Listen environmentalist and animal right activities. Factory farming is more environmental friendly for milk cows. It uses less water, releases less green house gas and produces more milk.
Jan 5th 2010, Economist
Milk them for all they’re worth
FARMERS are generally expected to be milkers and hay-stackers, not managers. The nursery rhyme about the farmer in the dell does not include a verse about the farmer calculating the net present value of any one of his cows. Yet such financial quantifications are as useful for the farm as for any other independent business; and the work of David Galligan makes those calculations much easier.
Dr Galligan originally went to veterinary school to treat dogs, but found cows simply too fascinating. After spending several years helping Amish farmers, he got an MBA from the University of Pennsylvania, and now teaches veterinary economics there, helping dairy farmers measure and increase the value of their myriad real-option investments. A cow, he explains, can be expressed as an annuity based on the expected longevity of the asset.
Dr Galligan has produced a series of online tools for dairy farmers to calculate the net present value of an individual cow, the expected profitability of a farm given certain prices for food and milk, or even the efficiency of adding, or reducing, a particular element to the cow’s feed. Several of the tools come with explanatory YouTube videos. Eventually the farmers should be able to calculate a cow’s net present value on their iPhones. As milk becomes cheaper and competition fiercer, such tools could be especially helpful to smaller-scale producers lacking in-house accountants.
Why has milk become cheaper? That, too, can be explained by one of Dr Galligan’s graphic tools tracing a half-century of dairy production. In 1950, 22m cows were responsible for milk production in the United States. By 2006 the number had dropped to 9m. Yet the volume of milk produced kept rising, from 117 billion pounds to 176 billion pounds. In part this was helped by consolidating farm operations; but the main accomplishment was to squeeze, as it were, more milk out of each cow.
The innovations that allowed for greater milk production—the “parlours” that can milk 100 cows an hour and the crowding of cows onto ever-larger farms (where they do not, as a rule, get to go out to pasture)—are the very aspects of modern dairy production that make environmentalists and animal-rights activists ill.
But Dr Galligan sees things a bit differently. More milk per cow allows for greater milk production without the dairy industry’s environmental footprint rising in lockstep. In 1950, 530 billion gallons of water were needed for milk production—double what is used today. Even greenhouse-gas emissions are smaller than they otherwise might be. While methane emissions per cow have risen, as a result of dietary changes, the amount of methane produced per pound of milk has fallen considerably. A farm with cows grazing peacefully on rolling grass-covered hills would need more land for less milk. Moreover, he notes, dairy consumption is expected to rise more sharply in developing countries, where people can often ill afford an increase in food costs.
And the annuities—sorry, the cows—themselves? The veterinarian points to recent data collected by the National Animal Health Monitoring System suggesting that somatic cell counts in cows have been shrinking (a high count is a potential sign of mastitis)—although other data suggest that incidences of mastitis and lameness have increased since 1996. Still, Dr Galligan says, “Cows have a built-in health-care system. It’s very difficult to get high yields out a cow if you don’t take care of her.” And perhaps it is easier to take care of her if you know exactly what it will cost you if you do not.