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1209 PD: Producers facing low prices do have options

Jarett C. Bies Published on 05 August 2009

Dairy producers may want to identify the areas of the farm in which the greatest expenses are incurred and act accordingly to minimize them.

They may take this approach to help cope with the current economic crunch, says South Dakota Extension Dairy Specialist Alvaro Garcia.

“The current economic situation of the dairy sector has producers looking at ways to improve returns, and milk prices have been near $10 per 100 pounds,” Garcia says. “Operating costs to produce that milk are at best at $14. In simple terms, by the time premiums are added to the base price, producers still lose almost $3 every time they sell 100 pounds of milk.”

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Garcia says that looking forward, there is no indication of a significant rise in milk prices in the near future.

“Milk prices for the next six months will be mostly below the operating costs of production,” Garcia says. “The best-case scenario seems to be break-even by December 2009 when base milk prices will be near $14.”

Garcia says it is important for producers to act in areas that will not directly affect herds in the near-term.

“Feed continues to be the greatest fraction of cost for producers, since nearly 70 percent or more of operating costs, or 44 to 50 percent of total costs of production, go to feed,” he says.

Producers who increase the quality of feed produced on the farm can decrease the expense of purchased feed. Producers need to make sure forages are harvested at the right maturity to maximize quality and stored properly for optimum preservation.

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“This is a key component, because if not executed properly, the purchased feed cost will outweigh homegrown feed investment,” Garcia says.

Veterinary and medicine expenses constitute about 8 percent of operating costs, and Garcia says this is an area where producer actions can reduce costs.

“It is very important, considering that 8 percent, to put special emphasis in detecting problems early to increase treatment effectiveness,” Garcia says. “Cow comfort is a critical component of the savings in this area. Bedding constitutes only 2 percent of operating costs, so it makes very little sense to try to save money there because in doing so, we are going to compromise cow well-being and increase veterinary expenses.”

Garcia says both lameness and mastitis – ailments highly correlated to bedding – continue to be the main health issues in dairies across the U.S.

Since roughly 8 percent of operating costs are repairs and energy use, Garcia says it is important to identify areas that need maintenance.

“To minimize the need of ulterior, costly repairs, identify maintenance issues quickly, repair them and in doing so, also consider those areas that use the most electricity in the dairy,” Garcia says. “Milk cooling, lighting and air movement fans use the most electricity, and there are alternative methods a producer can use to save money.” PD

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—Excerpts from South Dakota State University news release

Jarett C. Bies, Associate Writer, AgBio Communications Unit, South Dakota State University

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