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A Double Whammy: Weather and milk price

The last several months Pennsylvania dairy producers have received less than $16/cwt for their milk. The average breakeven milk price on many farms hovers around $18 to $19/cwt, so right now producers are hurting financially. If that was not bad enough, many dairies are suffering through drought conditions. The following website shows conditions in the U.S. and for individual states. These are both situations producers have endured before however it never gets any easier. If not already, now is the time to be forward thinking. Forage quality and quantity could be issues and purchasing additional forage is a real possibility. What contingency plans are in place if the worst case scenarios play out: continued low milk price and low forage inventories?

Production Perspective

When strategizing options, cow performance and animal growth should not be compromised. Setbacks in either of these areas can have long lasting ramifications to the dairy operation. The first step is to assess forage inventories. Some areas in the state may have very limited aftermath cuttings of hay-crop forages. Planning hay purchases sooner versus later may be prudent. Don't overlook the alternative of purchasing wet wrapped bales. Harvested under good management they can provide excellent feed for both lactating and non-lactating animals.

The corn crop is extremely variable. Assessing fields to evaluate the best corn to ensile for the lactating cows is one strategy. Fields with extremely short corn having little to no ears ideally should be segregated to a storage structure earmarked for dry cows and young stock. Even if putting up an Ag Bag is a new experience, it may be worth the expense. This could definitely be an option for farms that have to utilize all their corn for silage. Maintaining adequate forage supplies will be the priority and an Ag Bag may provide that critical extra few months of feed.

Shrink can erode away profits and feed inventory very quickly. Optimizing management practices during storage, feed out and feeding can go a long way to minimizing losses. If not monitoring what is being fed it is difficult to visualize the impact shrink has on the quantity available to feed. Fine tuning practices during ensiling and feeding can add several weeks of additional forage inventory.

Working with a nutritionist will be instrumental on evaluating the quantity of forages available for all animal groups. Frequent monitoring of forage dry matters and overall analyses may be necessary to account for increased forage variability. Cows thrive on consistency so the priority should be on the milk cows followed by the dry cows and heifers. The best quality corn silage and hay crop forage should go to the lactating cows. Dry cows and heifers do not require the highest energy forages and there can be more flexibility on what they receive. Their requirements can be more easily met through purchased hay, byproducts and supplementation compared to the milk cows.

Develop a cash flow plan if not already. Determine the farm's breakeven income over feed cost and monitor this metric monthly. This is a great tool for examining if changes being made are working or not. If the producer's advisory team knows where the operation currently stands, it makes for smarter decisions. Regardless of how well cows are performing, a $15 to $16 milk price will not generate enough income to cover all expenses. The goal right now is to control the amount being lost so that when the market does improve producers are positioned to rebound faster.

Action plan for improving milk income

Goals

With a team of advisors that includes the crop consultant, assess the crop status across the farm and make a plan for improving practices related to harvest, storage, feed out, and feeding for 2016-2017.

Steps

Step 1:

Close to harvesting date for corn silage, evaluate fields and make a list on which ones would work best for the lactating herd and if any fields should be separated from the main storage structure.
Step 2:

Assess the current hay-crop inventory and examine options for compensating the inventory.
Step 3:
As best as possible, determine the amount of forage going into the storage structure and weigh forages coming out to determine losses. Set goals on what shrink should be from each structure, i.e. 10% shrink from a bunk.
Step 4:
Set a realistic goal for milk cow refusals (i.e. 2 to 3%) and work with the nutritionist on how to incorporate them into the appropriate heifer diet.
Step 5:
Develop a cash flow plan to evaluate feed costs associated with the current feed inventory and any projected changes. Make adjustments as needed to maintain income over feed cost as close to the breakeven that is realistic.

Economic perspective

Monitoring must include an economic component to determine if a management strategy is working or not. For the lactating cows income over feed costs is a good way to check that feed costs are in line for the level of milk production. Starting with July's milk price, income over feed costs was calculated using average intake and production for the last six years from the Penn State dairy herd. The ration contained 63% forage consisting of corn silage, haylage and hay. The concentrate portion included corn grain, candy meal, sugar, canola meal, roasted soybeans, Optigen (Alltech product) and a mineral vitamin mix. All market prices were used.

Also included are the feed costs for dry cows, springing heifers, pregnant heifers and growing heifers. The rations reflect what has been fed to these animal groups at the Penn State dairy herd. All market prices were used.

Income over feed cost using standardized rations and production data from the Penn State dairy herd

Aug 2016 IOFC
Note: July's PSU milk price: $16.81/cwt; feed cost/cow: $5.29; average milk production: 81 lbs.

Feed cost/non-lactating animal/day

Aug 2016 feedcosts