale’s heifers on a custom basis. Meanwhile, a younger Gaul brother, Eric, was itching to farm on his own. This offered the opportunity for Tranel to put some of his start-up theories into practice.
Tranel wasn’t excited about getting into a sharemilking agreement. “The cash rent simplifies the arrangement. I don’t have to worry about the cows; the only thing I have to worry about is the check,” he explains. He also feels the cash rent deal offers more profit opportunity for a young person like Eric Gaul with the dairy skills to handle greater risk.
Eric did end up sharemilking for one year here, but it was for the Limited Liability Corporation that Dale and Jerome Gaul formed to back the venture. In year two Eric gained a 25% share in the LLC, thus sharing the corporation’s profits with his brothers. This year (the third) he assumed full ownership.
Eric bought more than 100 head of cattle: 50 Jersey/Holstein cross heifers from Missouri, about the same number of purebred Jersey cows from Iowa, and a handful of cattle from his brothers. While the average price for the entire herd was about $1,100/head, the Iowa Jerseys proved to be riddled with Johne’s disease, and death loss has been greater than expected. Calving is spread from February through November, although Eric and Amanda say they are now breeding to avoid summer freshening.
Tranel and the Gauls employed an unusual share agreement to upgrade the facilities to provide for a tripling of cow numbers while keeping labor requirements in line. In retrofitting a parlor and new stalls to the operation, the two parties agreed to a 50-50 split of both costs and labor. They’ve made virtually all improvements without hiring any help.
The swing-10 parlor with in-parlor grain feeding was installed in a calf shed attached to the main barn at a cost of $12,000, plus $1,400 for a used bulk tank. Much of the milking equipment was used (total cost: $2,500). The milking area is insulated well enough to allow comfortable winter milking with only a small space heater in the pit. An overhead garage door at the rear of the parlor can be closed from the pit to help retain heat.
They managed to cram the parlor and the feed system into a space just 15-feet-three-inches wide. While it helps to have a herd of smaller cows, Eric says even the bigger Holsteins can squeeze in – albeit at a true herringbone angle rather than the 70-degree “parabone” configuration for the smaller cows. Space was also saved by positioning the kick rail directly above the edge of the milking pit, rather than a few inches into the cow platform as is the norm for many “New Zealand style” parlors built in the U.S.
While the pit walls are almost six feet apart at floor level, overhanging concrete lips narrow the gap at hip level to four feet. “This is definitely a one person parlor. Either that, or you had better like the other person,” Tranel remarks.
But it works for this scale of operation: Eric says that he and Amanda can complete milking and cleanup in about an hour and five minutes using nine milking units. The time is closer to an hour and 20 minutes when Eric milks alone. He says the upgrade was well worth his $6,000 investment, plus the labor to complete the project. Tranel calculates the Gauls paid off their investment in less than six months with the labor reduction they realized compared to switching cows through the old barn’s stalls.
The rest of the old calf shed serves as a 75-by-12 foot cow holding area with a 90-head capacity. Earlier, Tranel had retrofitted an adjacent covered barn cleaner/manure spreader shed for manure storage. Solid waste is shoved into the pit with a skid-loader.
The Tranel/Gaul team also renovated the old stall barn to sand-bedded freestalls for housing during the coldest winter days and nights. While the stalls are too small for modern Holsteins, they’re sized right for Jerseys and Jersey crosses. They ripped out the old alleys, and lowered them to the depth of the old barn cleaner gutters to allow skid-steer cleaning. They put 16 stalls into an old maternity area, employing used dividers that Tranel had purchased for $25 apiece. A water fountain was added, as was a palpation alley. Total cost to increase the old barn’s capacity by 50%, while reducing barn labor by many, many hours: $2,500.
For about a thousand dollars, they added a fence line feeder to the edge of the concrete barn lot for hay and winter corn silage. The project required seven yards of concrete, and old railroad ties for posts supporting highway guard rails.
Since this is a windy farm with relatively few outwintering options, more stalls were required if the 90-cow goal was to be accommodated. Again employing the $25 dividers, six, sand-bedded stalls were installed under a lean-to at a total cost of less than $50 per stall.
“They love these stalls,” Amanda says. “The cows choose them before the ones in the barn.”
Finally, they added “cow-tel” sand freestalls. While they’ve been employed in the East for many years, cow-tels are very rare in the Upper Midwest. Tranel’s version is a shed 8.5-feet deep, and long enough for 21, 45-inch wide stalls with used dividers. The shed roof and long north wall are covered with corrugated steel, while the south side is open. Most of the roofing lumber had been used to form the concrete stall lip.
The open side butts up against a concrete cattle lane. The manure pit building is situated about 15 feet in front of the cow-tel’s open side, which is essential to keeping cold winds out of the area. Tranel says that if the existing building hadn’t been there for protection, it would have made sense to place the cow-tels in a “U” configuration. After one winter of use, the Gauls report almost no problems with drifting snow, or with chapping or freezing.
Total cost for the cow-tel: About $190 per stall. The idea has worked well enough that the Tranel/Gaul team this summer was extending the building with 12, slightly wider stalls to house transition cows.
Tranel, though, does not believe that cow-tels are for everyone. “A three-row freestall with outside feeding might be just as cost-effective,” he figures. “(Cow-tels) are cheaper, but we could get some extra milk in the three-row building with a covered feed area. But (cow-tels) were easier to cash flow, so they were less risky for what we’re trying to do here. We could build them as the herd grew. And besides,” Tranel notes, “I wanted to do something different, yet with so little financial risk that I could walk away from it.”
Tranel says there are other things here that not everyone will want to emulate on their farm. For instance, the paddock and lane fencing was built with steel corner posts. “This is set up so all the fences could be pulled out in one day,” he explains. “If I were doing this for a farm that I intended to operate myself for a long time, I wouldn’t do things this way. Everything here is based on the starter farm concept.”
And it is indeed an interesting concept. Tranel calculates that $35,000 was spent to upgrade the facilities, seed paddocks (now populated largely by quack, brome, reed canary, alfalfa and kura clover) and build the pasture infrastructure. Tranel says he provided about $23,000, while the Gauls spent about $12,000.
For their money and sweat equity, in three years the Tranel/Gaul team took a 32-stall operation to 87 stalls. In 2004 the 70 acres of pastures and hay ground on this farm were productive enough to keep purchased feed to less than $700/cow, even though the Gauls prepaid quite a bit of feed, and young stock are fed primarily on the farm. Labor requirements for 68 cows and accompanying young stock were pegged at just 2,400 hours.
Eric and Amanda say they’ve been fortunate to start during a period of relatively high milk prices. With their surplus cash, they’ve been able to purchase a modest line of basic equipment while also saving for the future. “We’re going to try to bank some cash, and head back to Iowa,” Eric explains. Their goal is to have at least 100 cows by the time the lease term is up, and to someday buy a place with a larger land base.
Tranel believes that the improvements the Gauls helped him install will make the place attractive to the next renter. He’s excited that the start-up model appears to be working as planned. Tranel’s home is across the farm driveway from Eric and Amanda’s house, and he is hoping that one or more of his own six children might take an interest in dairying because of what they’ve seen.
Yet he is also realistic about the challenges facing others who might attempt to employ and modify the model in their own attempt to get young people into grass-based dairy farming. Tranel says that such a farm and rental structure should be targeted toward operators who know how to milk cows and manage grass – not dreamy greenhorns. Eric and Amanda Gaul both grew up on dairies (Amanda has a dairy science degree from Iowa State University) and, while Tranel helped with pasture management the first year, Eric is now pretty much on his own.
Tranel figures that the operator of such a farm would require $30,000 of equity to get a bank loan for cattle and equipment from an understanding lender. And he wouldn’t recommend stocking the farm with $2,000 bred heifers.
There is also the problem with landlords who, at least in the Corn Belt, are accustomed to doing little more than banking checks from combine jockeys. Tranel is not the norm. “I’ve got this soil and energy conservation ethic, and having this land in corn and beans does not sit well with me,” he explains. Tranel was also willing to plow 50% of his facility rental income back into farm improvements. Overall, he figures his return on investment for the dairy is 5-6% before appreciation, depending on how the land is valued.
Tranel says a change in political and economic development attitude will be required if such a start-up rental concept is to take hold. He estimates that 25% of the rental value in his area is tied to federal crop subsidies. Pull the subsidies, toss in some tighter soil conservation regulations, season with increased energy costs—perhaps alternative land uses along the lines of Tranel’s start-up dairy model become of greater interest to landowners, and the general public.
The economics, he says, can work. “But you can’t overemphasize the people part of the equation,” Tranel notes. Matching the right landlords with the right renters will always require effort and a determination to get along.
Tranel will baptize Eric and Amanda’s new son, Noah, just over a year after he had married the couple, and just a few years after he helped introduce them at a parlor tour that Tranel organized. He’s proud of all of this, and he’s also proud to be able to practice what he’s been preaching for so long.
“We need government and other programs to get people started in farming, but we really need model farms,” Tranel asserts.