University of Wisconsin - Extension

Contact: Tom Kriegl, 608-263-5665, thomas.kriegl@ces.uwex.edu

Practices that maximize profitability when economic times are good are the same practices that help maximize profits or minimize losses when times are tough, says a University of Wisconsin-Madison/Extension farm financial analyst.

"I think this surprises people because, when times are good, one can achieve a satisfactory profit without using all of the profit-maximizing practices," Tom Kriegl of the UW Center for Dairy Profitability explained. "When times are good and profit margins are generous, people may become complacent and adopt practices that seem convenient or appealing even though the practices reduce profitability. When these practices become routine, it is easy to think of these less profitable practices as essential."

Kriegl said it's also important to understand that the components of these practices may change, depending on many factors.

"For example, feeding the least cost-balanced ration (compared with feeding an unbalanced ration and without regard to cost) is a practice that helps maximize profits or minimize losses under almost all conditions," he said. "However, the components of the least cost-balanced ration can vary radically as prices of the ingredients and the product change."

Kriegl also pointed out that even the best tools cannot maximize profits unless they are used.

"For example, feed testing, milk testing, soil testing, and record keeping and analysis are all tools that can help maximize profits," he said. "Yet, some managers pay for these tools but ignore the information these tools provide. Misusing or not using such tools will actually detract from profitability."

Kriegl said managers need to pay attention to details and make adjustments to these practices to fit their circumstances.

UW Center for Dairy Profitability: http://cdp.wisc.edu