The price of milk is in a race with the price of feed as both continue to climb in 2022. A higher milk price is welcomed by farmers, but profits are cut short when the expense side of the ledger is also on the rise. While reducing the cost of feed is appealing and perhaps necessary, University of Illinois’ Mike Hutjens cautions dairy producers from making drastic cuts.

During the April Hoard’s Dairyman webinar, Hutjens shared that feed costs have risen from 10 cents per pound of dry matter to 15 cents or more. For a cow consuming 50 pounds of dry matter daily, that equals an extra $2.50 in feed costs per day. He noted that feed represents more than half the cost of producing milk.

In addition, Hutjens pointed to data that showed diesel prices are up 60%, gas prices are up 50%, used truck values have risen 26%, and labor costs are 10% to 20% more this year. There are also world events, including COVID-19 variants and the conflict between Russia and Ukraine, that remain wildcards in terms of how they will impact dairy.

While these factors all weigh heavy on 2022, Hutjens said there are opportunities as well. For starters, the All-Milk average price for the year is predicted to be $23 per hundredweight. Milk components, especially milk fat, remain valuable and will help further supplement these record-high milk prices.

Some costs can be tempered through ration adjustments. “Farmers can manage part of the diet through forage quality and quantity,” Hutjens explained. He added that the new dietary recommendations for dairy cattle released late last year will also allow farms to do some ration fine-tuning.

Although there may be opportunities to save on feed costs, Hutjens reminded listeners that we only get to set peak milk levels once per lactation. For mature cows, peak occurs between 40 and 60 days in milk; in first lactation cows, it is around 90 to 100 days. “Peak milk sets the tenor of how much milk you will get in a whole lactation,” Hutjens noted.

In that same vein, Hutjens said, “High-producing cows are the most efficient and most profitable.” He said that one pound of dry matter intake can support about 2 pounds of milk production. With a current milk price around 22 cents per pound of milk and a dry matter feed cost of 15 cents per pound, the profit on each pound of dry matter is 29 cents per cow per day if cows are milking at that level.

If cows are not making 2 pounds of milk per pound of dry matter intake, profitability suffers. “I never want to give up milk,” Hutjens said.

There are ways to save costs and fine-tune the ration while maintaining high levels of milk production. To hear Hutjens’ recommendations, please watch the April Hoard’s Dairyman webinar, “Feed costs: Ten opportunities for savings.” This webinar was sponsored by Kuhn.

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(c) Hoard's Dairyman Intel 2022
April 25, 2022
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