Just before Christmas, one of my clients informed me that he had just received his first milk check for December with a pay price of $8.57 per hundredweight, the lowest he had ever received in his 20 years of dairy farming. Although the final price received by this client for December's milk was more than $11 per hundredweight - after all order adjustments, pooling and premiums were calculated by his co op - that starkly inadequate check for half of one month's milk represented an impossible situation.
The question that formed in my mind was, "How does a low price impact the health of a dairy herd?"
Gary Frank, director of the University of Wisconsin's Center for Dairy Profitability, has tracked cost per hundredweight on Wisconsin dairy farms. In 1999, the average value for all operating cost plus depreciation and interest was $11.79 per hundredweight - very close to the pay price that many of my clients have been receiving for the last year - and far above the $8.57 per hundredweight received in the first half of December.
However, this $11.79 does not include any pay for family living expenses or management labor.
According to the data, the average veterinary and medicine cost in 1999 was 38 cents per hundredweight, or, on average, $97 per cow (see the chart below). That allowed some additional preventative and therapeutic expense above my estimate of $56 per cow (or 27 cents per hundredweight for a farm producing 22,000 pounds of milk per cow per year) for a basic veterinary-care program that includes vaccinations, a pharmaceutical breeding program and a very low incidence of treated clinical disease.
In the 1999 Wisconsin data, the average milk price was $14.37 per hundredweight, which generated significant returns above the $11.79 operating cost. But today, many producers in the Upper Midwest are receiving just enough to meet their operating cost. In this situation, can an adequate health program be maintained? And, can health-related expenses of 38 cents per hundredweight continue if the cost of utilities increase by 75 percent and fertilizer prices double, as predicted for 2001?
I fear that many dairies will be unable to spare the dollars to effectively treat a major disease outbreak or health challenge, if one should occur.
Take a closer look
Low prices require producers and their veterinarians to examine the operation's veterinary and medical expenses. Look for areas where money could be saved. In many cases, taking a more preventive, proactive approach can help. For example:
- The amount of money spent on pharmaceutical protocols may be reduced with better visual heat detection. Could time devoted to heat detection and training employees on the visual signs of heat be more cost-effective?
- Improvement in the transition-cow program could reduce the amount of money spent on antibiotics for sick fresh cows.
However, not all health areas should be cut back, including vaccination programs and dollars spent on milking hygiene and udder health, as cutbacks here could potentially cost significant dollars in disease or premium losses.
With the costly testing and eradication of important diseases, such as Johne's, looming on the horizon, the dairy industry should work together to find solutions to the price issues that plague it continually. No matter what position within the industry we fill, we all have a vested interest in a better price. Without it, animal health will almost certainly suffer, which none of us can afford.
Brian Gerloff is a veterinarian and operates Seneca Bovine Service in Marengo, Ill.