URBANA, Ill. — June Dairy Month marks the midpoint of 2009, a year that clearly will not be “kind” to dairy producers, said a University of Illinois Extension dairy specialist.
“Dairy managers are recording huge financial losses,” said Mike Hutjens. “Milk prices dropped nearly 40 percent starting last January, reaching less than $12 per hundred pounds. The price was $18 per hundredweight in December 2008.
“To cover all the costs of production — feed, non-feed, and labor — dairy farmers need $16 to $18 per hundred pounds of milk produced, depending on herd size, debt load, labor efficiency, and feed costs.”
This year, from February to June, the average dairy farm with 105 cows is losing over $10,000 each month, he noted. But it could be worse.
Large dairy farms in the southwestern United States are losing over $300,000 a month.
“The reasons for these huge losses include a decline in foreign exports — 11 percent of U.S. dairy products were exported in 2008, a stronger U.S. dollar which reduces exports while raising costs, a decline in the U.S. and world economies, and less dairy products being consumed as a result of reduced incomes and lost jobs,” he explained.
Dairy farmers have few options when it comes to reducing daily losses on the farm.
“Feed costs represent 60 percent of the cost to produce milk,” said Hutjens. “With a new forage crop year started, any and all ways to increase forage quality and quantity in dairy rations will be a plus.
“Byproducts, such as corn gluten feed, wet brewers grain, and distillers grain are ‘good’ buys replacing soybean meal and corn as nutrient sources in rations, while reducing feed costs.”
Feeding guidelines include less than $6.50 per 100 pounds of milk produced, targeting feed costs at below nine cents per pound of dry matter, and raising feed efficiency over 1.6 pounds of milk per pound of dry matter consumed.
“Producers should carefully review feed additives included in the dairy ration,” he said. “Silage inoculants, monensin, buffers, yeast products, and organic trace minerals are excellent investments.
“Do not pull nutrients from the ration as this will reduce milk yield, decrease health and immunity, and lower fertility.”
Hutjens outlined other options dairy farmers have to reduce costs. These include:
— The Milk Income Loss Contract (MILC), a government-sponsored program that provides some relief for smaller dairy farms (those with less than 150 cows).
If the dairy manager has enrolled in the program, he or she received $1.51 per 100 pounds of milk in February, $2.04 in March, and $1.49 in April.
— Futures milk prices, based on the Chicago Mercantile Exchange, are increasing in the summer with $15 per hundred pounds listed for October, November, and December. This is better but still below breakeven milk prices.
— Cooperative Working Together (CWT) has launched another herd buyout program aimed at reducing cow numbers by paying some dairy farms to leave the dairy industry. This project is funded by dairy farmers using check-off funds in an attempt to reduce cow numbers and milk supply.
There is an excess of 300,000 dairy cows in the United States leading to surplus milk based on today’s market.
In some stores, the price of milk has dropped 50 cents a gallon, while other dairy products remain constant. As consumers respond with more milk and dairy purchases due to lower prices, this helps to reduce surplus levels.
“Other wild-card factors will be growing conditions in the summer, which will dictate forage amounts and quality, the price of corn and soybean meal in the fall related to ethanol production and yields, heat stress on dairy cattle which could reduce milk yield, world demand for dairy products and feed grains, and water restrictions in the Western states — nearly 50 percent of U.S. milk is produced in this region,” said Hutjens.
“Minimize equity losses, review feeding programs using economical feed ingredients, produce high-quality milk leading to quality premiums, and maintain high milk yields,” said Hutjens.
“Do not make ‘wrong’ decisions this summer such as postponing cow pregnancies or slowing heifer growth. These could result in long-term negative impacts in 2010.
“Dairy farming is a business. Make smart business decisions and hang on as the dairy industry’s future looks favorable.”