A purposeful grass dairy prototype...born to clone

by Allan Nation

DODGEVILLE, Wisconsin: These are unsettled times in rural Wisconsin. Small dairies are folding up and shutting down by the hundreds. People who have poured a lifetime into concrete and blue steel now find these structures valued at zero for resale. The cash grain farmers who are replacing these dairy farmers don't need the big barns and silos that are the trademark of the state's landscape. They also don't need the small town infrastructure of feed mills and cheese plants that have kept rural Wisconsin so vibrant. "Only dairy can support a town," is a frequent, and probably accurate, observation.

With so much negative energy in the air it is not hard to see why a pervasive funk smothers rural Wisconsin. A funk that even the huge success of the Green Bay Packers hasn't erased. Could it really be that America's Dairyland is going down for the final count?

Two people who don't think so are Wisconsin dairyman Dan Patenaude and California computer executive Mike Gingrich. They have no plans for a retreat to sunnier climes and have committed themselves to a program of systematic, planned expansion in Wisconsin.

Why Wisconsin?

Patenaude said the number one thing Wisconsin has going for it are its people. "We've got a lot of people who want to milk cows. You can't go anywhere else in America and find the depth of dairy related skills we've got here." he said.

"Second, we've still got the best dairy infrastructure. I've got five milk trucks that drive by our dairy every day. You won't find that level of competition for your milk anywhere else in the country. They don't care if you are seasonal, bi-annual or freshen once in a decade, the Wisconsin dairy infrastructure needs milk and a lot of it!"

Patenaude sees Wisconsin's huge inventory of gigantic wooden barns, not as a symbol of obsolescence, but as a resource that will allow the state to offset the lower capital costs of the southwestern dairies. "We don't have to build any new structures. The capital investment is already here. Wisconsin just needs to be retrofitted to compete in a lower-cost world," he said. To prove this theory, Patenaude and Gingrich have formed a company called Grass Dairy Inc. to retrofit an existing, typical Wisconsin dairy farm into a world class, seasonal grass dairy that would serve as a prototype for future retrofits. This retrofit would include a high through-put milking parlor and a New Zealand-style sharemilker arrangement whereby the sharemilker could eventually buy out Patenaude and Gingrich.

"We are going into this deal strictly as investors. Neither one of us wants a job milking cows," Patenaude said.

Dan Patenaude said he originally subscribed to the "small is beautiful" theory of farming on a 73-acre organic grass dairy. "I started out wanting to see just how far you could push a small farm into profitability. However, you eventually just have to take a look at the arithmetic and study the really successful prototypes in the world. I started to see that a key element of least-cost production was volume." He said he now sees the "optimum" size for a grass dairy as between 200 and 250 cows.

Mike Gingrich has an MBA in computers and management but has always wanted a dairy. Originally from California, he admits to having had a "farm fantasy" all of his life and even had a small dairy for a short time in the mid-1970s in Wisconsin before returning to California. Friends for 18 years, he and Patenaude's business partnership was described by both as "a marriage made in heaven." Mike has now moved to Wisconsin and built a new home on one corner of the new prototype farm.

SEVEN OUT OF EIGHT BANKERS SAY YES TO GRASS DAIRYING

With Patenaude providing the production input and Gingrich crunching the numbers, they came up with a business plan for a 200-cow seasonal, sharemilked dairy. Despite there being no proven prototype for this in their area, they took their proposal to eight banks and seven of them said yes. "Most of these bankers had never seen a professionally done business plan from a farmer," Dan said. "They were just overwhelmed."

With the bank financing arranged, Dan and Mike searched until they found a bankrupt 248 acre conventional dairy with a huge 1920 barn near the center of the farm. "This farm was so ideal for a grass conversion that we only had to put in one hard-surfaced lane." Dan said.

The old barn was gutted and a high-throughput herringbone milking parlor was installed in it. This milking parlor only took up part of the barn and there is room for 100 early spring calving cows free-stall. Milking season is March to December.

The former corn acreage has been planted to brome, orchard, reed canary, timothy and clover and the alfalfa acreage drilled with perennial ryegrass and orchardgrass. The farm was fenced into 16 permanent paddocks and a stockwater reticulation system was put in. Temporary electric fence is used to further subdivide the paddocks. Swiss, Jersey and Ayrshire breeding is used and the dry cows are wintered outdoors.

Total investment for land, cows and all capital inputs was $3000 per cow, or exactly half the average Wisconsin dairy investment. "This dairy is predicated upon generating a minimum return to capital of 20%," Dan said, "and we expect to do a lot better than that."

Their financial plan is based on a cow to the acre (246 cows) but they only milked 178 cows in 1996. They plan to be fully stocked in 1998 and believe at that time the farm will be a finished prototype. Mike Gingrich will present their farm business plan and the actual numbers at the 1997 North American Grazing Conference in Jackson, Mississippi, this December.

One thing that is visibly obvious compared to most Wisconsin dairies is the lack of machinery. "Contractors," Dan explained. "One of our criteria for locating a dairy is the presence of a good forage contractor in the area. We've got a real good one here."

Dan said that with a stocking rate of a cow to the acre, the farm could not produce enough feed for the grazing season and the winter. "We need 300 tons of forage dry matter for a five month winter. We are budgeted at a forage cost of $150 per cow per winter and are not afraid of buying in hay or silage. We would much prefer to use our grass to make milk than to produce dry cow feed."

Dan said the Midwest's tradition of self-reliance was a major factor in the region's poor returns to dairying. "We spend all of this effort to grow stored forage and grain that in the end really isn't worth anything. You can always buy it cheaper than you can grow it."

Dan's personal dairy farm has now been retrofitted into a replacement heifer development center. "Most dairy cows are screwed up for their whole lives by the way they are handled in the first six weeks of their life. The people who raise them know they aren't going to have to milk them. So, we feel we need to do this critical early phase ourselves." He said he would eventually like to contract the growing out of the heifers to others.

SHAREMILKERS ARE A KEY COMPONENT

Dan believes sharemilkers are a key component of a revitalized Wisconsin dairy industry. "Young people have got to be able to get in with just sweat equity and have got to be able to spend some years working with people who know what they are doing," he said. Dan said he foresaw a future in which the pastures in Wisconsin would look much better and the cows much worse.

Mike and Joan Keinitz are the current sharemilkers. However, rather than receive a straight percentage of the milk check as in New Zealand, they receive a salary, house and a percentage of the farm profits. "Because this was a new venture, we had to take the risk out of it for them," Mike said. "Also, this arrangement allows us to maintain control during the prototyping stage."

Mike admits there are still some technical and operational problems to be worked out. "Frankly I was disappointed that it has taken so long, but we know a whole lot more today than we did two years ago. The other retrofits will go much faster."

Dan said, "Our job now is to take a profitable dairy and fine-tune it into an extremely profitable dairy." Mike and Dan said they plan to retrofit 6 to 7 more farms and then take an "investors" retirement as their sharemilkers slowly buy them out. And does their prototype offer a way out of the capital trap for conventional dairy farmers? Dan shakes his head no. "A profitable dairy starts with a profitable paper plan. The conversion of an operating farm is much more expensive than a new startup because you have to keep the old system running during the transition. When we go in the old way has stopped and we get to rewind the clock."

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