Conferences
Financially Sensible Responses to Short Term Milk Production Limits
Robert Goodling and Lisa Holden
Summary
The COVID-19 pandemic had immediate and long-lasting implications on dairies, both from a workforce aspect as well as supply chain perspectives. It demonstrated dairies needed flexibility in evaluating short-term production limitations caused by market volatility and processing disruptions. A research
project was conducted to evaluate a well-trained and flexible workforce, healthy and reversible reduction in milk yields for herds, and sound cost-control measures that maintain profit. Using commercial dairy herds in Pennsylvania, strategies for reducing on-farm milk production in relation to potential over-production penalties ranged from reduction in production and feed costs, increased culling, or early dry-off for cows. These strategies may achieve similar short-term goals, but each has unique long-term ramifications to the financial stability of the business.
Two main factors, regardless the level of penalties implemented on the oversupply and the marginal cost of feed. When production is limited, how much reduction in costs, in particular feed, should be realized. Using market prices and a basic model of key feed ingredients, a marginal feed cost per unit of energy corrected milk can be determined. This value can then be used to estimate how much savings in feed expense should be realized, and if that would make the decision economically viable. Decisions being made at the farm level are complex and producers can benefit from decision tools that utilize sound data for various scenarios to manage short-term production reductions while minimizing long-term growth potential.
Details
| Conference | 2022 National Farm Business Management Conference |
| Presentation Type | Concurrent Session |