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milk price volatility

Milk Price Volatility


Rapid reductions in milk prices and uncertainty in feed price
 

The last few months in the dairy sector have probably been some of the most dramatic in recent times. The rapid reduction in the milk price, together with uncertainties in the feed price and major issues in parts of the processing sector have all combined to deliver serious turmoil! The range in the milk price is now probably the greatest ever experienced in recent years.
However, the outlook for the medium term is starting to look more encouraging. World demand is steadily growing and whole milk sales increased by 4% in the 12 months to October 14 versus the previous year. Also, a large proportion of the extra demand is forecast to be supplied by the EU with the highest increase in milk deliveries coming from the northern part of the EU, including the UK.


In the short term, dairy producers will need to explore every opportunity to drive profitability. For the majority, this will not simply be a case of reducing costs. There are a number of key areas to consider in more detail. In no particular order, they are as follows:

 

 

  • Reduce wastage. It is vitally important to minimise wastage. Recent calculations show that on a 250 cow unit if the amount of forage that is wasted is reduced by 5% this will deliver £5K per year to the bottom line. A similar calculation for concentrates will deliver a further £7.5K.
  • Consider moist feeds to help improve dry matter intake. The benefit of feeding moist feeds with certain types of forage is well documented and has been confirmed in practice in the last few weeks.
  • Increase milk quality. An increasing number of milk contracts now appear to have a greater emphasis on payment for milk fat and protein content than in the past. A careful evaluation of various options on an individual farm is required to maximise margin over feed. This is relatively simple using a new dairy management service.
  • Review protein nutrition. In grass based systems reduce the level of crude protein in the concentrate feed. A 14% protein compound with the right type of protein, formulated according to the target yield is normally perfectly adequate. In high yielding, housed herds, consider the benefits of protected soya in early lactation and non-protein nitrogen in late lactation.
  • Consider splitting lactating cows into more groups and target feed concentrates according to stage of lactation. The value of any reduction in yield may be counteracted by a greater reduction in feed cost.
  • Review the use of specialist ingredients such as protected fats and specific additives. It is likely that there are a number of opportunities to reduce cost. Start with a clean sheet of paper!
  • Review mineral nutrition. An oversupply of copper and other trace elements is still relatively common. A significant reduction in cost may be possible.
  • Evaluate the formulation of blends and review the type of compound. Stable, consistent diets are crucial but the relative value of various feed materials has changed and if cows are not milking according to target, controlled changes may be very beneficial.
  • Target calf and heifer rearing. In particular, understand the reasons for losses and remember that recent figures indicate that 15% of heifers born alive do not survive long enough to begin milk production. Also, consider the significant impact of calf growth rate on subsequent milk yield, namely that an extra 200g of growth per day between birth and ten weeks results in an extra 400 litres of milk in the first lactation.
  • Focus on the link between nutrition and animal health. A recent study has highlighted the negative impact of excess energy in the dry period on health problems experienced during the early lactation period. A new Mole Valley Feed Solutions farm based trial is about to look at the incidence of sub clinical hypocalcaemia. Recent studies in the USA suggest that the impact of this issue may be very significant.
  • Focus on improving fertility efficiency with a planned approach involving the nutritionist and veterinary surgeon. There are a number of promising new nutritional aspects (e.g. starch level, fat type, protein type) to consider in this area.
  • Measure the things that matter. This will vary according to individual farms. However, actual dry matter intake, energy balance in early lactation and pregnancy rate immediately spring to mind as being crucial for most units.

Finally, a look at the recent dairy herd costing data is useful to help put the recent changes in milk price and feed price in context. The data is summarised in the table below. For the month of November milk yield has decreased from 24.6 to 24 litres per cow. Milk fat and protein content remain at a very credible 4.12% and 3.37%. The milk price has decreased by 4.5p per litre and margin over purchased feed per cow has decreased by 18% to £130. Margin per litre has decreased 4.2p to 20.7p.


In summary, the next few months are likely to become even more difficult. However, there are many opportunities on every unit to fine tune dairy cow nutrition and management. A fresh pair of eyes may be required to help see some of the options available. An open mind, careful planning and a positive attitude will help to minimise the impact of the lower milk price on the overall profitability of the business.


Read more in our dairy section.

 



Source Details

Dr Chris Bartram, Head of Nutrition, Mole Valley Farmers.



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