Finally, Lower Feed Costs
Dec 02, 2013
With most of the 2013 corn crop in the bin, dairy farmers are finally starting to see some relief in their feed bills. It’s not all Mai Tais and Yahtzee, as one of my farmer friends likes to say, but $4/bu corn will go a long way in easing the income-over-feed-cost red ink.
Robert Tigner, a University of Nebraska Extension dairy educator, shares with me his monthly spreadsheet on dairy costs and returns. When corn was at $7.50/cwt, whole herd feed costs were running in the neighborhood of $17.50 per hundredweight of milk produced. (Note: Soybean meal was plugged in at $440/ton and alfalfa hay at $250/ton.)
Tigner’s October spreadsheet had corn at $4.30/bu, soybean meal at $436/ton and alfalfa at $250/ton. Consequently, whole herd feed costs—for milking and dry cows plus replacements—dropped to $12.75 to $14/cwt. (The lower number is for herds producing 24,000 lb. of milk per cow; the higher number, for 20,000 lb. herds.)
Here in the Midwest, the cost of growing alfalfa is far less than that $250/ton number. Alfalfa winterkill was a huge issue here, with some estimates showing a 50% acreage loss. But if you were one of those lucky folks whose alfalfa survived this nightmare and you don’t have to buy alfalfa, your feed costs will look substantially better. When I plug $100/ton alfalfa into the Nebraska spreadsheet, whole herd feed costs dip below $10 for 20,000 lb./cow herds and close to $9 for the 24,000 lb./cow herds.
Even if milk prices dip to $17 or $18/cwt next year (USDA is predicting nearly $20 milk prices), that will leave some room for real margins.
We might already be seeing the impact of these price changes. USDA’s October Milk Production report showed cow numbers across the country up 13,000 head over a year ago. The nation’s mid-section—Michigan, Indiana, Kansas and Texas—showed cow numbers up 5,000 to 7,000 head in each of these states.
Western states were more of a push. Idaho was down 7,000 cows; New Mexico, down 2,000. California, to my surprise, was up 3,000 cows. But that’s only a 0.17% increase, perhaps a rounding error, based on the fact that more than 100 California dairy farms have exited the business this year.
Farmers also appear to be culling fewer cows. They sent 8,000 fewer head through federally inspected slaughter plants in October than a year ago. And compared to September on a daily basis, slaughter was down about 7%.
All of this suggests lower feed costs—and availability--are driving profit margins. We’re not out of the woods yet. The Nebraska budget shows herds that only produce 20,000 lb. of milk per cow are still not covering total costs when you plug in labor and a return to management. But the good news is, we’re getting there.