The Upper Limit of Cost for Entrusting External Contractors with cultivation and ensiling at a TMR Center

A Case study of the Hokkaido TMR Center

Abstract

In Hokkaido prefecture, the TMR Center has increased the area where most farmers manage dairy farming. TMR is an abbreviated for“Total Mixed Ration”, and is one of feed to give milk cow. This feed is made to mix grass silage, corn silage, concentrated feed, maize, oatmeal to make from soybean and etc. in accordance with nutrition which milk cow requires. TMR Center is an organization that produces TMR and delivers it to customers. Most TMR Centers in Hokkaido are composed of several dairy farms (in this manuscript, they are referred to as“composing farms”) and are engaged in cultivation and ensilage.

At most TMR Centers, composing farms labor conducts cultivation and ensilage. However, since 2006, an increasing number of Centers have begun entrusting these activities to external contractors. The case that we have analyzed is one where the TMR Center has switched cultivation and ensilage from composing farmers to an external operator. So we use this case to clarify the reasons for making the change away from using composing farmers’ labor, which is linked to rising costs to produce TMR, and calculate the upper cost limit associated with changing to an external contractor.

The results are as follows. First, it is difficult for composing farmer labor to cultivate and ensile forage crops these days, because composing farmers’ labor is weakening due to aging and related factors. Second, if a TMR Center entrusts an external contractor with cultivation and ensilage, the cost to produce TMR rises. The cost of trust accounts for more than 20% of total the cost of the TMR product. Third, entrusting external contractor with cultivation and ensilage has caused product costs to rise to TMR and a corresponding lowering of revenues to composing farms. Therefore, a TMR center needs to establish an upper cost limit for about entrusting external contractors in order to manage the operation smoothly. The higher the production of milk per cow, the higher the upper cost is, so management of a TMR center can become easier.

It is effective to conquer labor restrictions when TMR centers entrust external contractor with cultivation and ensilage. However, this has caused rising costs for producing TMR and lower revenue for composing farms. If composing farms will lack labor in the near future, they will need to entrust more cultivation and ensilage. Under this condition, it is important for a TMR center and composing dairy farms to calculate and establish the upper cost limit for entrusting these operations, in order to establish a target amount of milk per cow for the smooth management of the TMR center and composing dairy farms.