September 2018 Management Report

Lawrence R. Jones, PhD FARME Institute, Inc

For September, our example herd was UP.
85 #, 3.9% fat, 3.1% protein, 5.7% other solids

Protein increased $0.38/lb. and fat decreased $0.06/lb. On a hundred-weight basis, Statistical Uniform Price (3.5% fat) increased $0.50/cwt and Class III price increased $01.14/cwt which resulted in PPD decreasing $0.64/cwt. We had previously predicted PPD to decrease $0.55/cwt. Regionally, fat and protein continued its seasonal increase.

Fat and Protein outlook – With this month’s increase in protein price and decrease in the fat price, it is always tempting to change a feeding program to capture the change in values. To better evaluate strategies, we modified our forecasting program to generate the expected yearly average price for fat and protein. For the next year, we expect milk fat to average $2.57/pound with a $0.13/lb trading range. Protein is expected to average $1.96/lb with a $0.32/lb trading range. Our take home message: where the values are now is about where the values will be for the year. A rule-of-thumb, which I heard from Mike Allen at Michigan State during a Michigan State Roundtable discussion, is that about 20% of the fat fed specifically for increasing milk fat ends up in milk. If we use this rule-of-thumb, the break-even price for fat, fed specifically to increase milk fat, is $1,030/ton. This assumes the fat product in 100% fat. Here is the math – price of milk fat/pound * 2000 * 20%.

What do I need to do to compete in this market? - A lot has been written about the plight of dairies in this down market. For many of us, despairing dairy producers and good friends and customers going out of business has been an ongoing issue. While many writers keep pointing out that this down market is still $4/cwt above the 2008/2009 market, for a variety of reasons things are tight on many dairies. A friend in the AI business recently shared that she felt powerless to help her customers. Many of us can relate to this. But it is time to figure out how to help our dairy producers. It is not good enough to hope that the price of milk cycles back quickly. Or to get mired in the blame games around consumers and exports. If all you can do is bring a good cup of coffee or lunch, Do It! If you are passionate about consumption or exports, get off FaceBook and get personally involved. Remind yourself to be a force for change. The most constructive view that I have heard is “What do I need to do to compete in this market”? The first rule is that there are no sacred cows. If the discussion about competing starts with “We can’t …” then the discussion probably won’t be fruitful. Help your producers to have fruitful discussions about improving their future.

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