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Weathering the Low Milk Prices

By: Dr. Larry Goelz

Throughout 2017 we have seen great production in dairy nationwide.  With a minimal increase in processing, we have entered an oversupply of milk, resulting in lower milk prices.  This oversupply has resulted in many processing plants trimming the Somatic Cell Count premiums, eliminating rBST premiums and shirking volume premiums.  Quite simply, there is too much milk for current processing capacity which puts the dairyman in a poor negotiating and financial position.

Given the current economic conditions, what options does a dairyman have to weather the storm of low milk prices?  This is the conversation that I have been having with dairyman as we look to 2018 and I have the following suggestions:

  • Produce more milk per cow.  The highest production dairies will always have a competitive advantage when prices are low.  2-3 more pounds of milk per cow throughout 2018 will greatly increase top-line revenue for your dairy and trickle down to profitability.  Of course, this is easier said than done, especially with the loss of rBST.  Don’t forget the basics are important:
    1. Good feed, available all the time.
    2. Excellent cow comfort, every day.
    3. Correct milking procedures and parlor maintenance.
    4. Good cow health
  • Milk more cows. Milking an additional 5% more cows with the same labor, facilities and equipment also will generate more revenue and hopefully more profit.  As long as the additional cows are near your average production this will help.  However be wary, milking 50# cows will not increase your profitability even if the barn is way over capacity.  Milking more cows will work only if they are profitable cows.
  • Trim expenses. Work with your veterinarian and nutritionist to examine every animal health product and ration supplement to determine if it is cost-effective.  Consider the risk of removing them from your program, essentially the cost benefit.  Be very cautious, removing a vaccine that results in an increase in treatment cost or death will not be a cost-saving measure.  Removing a ration supplement that results in ketosis or DA’s will not save you money.

The temptation in low profitability times is to cut expenses to save your way to profitability.  This works only if you maintain production and health.  Don’t forget to look for ways to increase productivity.  In many cases, small attention to details will have a more positive effect on your profitability than large, cost-cutting measures.  Feel free to visit with any of our veterinarians for ideas for your operation.

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