Let’s get real about dairy feed cost inflation

Sticker shock isn't just for car buyers anymore. Dairy producers reviewing their nutritionist's ration may be shocked at what it costs per day to feed their cows this fall.

Depending upon a farm's milk production and the value placed on home grown forage, the total feed costs of producing a hundredweight of milk on many Missouri dairy farms is running from $10.00 to $13.00 per hundredweight. That's just for the lactating herd, without including feed for dry cows and heifers.

According to the USDA's monthly cost of milk production, from 2005 through the first half of 2011, the feed cost to produce a hundredweight of milk increased from $8.12 to $11.21 in the U.S. That's an increase of $3.09 per hundredweight. Thinking like a consumer, that's equivalent to a $0.27 per gallon rise in the price of milk directly driven by rising feed costs.

The USDA estimates that Missouri's monthly cost of milk production increased from $7.40 in 2005 to $10.40 in 2010, more than the national average during this period. In California, the number one dairy state, USDA estimates indicate feed costs increased by $4.18 per hundredweight from 2005 through 2010, even more than in Missouri.

After Class III milk prices posted an all-time record high of $21.67 per hundredweight in August 2011, dairy producers are still nervously asking, "Is this as good as it gets?"

Producers accustomed to the three year milk price cycle, normally would expect 2011 to be the high year followed by a falling price in 2012. One may seriously question if the three year cycle will repeat on schedule in 2012, but it is time to get real about planning to control future feed costs just in case 2012 brings lower milk prices as futures currently predict.

Corn and feed grains are not the only cause of rising feed costs. Forage makes up more than half the dairy diet. Rising corn prices drive up corn silage prices. Competition for cropland and increasing fertilizer costs are driving up alfalfa hay prices. What can a producer due to control future feed cost inflation?

Short Term Strategies:

1. Eliminate every mouth on your farm that isn't making money. Brutally cull open, low producing cows. Sell excess heifers, cleanup bulls, and all dairy-beef animals. With today's high hay prices, don't overlook culling other sacred but non-productive hay burners like horses, roping stock, kid's pets and show cows. These changes alone have been shown to save up to 30% of total feed costs.
2. Challenge rations. Most co-products trade at a consistent relative value to corn & soybean meal but there are always local or seasonal price dips to cut $0.25/cow/ day.
3. Test and segregate forage supplies tighter than ever. There may be classes of livestock or times of year when your nutritionist can use cheaper, lower -quality forage.
4. Seek rental pasture to replace expensive hay. Use daily break feeding of stockpiled pasture to stretch supplies, and improve quality for heifers and dry cows.
5. Cut expensive silage losses by covering bunkers. Groom feeding face carefully to reduce spoilage.

Longer Term Strategies:

1. Raise more forage. Low cost-high quality forage has always been a key to profitable dairy production for confinement or grazing dairies. Keep labor and machinery costs low by sharing equipment and using custom operators. Use crop insurance.
2. Reduce fertilizer costs and thus forage costs by applying manure strategically rather than applying on the most convenient fields. Cost savings more than $100 per acre are possible.
3. Carry larger inventories of silage and hay. Building an extra pole barn or bunker may be the most practical way to control future feed price risks.
4. With tight grain markets and rising forage costs one can't take the risk of buying at market prices when feed is needed. Start thinking and planning for feed needs eighteen months into the future, crossing two crop years.

Source: Joe Horner, University of Missouri Extension Dairy Economist

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