 "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 -- Illinois
dairy farmers need $16 to $18 per hundred pounds of milk
produced, depending on herd size, debt load, labor efficiency
and feed costs."
From February to June this year, the average Illinois 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.
Illinois 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."
Illinois feeding guidelines include less than $6.50 per 100
pounds of milk produced, targeting feed costs at below 9 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 Illinois dairy farmers have to
reduce costs. These include:
-
The Milk
Income Loss Contract, 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 break-even milk prices.
[to top of second column] |
-
Cooperative
Working Together 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
checkoff 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.
Looking at the Illinois dairy industry in 2008 in comparison with
2007 causes concern, he added.
"The average Illinois dairy cow produced 18,569 pounds of milk
annually in 2008, down 0.2 percent, while the U.S. average went up 1
percent to 20,936 pounds per cow," he explained. "Illinois has 984
dairy farms, down 5.3 percent, compared to a national total of
57,127 which declined only 3.4 percent.
"Illinois ranks 20th in total milk yield, 21st in cow numbers and
25th in milk yield per cow. Illinois dairy farmers produce less than
30 percent of the milk and dairy products consumed by Illinoisans.
The state's dairy industry continues to lose jobs and market share
while having an abundance of feed and a huge consumer market base."
To survive in the future, Illinois dairy producers need to
aggressively pursue some basic goals, he said.
"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."
[Text from file received from
the University of Illinois
College of Agricultural, Consumer and Environmental Sciences]
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