Finding the sweet spot with more cows
When Rod Hissong returned to his family’s farm in Franklin County, Pennsylvania, in 1998, the family was milking 200 cows – a large farm for the area, and much bigger than the seven-cow operation his grandfather had started out with when he returned from World War II. Today, Mercer Vu Farms milks 1,560 cows, with another 175 mature cows on the property and 1,700 head of young stock. That rapid growth has been spurred by the family’s commitment to keeping the farm in operation and finding what he calls the “sweet spot” of economies of scale, where size and efficiency meet.
At a time when most dairies were aiming for 500 cows, Hissong and his brother Rick spent time visiting other farms and doing lots of reading and calculating. They found that operations with closer to 800 or 1,000 cows were the most economically viable. They decided that building new facilities, despite the amount of debt it would incur, would be a better investment than adding on to the existing barn and parlor, which they determined would be limiting and more costly in the long run.
Hissong said that at the outset of their expansion, the farm focused on building up the herd to generate income and contracted for many aspects of the operation. Today, there are few parts of the operation that aren’t run in-house. All replacement stock is raised on the property. With 2,800 acres of owned and rented cropland, the farm grows most of the forage and corn for the animals’ feed. Milk is transported from the barn to the co-op’s plant two to three times a day in the farm’s tanker truck. The double-18 herringbone parlor they built in 2002 has been expanded to a double-28.
Probably the biggest issue that comes with growth for dairies is labor. While many dairy farmers cite their love of animals, their pride in producing healthy food, or the pleasure they get from problem-solving and fixing machinery as reasons for choosing their profession, few say they got into dairying because they wanted to manage a large staff of workers. However, success depends on just that.
For Hissong, that means managing 35 employees, from mechanics to milkers to field hands. “We’re fortunate to have a good staff of people we can count on,” he said. That includes some middle management, but as a hands-on co-owner and manager, he tries to run the operation like a family business, getting to know employees on a personal level and being flexible with issues like needing time off for doctor’s appointments or family events.
“I try to treat people the way I want to be treated, and that means paying them competitive wages and respecting them as part of the team. There’s no real equation to how I do it,” he said. However, the farm’s rapid growth has made him aware of the need for more structure around human resource management issues, such as training and standardized policies.
Having a training program for staff has been invaluable, said David Fisher, whose Mapleview Dairy in Madrid, New York, employs 45 people, not including the many family members who work there. “We’ve gotten good at keeping people,” he said, thanks to a training program that helps educate inexperienced team members and standardizes the processes they have to learn. The more entry-level positions, such as milkers, tend to have more turnover, he noted, so that’s where they’ve focused their training efforts. “It’s easy to add cows and make more milk,” he said, “but the employees are what’s really important. It all comes down to people management.”
Fisher’s employees get paid sick and personal days, as well as health insurance and retirement plans. “We try to be as flexible as we can, but also make sure our employees know that when it’s crunch time, we may not be able to let them have time off.”
Having lots of staff gives a farm more flexibility than their smaller counterparts, Hissong said, because there are always enough people to cover for each other, and the business can afford to find people who are experts in particular areas, rather than counting on everyone to be a generalist. “We don’t need a guy who can feed, breed and do field work; they can become experts in what they do and do that all day,” he said.
Looking back, Fisher recalled that human resource issues were the biggest challenge when the farm had about 250 cows. “We needed guys to have lots of different skills, and that was harder to find. And if someone was out for a day, it was harder to replace them.”
Hissong said having a large, reliable staff allows him to spend more time working on the business instead of in it, and to justify bringing in consultants on milk marketing or finances that help him ensure the success of the business and plan for the future. “I do still help with field work and harvest, but I dread the backlog that I know will be waiting for me in the office when I get back,” he said.
Buildings are another big consideration. “Always plan for expansion,” Hissong said. When they built their first parlor and designed it for expansion, his lender tried to discourage him from building it so big. “That would have limited us to a size that would have been unprofitable,” he said.
“Think about the buildings you’re going to want next year and five years from now, but plan to be flexible too,” Fisher advised. Staying on top of new technological developments helps to ensure that any new infrastructure projects don’t become obsolete too quickly. “With any building project, keep your options open for other things, and think about things like manure, feed and cooling systems that will make things more efficient.” He said having a long-term relationship with a contractor has helped his farm’s expansion projects go smoothly over the years.
Another calculation Hissong made as the farm grew helped him determine that the farm was large enough to haul its own milk. The Land O’Lakes facility they ship to is just an hour’s drive away, and their volume allows them to ship two or three trucks of milk daily, enough to keep one full-time employee busy. “It’s another staff person to manage and a truck to maintain, but we figured out that it was cheaper than paying someone else to do it.”
As a farm grows, its relationship with the surrounding community becomes more important. Hissong said, “Large farms are losing the battle with public relations.” However, on a personal level, he has been able to earn the support of his neighbors by offering tours and being transparent about the operation. Adding a cover to their manure lagoon helped reduce odor, which the neighbors appreciated. Finding land to grow feed nearby has been critical, so feed and manure don’t have to be trucked through too many small towns, which often brings complaints.
As the biggest dairy in the county, and one of only 10 or so in the entire state with more than 1,000 cows, Hissong took it upon himself to educate the community about what such an operation meant. He built a website (http://www.mercervufarms.com) that included not only pictures of the farm and details about their management practices, but also analysis of the economic impact of their business: They purchased goods and services from more than 120 businesses within a 40-mile radius. The site also includes links to reports showing the positive economic impact that dairies have on their local communities. The farm actively works to limit its environmental impact through participation in programs such as the Northeast Farm Separation Project, which allows the farm to use manure separation to reduce greenhouse gas emissions and nutrient runoff, as well as operating costs.
“Larger farms get watched a lot more closely than smaller farms, so we have to be very detail-oriented about what we do,” Fisher said. “My sons are the eighth generation to farm in this area, and we’ve got no plans to go anywhere, so we want to leave it as good as or better than how we found it.” For a farm that grows over time, he said that means keeping up with constantly changing regulations and technologies. Farmers who dug their own lagoons a few decades ago, for instance, need to be aware that there are now pages of regulations for such facilities, and that any new construction involves detailed engineering plans, permits and regulatory oversight. “It makes it more expensive than it used to be, but that’s the only way to do it right and stay in business.”
Access to land is also a critical issue for growth, particularly for dairies that want to grow their own forage and grains. Hissong said, “Feed amounts to more than 50 percent of our costs, so being able to control that is important.” That has meant developing relationships with local landowners and finding opportunities for long-term leases so they can improve the soil. “We pay a fair amount for rent, plant cover crops, mow up around the farms, and do other things to try to make the landlords happy,” he explained. Recognizing that insurance and taxes are always increasing, they have even offered to pay farms more than the agreed-upon amount to help secure the land for future use.
For Fisher, it was a matter of not having many custom crop growers in his area who would provide the feed he wanted for his 2,200 cows. Today, his farm plants 4,500 crop acres, growing all of the forage and most of the grains his animals need. The economic feasibility of growing your own feed depends on the availability of land in your area, he said, and whether there is competition for custom growing from other nearby farms.
Hissong said the learning process never ends for dairy farmers. He’s active in a discussion group of larger dairies in the state. They’ve been getting together four times a year for seven years, rotating among the dairies for the meetings. Hissong said that seeing each operation and getting to know other farmers has shaped his decisions and made him better at what he does. Above all, he said, he has learned that “there’s no one way to do things right.”