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Is There a Light at the End of the Tunnel for the Dairy Industry?

Posted: August 12, 2009

The dairy industry is struggling more than ever with low milk prices and high operating expenses.

Everyone, regardless of what industry you are in, is feeling the effects of the current economy. Right now the dairy industry is struggling more than ever with low milk prices and high operating expenses. It feels like this scenario has been persisting for a long time and we are still waiting for things to improve. The frustration for those of us in consulting and education is there is very little we can do to compensate for these outside forces. So other than taking one day at a time what can be done?

It is hard to rely on historical data related to the markets in light of the volatility of the past few years. We seem to have really good times and really bad times. So how does a dairy operation deal with these extremes? The answer: Start now to prepare for the good times ahead so the operation can maximize profitability and prepare for the bad times.

In order to succeed, a major responsibility of the owner/manager is to develop a plan, monitor a key performance indicator(s), and make adjustments if something is moving off track. One such indicator is income over feed cost (IOFC). This number monitored monthly over time gives great insight on where things may need to be improved. Some areas to investigate when IOFC is too low are dry matter intake efficiency, use of excessive feed additives, level of concentrate feeding for production, or poor feeding management practices.

The solution to almost all of the nutrition and feeding management practices requires time commitment from the owner/manager and the willingness to make changes, if necessary. Both of these can be very difficult when time is already our greatest enemy. For that reason the Penn State Dairy Alliance, a Cooperative Extension initiative, has developed a Risk Management Team with the focus of working with producers during these tough times and preparing them to take advantages of opportunities in the good times ahead.

Currently, Penn State is working with numerous producers on developing cash flows and calculating IOFC. Monitoring this information over time will help them make smart decisions regarding management strategies.

The Risk Management Team is offering assistance to Pennsylvania dairies in various formats:

  1. Start measuring IOFC: Contact Erica Cowan, senior project associate, at ecowan@psu.edu or (814) 863-3917 for assistance in getting your herd started.
  2. Start developing a Cash Flow: Contact Tim Beck, Cumberland County Extension educator, at tbeck@psu.edu or 717-240-6500 for assistance.
  3. Start a dairy discussion group on the topic “Making Smart Decisions Based on IOFC:” Contact Dave Hileman, discussion group facilitator, at hilecrest@keyconn.net or toll-free at 888-373-7232 

 Michele Moyer, Program Manager, Penn State Dairy Alliance