Growth Needed for Next Generation of Dairy Operators

Nebraska Dairy Operators Comfortable with Expansion

“T

Leigh, Nebraska

his farm is where my roots are. I wanted to stay here, specifically as a dairy farmer.” The farm is a major dairy operation in eastern Nebraska. The voice is Mike Malena, talking about his early decision to stay with farming. Malena tells how he grew up on a farm which is part of a 1500 acre property located 75 miles northwest of Omaha, near Leigh, Nebraska. “My dad was not a dairy farmer but I learned a lot from him. He was open to new ideas and I guess he was what you would call an ‘early adopter’ of farming techniques. He encouraged me to make my own decisions.”

After Graduation, Back to the Farm Malena describes his plans after graduation from the University of Nebraska in 1971 with a degree in economics and accounting. He had already made the decision to go into dairy farming. “When I told my Dad, he kind of raised his eyebrows and said, ‘Are you sure?’ I was, so my Dad helped me get going. I got started on this property with 40 cows, with a lot of help from Dad. We actually had our first dairy calf the day I graduated.”

From then on, growth was steady. In 1973 Malena and his father built their first free-stall barn and were soon milking 100 cows. In 1975 Malena and his wife Joy were married, and they had children Heather in 1979, Brent in 1981 and Sean

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in 1985. They bought additional adjacent properties and in 1986 put up a second barn and at that point were milking 160 head. They continued to expand, and built yet another barn in 1994 and expanded the milking herd to 350. This was when Mike began to wonder about the future.

Decision Time Approaching At this point the children were 16, 14 and 10 and had all been involved in farm work as they grew up. But Malena emphasizes, “They were too young to make a commitment to farming. We didn’t want to push them that way. It had to be their choice.” He explains that he still had a desire to grow the operation, but realized that with further growth, more hired help would be needed to meet scheduled milking three times a day and other critical farm tasks. “We were moving in that direction, but we knew there were some big steps in the future.”

Son Brent attended a community college after high school for some time, but in 2000 came to Joy and Mike and indicated he wanted to get involved in the farming operation. Daughter Heather also attended college and gained experience in accounting and banking through working at an area bank. She married Keal Held in 2002, and the couple also indicated an interest in getting involved in the farming business. Finally, son Sean also attended a community college,

but came back to get involved in the farming business in 2005.

Recognize Growth is Required “That was the situation in 2005,” says Malena. “I was not going to tell any of them that they can’t farm.” However they all realized that to support four households, major growth was needed. Malena explains that expansion would require more cows, more housing, a much bigger milking parlor, and other supporting activities. “A lot of people were counting on us to make the right decisions, and I wanted to be comfortable with the way we were going.”

The family, now doing business as Holsteins Unlimited, contacted Greg Squires from Dairy Enterprise Services of Ashland, Ohio in the winter of 2004-2005. Squires’ firm offers business, financial and organizational consulting services to U.S. dairy farms. Greg Squires has significant experience in dairy enterprise establishment and expansion, and often helps

dairy operators visualize the necessary steps for a successful expansion. He was engaged by the Malena family to make such an assessment.

Gathering Background Data Malena says, “Greg had us do our homework, too. He wanted lots of numbers. For example, he had us tabulate the prices we’ve been paid for milk a good many years into the past. And he spent time with each family member – one on one – to determine their levels of commitment, and how they visualized their future in the farm operation.”

Squires notes, “Financial planning is an important element of a dairy expansion, but there’s more to it than that. We work with farm owners to make sure they are in agreement regarding their long-term vision and business goals. We also look at the farm operation itself, both the way it runs now and the way the owners want it in the future.” The Holsteins Unlimited operation is a vertically integrated

The Malena family, now doing business as Holsteins Unlimited.

“There is less walking and better access to the udders in this configuration.”

dairy operation. The dairy rations are largely produced on the farm itself, as are their replacement heifers. This is the model that Squires examined in his analysis, and projected into the future with a larger herd.

After closely examining the potential of the farm, its financial position, and the commitment of family members, Squires created a model that indicated that expansion was indeed practical, and the farm could generate sufficient income to support family members and pay down debt. Malena explains, “Greg told us that a 900 cow dairy was practical. That gave a comfort level to me, as I was signing the loan papers and pledging assets.”

Paying Down Debt a Priority Malena notes, “Under Greg’s model, we felt we could pay off the expansion debt in seven years. That debt payoff is important to me.” Malena indicates that the milk price is a key variable. “The year before we embarked on this expansion, milk prices were the lowest in many years – around $10 a hundredweight. The year after, they were the highest we’ve seen – around $20. That really encouraged us that we could pay down the debt.” Currently the farm is selling its milk to Dean Foods in Le Mars, Iowa. It is picked up by bulk tanker daily.

An important element of the Dairy Enterprise Services offering is assistance in right-sizing housing, milking, maternity and other key facilities. Squires and the Malena family evaluated several possible expansion sizes and ultimately focused on sizing for 900 cows, making physical allowances for possible future expansion to as many as 1800. Squires calculated they would need to build a free-stall barn with four housing sections, each section with 168 stalls. Additionally, he recommended a separate “special needs” barn separate from the milking cow housing with space for maternity and veterinary care animals.

New Milking Facility Essential With this expanded herd, everyone knew that a new milking facility was essential. Until 2005, they were milking 350 cows three

times daily in a parlor with a double-eight herringbone arrangement. He explains, “We were working at capacity. It was a scramble to get the parlor cleaned up in time for the next milking. We knew we had to replace it.”

The new milking parlor would be adjacent to the new barn, and they decided on a basement milk-handling room below the milking floor. With guidance from Squires, the family settled on a BouMatic® double-24 parallel milking system. “We studied the options and decided this was the best solution for us. Particularly we have found that there’s less walking and better access to the udders in this configuration, at least in our operation.”

Holsteins Unlimited chose a BouMatic® double-24 parallel milking system.

- Mike Malena

ph: 419.282.6244 • fax: 208.379.1232 • www.DairyES.com • email: gsquires@DairyES.com

CASE-DES01-EN

Support System Also Expand The new housing also necessitated a new manure handling system. Again with sizing help from Squires, they decided on a water-flush system. They wanted to continue to use sand bedding, so the new system features gradually sloped sand separation cells, a solids separation plant, and a storage lagoon. Clarified lagoon water is recycled as flush water, and lagoon water is also used as a fertilizer with the farm’s five center-pivot irrigation systems. The irrigated land is used to raise corn and alfalfa.

Construction on the farm expansion was completed in the spring of 2006, and at move-in time

I don’t worry about it. More and more, the next generation is doing the hands-on work of running the operation.” He sees his current and future role increasingly as being an advisor.

He also appreciates the help the family received from Dairy Enterprise Services in planning the expansion. “Greg gave us more than just numbers: He showed us a process. That gave us all a lot more confidence in what we could expect. If we do another expansion, we can build on what he taught us.” No decision has yet been made on future expansion. But if and when it is, it will be based on a solid understanding of how to do it.

in April, the herd had grown to 426 head. By July it was in the mid-700s, and today the farm is near current capacity in the low 900s. Malena says, “The move-in to the new barn and milking facility was the smoothest transition I’ve ever seen.” He credits this largely to the extensive planning they had done.

Learning from Others Looking back, Malena remembers the help he had received from his father when he started farming, and is pleased to be participating in his children’s involvement in the farm. “My Dad passed away in 1992 but I always remember his help getting us started. We’re doing the same now with our children. Joy and I can leave the farm for a vacation and

Clarified lagoon water is recycled as flush water, and lagoon water is also used as a fertilizer with the farm’s five center-pivot irrigation systems.

Milk meters and pulsation systems are located in the parlor basement, allowing easy access for service and maintenance.

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