Economic Analysis of Major Dairy Forage Systems in Pennsylvania: The Role of Intensive Grazing

Abstract

The economic impact of intensive grazing for a representative Pennsylvania Holstein (Bos taurus) dairy farm was evaluated using a Monte‐Carlo farm level simulation model. Ten harvested forage combinations with or without intensive grazing of pasture were modeled. For each of 10 farm scenarios, least‐cost rations were developed to meet the requirements for the level of milk production. Net cash farm income, and the after‐tax net present value of ending net worth were used as profitability measures. The after‐tax net present value distributions of the 10 dairy farm scenarios were also compared using stochastic dominance analysis. Results showed that under the assumption of equal milk production level (IS 800 Ib/cow per yr) and depending on the forage crop mix, annual net cash farm income with intensive grazing increased by 14 to 25% compared with farms without intensive grazing. These increases translated into $8 400 to $12 400 more in annual net cash farm income for a typical Holstein dairy farm with a 60‐cow herd. The observed increase in income and profitability for farms with intensive grazing was largely due to the decreased cost of milk by an average of $1.20 to $1.42/cwt, depending on the forage crop mix analyzed. A risk assessment of intensive grazing using stochastic dominance analysis showed that most farms with intensive grazing were preferred to the nongrazing dairy farms under the assumption of equal milk production output per cow. When milk output per cow was allowed to fall for farms with intensive grazing, however, the stochastic dominance analysis showed that the robustness of the preference for intensive grazing depended on the harvested forage mix used. Milk yields could only drop from 4 to 6% before the grazing forage crop mixes were no longer preferred under risk. Research Question The current cost‐price squeeze faced by dairy farmers is prompting many to seek alternative forage feeding systems to control feed costs and improve profitability. Incorporation of intensive grazing into current forage feeding systems has gained increasing interest in the Northeast. The objective of the present study is to analyze the potential impacts of intensive grazing vs. harvested forage systems on profitability for typical Pennsylvania dairy farms. The study also compared the preference of forage systems with intensive grazing under risk and uncertainty. Literature Summary Little research has investigated the economic impacts of grazing‐based forage systems for U.S. dairy farmers. Most research on dairy grazing has emphasized either the nutritional impacts of grazing or the effects of grazing on milk output per cow and animal weight gain. Preliminary economic evaluations of the benefits of grazing in the Northeast have shown an average increase in net farm income of between $12l/cow (Pennsylvania) and $15Ucow (Vermont). Most of these studies have the same limitation, however, the use of partial cost approach leaving unaccounted for such factors as fixed costs, machinery costs, and labor requirement changes. A ...

The Effect of Pasture Allowance and Supplementation on Feed Efficiency and Profitability of Dairy Systems

“…Ration ingredients and prices for all feeds (Table 1) Table 2) (Rasmussen, 2003). Pasture costs were derived from Elbehri and Ford (1995) and were estimated to be $0.0482/kg DM grown. The cost data of Elbehri and Ford (1995) are older than that of the output prices.…”

“…Pasture costs were derived from Elbehri and Ford (1995) and were estimated to be $0.0482/kg DM grown. The cost data of Elbehri and Ford (1995) are older than that of the output prices. However, those data were used because more contemporary data were not available.…”

Small U.S. dairy farms: can they compete?

“…The Minnesota and Mississippi studies found pasture‐based systems to economically outperform conventional systems; the North Carolina study found that pasture‐based systems could be competitive with conventional systems under certain conditions; and the Pennsylvania study found higher economic performance with conventional systems. Analyses using simulation or linked spreadsheet analyses have included Parker et al (1992) in Pennsylvania; Elbehri and Ford (1995) in Pennsylvania; and Soder and Rotz (2001) in Pennsylvania; all of which found favorable economic performance of pasture‐based relative to conventional farms. A third category of studies has compared the systems based upon farm survey results: Hanson et al (2004) in Pennsylvania and Dartt et al (1999) in Michigan, both of which found favorable economic performance of pasture‐based relative to conventional farms.…”

Stockpiled Annual Ryegrass for Winter Forage in the Lower Midwestern USA

“…T he number of pasture ‐ based dairy operations in the lower Midwest has increased four‐fold since 1998 (Pierce et al, 2002). These operations seek to maximize profitability by minimizing input costs while maintaining economic levels of milk production (Elbehri and Ford, 1995; Hanson et al, 1998). One characteristic common to pasture‐based dairy operations in this region is their reliance on high quality pasture instead of hay or silage.…”