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Additionally the contracts are conditional on growers taking, pro-rata to their contracted area, and all the manure from the dairy in the form of separated digestate with 50% of the value of nutrients (N, P&K) in the digestate available in the first year offset against the price Holsum pays for forage.
Holsum organise all harvesting operations through local contractors to better manage harvest logistics and the quality of work done and to further reduce costs for all parties.
The forage contracts are structured in such a way that a typical grower earns 10% more in net profit terms supplying Holsum Dairies than he otherwise would grow Corn & Soybeans for the general market.
This arrangement works extremely well in practice, with 40 growers contracted in 2008 and demand for the digestate so high that Kenn was in negotiation with suppliers to increase the value of the offset to 75% of available nutrient value for 2009, to reflect its increasing value as a fertiliser Where there’s muck....
All manure is processed through an anaerobic digester to produce Biogas which in turn is burned in an onsite Combined Heat and Power (CHP) plant to generate electricity and hot water.
All electricity generated is sold to the local grid, in order to obtain maximum carbon credits, and any requirement for the dairy is purchased back at commercial rates. The recovered heat is used to maintain digester vessel temperature, provide hot water for the dairy and heat the floors of the free-stall buildings in winter via an underground heat matrix. This prevents slurry freezing to the concrete in the very cold winter temperatures common in this part of North East Wisconsin.
Using digested manure solids (DMS) as free-stall bedding requires careful management, but does avoid many of the costs and logistical challenges of using sand, particularly when anaerobic digestion is an integral part of the manure handling process, without compromising cow comfort. Work at Cornell University has shown that somatic cell counts and mastitis incidence in well managed systems using DMS are statistically no different to sand based systems and in some cases improvements in environmental hygiene were reported This would be supported by the experience at Holsum dairies, but Kenn pointed out that regular stall grooming and topping up with fresh material every other day was essential to maintain a healthy environment. This is not a problem given the volume of solids generated; in fact for Kenn, it also provides a significant source of revenue for the business, as he is able to sell 30 truckloads of separated solids a week, at $15 a tonne, to other dairy farmers to use as bedding. This income stream effectively covers the salary cost of the two unit managers employed to look after the day to day running of the business.
The separated liquid fraction is stored in a sequence of settling lagoons, and used as fertiliser for forage crops. The combination of solid separation and post separation settling, essentially removes the majority of the phosphorous bearing particles from the manure stream.
This is a major benefit as Phosphorous rather than Nitrogen is the determining factor that limits the quantity of manure that can be applied to land in many states in the US. Low P levels in the resulting liquid fraction allows larger quantities of N&K to be applied to crops as digestate, reducing fertiliser costs for the growers and minimising the amount of land required to dispose of the dairies liquid waste stream.
Exporting manure solids, regular dredging of the settlement lagoons and the subsequent spreading of high-P solids to land with a requirement for Phosphorous allows Holsum dairies to better exploit the nutrient value of their manure without compromising environmental legislation.
Kenn sets a very high standard in all areas of his business and environmental management is a key performance area for him, given the level of scrutiny large dairies are under in this respect. Holsum Dairies have set new standards for environmental compliance within the dairy industry. In 2006 they were the first dairy farming business in Wisconsin to achieve ISO 14001 standard for environmental management and are active participants in the Green Tier Environmental stewardship programme run by the Wisconsin Department of Natural Resources.
Both of these components can be replaced while the parlour is working. Other key system components such as the vacuum systems and refrigeration plant are modular and have built in surplus capacity to allow maintenance to be carried out without interruption to milking operations.
As is increasingly common on large US dairies there is no bulk milk tank on the unit. Milk flows from the parlour through a filter and over a plate cooler where it is chilled down to 38 degrees farenheit (3 degrees C) and directly into a ‘semi-trailer’ tanker parked in one of 4 docking points adjacent to the dairy.
Tankers are filled at a rate of one every 6 hours, so hauliers drop empty tankers on arrival, hook up to a full one and go minimising turnaround time. Tanker load status is visible to the milking team who can monitor and switch between trailers remotely from the parlour as necessary.
Milk production and milking time is recorded in the parlour on an individual animal and group level to track performance on a shift by shift and group basis. Each group of 350 cows is moved from their pen to the parlour holding yard as the previous group is being milked allowing a seamless flow of all 3,350 milking animals throughout each shift.
Target ‘turn time’, measured as the time between the first cow in a group leaving the freestall pen and the last one returning to the pen after milking, is 45 minutes. This means that despite being milked 3 times a day, the maximum amount of time that any one cow is away from its food water and lying area is limited to 2½ hrs in any 24 hour period.
Cow management & cow comfort
Heifers are kept separate from mature cows for their first lactation to avoid bullying, thus allowing them to reach mature size without compromising milk yield. Stocking rate was slightly over 100% in terms of cows per free-stall (with the exception of fresh cows’ pens which was never more than 80%) but always below 100% in terms of cows to available feed spaces, ensuring all cows were able to feed at the same time. Dry matter intake along with cow comfort was a key driver of performance and anything that compromised that was designed out of the system All free-stall pens are fitted with self locking yokes on the feed fence which were set to catch the cows as they return from milking and hold them for up to one hour. This allowed each group to be inspected, and routine procedures such as AI & Pregnancy diagnosis to be carried out while the cows were eating in a familiar environment. It also allows sufficient time for the cow’s teat canals to close fully before the lying down in their fee-stalls, significantly reducing the rate of pathogen ingress and consequently mastitis incidence.
Typically cows would be locked up for an hour following the morning milking to allow time for routine inspection and no more than half an hour for the other two, for teat canal closure, optimising the amount of time spent away from the lying area. Research has shown that the more time the cows spends lying down, the greater the rate of blood flow to the udder increasing milk production and the lower the incidence of lameness.
Standing and ‘high-traffic’ areas within the pens, transfer alleys and collecting yard have rubber mats on the floors to improve comfort and traction for the cows and to minimise the amount of time spent standing on concrete, a key cause of lameness in housed dairy cows.
Another interesting observation was that the width of the rubber walkways in the return lanes was restricted to little more than that of a single cow. This improved cow flow around the unit considerably, as cows tended to push the cow in front along rather than walk around her on a concrete surface.
Diet & Feeding
The cows are fed a Total Mixed Ration (TMR) ration based on Corn (maize) silage, Alfalfa (Lucerne) haylage and by-product feeds (Brewers & Distillers grains, Corn bran, Cotton seed, Whey protein permeate, & Blood meal); the majority of which are sourced locally resulting in a very low cost ration requiring no prime grains (Corn or Soya).
Due to this availability of abundant good quality by-product feeds, Kenn is able to keep his feed cost per cwt of milk as low as anyone in the state if not the entire US. Each ration is costed down to the last cent allowing him to establish a feed efficiency curve for individual groups of cows according to age and lactation stage.
All animals are fed by one man using a single 45cubic metre, tractor drawn mixer wagon, working approximately 10-11 hours a day, every day of the year. Loading instructions are sent direct from the office computer to a display on the mixer wagon in real time, telling the operator exactly how much of each ration component is required for each mix. The system monitors exactly what is fed and how long each load takes to load, mix and feed enabling feeding efficiency and feed inventory to be tracked extremely accurately.
When I visited Holsum in October 2008, the tractor that drove the feeder wagon had recently had an engine overhaul, having clocked 21,500 engine hours in a little over 5 years!
Blood meal & Posilac (rBST) Kenn was quite relaxed about using blood meal as a protein source for the cows, something not permitted in the EU since the BSE crisis of the 1990s. As a veterinarian he was satisfied with the regularly audited risk management processes in place and felt the economic and environmental benefits far outweighed any perceived risk to health, either animal or human. There have been no reported cases of BSE associated with the practice of feeding blood meal in the US and he did not feel that there was any ethical or physiological issue either.
The amino acid profile in blood meal was such that he is able to maintain a herd average yield of 11,500 litres of milk sold per cow per year, feeding a ration with a significantly lower crude protein content than he could use soya or other vegetable protein sources. This in turn reduces the amount of nitrogen excreted by the animal, in turn reducing the overall environmental load created by his dairying operation. And given that blood meal worked out at 60% of the cost of soya on % protein adjusted basis, then is his view it was a ‘no brainer’.
Similarly, he routinely uses Posilac (rBST) to maintain milk yields in mid to late lactation cows. With no evidence of any risk to human health but a quantifiable improvement in Feed conversion efficiency, the benefits in terms of reduced feed cost and consequently carbon footprint per litre of milk produced, (something he felt would probably have a commercial value in itself in the future), and using rBST was both an economically and environmentally simple choice.
Financial performance and business growth.
In 2006 Kenn built a second unit, Holsum Elm Dairy (below), three miles away from the original site. This unit was designed for 4,200 cows milked through an 80 point rotary and whilst it incorporated a number of minor design improvements were essentially a larger version of the original design. Milking began in November 2006 and by June 2007 the unit was operating at full capacity.
Holsum Elm Dairy – October 2008
Meticulous attention to detail at every level has allowed Kenn to achieve and maintain remarkably low operating costs through a period of rapid business expansion. In the 12 months to October 2008 his average cost of production across both units was $12.40 per cwt, the equivalent of approximately 16.5 ppl at the prevailing exchange rate. Over the same period his average receipts were $21 per cwt.
To put that in perspective, in the 21 months between commencement of milking at the second dairy and my visit in early October 2008, the two dairies had, between them, generated sufficient net profit to pay off the $15 million build cost of the Elm dairy. For a new dairy to achieve that level of performance from a standing start is a remarkable feat and a testament to Kenn Buelow’s excellent management.
Refining the model
The Future By May 2009, the dairy market had weakened significantly. The market price of milk had crashed from $19/cwt in October to around $11 but a combination of effective hedging of his milk price and increasing gas/electricity output from the AD/CHP plant through the introduction of food and abattoir waste, for which he was charging a gate fee, meant that while the third dairy had been put on hold, Kenn was continuing to operate at what he described as ‘above breakeven’ while the majority of dairies across the US were losing over $5 a cwt Kenn is constantly looking to the future. When it is built, he will have a significantly larger equity stake in both the property and operational businesses of the proposed third dairy, but is actively planning his own obsolescence, training two young managers to whom he is increasingly delegating more of the day to day management responsibility for the business as he looks for new challenges both at home and abroad, citing China as ‘offering some interesting opportunities’ He has achieved the difficult task of building a world class large-scale dairy business in a traditional dairying area where such businesses are often viewed with antipathy if not outright contempt. He has done so by forging genuine partnerships with local businesses and created mutually reinforcing relationships that have won him a great deal of support from the local community.
MilkSource Group, Kaukauna, Wisconsin “We are committed to being stewards of the land, our employees, our cows, our community, our neighbours and the future of dairy farming in America’s Dairy State,” - Jim Ostrom, CEO Milksource Group.
Much of Milksource’s original borrowing was secured via the US Farm Credit System (www.farmcreditnetwork.com) a nationwide network of financial cooperatives, owned and operated by the farmers, ranchers and rural customers it serves.