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Novices noted for very sharp management
First generation dairymen focus on communication, partnerships, labor efficiency, simplicity

Bill Morgan, left, and Jon Gilbert are first generation dairymen. Cornell graduates, the two men have unique insights on dairy partnerships, management and how they work with growers to purchase forage by the acre in order to control the quality of the harvest. They started their first dairy in 2002 and added a second one in 2008, milking a total of 1500 cows. Photos by Sherry Bunting

By SHERRY BUNTING
Special for Farmshine

STATE COLLEGE, Pa. -- “We weren’t raised on dairy farms, but we both chose careers in dairy farming. We see more of that in our area of Upstate New York,” Bill Morgan told 300 Pennsylvania Dairy Summit attendees here in February.

Morgan and his partner Jon Gilbert “tend to do things on a shoestring” because they are aggressive. They are aggressive because they started out as first-generation dairymen with limited equity and significant debt.

“We like to think of ourselves as being creative instead of cheap,” Gilbert said, grinning. They have developed systems and routines for staff and strive to keep those systems simple for the employees and the animals.

Their insights building Scipio Springs Dairy near Auburn, N.Y. -- and later Windsong Dairy, Watertown, with a third partner -- were a featured showcase at the 2014 Summit.

Overall, the success of Scipio Springs and Windsong is seen in the priority the partners place on empowering their employees, focusing on team responsibilities and communication with monthly meetings, benchmarking with other dairies -- and in the relationships they have formed, especially with crop and heifer growers.

“Working with others was essential when we began due to our limited equity,” said Morgan. “We have the ability to see the other side of the partnership situation and to maintain a long term focus.”

In working with their employees, they put real emphasis on prioritizing responsibilities and communicating the fact that “little things aren’t so little” on a dairy farm.

“Covering the bunk silo is a lot of work,” Gilbert said as an example. “But it is important work and you can still have fun doing it. We try to encourage that kind of teamwork.”

The partners say teamwork improves their main pillar of profitability: Labor efficiency.

“We want to minimize cow moves. When a cow leaves the fresh pen, she stays with that group until the day she dries off,” he explained. “We have found that moving cows is just not good for us -- or for the cows and employees.”

This means they feed a one-group lactation ration and a one-group dry cow ration and needed a bigger mixer, but in the end, it frees up less man hours spent on the payloader and mixer.

“That one man hour we free up makes a big difference at certain times of the year,” Gilbert said.

He also noted that the Scipio Springs milking throughput is 100 cows per hour, and they make the milking process simple.

While the two Cornell University dairy science and ag business management graduates were not raised on dairy farms, Morgan’s wife has a background in dairy and Gilbert had spent summers growing up on his uncle’s dairy farm. Before starting their own dairy partnership, the two men were herdsmen for nearby Oakwood Dairy and were part of the Oakwood herd expansion process through the 1990s.

Their investment as eventual Oakwood partners at that time, ended up being the key to starting their own dairy. Gilbert had been a herd manager on other dairies before coming to Oakwood, and Morgan had experience in the Farm Credit system.

“Oakwood gave us the opportunity to work a few years and then buy into the dairy, which was separate from the farm,” Morgan explained.

During the 1990s, Oakwood grew from 250 to 800 and then 1200 cows. Jon Gilbert came to work there as the dairy expanded from 1200 to 2000 cows. The two men decided to go out on their own to advance their ownership opportunities more quickly.

“We had the buy-out dollars from Oakwood,” said Morgan with gratitude for their willingness to buy them out of their investment in full so he and Gilbert could leverage those funds to build their new 500-cow dairy.

By 2002, Morgan and Gilbert had their Scipio Springs Dairy underway; and by 2007, they were looking to add a satellite dairy managed by Diesel Hitt. Today, Hitt is a partner in the second operation, Windsong Dairy.

“We started out capital-constrained,” said Morgan. “So we made no real investment in land, buying just enough land to build a dairy and investing in the equipment to feed cows and spread manure. We have no heifer facility.”

They also brought with them the Oakwood focus of high production and labor efficiency.

At Scipio Springs 30,700 pounds of milk were shipped per cow in 2013. Windsong Dairy’s 2013 total came in at 28,920 pounds. Both dairies utilize custom harvesters and custom heifer growers, and the number of full time equivalent workers is at 13.8 for Scipio Springs and 13.5 for Windsong.

“It all worked well in the beginning,” said Morgan. “We were able to build a balance sheet and add 250 cows in 2006.” This brought milk cow numbers at Scipio Springs close to 800 head.

Then came ethanol, and the rising price of feed changed the way the model worked. Morgan and Gilbert had already put a priority on building relationships with their main crop growers, buying corn silage by the acre and buying hay forages standing in the field. They took on more of the yield risk, but it helped them control quality and compete against grain prices to secure crops to feed their cattle.

They made the conscious effort to find a location for their satellite dairy that would include ownership of a land base to feed it. This is the main difference between Scipio Springs, started as a 500-cow dairy in 2002 with virtually no land base, and Windsong, started as a 600-cow dairy in 2008 with more acreage than needed to feed it.

They knew their herd manager Diesel Hitt would move on for ownership opportunities, so they stayed connected by loaning him the 20% investment to be a partner in Windsong. The previous owner helped with the financing for Windsong with a lease/buy option.

The longstanding relationship with crop growers paid off in 2009 when they started a 50:50 joint venture LLC with their main corn silage grower to buy the land and grow the crop.

“With land being a tight commodity, we didn’t want to compete with each other. There were plenty of other people to compete against for this land,” said Morgan. The joint venture DGM, LLC owns no machinery and the profits are split 50:50. They purchased their third parcel recently under this joint venture.

Scipio Springs ships 3000 pounds per cow per man hour, and the annual efficiency is 1.95 million pounds per worker. They have set a goal to reach 2 million, and what they shoot for is to have 60 cows per man -- without the heifer growing responsibilities and only half of the associated crop work included in that labor efficiency goal.

By benchmarking their dairy against other members of the Cayuga Marketing Group, they have improved reproduction and other aspects of herd profitability.

“We took a hard look at our fresh cow culling rates -- our involuntary culls in the first 60 days of lactation,” Gilbert gave an example. “That’s the worst time to sell a cow, so we had to figure out what was happening.”

Their culling focus now identifies “do not breed” cows and marks them for profitable culling before investing any dollars into breeding them for another lactation. “That’s the best time to cull a cow, when you can trade a marginally profitable cow for a more profitable heifer,” said Gilbert. “It has been five years since we grew in numbers. Our focus is to maintain the best 800 cows possible.”

With a preg rate of 31%, Windsong is in the top half of 1% in the nation. “It takes a lot of effort to get that,” said Gilbert of Hitt’s management there. “We were struggling with that at Scipio Springs. We had gotten complex with our system, so we backed up to the basics and reinstated our heat detection bonuses for the milkers.

“Our average jumped instantly,” he reported. “The incentive of a $50 bonus every month for moving the needle 5%, was like magic. We went from being at 55% to 65% up to 72%.”

“Benchmarking is more than numbers. It is an important reference point for us,” said Morgan. “It gets pretty apparent pretty quickly when you are in the top half. On the other hand, when you are looking up at average, you know where to put your focus.”

Look for more about how these partners handle their crop and heifer growing and for a story about the Cayuga Marketing Group’s new milk ingredient plant in future editions of Farmshine.