Alvin Peachey's regenerative practices for his 100% grass-fed dairy farm

Hi, friends, welcome back. This is John and this is the.

Regenerative Agriculture podcast where we talk about the agronomic sciences and the cultural management practices that regenerate plant health, soil health and livestock health, and ultimately public health and the health of farming profitability. My guest for this episode is someone you may have heard me mention on several different occasions, an Amish organic dairy farmer from central Pennsylvania, Alvin peachy. Alvin has 100% grass fed dairy and has been doing some really extraordinary things that kind of put the status quo of dairy farming on its head. And he has lots of really interesting insights for us to share. So, Alvin, thank you for being willing to join us and to share some of the experiences that you've had. Can you tell us a little bit about your personal story and tell us a little bit about your operation and where you've come from and what brought you to the work that you're doing today?

Sure. Well, I thank you, John, for inviting me on this phone conversation and I feel honored to be on this call. First, I want to express a very deep thank you to all of my very good mentors, which would be John Kemp, Gabe Brown, just to mention a few. Sam look From Keesen Bylag, Dr. Sully, Abel Kingsley, some of my tremendous good mentors that have helped me a lot over the years. We are a small certified organic grass based dairy in central Pennsylvania and currently we're milking around 90 cows total. So I was smoking cows twice a day since I was 8 years old for my mom and dad and grew up on the dairy farm. At age 15, I was put in charge of the dairy cows. Really enjoyed that. And there's something that get talked about a lot, but when you picture somebody where you have a conversation with somebody about somebody or about something, you, you instantly paint this imaginary thing in your brain that, okay, this is what you see or this is how you see about the person. So when I think about cows, about dairy farming, I'm thinking about cows on green grass. That's exactly what I think about dairy farming. That is what I thought back when I was 15 years old. So I started on my own in 2010, which is 11 years ago, started out with 25 cows and like I said, today we are currently at around 90 cows on the same farm. We didn't add any more acres. So it's been a very interesting journey. We started shipping milk to Organic Valley from the get go. And just this year, January 1st, we got on the grass milk trout. Like I said, it has been very interesting. We have Learned a lot over the years and we are learning every day. Every farmer needs to have a mission statement because that is our driver. It describes our driver for what we're doing. So for our farm, our mission statement is our mission is to practice regenerative agriculture practice in an enjoyable low stress family environment for our land, animals, community and economics. So that is our mission and our vision for the future for dairy farming.

Well, I think what you just described already sets you apart from many different farming operations because there I would suspect that, or anticipate that very few farming operations have actually thought about what their mission is and what they hope to accomplish and deliver. Let's dive a bit deeper into the context of your farming operation. You mentioned that you have added additional cows. You started with 25 cows 11 years ago and now you're at 90 cows without adding any more acres. How many acres of farmland is feeding and sustaining those cows?

On our current farm, we have 92 acres on the deed and there's 85 acres tillable. So we have 85 acres. And when we started, we were at 25 cows and 10 replacements and we were purchasing up to 50% of our feed that we needed. So over the years we have done a lot of management practice for regenerating soils, improving soil fertility, and yeah, the list goes on and on on that part. And at the same time, we're starting to really pay attention to grazing. And by the way, we do not do, we do not do rotational grazing on our farm. Yeah, that is a big no, no to me. We do what we call manage intensive grazing. It's a very, it's a huge difference between those two. So we started doing that. I noticed, lo and behold, that there is a lot of things that we are under evaluating, under estimating, and that is what, how much grass we can.

Actually produce per acre.

So I started adding more cows. And now my common thing to say at a grazing day or a pasture walk is the most common mistakes that grazers make is we are understocked and overgrazed. So if I see a farm struggling or a pasture struggling, I say your biggest problem is you don't have enough animals, Get a longer recovery period, get more animals on a smaller area, and do a lot more aggressive grazing. So we started doing those management practice and at the same time we decided we're not going to mechanically harvest any feed on the farm. So my current goal is to maximize and optimize our acres with cows to consume that grass and at the same time travel about 50%, which is our Goal. So what I'm seeing is every year we are getting more and more production. And another thing that we experienced in 2020, which is very exciting, was we had the worst drought that our county had for over 80 years. I have to say, we had the best year for dairy farming ever in a drought.

Wow. So I want to unwrap things a bit further. You've mentioned that you want to graze all of your acres and not do any mechanical harvesting. And then if I heard you correctly, you also said that you want to get 50% of the cows intake from grass. Does that mean that you are still buying hay and feeding forages from other operations?

Yes. When I made that decision five years ago is when I started learning more and more about the lean method, the lean model of farming, and be a lot more efficient and a lower cost operation. So when I look at my farm, in particular my dairy, we had a lot of overhead. So our current output, which was milk, okay, so we get just a set amount for the milk and then it is up to the farmer. At what cost do you want to produce this product? So with the prices of horses and the price of equipment just skyrocketing every year, we had to find ways to lower our cost of production and by grazing. That was one way to do it. Then I had to turn around and look at, okay, so now what about winter feed? How are we going to manage that? So we were actually at renting ground and making our own feed and we decided we were going to split that as a separate business entity. So we are adding acres on that business and Daria is buying it from that business entity, if that makes any sense. So we are trying to use the same lean method on the crop farming at business entity now. And the dairy is buying six months worth of seed out of the year and the rest is being grazed on the dairy farm.

All right, I want to dig a bit deeper into the aspects of grazing and how you're managing that because you mentioned some interesting thoughts there. But before we go there, just now you mentioned the economics and managing the cost of production with the management system that you have adopted and how you're approaching dairying. What is your current cost of production for milk compared to the mainstream?

So talk about dairy economics. To me, that is a really interesting discussion because it is the most talked about thing and dairy farming today for a couple reasons, but it is the least understood and definitely by the dairy farmer because the people that are having the conversation about the dairy economics is their, their banker and their feed salesman. At his meetings. And the, and the banker says, okay, we need more production because we need more cash flow. And then the feed salesman says, okay, we need to increase some of the inputs xyz to get more total volume. So it is the most talked about but the least understood. So the way I look at it, there's only a couple of numbers that really play a big role in determining farm success. And the first one is if you know what your total gross income is for the year, your fixed cost should never exceed 50% of your gross income. So just for a hypothetical number, an example is if you, if your gross income would be $500,000, you do not want your fixed cost, which would be your labor, your day to day expenses on the dairy farm cost of growing your feed, if you grow your own feed cost, just the everyday expenses to make this operation move forward. You do not want that to exceed 50% of your gross income. So that would be. You want to stay below $250,000.

I want to clarify on that point, Elwin, because often when I hear the term fixed costs, I tend to think of it in terms of capital costs, such as buildings and equipment and so forth. So you're defining fixed costs a little bit differently. Can you just expand on that a little bit? What you're including in the group of what you're calling fixed costs?

Sure, yeah. The fixed cost, like I had said, would be the, would be the feed cost, the supplies, et cetera, the daily expenses to make the farm move forward. And what I would call the, like the long term would be your, your mortgages, your, your taxes. And all that would be what I would want to see being paid out of the remaining 50% overhead, if you.

Will, or capital expense.

That's right, yes. Okay, got it.

You were saying that you only want these operating costs. Essentially what you're talking about is operating costs. You want the operating cost to only be 50% of the gross revenue.

That is correct, yes. 50% or less, 30% would be a whole lot better. Right. So that is, that's the number one thing you want to look at. And then the second thing you want to look at is what is my time worth on a per hour basis on the dairy farm? So I, when I interview farmers, I ask them, do you know what your time is worth per hour? And this is based on 3,000 hours per year. A lot of research has been done in different universities. They go by 3,000 hours per year. And you can do the math at 52 weeks a year. So there's Essentially a new format that knows what their time is worth. And that is a huge problem because they say, well, our time isn't worth anything. We just, we work for nothing. And you know, anyway, that is a very important factor is know what your time is worth on a per hour basis.

What should that number be? I'm sure it varies significantly with the scale of operation. But can you give us some context for what that number should be?

Roughly, as a starting point, so I look at a net profit. So after my 50% or less of the fixed cost is deducted off of my total income, then I would take that number and divide that by the 3000 hours. And I say it should be $50 or higher per employee on the farm. So if you have four employees on the farm, it should be $200 an hour. If there's only one employee, I would like to see that at $50 an hour. And I see a lot of farms that we actually analyze, we see at in the neighborhood of 10 to $15 an hour. Okay, then the second thing is every farmer should know what their cost per seaweed is, what the cost of production is. And then the next thing is to know what their net income per acre. This is not gross income. This is after the fixed cost expense that I was describing earlier in the conversation or deducted off of your gross income. And that gives your net income per acre. And I would like to see that in the neighborhood of $1,500 to $2,000 an acre.

So give us some context for your operation and what you are producing as contrasted and compared to where many dairy farms are today. And I understand that a lot of this information obviously is personal to you, it's specific to you, but give us some comparison. What do many dairy farms look like today and what does your dairy farm look like for these major economic indicators?

So like I had said, In 2020, we had a major drought. It was the worst drought for 80 plus years. And at the same time I was not on the grass milk truck with Organic Valley, which that is A$5, a hundred premium. And at the same time we were getting hit by over quote of milk. We had some major deducts. But even with all those deducts, so to speak, that we had for 2020, we came out at $50.20 per hour of net income. Okay, so if I take our estimated additional feed cost that we had because of the drought, our quota deducts, and the organic grass milk premium that we are getting today, that would push that number up an additional $40 an hour for 2020 actual production. So I'm very excited about 2021. And our net income per acre after all expenses for 2020 was $984 an acre. On the additional income that we should be expecting this year and hopefully not a drought, again, we should be in the neighborhood of 15, 1800 dollars an acre of net income per acre.

We started this economic conversation by me asking the question of what is your cost of production? Very commonly this conversation in dairying is framed around cost per production. 100 weight of milk. Do you know what those numbers are for you as contrasted to many other.

Operations compared to other operations? I do not know that. But our cost of production is $16.42 in the dry year because we had purchased more forages. Without those additional forages that we had to supplement during the drought, it would have dropped that to $13 per se weight. So, and the reason I know these numbers is I was getting frustrated with the kind of record keeping and the tools out there available to do a good job of record keeping. So we actually built our own software model of it is called the Peachy Dairy Log, where we do a daily log of milk production, cows going in the tank, and it gives us our herd average. And we also enter in how many pounds of dry matter we said every day. And then we do a monthly sheet of our solids that we produce, a butterfat protein, other solids and everything that really has an impact on the financial reporting. So then we have a summary where this all flips over into the summary and I can see all these numbers exactly to the dollars and to the cents of exactly what our expense and our income is on the per seaway basis. So I built this two years ago and we currently we have between 30 and 50 farms that are actually using this to track the dairy 2021 for the first time. So I'm really looking forward to the numbers coming back from the 2021 season. So this software program is really exciting. It's very, very interesting. And you can really track and crunch the numbers on a dairy farm.

All right. And so as I've been following the conversation, I've been doing some mental math for the numbers that you're reporting on a per acre basis and reporting on your 85 acre home farm. If I'm understanding this correctly, then you are anticipating you had a bit of a down year Profitability wise in 2020 with the drought conditions, but you're essentially reporting $200,000 plus per year in net income from milking 90 dairy cows is that. Am I close on that?

Yeah. You must do math really fast, John. I like that. Yeah. So yeah, I'm going to be really honest with my numbers. It's no huge secret. So 20, like I said 20, 20 was a drought year, but we had our best year financially. Okay, just to clarify that we had the best year financially. Since we were farming for 11 years, we had about 10 more cows, but it was because we have things so much more streamlined and our soils are so much better and our forage quality, our grass quality is so much better. That is why we had that really, really good year. So last year we ended up at $150,000 of net income for the farm. That is correct. And for this year we are projecting between 250 and $300,000 of net income on this farm.

So why the significant jump? Why jumping? If last year was your best year ever, why? How are you moving from 150 to 250?

Well, every year gets better. Okay, so we are getting the grass mill premium. We are not forecasting a drought this year. So we have to purchase less feed. And additionally to that, I did get a new base approval where we can actually produce more milk and not get deducted from our over quoted production. So those in combination will really have a big effect. But the biggest effect of all is as we keep on improving our forage quality and our pasture quality and our pasture management. And we see that we actually have to add more cows to eat this grass. And the more cows are producing more pounds of milk per day or per year is going to increase our herbal production by a significant amount. So all those four or five different factors combined is really going to spike that number for 2021.

Wow, that sounds like really exciting progress. So let's dig into your forage management on your home farm, your pasture management a little bit. You've described how you constantly need to keep adding more cows and you're constantly refining your grazing management. You talked about being overstocked and undergrazed, if I recall that correctly. Let's talk about your forage management just a little bit. Do you have summer annuals? Is it all perennials? Is it alfalfa?

What does the mix look like of.

The forages that you're grazing across those 85 acres?

So these 85 acres, we are very diversified. For me, I think it is a lot easier to have different pasture species than having everything in one paddock, so to speak. So I take about 50% of the farm and I want that 50% in perennial pastures a Mixture of orchard grasses, meadow fescue, clovers, native grasses. So, yeah, 50%. Then I want another 5 to 8% of our acres in like a really dominant fescue pasture, because those are like a sacrifice pasture where you can go in on a rain occasion or they're the first degrees in the spring and the last in the fall. Then we have an additional 20 or 25 acres where we have orchard grass, alfalfa mix, and then we do another 10% of the farm, 10 to 12% of the farm, on pure alfalfa. So we do have a diversified type of pastures on the farm. To me, that is a lot easier than having every acre the same and trying to have the most diversified species in each paddock. So that way if we have different paddock species, we can hit them at different times of the year and weather events. We can really. We're a lot more flexible, I should say. And why we keep adding more cows and why I think we are understocked. I don't think that I do overgrazing a whole lot anymore. But that is the most common mistake that most grazers make. So my goal for the last four years has been we want to take the best and leave the rest. That would be we remove around 50% of what is there at grazing and the rest gets trampled. So we go into paddocks where we have 2 ton of dry matter equivalent in these 2 acres and we want to trample 1 ton of dry matter, or you could think of 5 ton of biomass per acre. We want to travel down to the soil surface for the microbes and our earthworms to really enjoy the feast. So what I have seen over the last several years is the more we can do that, the more grass we will have, the next grazing and even the next year. It's tremendous. Once you have that system going, it is really, really amazing what happens in the next grade year and the following year. So that is why we have been able to ramp up cow numbers on the same acres is by doing that. And we will trample all that residue and we come back in 35 days is our rotation or rest period. We come back 35 days later and there is no residue to be found except another layer of earthworm castings.

Wow, that's really interesting. Is that one of the questions that sometimes comes up in these types of ecosystems is the compaction that cows can cause. And earthworms can be really aggressive pillage tools given the right environment. And it sounds like you, you're not in a no till System. You actually have a lot of tillage, but it's the earthworms producing the tillage.

Yeah, I usually make a joke out of it. I say, yeah, we do tillage. Yeah, we do tillage. And it's the earthworms of Judah tillage. They do, they do amazing kindness. They do amazing stuff. Yeah.

So when we, when you think about the different, the conversation we're having brings so many different questions to mind.

It's.

We could probably have a lot longer conversation that we really have time for, but one of the obvious questions that comes to mind is balancing a ration. If you're doing 100% grass fed dairy, then obviously the only way to balance the ration is to balance what is in the forages. And having these different types of species kind of concentrated in different blocks gives you the opportunity to adjust and manage that a little bit. But what does nutrition management look like for you? What are your thoughts on providing enough energy in particular? I know that's a significant or can be a significant challenge on 100% grass fed production. So energy is one question that comes to mind. And then the other question that comes to mind is if I understood correctly, you have a section that is 100% alfalfa. Maybe you said alfalfa ryegrass blend.

How do you prevent bloat? Okay, so two questions you have there. Okay, so number one, the nutritional side of, of dairy cows. I usually say this with, with a little bit of a joke, but in reality it's very true. I do believe that if a dairy farmer needs a nutritionist to come in every week to balance ration and tell them how to feed this cow, I do not think that they are a dairy farmer. If you know what to look for. I'm looking at rubenfil. I'm looking at body condition. I'm looking at muns because the muns are a very good indicator of protein that the cow is actually consuming. So muns are a very good indicator. And again, you want to look at this manure pie to see if it is running, if it's loose or if it is on a really nice padding. So those are visual observations that we can use to gauge to determine the cow's diet, if we should tweak something or should graze taller or shorter or feed some grassy hay in the barn. So those are all the different things that we can do as dairy farmers to manage the diet. And then your question about alfalfa and bloat. We used to say that we still have to see our first cow Bloat. And guess what had happened in 2020? And what I have learned is since alfalfa is a legume, it will be fixing nitrogen and if it does get really dry, it will store the nitrogen in the roots or the nodules. When we get a rain, we get this flush of nitrate coming up to the above ground biomass up to the plant residue. So in our experience with the drought, after we got a couple inches of rain in the fall, we were grazing alfalfa and we had a bloated cows, not only in our county, but a lot of surrounding counties that were having a drought at the same time. So it was an issue of high nitrate and usually that would be a magnesium deficiency. So those are things that we need to watch for if you want to graze alfalfa is do not turn the cows out into alfalfa after a drought. Once you do get rain, that's dangerous. But if you have just decent weather conditions all summer long, you can cruise right through and it is not a problem once the cows are adapted to it. And another thing is you want to graze alfalfa during the day instead of at nighttime. Another important thing, and secondly is you want to see 10% bloom on the alfalfa before you start grazing. And that is approximately 35 days. 10% bloom. What does that contribute?

What changes at that point? Why is that important?

Okay, so 10% bloom as that plant reaches its peak maturity, I should say just before it goes into reproduction, as one is the highest in crude protein. And when it flips that switch and goes into reproduction stage, as in shooting a buzz and going into seed heads, that protein will start declining rapidly, very, very rapidly. And right at that peak is when you have the most digestible fibers as well. So you're really getting that plant at a very balanced nutritional profile.

So when we think about balancing and nutritional profiles and balancing a ration, you're doing this in the field, you're doing a little bit with the seeds that you're feeding in the barn as well. You mentioned feeding grassy hay at specific times when you're feeding the alfalfa. I guess I have kind of a two part question. Often it's been my observation that 100% grass fed dairies struggle to get enough energy. So what approach are you taking to supplying enough energy? Are you feeding molasses? Are you feeding other supplements that are not grain? And then also talk a little bit about the types of forages that you're supplementing and that you're feeding in the barn to supplement the Pastures. What do those look like?

Very good. Okay, so first of all, before I forget, we do not feed any supplemental energy sources in the barn. It is zero molasses. No fats either. No fats except what is coming in.

To feed right in the 4 inches.

So, okay, so back in 2020 we averaged 10,980 pounds per cow for the year. So this year we are leading already by a significant amount. Today we are at a 40 pound herd average for the wintertime, which is 10 pounds higher than we were a year ago. So that's why I say it looks like we're going to have a very productive 2021. And the reason for that is forage quality. Voyage quality is so important. I could talk for two hours about voyage quality and how important it is. So it's one of my most passionate topics to talk about voyage quality. So you asked about energy, how can we get enough energy? And you're probably referring to like a net energy calculation and a feed test. I'm assuming the neo to me I'm.

Talking about keeping cows in good condition and being productive. I mean it's what does it take to make that happen?

So it does take energy, but at the same time you need forages that are very digestible and the cows are going to need less energy to digest these forages. You need forages that are extremely high in sugar and that is what is going to make cows milk and keep body condition on the cows. If we take a pasture clipping, those clippings are usually coming back at about a 220 to 260 RFQ. The RFQ or the feed test reflects off of the digestibility of the forage, the sugars and the crude protein. So I want the protein at about 18 to 20% protein with an RFQ of 220 to 250. If you have that, you have a tremendous energy packed, highly digestible, extremely high sugar content forage. And that is what will keep condition on grass fed cows. So that's pretty simple to do in a grazing situation. But the biggest challenge is to do that with winter forages. That is where we find that the biggest challenge.

So before we go to the winter forages and talking about what you're feeding in the barn, you made just a quick mention in passing of the fat content in forages as well. Do you consider fat content when you're looking at forage quality in addition to sugar content as an energy source?

I do, but I do not understand the fat quite like I would like to. And I do Think that some of the labs do test our fat a little different than other labs. I'm currently working with Rock River Labs and we are running between a three and a half, three and a half to four percent fat is what we run on our forages on the pastures. We are at about four to four and a half percent. And I do think fats are a very important factor to consider. But it's not the only factor. I mean, it's going to take more than just fat to make cow's milk. Right. But it is an indicator of a very healthy plant.

So let's talk a bit about winter feed and then the obvious kind of next place I want to go is how do you produce these high energy, high sugar content forages? But you started talking a little bit about winter feed and how you're producing high quality winter feed. So what are, what are the quality challenges that you observe with stored feed, if you will?

So first of all, when I look at quality, it is not in the context of how do we increase quality. It is how do we retain the quality the plant has standing in the field. How can we get that feed into a silo, into the trench or into.

A bale by not losing that quality.

That is there currently. That is very important. Most of that ties into harvesting management. Obviously you have to wait until the plant reaches its peak maturity. It's optimal balance maturity. We are learning more and more about haying a day. Currently we do not do a lot of hay in a day. We mow one day and build the next day. But the key thing is to lay the hay out wide, completely wide, be not crimp it. And within eight or so hours that hay should be in a bale. So when you think about this, it sounds almost crazy, but we have done some trials where the hay was mowed and in six hours later it was in the bale at 40% moisture. So if you cut grass or a alfalfa plant that is photosynthesizing already, you lay that wide in the field, it is not crimped, that plant will keep on photosynthesizing. And what is the number one mineral? Not a mineral component needed for photosynthesis?

Well, it keeps using up water, obviously.

Exactly. It's going to pull all the water out of the stem. The leaves are the last to dry. You do not lose the leaves. So as long as you can keep that plant photosynthesizing, it's going to pull moisture out of the stem and it dries down really, really fast, 75% when it's mowed. Two hours later, it should be at 50%. You should be raging. One, two, later, it should be at 45% and going into the bale.

So, in other words, not crimping is really important because when you crimp, then that blocks or that cuts the water flow from the stem into the leaves. It prevents the cramp from drying out.

You'll have no further synthesis happening if you crimp. So harvesting forages in this particular management, you actually increase sugar content by mowing without crimping and then harvesting the same day, you actually accumulate sugars that were not in the plant when it was mowed. Secondly, here, these cows, we struggle with high humidity. Most farmers go out and when they mow, they want to put everything on the windrow because it's a lot easier for the next step of the project. And in 30 minutes after this hay is mowed with this high humidity, that hay is going through a composting process. This windrow, the top inch and a half, is drying, but underneath it is composting. Composting requires a lot of energy. It actually pulls a lot of energy out of that windrow to go through this. Through this composting process.

You're saying that bacteria and other organisms are actually fermenting sugars in the forages and pulling sugars out of the forages. That is underneath the surface.

That is absolutely correct. Absolutely correct, yes. A lot of this I learned from Tom Kilser from Cornell University. He does a lot of research, has a lot of very good information on hay today where they use a lot of monitors to monitor exactly what is.

Happening when you describe this hay in a day process. You said you're not quite at this point yet. What is your perspective? What's the optimal time for mowing? This is a question that gets asked pretty frequently. Is it better to mow in the afternoon when you have higher sugar content, or is it better to mow in the morning?

So I used to think in the afternoon, but I'm changing my mind on that. I discovered I was wrong because we usually wanted to mow in the afternoon when the sugar content was the highest in the leaves up in the stems. And then we want to cut it off and let it lay overnight and build the next day. So what happens in this process is if this, if this hay is mowed in the afternoon, it's dry, let's say, dries down to 50%. In the nighttime, it goes up to 65% moisture. Again, anytime it goes from a dry percentage point to a higher percentage point, you're going to lose a lot of sugars, the bacteria that need sugar to thrive. And anyway, the first night that this hay is laying overnight, you lose 80% of your sugars that were there. So for example, let's say you cut a hay that was 12% sugar and you let it lay overnight and now you're down, you lose 80%. So you want to do the math, you'd be down to what, 3 or 4% sugar by the day. Exactly. By the next day. But if you know hay in the morning, and let's say it is at a six sugars in the morning, eight o' clock in the morning, and it will keep photosynthesizing during the day, and let's say you can spike it up to 12 or 14 after it is mowed. And this is possible and this is happening all the time, you can actually you gain a lot of sugar. But what is really exciting to me is when you mow here in the afternoon, all the sugars come from the root system up to the top part of the plant. And you basically bind that plant. Those roots almost have no sugars in them. If you mow in the morning, you get a lot faster regrowth because you have a lot more sugars in the roots for the next cutting regrowth. So going in the morning, we see a lot of really, really good benefit. Now I would advise though, if you want to do hay in a day, have one sunny day and then the.

Second sunny day, the second sunny day, so that you have increased plant photosynthetic activity the first day. What's the reason for that?

That's correct. And some drying time for the soil to dry out a little bit. Got it.

So we should add some context for what you're feeding in the barn. When you're talking about making hay in a day, you're talking about reducing it down to 40% moisture content. It seems to me you're talking about producing haylage or baleage, not dry hay. So what are your feeding practices in the barn? For 100% grass fed dairy, do you feed any completely dry hay? Is it mostly baleage? What does the process look like for you?

We feed all baleage. Everything is baleage. Some rounds and some square bales. But we do not feed any dry hay. Our lowest percent moisture might be the 28 to 32%, all the way up to 65 to 70%. But I like to see a diet between that 45 to 50% moisture range is where the cows seem to be performing the best. So we know we do not feed any dry hay.

So a little while ago in the conversation, you talked about your cow production numbers. And I'm just going from memory here, I think you said something like £10,500 rolling herd average and 40 pounds per cow per day versus being 30 pounds per cow per day during the drought year. Those are numbers that would make many dairymen cringe because they're maybe 40% of their target production. Why? Why such low numbers?

Okay, so I'm going to talk a little bit about the farmer wedge. You ever heard of the farmer wedge, John? I have not.

What's the farmer wedge?

Okay. The most common thing that farms are talking about is milk prices.

Right.

That's what dairy farmers talk about. So just picture this imaginary grass in your head. And let's say the grass starts at 1980. Okay. So split it in three parts. The bottom part is what it costs the farmer to produce the product.

So you're imagining this as a pyramid.

No, it's diagonal graph. Okay, Got it.

From left to right.

Yep. Exactly. On the top you have what you get paid for your product. Yeah. And in the center is the farmer. Or. Or I should say your net. Your net profit for your product. So when you look at this, back in the 1980s, it was about 30%, 33% each, actually. The farmer was probably about 40 to 45%. So the cost of the product was actually in that 25 to 30% range. Farmer was in the 40 to 45%. And then the processor, the percentage that the processor was getting from this actual product was in that 25% range. Does that make sense? So as the years progress, today, this farmer is getting wedged tighter and tighter and tighter. The cost of production is going up, and the processor wants a bigger percentage of this product as well. So the farmer's in this wedge where he can't hardly do anything because his bank and his nutrition is on the bottom side and his milk crop is on the top side. There's nothing he can do about. So he's getting pinched in this wedge. That's what I call the farmer wedge. So today they are down to about 5% remaining for the dairy farmer.

I'm not even sure, though. I'm not even sure it's that much when you consider the large number of dairy farms that have been going bankrupt over the last six or seven years.

Well, I want to be reasonable. I want to be reasonable. Right.

Well, my understanding is, from having conversations that many dairy farmers have been going out of business and they have been consuming their equity for years before they went out of business. So I think many commercial dairy farmers have actually been running out of negative. But anyway, I get your point.

So what I want is I want to figure out on my farm, okay, so I know organic value is going to pay me this much and I know what my cost of production is. Then I look at, okay, so why only 30 pounds of milk or 40 pounds of milk? Why don't we get 70 or 80 pounds of milk or 18,000 pound rolling yard average? So that is how this all ties into this farmer wedge. But in reality, if a cow gets pushed, I say you push a dairy cow to produce tremendous amounts of milk, 60 pounds of milk per day, or let's say 18 or 20,000 pounds rolling herd average, your cost of production is going to go up significantly. So how can I have a good balance where we have a decent production and very low input? So that widens out the gap for me on this graph.

So I get what you're describing in a sense, but how does having 10,500 pound rolling herd average and 40 pounds per cow per day, how does that. I asked this question earlier a little bit. I guess we're coming back to it. How does this influence your cost of production directly as compared to the mainstream? So you mentioned that your current cost of production in the drought year was $16 and it's currently projected to be around $13. How does that contrast with the mainstream?

The conventional dairies that we analyzed were between $15 and $16 for the cost of production. And these are dairies that are producing £25,000 of milk per year. So even though they are producing mass volumes of production, their input cost is significantly higher. So if they have, they have a lot smaller profit margins, they need to focus on volume and at the same time they are going to have a negative impact on longevity animals. So I want a cow that is 12, 14 years old or even older, the same that herd. Instead of a one and a half lactation per animal, we get a lot more milk per animal lifetime than a conventional dairy does at 25,000 pound rolling herd average. So if that makes any sense for.

You at all or not, replacement cost and reduction, Replacement cost is a significant. That's a significant contributing factor.

Absolutely.

When you talk about conventional dairies being at $15 to $16 per hundredweight and your costs, historically they were 13 and you're expecting them to be 13 again in the future, that's a difference of $3, a hundred weight. And that Certainly is significant. But I guess the question that is coming to my mind is how significant a contributing factor is the top line. You've been receiving an organically certified price, and now this year for the first time, you're also getting a grass fed premium. How critical is that contribution to your overall profitability?

I see a lot of conventional dairy farmers and even organic dairy farmers operating at about a 2 to $3 per se weight income margin. So for us, in 2020, we averaged a $31.30 average milk price with overload of deducts and not the premium for the grass milk. So this year we are projecting a $37 100 average. So for 2020, we had a net income of $14.88 per se weight. And I see a lot of other farmers operating about a two to three dollars per hundredweight net income. It is a very significant difference. Another thing that I really try and dig into two is instead of always working for the cow, consider getting the cow working for you. All right? That is the most enjoyable, most relaxed thing there is. And the cows really enjoy doing that. So when you think about cows hauling all the feed into the cows and hauling or out, you're doing a lot of labor, a lot of mechanical moving. But if you go into the grazing system, into the magic intensive grazing System, you graze six to eight months out of the year, you have to harvest 60 to 70% less for the cow where she would do her own harvesting and spread her own manure. That is when it really drops your cost of production.

You mentioned that you do not do rotational grazing, but that you do management intensive grazing. And that's something that's really important for you. What are the differences between those two in your mind? Why the distinction?

So a rotational grazing system, they will go out and they will start at the same paddock every year, and they will have their same cycle around the farm for evergrazing. So they will start a paddock A, and they will go through B or C, whatever you want to call it, but they will have their same pattern on every rotation. That is why I call rotational grazing. But the managed intensive grazing is where you have these different grass species, the different fields, and you monitor which field is ready to be grazed, which field is at its peak maturity. So that is the difference between the rotational or the managed grazing. The rotational is a lot easier for the mind. I mean, yeah, the cows are going to go into paddock B tomorrow because they were in paddock A today. So, yeah, it's a lot easier. But the managed intensive grazing is where you can really see tremendous results from the grazing.

One of the.