IDENTIFYING EFFICIENT DAIRY HEIFER OPERATIONS IN PENNSYLVANIA USING DATA ENVELOPMENT ANALYSIS

The profitability and sustainability of dairy farming depends vitally on efficient management practices that result in maximizing milk production at a minimum monetary and environmental cost. While practices of managing lactating dairy cattle occupy the greatest share of time, effort, and costs associated with dairy farming, the total costs of raising dairy heifers are the second largest contributor to the annual operating expenses of dairy farms in Pennsylvania. Feed costs represent over 60% of these costs. This large contribution toward operating expenses would indicate that an opportunity exists to reduce whole farm expenses by reducing the expenditures on raising dairy heifers through improving management practices. There is limited information available to dairy producers and consultants on the factors that create a farming operation that raises profitable dairy heifers. However acquiring healthy replacement heifers that calve between 22 and 24 mo of age represents a major expense to dairy operations. Due to the nature of replacement heifer management, a dairy operation must invest feed, labor, and capital for a period of 22 to 24 mo without receiving any realized benefits. Consequently, minimizing or optimizing heifer rearing investments while maintaining the productive integrity of the replacement heifers should be a primary objective of replacement heifer management. Some dairy operations are utilizing specialized services to compliment weaknesses or limitations in management, labor, or capital resources to improve productivity and profitability. Therefore studying contract heifer growers is an important comparison to be made with this study as they may be viable alternatives for dairy farms to use as a source of replacement heifers. Dairy farmers must combine multiple inputs such as facilities, labor, feed, equipment, and management to produce the output of a dairy heifer that may be various ages or size relative to mature herd body size. Farmers are challenged to provide the most efficient combination of inputs to produce the most productive potential output. In this case this output is a well grown heifer that has the production potential to be a highly productive milking cow. A method that is often used for farmers to determine the best practices is to use benchmarks such as age at calving, daily costs of feed, and size of animal. Since these types of measures only partially measure efficiency and when one attempts to address one benchmark alone, it affects others directly or indirectly. Since benchmarks often do not focus on optimization, use of more holistic efficiency measures such as data envelopment analysis have become popular to measure whole farm system efficiency. The DEA technique will provide important information for inefficient farms to become more efficient. The approach also will provide information on benchmarks so that inefficient farms can determine areas of their farm that require different or better inputs. This study will provide goals for inefficient farms to aim for or compare with in an attempt to become more efficient and profitable.