The William H. Miner

Agricultural Research Institute

Miner Institute
Farm Report


Volatility is a new buzz word in the dairy industry. A dramatic increase in U.S. dairy exports and a new norm of high feed prices has increased volatility of the dairy industry in recent years. For example, in 1996 only about 3% of the total milk solids produced in the U.S. were exported compared with 10-13% of dairy exports in the last five years. Therefore, the global economy now has a greater impact on domestic dairy prices. In addition, feed prices are higher than ever. Two of the primary drivers of the high feed prices: 40% of corn produced in the U.S. is now used for fuel ethanol production; and a record drought for much of the U.S. during the 2012 growing season. Managing your dairy in a volatile market is a multipronged approach. Small improvements in many areas of your operation, including nutrition and feed management, may be beneficial. Increasing income over feed costs via opportunity costing, better feed management, and improved feed efficiency may help you remain profitable during the highs and lows of the volatile market.

Opportunity Costing. Consider utilizing programs like Sesame III (Code Star Software LLC, Dublin, OH), which provides price comparisons for feeds based on digestible or metabolizable nutrients for dairy cows specifically. The program classifies feeds into 3 categories: under-priced, neutrally-priced, and over-priced. Optimal use of feeds that are under-priced will help with capturing margin on the dairy farm.

Feed Management. Other than selling feed, there are two ways feed is generally removed from the dairy: 1) It is consumed by cattle and converted into milk, body tissue (including fetal tissue), and manure or 2) It flies away in the form of dust and starlings. Clearly, reducing the amount of feed removed via the second option will improve income over feed costs. There is a capital investment with on-farm feed management, but with high feed prices it’s a good time to reevaluate the value of improved commodity bays, bins, or concrete pads in reducing shrink on farm. In addition, improved capacity to store commodities on farm will give your nutritionist more flexibility to balance rations for different lactation groups, which may improve feed efficiency.

Feed Efficiency. With current feed prices, increasing energy-corrected milk output per pound of dry matter consumed is a relatively easy way to capture more margin on the dairy farm. However, in order to manage volatility through improved feed efficiency, you have to measure it, which means monitoring DMI daily. Investment in feed management software programs may be worthwhile depending on the size of your operation.

Conclusions. Increased volatility in the dairy industry is of concern to dairy producers and their nutritionists alike. Staying focused on maximizing margins during all phases of the market will allow you to adapt quickly and remain profitable through the volatility. Buying feeds based on their nutritive value, improving feed management, and maximizing feed efficiency are all ways that you can manage through the volatility with your nutritionist. Keep in mind that there is opportunity in this volatility. The global population is growing, resulting in an increased demand for food outside of the U.S. borders.

— Sarah Schuling

* I was known as Sarah Boucher when I was a post-doctoral research associate at Miner Institute from Sept. 2008 to June 2010. I am newly married and currently employed as Dairy R&D nutritionist with Hubbard Feeds, Inc. I am based out of my home office in Des Moines, IA and travel through all of Hubbard territory.

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The Miner Institute Farm Report is written primarily for farmers and other agricultural professionals in the Northeastern U.S. and Eastern Canada. Most articles deal with dairy and crops topics, but also included are articles dealing with environmental issues and global agriculture as well as editorial commentary.

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