Thursday, February 6, 2014

The Economics of a Backyard Milk Cow

Earlier this week, I explored the economics of keeping backyard egg-laying chickens. Since I want to get and keep a milk cow for the family, I thought I'd do the same thing for a cow.

Hey! I don't wear overalls!

We're going to need to make a few concessions and constraints based on my situation here, though.

  1. A milking cow need at least an acre of good growing pasture. Add in a growing steer for beef, and you can effectively double that. So a cow/calf pair should have 2 acres of pasture during the growing season. Let's assume I have that.
  2. A milking cow must be fed hay in the winter at about the rate of 25-35 pounds of hay a day. We'll crunch the numbers using 30 lbs./day as the go-to hay rate.
  3. Hay can be harvested in three cuttings a year at the rate of about 5 tons per acre in zones 6 and 7 (we are in 6b), and potentially more if fertilized. I will assume less than the ideal and guess it's closer to 4. Let's also assume that I have a separate section of land for hay harvesting.

So, those things being assumed, let's dive in and see what we can see.

First, let's look at the start-up costs. Around here, let's assume start-up costs are about $3,000. This covers the cost of the cow herself and materials (halters, milk pails, wagons, steel buckets, etc.). This is for a cow either in milk, or pregnant and due soon. Let's assume for a moment that it is a 5-year-old cow, in milk, with no calf.

A heifer typically first gets pregnant at around 2 years of age, and has the first calf around 3 years of age. Commercial dairy cows are "one and done," but we're not thinking in terms of burning out on a grain-fed frenzy. We want a repeatable cycle of calf/milk for several years to recoup our investment. Data is scant on this topic (and seemingly unreliable), but the "average" number of calves a cow can have seems to range from 10 to 20, with the record being 39. Again, this is mostly forum speculation with no personal testimony, so four our sake let's assume a productive life cycle of another 10 years of calves. Let's also assume (as we'll factor in later) that 3 calves out of the 10 will die before slaughter or sale (a conservative and pessimistic outlook). So, our "example" 5-year-old milk cow will produce milk for another 10 years, and provide 7 live calves during that time.

Now, about the milk.

See the cream line? YUM!

A typical Jersey gives between 2 and 4 gallons of milk per day. This can be even higher with additional feed, but let's stick to the averages and say we can expect 3 gallons a day. The first month or two of lactation, half of that goes to the calf. So we have 60 days at 1.5 gallons, followed by another 240 days at 3 gallons, for a grand total of around 800 gallons of usable raw milk in a 300-day lactation. This factors in a two-month "dry-off" period to allow the cow to go from full milk to dry to colostrum as a calf is readied to be born.

800 gallons of milk weighs 6,880 pounds. The "average" Jersey lactation supplies over 15,000 pounds. So I'm definitely low-balling this estimate by about half for Murphy's Law's sake.

The grocery store sells milk at $2.70 a gallon around here. So, there's a net worth of $2,160 on the milk alone. But that's comparing it to processed, industrial, white-colored crap, and not organic, raw, healthy, full-fat, extra-creamy MILK. So double that figure to compare apples to apples. Already, on the milk alone, our $3,000 investment has netted $4,320 in the first 10 months.

But, chances are, you're not going to sell it all for $5.40 a gallon. You could. But you won't. You'll make butters, cheeses, ice creams, and the like, which means you will NOT be buying any of those things from the store. So figure the average household spends $32 a month on dairy, and in 10 months, you've recouped $350 (adjusting for inflation). In 10 years of milk alone, you're $500 ahead of your investment.

But, the milk gets spread to other places too. There's just no way the average family of 5 is consuming over 2 gallons of dairy a day. No - it gets used and recycled to feed chickens, dogs, rabbits, pigs, cats, and other animals, which significantly reduces or eliminates feed bills. I figure than by feeding our chickens half of their protein and caloric requirements from milk (a measly 4 pounds, or a 1/2 gallon a day for 32 chickens), we can save another $15 a month on feed. Maybe more, since they'll metabolize milk better and eat less of the other stuff. Same with the dog - he gets about 2 pounds of food a day, so by switching to half milk, we save upwards of $30 for a pint a milk a day. The total savings of dairy-free shopping and reduced feed bills nets us $80 a month., or $800 a year, and $8,000 over the productive life of the cow.

And then there's this whole calf business.

I figure we'll get 7 in 10 years.

Of these, I would anticipate that 6 go for beef, and one heifer is selected to become the next milker.

That means that in 10 years, the initial investment becomes not only an investment of one cow, but of an indefinite number of family milking cows.

In 10 years, you get 6 beef calves. These are NOT going to be 1-ton steers. They are smaller, leaner, and more tender cuts of meat - and also extremely healthier.

At 7 months, a grass-fed cow weighs about 450 pounds. At a year, this goes to about 600 lbs. Let's say we expect a solid 500-lb., on-the-hoof steer for butcher. At a 40% live-to-packaged ratio, we get 200 pounds of beef with each calf. Grass-fed ground beef prices in Middle TN right now are about $6 a pound. Suppose we process at home and don't spend money for a butcher. That means we come out with $1,200
 worth of beef for each steer. For five steers in 10 years, we have a half-ton of pure, grass-fed beef for a net savings of $7,200.

So our $3,000 investment now turns into over $16,000 of food, plus a free dairy cow, in just 10 years.

This is assuming that the cow is raised entirely on grass, and that nothing is purchased. Let's, for the moment, assume we need to spend about $150 a year on supplemental minerals, another $50 on antibiotics and immunizations, and $200 per steer for meat processing. That leaves us with an adjusted savings of only $13,000, for a total GAIN of $10,000 in 10 years, and $23,000 after 20.

Those figures are for beef, milk, and feed bill savings alone at today's Middle TN prices.

I hope neither side wins, to be frank.
And we all know how stable food prices are.  ::rolling eyes::

What this doesn't factor in is by-product savings. Cheese is more expensive than milk, so you save extra on cheese than milk, and therefore the savings figures increase. Rib roasts ans strip steaks are WAY more than $6 a pound, so the beef savings is in reality more than that. Rabbit meat, for example, raised on supplemental milk and scythe-cut hay is essentially free (and healthy) after the initial investment, so supplying some leftover whey and buttermilk helps grow out other types of meat, further reducing the feed bill. It's to get real numbers to support these, but I'd venture to guess that the extra milk (and eggs produced by healthier chickens) can support about as much meat from other animals as you'd get from a young steer.

So with a $3,000 initial cow investment, you'd make back about $2,600 in Year 1. This is the combined savings from the milk, beef, and additional meat (priced at $3 a pound - half that of grass-fed beef, for the sake of arguments). At the end of year 2, assuming a beef calf every other year, you've grossed $4,000 and are now ahead $1,000. At the end of Year 2. And this doesn't even look at sales tax saved (ahem, $390). It also doesn't factor in a higher survival rate for the calves (more free beef!), a really big steer (more free beef!), increased food prices (more free bigger savings on beef!), increased dairy prices, etc., etc.

And it certainly does not account, in dollars, for the numerous health benefits of grass-fed dairy and meat.

So why did I not factor in feed cost?

Because, I have 2.5 acres of pasture (plus some spots in the yard to munch on), and about 0.4 acres of hay field. Remember our assumptions? I can run a dairy cow and calf on 2.5 acres for 9 months. Grazing on a rotational basis with the sheep, this is more than adequate pasture land in my climate.

Also, the 0.4 acres of hay I have will net me about 2,800 pounds of hay. Butchering the calf before hay season means no overwinter feeding. I can sustain the cow for 106 days on hay alone.The sheep, of course, will eat hay, too, at about half the rate as the cow. The combined 45-pound-a-day hay habit will last for 71 days. What this means is that I will need supplemental hay - just not for the cow. This also means I need to figure out how to cut, harvest, and store the hay field 3 times a year. Using my "knee-high and cut it" hay rule will yield me a good hay cutting in April, late June or early July, and late fall (October, most likely).

The one thing we have not yet discussed is time.

Time keeps on slipping, slipping., slipping....into the future.

In order to be considered "profitable," most operations factor in the per-hour cost of the labor involved. I guesstimate this, in my case, to be about an hour-and-a-half a day, plus some extra time on the weekends, plus time cutting hay. Cost per hour? I have no idea. It's a hobby. I don't look at my time on the homestead in terms of dollars per hour. So these estimate do NOT factor in time.

I suppose if you look at it in terms of a median U.S. income ($24.17 per hour), it would "cost" me $13,000 a year to "work" for these benefits. And I can see how some folks use this to say that backyard farming is not profitable.

For me, though, I wrap up the time spent into what I call a "workout." Instead of spending for a gym membership, I haul water buckets. Instead of getting a treadmill, I move chicken coops. Instead of bench presses, I scythe. I don't look at dollars per hour lost - I look at time outdoors and exercise gained while producing top-of-the-line food myself.

So anyway, there it is. My take on the economics of the backyard family cow. Still, there is that initial investment. It's a big number, and one that scares me just a wee bit. Like I mentioned, our foray into milk cows needs more prayer and thought.

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