ROTATIONAL GRAZING WITH DAIRY HEIFERS ON WICST:
c. Economic Summary

Don Schuster ^[1] , Janet Hedtcke², Josh Posner ^[2]

INTRODUCTION

Traditionally, dairy heifers were raised on pasture in Wisconsin.  However, raising dairy heifers in management-intensive rotational grazing (MIG) systems is still fairy new and is becoming increasingly popular as the capital costs of dairy farming increase ^[3] .  MIG is one way for new dairy farmers to break into farming without having to generate the huge capital investment needed for confinement systems.  One of the objectives of WICST is to measure the profitability of MIG.

METHODS

The 6^th cropping system of WICST is MIG with dairy heifers.  This treatment took place at both the Arlington Ag. Research Station (since 1993) and Lakeland Ag. Complex (since 1992).  The trial used four research plots, each under one acre in size.  These plots were subdivided into smaller paddocks that best matched forage availability with stocking density.  The plots were initially seeded with red clover, smooth brome grass and timothy; later, orchard grass, perennial ryegrass and reed canarygrass were also included. 

Three grazing management strategies have been used.  From the beginning of grazing through 1995, each repetition was stocked with two 500# heifers and they were moved up and down the plot to simulate rotational grazing.  Excess forage was removed as hay.  This system worked well statistically and replicated observations were taken each year on forage quality, animal weight gain and soil characteristics.  Unfortunately this system was too constrained for best management of the animals and paddocks.  For the next four seasons (1996-1999) a put-and-take system was developed where 12, 500# heifers started as a cohort and moved through the four repetitions.  As feed became limiting after the early spring flush, some heifers were removed.  Little to no hay was taken during this period.  This system made it impossible to conduct economic analysis as once the heifers were removed they left the experiment, which is not the case when actually grazing heifers in a custom operation.  Since 2000, four 500# heifers were placed on the pastures and left there for the duration of the grazing season and excess forage was mechanically harvested.

Much debate went into how to best evaluate the MIG system in the WICST.  Heifer performance in this system was first measured using daily rate of gain, with a dollar value placed on that gain.  However, several heifers were removed from their paddocks after a few weeks of the trial as a function of the put-and-take system.  Because many of these heifers gained poorly during those weeks, it became clear that daily rate of gain would inadequately represent the performance of this system.

As custom heifer production has become more common in the dairy industry over the past 10 years, other arrangements have become prevalent. Under a typical custom heifer production arrangement, a dairy producer sends heifers off of the farm and hires someone else to raise them.  In most cases, the dairy producer simply provides the heifers and the contracted grower supplies the rest (i.e. vaccinations, deworming, vet care, etc.).  The grower is paid a fixed amount per day for each heifer that is on his or her farm.  When the heifers are close to freshening, they return to the original dairy farmer.

This custom heifer-raising scenario was determined to be the best fit to evaluate the heifer enterprise for WICST.  The Stocker Enterprise Budgets for Grass-based Systems ^[4] was used as a model for the pasture inputs with the rest of the data coming from WICST.  The farm size has been scaled up to 150 acres from our research plots to match the farm size used for the other two dairy systems on WICST (CS4 and CS5).  The numbers of heifers were proportionally adjusted to come up with the stocking rate on 150 acres.  Expenses are divided up into pasture costs and heifer costs ^[5] .  Heifer costs include labor (to move fences, heifers and supply feed), supplemental feed (grain and hay), minerals and salt.  Pasture costs include reseeding, clipping/haying, fertilizer, and use-related costs (energy for fuel, lube; repairs and maintenance; overhead on tractors, buildings, waterlines, fencing, etc.; and interest).  Grain prices were different at each site because of available resources.  At Arlington, the feed mix was a mix of corn, oats, and soybean oil meal with vitamins, salt, trace minerals, and feed medications and cost $0.18/lb (ranging from $0.156 to $0.213/lb) The feed mix at Lakeland was simply barley grain and was only half the cost of the grain at Arlington ($0.09/lb, ranging from $0.078 to $0.107).  In some years, additional income was earned from custom bailing surplus hay for $7/bale (935 lb bales, DM) and selling it in the same manner as in CS4 and CS5:  Hay was valued at $80/ton based on RFV 140, with a floor price of $50/ton.  No value was placed on the forage that the heifers consumed, as its value was captured in the daily cost of grazing the heifers.  It was assumed that all forage would be consumed and any forage left would be baled and sold back to the heifers as feed or sold outright.   

A budgeting program, ABCS (Agriculture Budget Calculation Software; Frank and Gregory, 2000) has been used to calculate gross margins on the WICST pasture system.  Gross margins are the difference between the product income (based on the actual yield, its quality, and the price received for the harvested product) minus the variable expenses (seed, fertilizer, fuel, repairs, etc.).  Gross margin figures are the dollars available to cover the overhead costs of capital, land, labor and management.  The way to interpret the adequacy of the gross margin figure is to estimate the amount of money needed per acre to cover those overhead costs such as labor and management, land rent, and depreciation and interest cost associated with machinery and sheds owned on the farm.  Generally, gross margins less than $125/a will not cover these overhead costs in a grazing system.

Based on an informal survey, two different daily charges per heifer—$0.85 and $1.40 were used to estimate overhead costs and evaluate the system’s economic value.  These values reflect contracts that actually exist in the industry today.  The higher priced contract is paid when the grower accepts a higher level of responsibility for the heifers; such as vaccination, deworming, vet costs, etc.  These same surveyed farmers that used MIG rarely fed grain in their operations.

RESULTS

Days on Pasture. What can be seen clearly in the results is that the number of days on pasture is an important factor affecting the gross margins of this system.  On average, animals were on pasture at for 132 days at Arlington.  The grazing season on the Arlington Research Farm was generally 30 to 40 days shorter than on production farms due to the number of experiments being conducted and resulting labor shortage.  In 1995 for example, heifers were on plots for only 60 days of the season, which severely impacted profits (see Table 1, Chart 1).

Because Lakeland wasn’t constrained by research, it could more closely mimic an actual grazing farm by grazing more days with average of 151 days over 10 years.  One exception was in 1996 when animals were on actual CS6 plots for only 56 days. This was a very wet year and there was significant hoof damage done to the sod. This resulted in moving the heifers to another pasture area (off WICST plots) for the remainder of the season and to plot renovation in 1997. As can be seen from Table 2, both 1996 and 1997 had the lowest gross margins because of the number of days heifers were (or were not) on the plots. But in general, this farm was set up for MIG and milk cows and replacements were on pasture most of the year.  Moving the trial heifers from the main herd to the CS6 plots and back again at the end of the season wasn’t a big deal.

Pasture Expenses.  Differences in pasture costs between the two sites showed up under fence trimming and custom bailing.  At Arlington, the perimeter fence was well maintained in June and July with either hand-held weed wackers or gas-powered trimmers.  However, no trimming occurred at Lakeland.  Ideally, fenceline trimming should be done at least once a season (late June) to keep weeds, grass and brush from shorting out the electric fence.  More hay was made at Arlington compared to Lakeland; hay was made at Arlington in all but 2 years of the trial vs. Lakeland, which made hay about half the years.  More hay would have been made at Lakeland but in 1996 and 1997, plots were renovated due to hoof damage to the wet sod.

Supplemental Feeding.  Grain was the largest expense incurred on this system at both sites.  Arlington fed more at 2.8 lbs ‘as fed’ grain per head per day vs. Lakeland which fed less grain with an average of 1.8 lbs ‘as fed’ per head per day.  In addition, a very high quality, expensive feed mix of corn, oats, and soybean oil meal with vitamins, salt, trace minerals, and feed medications ($0.18/lb) was used at Arlington, as the heifers were to be re-integrated into the experimental herd upon completion of the grazing season.  Lakeland used a barley grain supplement that was a good deal cheaper ($0.09/lb).  Both price and quantity of grain severely impacted gross margins at Arlington.

In part, due to these constraints, the gross margins over the last 10 years at Arlington were only $64/ac at $0.85 per day and $226/ac at $1.40/day. (See Table 1 and Chart 1).  At the hire rate, gross margins are comparable to CS4 and CS5.  In spite of the low gross margins at $0.85/hd/day, the $1.40/hd/day rate results in good returns and good use of the land. 

Grazing at Lakeland was just as competitive as the other systems on WICST but with a lot less overhead. At $0.85/day, gross margins were $143/ac, which is about equal to the gross margins of CS4 and CS5 and there was considerably less labor with grazing since the animals do most of the harvesting. At $1.40 per day, gross margins were $287/ac (See Table 2 and Chart 2).  These averages include 1997 when pasture plots were renovated and no grazing occurred. 

SUMMARY

Many times research doesn’t allow us to exactly adhere to real life farming practices and many assumptions have to be made.  The number of days on pasture is one of the key factors that affect gross margins in MIG. Full-season grazing has not been done at either site and has severely impacted gross margins. Furthermore, the philosophy of feeding grain matches well with the confinement herd but not so well for grazing animals. Grain expense at Arlington had a very large impact on gross margins and combined with the less-than-ideal number of days on pasture, gross margins just covered the variable costs that were incurred. At Arlington, the philosophy of feeding grain matches well with the confinement herd but no so well for grazing animals.  Grain expense at Arlington had the biggest impact on gross margins and as a result, gross margins just covered the variable costs that were incurred.  Based on these figures and the high land rent in the Arlington area, a farmer would have a hard time justifying a custom heifer raising business unless he was getting the $1.40/day rate.  At Lakeland, gross margins covered the variable costs at either rate.  Here, grain was the biggest expense but it was much more in line with the other expense compared to Arlington.  Even with the high cost of land in the area, a nice profit could be made using MIG.

		1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	10-yr avg
	Days on pasture	137	120	60	127	125	138	134	161	153	163	132
	Heifer income @ $1.40/d	82282	72072	36036	69940	65366	75543	73480	48461	46053	49063	61830
	Heifer income @ $0.85/d	49957	43758	21879	42463	39687	45865	44613	29423	27961	29788	37539
	Additional hay income	3038	18825	10275	0	2949	5355	0	5306	4800	6119	5667
HEIFER COST
	Labor i	552	475	258	563	606	668	662	840	824	1013	646
	Salt and minerals ii	1151	1008	504	996	936	1079	1050	692	649	701	877
	Grain iii	31777	15211	26838	32000	28265	22065	26027	12074	13684	14018	22196
	Fed hay	0	0	0	455	0	6134	0	0	0	0	659
Total Heifer Cost		33480	16694	27600	34014	29807	29947	27738	13606	15158	15732	24378
PASTURE COST
	Seeding cost iv	2196	0	2745	1464	1098	0	0	0	2196	0	970
	Fertilizer v	3033	3302	0	2325	0	0	0	4044	0	0	1270
	Spraying vi	0	0	0	0	0	0	0	0	0	168	17
	Hand Fence Trimming vii	2000	2000	2000	2000	2000	2000	2000	2000	2000	2400	2040
	Custom bailing viii	910	4896	3077	0	809	943	0	1595	1437	1325	1499
	Energy Expenses
	Fuel ix	297	840	537	108	165	157	194	259	327	302	319
	Electricity x	25	25	25	25	25	25	25	25	25	25	25
	Lubrication xi	45	126	81	16	25	24	29	39	49	45	48
	Repairs and Maintenance
	Power Unit xii	54	154	154	21	36	35	53	40	72	67	69
	Implement xiii	124	433	433	1	72	81	108	108	163	183	171
	Durable xiv	2445	2445	2445	2445	2445	2445	2445	2445	2445	2445	2445
	Input Interest Exp xv	329	317	321	320	193	138	143	146	264	666	284
Total Pasture Cost		11457	14538	11818	8725	6868	5848	4997	10700	8978	7626	9155
		1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	10-yr avg
gm/acre at $1.40/day		269	398	46	181	211	301	272	196	178	212	226
gm/acre at $0.85/day		54	209	-48	-2	40	103	79	69	57	84	64

i)                     Assume 0.67 hours/day for changing paddocks, veterinary and other task.  Used dollar amount per hour from USDA – NASS, Lake region for each year

ii)                   Assume 2oz/day/head

iii)                  Actual amount of grain fed at the price charged for the feed mix – average Arl=$0.18/lb and LAC=$0.09/lb

iv)                  Actual cost for frost seeding

v)                   Actual cost for N fertilizer

vi)                  Actual cost for spot spraying

vii)                Actual cost for trimming vegetation along electric fenceline

viii)               Actual cost of custom harvesting a 935 lb (DM) bale, $7/bale

ix)                  Assumed cost to run the tractor

x)                    Assumed cost to pump water and run the electric fencer

xi)                  Assumed cost for lubricants for the tractor

xii)                 Assumed depreciation cost for the 60 horse tractor

xiii)               Assumed depreciation on the cost of the implements, a 9-foot mower conditioner, a 9-foot, a 9-foot hay rake, a 3 point hitch broadcast seeder and a 10 –foot utility trailer

xiv)               Include loading chute, shed, and watering system. It also includes 150 acres parcel surrounded by an exterior fence that is divided into six paddocks using an interior fence.  The exterior fence consists of fire strands of high-tensile electric wire and 6-inch x 8-foot treated-wood posts space 40-feet apart.  The annual interest and depreciation was calculated at 15% over 10 years.  The interior is fenced with a single strand of 15-gauge polywire and a plastic post every 12 feet.  This fence has an initial cost of $500 and was depreciated over 5 years, resulting in an 18% annual charge

xv)                 Interest charge on inputs for 6 months at 12%

		1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	11-yr avg
	Days on pasture	167	152	178	154	122	na	96	148	164	158	172	151
	Heifer income @ $1.40/d	87675	98910	93450	80850	36177	0	44083	50058	41787	40258	43826	56098
	Heifer income @ $0.85/d	53231	60053	56738	49088	21965	0	26765	35244	25371	24443	26608	34500
	Additional hay income	12227	0	2925	3300	0	0	0	0	3279	1406	2400	2322
HEIFER COST
	Labor	594	608	703	663	247	0	469	731	855	837	1038	613
	Salt and minerals	1253	1413	1335	1155	517	0	630	715	597	575	626	801
	Grain	0	7880	0	12359	7788	0	5416	4339	4656	4486	5384	4755
	Fed hay	8613	4824	5942	2756	395	0	0	0	0	0	2912	2313
Total Heifer Cost		10460	14725	7980	16932	8948	0	6515	5786	6109	5898	9961	8,483
PASTURE COST
	Seeding cost	0	3660	0	3294	4034	4928	2745	0	0	1098	0	1796
	Fertilizer	0	3906	0	0	0	0	0	0	0	0	0	355
	Spraying	0	0	0	0	0	10219	0	0	0	0	0	929
	Custom bailing	2409	0	876	988	0	0	0	0	898	427	719	574
	Energy Expenses
	Fuel	473	245	129	421	84	498	162	23	145	183	102	224
	Electricity	25	25	25	25	25	25	25	25	25	25	25	25
	Lubrication	71	37	19	63	13	75	24	4	22	28	115	43
	Repairs and Maintenance
	Power Unit	129	71	28	128	17	100	37	5	23	30	23	54
	Implement	398	183	72	342	0	217	54	0	54	54	54	130
	Durable	2445	2445	2445	2445	2445	2445	2445	2445	2445	2445	2445	2445
	Input Interest Exp	177	529	136	336	331	925	275	125	136	193	133	300
Total Pasture Cost		6127	11101	3730	8042	6948	19432	5766	2627	3748	4483	3616	6875
		1992	1993	1994	1995	1996	1997	1998	1999	2000	2001	2002	11-yr avg
gm/acre at $1.40/day		555	487	564	395	135	-130	212	278	235	209	218	287
gm/acre at $0.85/day		326	228	320	183	40	-130	97	179	125	103	103	143

Chart 1

Chart 2