Dairy 20/20 –What’s your competitive advantage?

By Susan Harlow, editor
Northeast DairyBusiness

Competitive advantage – what do countries, regions, individual dairies have that gives them a business edge over their competitors? What can producers do to manage that competitive advantage?
That was the theme for Dairy Analysis 20/20, billed as East Meets West Multistate Business Analysis Workshop, which met in Gettysburg, Pa., in June. Now in its second year, the workshop brings together producers from around the country to analyze financial and management practices and exchange information.
The event is organized by Penn State Dairy Alliance, collaborating with Cornell’s PRO-DAIRY program, the University of Florida, New Mexico State University and AgChoice Farm Credit.
Producers from the 12 participating dairies submitted financial data ahead of time. During the meeting, all participants got a chance to analyze each other’s numbers and benchmark their own. The experience was invaluable, several of them said.
“This is where the rubber meets the road with the numbers,” said Lloyd Holterman of Rosy-Lane Holsteins in Watertown, Wis. “Here, we look at specific dairies’ numbers and ask how you got them. You can see the impact on profits.”
Industry benchmarks are helpful but not nearly as useful as seeing financial data from other dairies and being able to ask specific questions about them, he said.
New Mexico producer Doug Hubby, who milks 6,000 cows in the Clovis-Portales area, said he was enlightened by the chance to see production and financial details and talk to producers from other parts of the country.

Competitive advantage – what do you have?

The geographical spread of producers offered a good entry point for a discussion of competitive advantage. For instance, said co-coordinator Brad Hilty of Penn State Dairy Alliance, New Mexico has certain advantages – lower living and facility costs, a consistent, large herd size, a political climate welcoming to dairy. Some are less obvious – the lack of humidity means New Mexico producers don’t deal with liquid manure.
The state also has weaknesses such as high feed costs, much of it due to competing with West Texas dairies for alfalfa. Nor do producers have the opportunity to do much peer-to-per analysis – just what the Dairy 20/20 was set up for.
Pennsylvania, on the other hand, does have a dairy industry active in educating producers. It also has a better milk price and available water and forage.
Competitive advantages are often in flux. “Competitive advantage never lasts,” said Bob Barley, a Conestoga, Pa., producer. “Once it’s repeatable, it’s over. If you’re not moving forward, you’re going backward.”
The competitive advantage now may be shifting to producers who own their own land and can grow their own corn. Oil prices are another catalyst. “Fuel is one factor that has shifted competitive advantage to the Northeast as transportation costs increase,” Hilty said.
He outlined four areas that producers should work to gain competitive advantage: revenue control, cost control, asset control and managerial competence.

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