Revenue—More Than Milk for the Modern Dairy

ow to diversify with alternative profit lines

As dairy margins tighten, many producers may consider diversifying their business operations to
generate alternative profit lines. The profitability of these ventures may hinge on choosing between
competing and complementing diversified businesses.

“While milk still accounts for the majority of revenue on dairies, we are seeing more and more of the
revenue coming from non-milk sources,” says Kevin Dhuyvetter, agricultural economist and dairy
technical consultant for Elanco TM .

Both large and small dairies can take advantage of alternative revenue streams. Large dairies are
more likely to install things like methane digesters on their operations. Diversifying with alternative
profit lines also includes on-farm processing, agritourism, beef-on-dairy, ice cream- and cheese-related
businesses, and more.

These are all non-milk revenue sources. In some cases, this may boost the businesses’ bottom lines
and add economic stability to dairy operations. However, non-milk income is often operated as a
separate enterprise that is not factored into the dairy’s milk income, making the secondary business’s
economic contribution to the dairy unknown.

Regardless of diversification, Dhuyvetter challenges dairy producers to consider whether alternative
revenue streams complement or compete with their milk business.

For example, while an ice cream business may seem like a natural complement to a dairy’s milk
production business, it may compete for its time and management resources.

When considering diversification, you should ask yourself, ‘How does this affect my core business? Does
this alternative revenue stream compete with making milk or not?’

A New Income Option

Complementary income streams may include beef-on-dairy calves, sustainability projects and carbon
markets.

“Beef-on-dairy is just beef, which dairies have always produced. It’s just that it is a higher valued beef
than what was historically produced,” Dhuyvetter says.
He notes three questions producers should ask when considering whether to diversify into beef-on-
dairy.

Selling Calves

“Should I be breeding cows to beef? For most producers, the answer is yes, but the next two questions
are the ones you need to think about,” he says. “What percent of my cows should I breed to beef? What
do I do with the beef-cross calves produced?”

Calculating the percentage of cows that should be bred for beef requires first determining the number
of heifers needed. “This is an income opportunity that can complement your current
business. However, if we fail to produce enough replacements, it can also compete with your core
business of producing milk,” he says.

The next question is, are you a dairy producer who produces beef and retains ownership of your calves,
or should you sell your beef-on-dairy calves at birth?

The beef market can be tough and selling into the calf market may prove more profitable, especially
when feedlot capacity is high. There are situations, though, when raising those calves may prove equally
profitable.

“A beef-on-dairy calf is an extremely valuable animal with a low carbon footprint because most of the
carbon footprint of producing that animal goes to the milk,” Dhuyvetter says. “The native beef calf
doesn’t get that luxury. We also know how old it is and everywhere it’s ever been. That ability to verify
the animals’ age and source can be valuable.”

The decision to retain ownership of a beef-on-dairy calf should depend on whether selling it as a calf or
retaining ownership provides the higher economic return. “But, if retained ownership is the route you
go, you still need to make sure this is not competing with resources of your primary business,”
Dhuyvetter adds.

Manage Carbon Emissions

Other viable income streams for dairies include sustainability interventions and stewardship resources,
such as methane digesters, feed additives, and solar panels.

There’s economic potential in monetizing reduced emissions, measuring and reporting greenhouse gas
emissions, and manure and nutrient management. However, some options, including digester
installation, aren’t available to everyone.

“These opportunities don’t exist for everybody. Unfortunately, that’s just the reality, right? If I’m milking
500 cows, not many people are knocking on my door saying I want to put a digester on your farm. A
large capital investment is associated with digesters and modified manure systems,” Dhuyvetter says.
lass=”yoast-text-mark” />>The next question you should ask yourself before you invest in a newer technology and later need to
change direction is, “Is it economically reversible, or will you be stuck with a large sunk cost?”
Another revenue stream option is the inset carbon market.

Elanco offers dairy producers an avenue to monetize carbon emissions reductions through an inset
carbon marketplace using Bovaer® and Rumensin®.

Rumensin has been approved as a feed additive for increased milk production efficiency (production of
marketable solids-corrected milk per unit of feed intake). In addition, the opportunity exists in some
markets to monetize emission reductions.

“With Bovaer, we’re talking around $20 annually per lactation from emissions reduction,” Dhuyvetter
adds. “In-feed solutions that can generate an additional revenue stream via the carbon market are
attractive because they tend to complement, as opposed to compete, with your core business. They are
also easily implementable into existing production practices.”
Revenue has always been about more than just milk for dairy producers.

Sell off Farm, or Utilize?

“One hundred years ago, you had a bull calf, and you probably didn’t sell it. You probably fed it to your
family, which is diversification by a different path. And we went through some tough years in the late
80s and into the 90s, and we always talked about having alternative revenue resources to survive in
farming. Carbon monetization is another step on that path,” Dhuyvetter says.

When considering enhanced revenue streams, consider whether they complement or compete with
your current business. Is it reversible if things change? Is it dairy-dependent? Lastly, understand the
numbers to properly assign costs and revenues so you know what is driving the bottom line.

The label contains complete use information, including cautions and warnings. Always read, understand and follow the
label and use directions.

BOVAER

Caution:
Do not feed undiluted. For use in feed for lactating dairy cows only.
>Directions for Use: Thoroughly mix Bovaer 10 into a total mixed ration at 540-720 g/ton of complete feed (100% dry matter basis)
to provide 27.2-36.3 mg 3-nitrooxypropanol per pound (60-80 mg per kilogram) of dry matter intake. Feed continuously to lactating
dairy cows.

RUMENSIN

Caution:
Consumption by unapproved species or feeding undiluted may be toxic or fatal. Do not feed to veal calves.
>Dairy Cows: For increased milk production efficiency (production of marketable solids-corrected milk per unit of feed intake):
Feeding Directions: Total Mixed Rations (“complete feed”): Feed continuously to dry and lactating dairy cows a total mixed ration<br />(“complete feed”) containing 11 to 22 g/ton monensin on a 100% DM basis.

Component Feeding Systems (including top dress): Feed continuously to dry and lactating cows a Type C medicated feed
containing 11 to 400 g/ton monensin. The Type C medicated feed must be fed in a minimum of 1.0 lb. of feed/cow/day to provide
185 to 660 mg/hd/day monensin to lactating cows or 115 to 410 mg/hd/day monensin to dry cows. This provides cows with similar
amounts of monensin they would receive by consuming total mixed rations containing 11 to 22 g/ton monensin on a 100% DM
basis.

Bovaer is a registered trademark of dsm-firmenich. Rumensin, UpLook, Elanco and the diagonal bar logo are trademarks
of Elanco or its affiliates. ©2025 Elanco or its affiliates. PM-US-25-0836