Dairy Economics-Factors Affecting Production

While Dr. Jardon only had milk in his glass for this pubcast, he did share about his bottle of “wheyskey” (whiskey made from whey) from Wheyward Spirit Distillery in California (https://www.wheywardspirit.com/). Iowa State Dairy Extension is offering a webinar, “Fermentation and Distillation of Whey to Produce Spirits at Copper Crow,” on May 15 at noon Central. Curtis Basina of Copper Crow Distillery in Bayfield, WI, will be the speaker. You can sign up for the webinar at https://go.iastate.edu/WHEY (4:13)Dr. Dhuyvetter presented a March 5 webinar on dairy economics, which can be found at balchem.com/realscience. Key consistent data across time indicate that more profitable dairies tend to be larger. This doesn’t mean that all dairies must be large, but more the reality of the large number of fixed costs in dairying. Diluting costs by having high production per cow is also a mark of a profitable operation. Kevin reminds the audience that he’s talking about averages and there are exceptions to every rule. The key message is that you need to strive to get better. In the long run, profits are equal to zero in a competitive industry, and dairying is no exception. Dr. Dhuyvetter includes all economic costs in his analyses, recognizing all assets, including skills and capital, such as land, facilities, and time. (8:08)Dr. Jardon suggests that exceptional operations emphasize efficiency and ensure they dilute maintenance costs well. Everything is fine-tuned: feed's always pushed up, stalls are full of bedding, and the time budget of the cows is usually spot on. Dr. Tully echoes this sentiment from his consultant experience. Phil also underlines the importance of focusing on how much it costs to make a unit of milk or income over feed costs rather than concentrating solely on saving money. Kevin agrees that all the little things done right and done consistently often make the difference in profitability. Further, if cutting costs negatively impacts production, then saving money is counterproductive in the long run (15:14)Dr. Dhuyvetter reminds producers not to automatically assume they have lower costs because you raise your own feed. More often than not, the opportunity costs of producing that feed haven’t been evaluated. If you can produce nutrients more efficiently and cost-effectively on your land, then home-raised feed is a very good thing. But if you produce low-quality home-raised feed, it might be better to purchase feed elsewhere. In addition, growing high-quality feeds takes time and energy away from dairying. Phil saw this when he was a practicing veterinarian. Jim suggests that those larger operations can have a field crew and a herd health crew who aren’t the same individuals. The panelists discuss the shift from getting paid for protein in milk to getting paid for fat in milk and what that means from a cow nutrition and profitability perspective.(22:51)Dr. Dhuyvetter then discusses how culling practices impact profitability. He expects successful operations to have very low cull rates because they have healthy, well-managed cows doing all the little things right. On the other hand, unsuccessful operations may also have very low cull rates because they struggle to produce heifers, get them pregnant, and keep them in the herd, leading to keeping cows longer than one should. Jim and Kevin emphasize that the culling rate is individualized and will vary by operation. Phil suggests that perhaps some of the available software tools to help with culling decisions may be underutilized. (35:10)Many dairies want to know if they should wait longer into lactation before rebreeding cows. Because production is up and reproduction has improved over the last 10-15 years, dairies are drying cows off while still giving a lot of milk. Dr. Dhuyvetter’s analysis of the data for Holstein herds in second- and greater-lactation cows suggests getting them pregnant as fast as possible and getting them back to peak milk sooner. (43:07)Phil, Kevin, and Jim then touch on comparative advantage and revealed preference and how those relate to shifts in the dairy industry away from some states and toward others. (50:29)In closing, Dr. Dhuyvetter suggests that the days of being very successful with gut-feel decisions are probably behind us. Making decisions based on the best information from data and analytics is the way forward. Constantly strive to get better, and don’t worry about what your neighbor’s doing. Control what you can control. (58:29)Please subscribe and share with your industry friends to invite more people to join us at the Real Science Exchange virtual pub table.  If you want one of our Real Science Exchange t-shirts, screenshot your rating, review, or subscription, and email a picture to anh.marketing@balchem.com. Include your size and mailing address, and we’ll get a shirt in the mail to you.