Wednesday, October 30, 2013

The Equation

aka How to Calculate a Cow Owner's Share of Milk Income 

Last year at Midwest Dairy Expo, Glen and I shared our experiences as beginning farmers as part of a producer panel. One of the questions we were asked was how we calculated our milk check while we were working on another farm as herdsmen and housing our milk cows there. I'll explain everything below, but here's The Equation that Glen came up with:

number of cows
x  average daily milk production in pounds
x  days in month
x  milk price (per pound)
x  farm's net farm income ratio
x  cow owner's percentage of income
= cow owner's share of milk income

Before I explain how we ended up using this equation and give an example, let me share a few assumptions and requirements for this equation to work.

This equation can be used in a situation where the Cow Owner(s) own the cows, but someone else (the Farm) provides housing, feed, veterinary care, breeding expenses, labor, etc. Cow Owner(s) might be farm employees who own cows, like we did, but Cow Owners do not necessarily need to work on the Farm. Milk from the Cow Owner's cows is commingled with milk from the Farm's cows in one bulk tank. This equation is set up for a once-monthly payment from the Farm to the Cow Owner.

To use this equation, you need to know the cows' average milk production for the month. We used the production information from our monthly DHIA (Dairy Herd Improvement Association) test. We kept our cows in a separate string, which allowed us to easily determine average production.

For milk price, we used the Farm's mailbox price, which, of course, isn't available until the milk check for that month comes. (For example, we were paid in mid-January for the milk our cows produced during the month of December.)

You also need to know the Farm's net farm income ratio. The net farm income ratio, which is a measure of the Farm's financial efficiency, is the percent of the gross farm income that remains after all expenses are paid. The farm where we housed our cows was enrolled in the Minnesota Farm Business Management program, so we pulled their net farm income ratio off the executive summary of their financial analysis. We included this ratio in The Equation to make sure the Farm was compensated for feeding, housing, and otherwise providing for our cows.

The Cow Owner's percentage of income is a percentage that's mutually agreed upon between the Farm and the Cow Owner. We used 66%, which meant that we received two-thirds of the income from milk our cows produced and the farm kept the other third. This figure wouldn't necessarily need to be included in The Equation, but we added it so that our situation would be a win-win for both us and the farm we were working on. Adding our cows to the farm meant longer milking times and rearranging some fencing. In other situations, employee-owned cows might be occupying stalls that could otherwise house farm-owned cows. If the cows being housed on the Farm are owned by multiple owners, this percentage could be divided accordingly.

Here's how we ended up needing The Equation:

Back in 2006, we were milking cows on my dad's farm. We had just purchased the cows from him, but were still renting the facilities. Jane Salzl needed a herdsman for one year for the dairy farm she owned with her husband Sam. Sam had been badly injured in an accident earlier that year and was still recovering. Jane called us on July 29 and asked if we would be interested in the herdsman position. (Glen and I had done relief milking for Sam and Jane before we started farming.)

After considering Jane's question, we said yes, but with one condition – only if we could bring our cows along. As most dairy farmers and cow owners understand, we were attached to our cows. And we knew that after our year of working for Jane and Sam, we planned to find a farm in Stearns County and return to dairy farming on our own.

Jane and Sam decided that they could make room for our cows in their dry cow pasture, so we brought three-quarters of our small herd along with us. (Glen's dad and brother milked and housed the rest of our milk cows, along with our older calves.) We brought our bottle calves along to Jane and Sam's. We left our yearling heifers at my dad's.

During the four weeks between Jane's first call and the day we moved, one of the things we needed to figure out was how we would get paid for the milk our cows produced while they were at Sam and Jane's. One night during milking, Glen came up with The Equation as a solution. When we presented the idea to Jane and Sam, they agreed that The Equation would work.

Finally, here's an example of how we used The Equation:

In December of 2006, we had 32 cows milking at Sam and Jane's. On test day, they averaged 77 pounds of milk. Sam and Jane's milk price for December was $14.81/cwt. Sam and Jane's net farm income ratio was 37% (based on their financial analysis from 2005). As mentioned above, we used 66% for our share of income from our cows' milk.

So, plugging those numbers into The Equation...

32 cows  x  77 lbs.  x  31 days  x  $0.1481  x  .37  x  .66 = $2,762.51

We used this money to make our equipment and cattle loan payments while we worked for Sam and Jane.

If you have any questions, please feel free to contact us.

Monday, October 14, 2013

The salamander's great escape

What are little boys made of?
What are little boys made of?
Frogs and snails and puppy dogs' tails,
That's what little boys are made of.

This bit of the little poem about boys and girls should have included a line about salamanders. At least, that's what I've decided after observing how much Dan loves the slippery, slimy, wiggly little creepers.

Each summer, Dan waits and waits for salamander season. When is salamander season? Salamander season is that time of year in the fall when, all of sudden, there are salamanders everywhere.

When salamander season starts, we find salamanders in the gutters in the barn (not a good place for them). We find salamanders hanging out on the sidewalk to the house. We find salamanders creeping through the grass on the lawn.

black and yellow spotted salamander

And when salamanders are found, they're captured. Most of the time, the captive salamanders are kept in a pail, with a little bit of water in the bottom. We let the kids keep the salamanders overnight and then they have to let them go. Sometimes, captured salamanders end up elsewhere – like in the refrigerator.

So, it should come as no surprise that we had a salamander in a pail in our front porch a couple of weeks ago. I found the salamander on the sidewalk and gave it to Dan. He asked for a pail to keep it in, so I got him an ice cream pail from the house.

When the kids came in for dinner, the salamander came with them – right into the kitchen. I turned Dan around and told him the salamander had to stay in the entryway. So, he set the salamander's pail in the corner by the doorway.

After dinner, we all went back outside to do evening chores. When we got back to the house after chores, Dan went to get the salamander. I was just coming through the door, when I heard him exclaim, "Where's my salamander?"

"What?" I automatically asked, hoping I hadn't heard him correctly.

"My salamander is gone," Dan said.

I looked in the pail. The water was still there. But there was no salamander.

Great. There's a salamander loose in our house.

I told the kids we'd look for it after we changed out of our barn clothes.

Glen just laughed and said, "You realize you're trying to find a creature that makes its living by being a master of disguise."

While we changed, I told the kids that salamanders like dark, damp places. They decided they should search the bathroom first.

By the time I changed my clothes and had undressed Daphne, Monika was squealing that she saw the salamander.

"It's in the office," she shrieked. "I saw it's tail go under the door."

I rushed to the office. It took a couple seconds after I opened the door, but I soon spotted the salamander crawling toward the desk.

Except it didn't look like a salamander. It looked like a salamander in a dust bunny costume. Which was seriously discouraging, since I've been deep cleaning like a mad-woman since school started.

No, I didn't take a picture. I whisked the dust bunny-salamander to the sink and rinsed him off under the hard water faucet. Dan had fetched the salamander's pail, so I set him back in it.

Then I told Dan that he had to say good night to the salamander and let him go outside. He protested until I explained that if the salamander managed to escape from the pail once, he could probably do it again.

"But, how did he get out?" Dan asked.

"I have no idea," I said. "Maybe he climbed out."

"We should have put him in a milk house pail (aka a five gallon pail)," Dan said.

"Yes, we should have. No more salamanders in ice cream pails."

I should probably extend that to no more salamanders – or other critters – in the house, but I know better than to put unrealistic limits on a little boy who loves creatures, especially the slippery, slimy, wiggly ones.