The Business of a Micro Dairy
By Steve Judge
A micro dairy is a business just like any other business: it should make money. The easiest way to make money with a micro dairy is to sell fluid milk directly to customers at the farm or at farmers markets. An owner probably won't make a living solely by operating a micro dairy, but significant profits can be generated.
Let’s do the math. Farm fresh milk currently sells for $6 to $12 per gallon; total operating costs to produce that gallon will likely be $3 to $4 per gallon; if a micro dairy sells 100 gallons of fluid milk per week the gross income will be $600 to $1200, with production costs at $300 to $400. That’s $200 to $800 profit that goes right into the bank.
A solid supplemental income can be generated operating a micro dairy, but probably not enough income to support a family. So it is critical that operating a micro dairy take up as little time as possible to leave time for other full- or part-time jobs. For this reason, it must be extremely efficient and easy to operate: milking and chore time must be kept to an absolute minimum to prevent burn out. For example, it takes me a half-hour to milk my cows* — just an hour per day. That's why I have the time to sit here and write this.
Like any other retail business, a micro dairy needs to be in a location that offers easy access to a solid customer base. A little farm at the end of a dirt road may be a nice quiet setting, but probably not the ideal location for a micro dairy. Here at Bob-White Systems, we have calculated that a micro dairy needs three customers for every gallon of milk produced, based on one-gallon consumption per customer every three days. One little Jersey cow making five gallons of milk per day will require 15 customers to buy all the milk she produces in a week, and hopefully, an average of five of them will stop at the farm each day.
We have also found that it is difficult to sell more than 100 gallons of milk per week from a micro dairy. That usually caps a herd at three to four cows, depending on how they’re managed. Needless to say, a micro dairy needs to be in a convenient location that customers can easily reach.
Today "time is money" more than it ever has been. A farmer needs to consider his or her time as money and put a per-hour dollar value on it. Every minute spent on a micro dairy deprives the owner of the opportunity to earn a second income or do other things they would like to do (known by economists as Opportunity Costs). Therefore a micro dairy must be laid out and equipped for efficiency and ease of operation.
For example, a small 50-gallon bulk tank costs less than $6000. However, if that small bulk tank eliminates the need for filling cans or jars and cooling them in chilled water, then that will save a couple of hours per day. If time is valued at $20 per hour, those two hours cost $40 per day. In terms of time alone, that little bulk tank can save nearly $15,000 per year – and that doesn't even factor in the improved quality and flavor of the milk. Not bad for a $6000 investment.
Personally, I think a pipeline milking system is an essential piece of equipment on a micro dairy that can easily generate thousands of dollars per year in saved time. Milking animals is so much faster, easier and fun with a pipeline compared to bucket milkers – just check out our "Morning Chores” video.
Cleaning milking buckets is long process even with a claw washer. With a pipeline, the cleaning process is all automated. Simply milk the cows, hook the milkers up to the CIP (clean in place) system, turn a dial, push the button and the farmer is free to do whatever they want to do. It only takes a minute or two, and the same quantity of cleaning supplies is used washing a short pipeline as washing buckets.
Because used pipelines are more common these days, the cost is becoming less of a factor. At Bob-White Systems, we have over 20 for sale in various shapes and sizes. No one should have to pay more than $5000 for a good used system. Pipelines also produce better milk, because it’s not exposed to air from the time it leaves the cows until it reaches the bulk tank.
There are many other ways to save time and effort on a micro dairy while producing premium quality milk for local customers. Placing a value on time and factoring in saved time as part of the return on equipment investment is a good place to start. Producing high-quality milk with a small pipeline and bulk tank on a micro dairy does make sense – not to mention dollars.
Like other successful businesses, a micro dairy needs to sell a quality product. The milk needs to be delicious and has a good long shelf life, so everything on a micro dairy must be kept squeaky clean – even the cows. There is an art to producing high-quality, great tasting milk. It is a subject worth studying, and we’ll be featuring more on that in an upcoming article.
*Though I only refer to cows in this piece, the same principles apply to goats, sheep, water buffalo, camels, etc., producing roughly the same amount of milk per day on a micro dairy. They are all valuable members of the micro dairy family.
Read Steve Judge's new blog 'Milking Cows with a Pipeline' next!
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