Lessons Learned from Low Prices

I heard the governors of Minnesota and Wisconsin on the radio today discussing the historically dismal state of the dairy industry. It’s good to know that the situation is getting their attention. But no politician could have fixed this dairy economy. We need to be prepared for continued price variability. And we should not forget the lessons learned from low prices, no matter how good it gets.

Feed is the largest single cost on a dairy, so nutritionists are challenged to cut feed costs when milk prices are low. But our feeding philosophy should be the same, no matter what the milk price is – otherwise we’re not maximizing income.

A study of California dairies in 2006 and 2007 sheds some light on what affects profitability during both low and high prices. The study included over 150 Holstein, Jersey and crossbred herds with between 100 and 4600 cows/herd. Milk price averaged $11.46/cwt in 2006 and $17.69/cwt in 2007. Besides milk price, solids corrected milk yield was the most important determinant of profitability on these dairies – regardless of feed cost. The highest producing herds were the most expensive to feed on a per cow basis, but had the lowest feed cost/cwt of milk. The highest producing herds minimized their losses during low milk prices and maximized profits during high milk prices.

This study indicates that feed changes that reduce milk production will reduce profitability, regardless of milk price. The most effective feed cost savings are usually in feed management, not by feeding cheaper rations that don’t maximize milk yield. Fine tuning weighing, mixing and feeding procedures improves feed efficiency, effectively getting more milk from the same feed. Hopefully these low milk prices have made us all pay closer attention to our feeding management.

But low milk prices may also have caused many of us to reevaluate the nutrient levels in our rations such as protein levels, certain minerals and vitamins or feed additives. If trimming these nutrients didn’t affect milk production, reproduction or cow health over the past few months, they probably won’t improve your bottom line if you add them back when milk prices rebound either.

Reference: Rodriguez, L.A. and J.M. DeFrain. Factors Affecting Profitability of Western Dairies. 2009 Southwest Nutrition and Management Conference Proceedings.

--Rick Lundquist is an independent nutrition and management consultant based in Duluth, Minn. You can contact him at siestadog@aol.com.