We have a 300-cow milking herd averaging about 24,000 pounds a cow, and could grow the herd internally. But with current milk prices, would we be better off breeding low-end cows with black beef genes and feeding those calves out or selling them as yearlings?

Mike Evanish: Stick to milking cows
Based on your herd average, you seem to have a good dairy operation. Having and raising beef-dairy crosses is a different business. I find myself wondering why you want to add to the operation’s complexity. You need to answer these questions:

• Do you have the required feed?

• Do you have the necessary facilities?

• Do you have the labor?

• Have you looked at the margins being earned in the beef business?

Assuming all you say is true, stick to the business you know best (producing milk) and grow the herd internally. If you don’t have the needed feed, space or labor, your herd average should enable you to sell some breeding stock and maintain your size, but with better production.

If, on the other hand, you have excess feed, labor and facilities, grow to 350 or more cows as quickly as possible. Then use the internal herd growth to efficiently maintain that size.

Dale Johnson: Against ‘beefing up’
Just fine-tune your dairy management and scrutinize all expenses. Current economics don’t favor beef any more than dairy. Both are in the doldrums.

If you’ve weathered the low dairy prices through 2015-2016, hopefully you can continue to hang on until prices improve a little as 2017 progresses. If you can maintain your good production or even improve it while increasing herd size, you can spread your fixed costs over more production.

Max out your current facilities; run the factory at capacity. But I’d caution against a major capital expansion unless you’re fairly sure your cost of production will be low enough to be profitable in the long run, and you can cash flow it in the short run.

George Mueller: On the ‘bully pulpit’
Right now, there’s a horrible surplus of Northeast milk. One thing we (the industry) don’t need is for you to go from 300 to 400 cows.

Back in 1960, there was also a huge milk surplus. I had 80 heifers I couldn’t sell. And I was told the same thing: “George, the last thing we need right now is another dairy producer.” But I went ahead and built a milk house and starting milking. It was the best decision we ever made.

Your best decision right now is to expand your herd by growing internally. Here’s why:

• I’m a strong believer in keeping things simple. Adding a Holstein beef venture is more complicated. You’re obviously a good dairy farmer with a respectable herd average and a good-sized herd. Increasing your herd size makes a great deal of sense.

• Economies of scale are “king” in any business — especially the dairy business. Going to 400 cows will gain even more efficiencies. For example, it takes just as long to clean up the parlor after 400 cows as it does 300. The extra 100 acres of corn doesn’t take as long to plant and harvest as the first 100 acres. With more or less the same equipment and facilities, the economies of scale (and profits) with a larger herd are real.  

• By stressing cow comfort, more timely harvests to capture forage quality, better silage processing and packing, plus other good management practices, you can raise your herd average to 26,000 pounds or more.   

You’ll be in perfect position to capture full profits from milk sales when milk prices recover — as they always do. Good luck with your expansion from within.         .

Glenn Rogers: Only as a planned niche
I get these questions every time milk prices go down. When dairy prices are down, beef prices head down; the reverse is also true. It only works if it’s planned out in advance of these swings.

Obviously, you have the ability to gain high yields from your dairy animals. A good part of that yield is the genetics. Your next generation of heifers will always have better genetics than old cows going out of the herd. Consequently in your case, with high dairy production yields and with great genetic potential, it doesn't make economic sense to take the lower-production cows and breed to beef, then sell some of the replacements as dairy beef crosses.

Even the animals in your lower-production group have a better genetic capability, higher growth rates and potentially greater milk yields than some other dairies seeking dairy replacements. If they aren't needed, sell them in consignment sales or on the private market to individuals seeking to improve their herd quality or expand their herd.

Consider the dairy beef alternative only in a planned way to gain additional income and expand your business if other alternatives aren’t as profitable. Maybe look at dairy beef branding, sectional marketing or another niche — not strictly wholesale.

Got a question? Our experts await!

Our Profit Planner panel would like to hear your question. The panel consists of Michael Evanish, farm business consultant and business services manager of Pennsylvania Farm Bureau’s Members’ Service Corp.; Dale Johnson, Extension farm management specialist at University of Maryland; George Mueller, dairy farmer from Clifton Springs, N.Y.; and Glenn Rogers, University of Vermont Extension professor emeritus and ag consultant.

Send your questions to Profit Planners, American Agriculturist, 5227B Baltimore Pike, Littlestown, PA 17340. Or email them to [email protected]. All are submitted to our panel without identification.