Those of us who have been in the dairy business for a while have experienced a lot of ups and downs when it comes to milk price and profitability.
However, since the early ’90s when the support price was set at $9.90 per hundredweight, we have seen a lot more milk price volatility with prices higher and lower than in the past.
It looks as though we are in one of those low cycles and this one may be with us longer than we would like, causing dairy producers to make some difficult decisions.
Some may decide to exit the business, some will stick it out and some will continue as planned, which may include expansion.
Workbook time. For those who are staying with it, now would be a good time to pull your Dairy Excel Workbook off the shelf. You will note that in the first section we talk about the five functions of management. They are planning, organizing, controlling, directing and staffing the farm business.
All of these functions of management are important, but I would like to talk about two of them: planning and controlling.
The planning function is the on-going process of developing the farm business mission, objectives, goals and detailed tactics to clearly focus activities toward the most productive and rewarding ends.
Planning also involves the process of problem solving which includes decision-making.
Controlling is measuring and reporting actual performance at prescribed intervals, comparing that performance to set standards and taking appropriate corrective actions when events are not conforming to plans.
It comes to you. Well, with the present economic situation of low milk prices it is time to review the nutritional plan of your operation.
The USDA reported the milk-to-feed ratio for August to be 2.38:1 and below 3:1 it is considered to be a problem.
So is your feeding program meeting the goals of your operation? Do you need to change your goals or should you modify your feeding program because your goals are not attainable?
This brings into action the controlling function. Look at your production levels. Is the production performance meeting the standards you have set?
If not, start asking the question why and make corrective action. I’m not suggesting that you hammer on your nutritionist to lower feed costs and sacrifice production. But you need to determine what might be keeping you from your goal.
Is it somatic cell? Is it feed (forage) quality? Is it cow comfort and environment?
One of the most important controlling functions is that of feed cost. As you all know, on most dairy farms feed costs per hundred pounds of milk can be 40 percent to 60 percent of the cost of producing milk.
This being the largest cost item, it is the first place one looks to make reductions.
However, even with milk prices at $11-$12, feeding that high-producing cow for top production will still pay. Here are some examples of income over feed costs you can expect when cows are fed balanced rations at various levels of production:
Starting with a 1,350-pound Holstein cow, it will cost you approximately $1.50 per day just to keep her alive.
Production — Feed — Cost/Day
70 pounds — $3.52 — $4.53
85 pounds — $4.13 — $5.62
105 pounds — $4.70 — $7.38
The table shows what the feed costs per day will be at using different levels of milk production and the expected income over feed costs using milk priced at $11.50 per hundredweight.
Explanation. All diets in the above rations contained the same ingredients at the same prices. We balanced the rations by using the Ohio Dairy Ration Evaluation Program.
The following feedstuffs were used: early cut alfalfa hay and silage, corn silage, shelled corn, 48 percent soybean meal, soy hulls, wet brewers grains, whole cotton seeds, fat, vitamin and minerals.
Even with corn and soybean meal prices starting to rise, it will take much higher prices to make feeding for maximum production to not be economical.
That’s not saying there are not some ingredients that you are feeding that could be eliminated.
That is where your controlling function determines that you are not getting the results expected.
Milk production. Lastly, peak milk production will determine the amount of milk a cow will produce in that lactation. It can mean 500-1,000 pounds or more of milk by feeding to obtain maximum peak milk.
Don’t leave that income behind to save a few cents per day in feed costs.
Now might also be the time to review the other three functions of management and perhaps review the mission statement of your farm.
(The author is a dairy agent for OSU Extension in Wayne County. Questions or comments can be sent in care of Farm and Dairy, P.O. Box 38, Salem, OH 44460.)