Integrating beef cattle more profitably into grain-crop farming

 The national beef herd is the smallest it has been in sixty (60) years.  
The national dairy herd is also the smallest it has been in twenty five (25) years.

Meanwhile we have 50% more people to feed than there were here 60 years ago.

All this means that the current, profitable prices for deacon dairy calves and fed beef cattle are likely to remain for quite awhile—long enough to reinvest in your beef cattle side of your total operation.

 

Producing any farm commodity at a PROFIT requires us to have a good handle on production costs.    This helps us survive times of lower prices, as grain farmers currently lament.    But it also requires us to think about all possible income streams, and the management of “equity” to produce greater future returns.     While your equity in machinery may slowly be rusting away, the equity in your cow and calf herd has risen.    You can push that up a bit more.

 

MIch Livestock Service, Inc ***  “For the Best in Bulls”   and   For the Best in forage seeds”
110 N Main St  (PO Box 661)  Ovid,  MI  48866        phone (989) 834- 2661
email:  greg@michiganlivestock.com          website:   www.michiganlivestock.com

How long will “high” beef cattle sales prices last?

CONCEPTIONS   Beef cow-calf route newsletter  Nov Dec 2024

Mark Curry           (989) 984- 7027      Route service and sales/ Ov Synch AI by appointment
Sue Palen              (989) 277- 0480      Office manager/ advance order desk/ products
Greg Palen            (989) 277- 0631      Certified seed specialist/ Refresher AI training

Mich Livestock Service, Inc     “For the Best in Bulls”     “For the Best in forages”
110 N Main St  (PO Box 661)   Ovid,   MI   48866    ***      phone (989) 834- 2661

Featuring sires through “Cattle Visions”           Featuring “Byron Seeds”   Kingfisher & Red Tail

In economics classes we learned that the pricing of “commodities” always falls to the level that clears the market of supply.   In most of agriculture, the industrial model of advice is “More yield solves all financial problems”—which has never worked for us (increased production beyond the quantity the market is prepared to use results in lowering prices to absorb the yield increment).

Thus, the secret to profitable farm commodity production is to become a least cost producer (rather than a maximum yield producer).    This allows you to capture savings when prices are good, to carry you through times when prices are not so good.    (Savings allows you to put up bins to store grain when you don’t like the current price, holding it from the market so as not to force prices lower).    (SAVINGS ALLOWS THE CATTLE PRODUCER TO SELL LOWEST EQUITY VALUE ANIMALS WHEN PRICES ARE LOW, RETAINING GROWTH EQUITY ANIMALS TO A FUTURE HIGHER VALUE.)       Cost control allows you a chance of profit whether prices are up or down.

It  Is  a  perversity  of government “cheap food”  policy ( since FDR’s  Great Depression)  that whenever a  farm  product  reaches  a  profitable  price,  the  ag  media  says  we  have “high” prices – instead  of  being  thankful  that  current  prices  allow  farmers  to  rebuild  equity  and stay in  food  production  for  the 95%  of people  who  do  not  grow  any food  for  themselves!

Will profitable prices continue?    The USA population of beef momma cows is at its lowest level since 1965.    The USA human population is 50% larger today than it was then.    As consumption of beef today “per capita” is nearly as high as it was in 1965, the national dairy herd  (producing deacon bull calves to feedlot and cull cows for hamburger)  has taken up the slack.    This aided the grain markets in propping up corn and soybean prices, given feedlot feeding of “dairy beef” was focused on grain (rather than pasture and hay, the preferred steer feed for critters still on a farm).

Recently, the practice of breeding dairy cows to beef breed sires  (to produce “premium” price deacon calves) is helping the expansion dairies generate non-milk cash flow to pay rising labor bills.    In spite of “sexed” semen, it now appears there is a shortage of dairy replacements.

How  does  dairy  farming  affect  beef  production ?

Anyone who has a dairy farm, whether the industry would admit it or not, was also in the beef business.   A ten million cow dairy population (prior to sexed semen) produced four million bull calves annually, ending up in feedlots.    Prior to 2015, these Deacon bull calves generated $400 million in non-mik income!     As dairy cows turned over after three calvings, you also had three million cows culled annually generating $500 million in non-milk income.  Cull cows and deacon  calves helped finance the large-herd replacement deficits, which was the biggest stimulus to the development of gender-selected semen!   Smaller dairies with better reproduction and herdlife were always the source of surplus cows to keep the expansion dairies in supply;  as they have been forced out, prices for replacements have risen to the $3000 mark, the highest-ever point in the history of modern dairy).   

Value of deacon calves is four times what they used to be;  salvage on culled dairy cows twice what they used to be.    The deacon calf price has influenced 20% of dairy cows to be bred Beef, and with the national dairy herd down to Nine million cows (one million less than it has been for twenty five years!)  you can see how all-time record prices for beef feeding and slaughter cattle have led the dairy breeding industry to acknowledge Beef selection for the first time ever.

Basically, for your operation, smaller national cow herds (both Beef and Dairy) means your cow herd is worth more than ever, and your calf crop worth more than ever before.   Reproduction is the key to converting this value into farm income.

NOTE to PUREBRED and SHOW BREEDERS:   when commercial (commodity) cattle prices go up, the cost of quality replacements to improve your herd become more reasonable in comparison.  
The biggest weakness in cow herds built on EBV or show type selection is often related to lower natural fertility or more difficult calving.    Now is the time to do culling that improves your cow herd to regain maternal traits that optimize reproduction and calving ease, and in selection for new cows, seek longer reproductive life.    

The effect of grazing on financial returns to your land ownership

If you are a cash-crop farmer with cattle “on the side” you are painfully aware of how the runup in corn and soybean prices has run itself back down.    As your cheapest land is what you rent, it may still be profitable to plant row crops in rotation on that land;  but for any land you own, the growing of forages and the grazing of your cattle generates more profit than any “legal” crop.

The math is really quite simple.    If corn is $4.00 per bushel, and you are a good enough farmer to get 200 bushel per acre, you gross $800 per acre on corn, before all the costs.    Those costs are considerable, as you know:  seed, spray, fertilizer, fuel, machinery overhead, land rent…

If you return your “home” fields to grazing, dairy farmers have learned that high energy grasses generate $3000+ per dry matter ton in milk.   You can get 2 to 3 tons dry matter per acre from a grass pasture rotated to keep it vegetative (which means more than two cuttings of hay…)

Producing  quality  forage  for  cattle  within  a  grain  farming  emphasis 

Everyone knows the best corn crop you ever grow, is in that first year after you rip up an old alfalfa stand.     The soil is full of accumulated nitrogen from the nodules on the alfalfa roots.   The years away from row cropping have rebuilt soil structure with organic matter, and those corn root borers and other pests died or moved to other fields.   

You can rotate annual forage crops like Winter Triticale between corn and soybeans, planting as soon as your grain crop is harvested.    Triticale will be ready to harvest as a forage by mid-May (pre-seed heads) and your next corn planting will be timely.     The double crop insertion feeds desired soil biology through the winter, increasing nutrient transport capacity in the grain crop, and inhibits the overwintering of corn borer and other corn-specific pests.

Consider this as your new seeding approach:  Plant a Synergy X blend of alfalfa with a non-oat cover you can harvest green or wilt to bale in the same season.    In the following year, once a year of clear alfalfa has passed, it will be producing root zone nitrogen;  overseed high energy grass blends that will fill in open spaces between the alfalfa rows, and develop maximum tons of hay per acre.    Once the field is half grass, fence it and graze it (maybe you just bale a first cutting and rotate graze the rest of the year).     You can always frost seed red clover and cows will continue to see an optimal energy feed in front of them each season.

Whether you get five years or seven or ten years from this, you will be feeding an optimal feed to a maximum number of animals, while maintaining grain crop production in rotations as well as on your rental lands (which can always benefit from your winter-stored manure).

Why rotate graze?

Dairy farms set up for haylage harvest in Michigan generally get three cuttings in.    Those with dry hay baling systems only got two cuttings this year, most places.     If you push alfalfa into a four-cut season, you generally end up with only a three year stand life.   Nationally, the alfalfa acreage has declined from its peak, as big seed companies (owned by chemical companies!!) make a lot more on chemically-dependent GMO row crops.    However, when it comes to any farm feeding ruminants, the blend of legume alfalfa with high digestible grass is ideal for any momma-cow operation, nutritionally superior to corn silage and a lower cost per acre.

How does rotation make the difference?     We used to get six passes per acre in grazing our cows, by keeping the grasses in a vegetative (pre-seed head) state.    Picking the worst stand for that spring’s “sacrifice lot” (to get the cows outside for the earliest grass), all the other pastures could be cut for first-crop hay, and then rotate their regrowth for the remainder of the season.  
First-cut hay would feed the cows all winter;  the sacrifice lot would get planted to a grazable summer annual (we liked BMR-6 sudangrass) that could produce feed for the six weeks of hot, dry summer when the grass pastures are slowed down and need to regenerate roots. 

Breeding for easier calving

Selecting “calving ease” sires only affects birthing of the calf.    It does not provide you cows that will calve easier in the future.    (There is a separate selection trait, called “daughter calving ease” that is a better indicator.)

Given the relatively low levels of heritability for most linear evaluation traits, they are not adequate to the full job of consistently breeding better physiques into the herd.    For this, the qualities identified in your herd (and in AI sires) by the “aAa” breeding guide are more reliable (and more directly related to function).    

How many genetic characteristics affect calving ease?    Open this newsletter and find out.    As with all aspects of biology, there are multiple gene factors and there is the over-riding epigenetic effect from the nutritional environment you created for your herd.    It is a manageable situation regardless of your breeds.

If you still have questions after reading this, ask us.    We are here to be helpful.

Mich Livestock Service, Inc    ***     “For the Best in Bulls”   and   “High Energy forages”
Ovid,  Michigan        phone (989) 834- 2661          email  “greg@michiganlivestock.com”

Understanding “calving ease” (differences in breeds and in crossbreeding)

 

CONCEPTIONS  Dairy route newsletter                    Nov Dec 2024

Mark Curry      (989) 984- 7027     Route services and sales / Ov Synch AI by appointment

Sue Palen         (989) 277- 0480     Office manager, product sales

Greg Palen       (989) 277- 6031     “aAa” Breeding Guide / certified forage seed specialist

Mich Livestock Service, Inc         “For the Best in Bulls   and   High Energy forages”
110 N Main St   (PO Box 661)    Ovid,  MI  48866       ***       phone (989) 834- 2661
email:   greg@michiganlivestock.com          website:   www.michiganlivestock.com 

 

Why is it mostly in the Holstein breed that we collect data on calving difficulty?    The only way to explain it is to compare with other breeds, and then to suggest the impacts of indexing as it culled some bloodlines while multiplying others.

Comparing familiar breeds.    Holsteins and Brown Swiss have the largest frames, also had the longest length of gestation (time a cow carries the calf before birth).    Historically, Brown Swiss cows carry calves 288 days;  a Holstein cow 283 days;  a Jersey cow 276 Days.   For Jersey calves, they tend to be born at 5%  of mother’s mature size.   Thus they will weigh around 50# when born (1000# mature size  x  5%:  With 800# first calf heifers a 50# calf is not an issue).   Beyond the shorter gestation (fewer days gaining weight inside the cow) Jersey calves also have little to no fat reserve at birth  (their mothers provide it from higher butterfat% milk after birth) (Jersey island has a very mild climate, so native Jerseys did not require extra energy in winter at birth).

Smaller frame size breeds (Jersey, Guernsey, Dutch Belted) tend to reach puberty earlier, and also physically mature a year quicker than large frame breeds:  thus the first calf heifer is more ready to have a calf at a younger age (many Jerseys calve successfully prior to two years of age).

Holsteins, in contrast, tend to be born at 7% of mother’s mature size.    Thus they would weigh around 100# when born (1500# mature size  x 7%;  with 1200# first calf  heifers a 100# calf can be an issue).     As in all breeds, most of the calf weight growth comes in the third trimester, so rations need to avoid being high energy to control calf size.  Holstein calves will be born with a significant body fat reserve (their origin in northern Europe by the North Sea meant adaptation to cold weather climates, calves could stay warmer from metabolizing the body fat).     Holsteins traditionally were slower to mature physically (mature cows usually 30% larger than first calving heifers) so it was safer to breed them to calve their first time after two years old.

Why do Brown Swiss avoid calving issues in spite of longer gestation?   They may be the oldest “pure” breed that came to America.    Originating in Alpine mountain valleys, developed totally on grass for centuries, calving unassisted, culled out hard calving lines before they came here.

How does CDCI calculate “calving ease” today?

Geneticists are in essence mathematicians (data crunchers), not biologists (good at observing behavior and seeking causes for effects).    They were never happy with the “original” calving ease data, because it depended on herdsman observation  (did she calve by herself easily?  Or did she calve safely with mild assistance?  Or was she going to die calving without assistance?)

The first enhancement to farmer observation was to calculate Stillbirth rates.   If a calf is born dead, they assume she had a “hard calving”.    There were many “calving ease” bulls (I recall “Morty” and “BW Marshall”) who lost their calving ease designation with this change.   More importantly, they learned that calf livability was genetically influenced.

The next (and equally important) enhancement was the realization that  Gestation length  was genetically influenced too.   Shorter gestation became used to enhance calving ease (geneticists preferring a “statistic” over “observation”) and is now a big part of the calculation.

At this point, the hubris of CDCI (Council for Dairy Cattle Improvement, which took over from AIPL- USDA Animal Improvement Programs Laboratory with the introduction of Genomics) says “we have solved calving ease”.     According to the data trends,  average difficult births fell from 8.6% (pre genomic) to 2.3% …  Genomic procedures have “identified the genes for calving ease”.

A word about CDCI  (an uneasy partnership between purebred breed associations and invested AI bull studs focusing on Genomic selection)  -- their calculations for DPR  (daughter pregnancy rate)  do not sort between “natural” conceptions and “OvSynch” conceptions.    Likewise their calculations of “calving difficulty” do not sort between gender-selected calves and conventional semen calves; but in herds that participate in DHIA data collection, “OvSynch” reproduction and using “sexed” semen on virgin heifers is the “norm”….   

Feeding for easier calving

What you feed your heifers in the third trimester (last three months of gestation) when 75% of the calf growth occurs  in utero  has a big influence on  birth weights and thus calving difficulty.   That calf is growing 2+ pounds per day in the last two weeks prior to birth.    High starch energy TMRs (higher in corn, oilseeds, commodity energy sources to force size into younger heifers) are going to produce larger calves than you will get from heifers grown out on high forage diets.

For crossbreeders, if you are using any breed that originated in a region (like France?) where it is not customary to feed corn and soybeans, you might get calves 40% heavier from a corn based TMR than a forage based feed regimen;  you may also see excessive fat deposits in their udders as well as within the pelvis, making calving and then rebreeding more difficult.    It required two decade of genetic selection to produce Holsteins and Jerseys in the USA that could eat corn and oilseed-based rations and make milk, instead of getting fat OR sick…  the linear trait system that CDCI champions was first designed to identify the physical cow that would make milk from corn.

Genetic selection affecting calving ease

Holstein USA released a study several years ago indicating that the breed average Stature was increasing at a rate of 2 inches per generation.    Why would this happen?    Before Genomics was introduced, the “TPI” selection index favored Stature in type classification, and was more focused on PTA Milk yield than the “Net Merit” index (focused on PTA Butterfat and Protein).

Because PTA milk yields were in “Mature Equivalent” rather than actual yield volumes, this was giving an advantage to the faster maturing sire lines.     These tend to have Tall features  (within “aAa” observation), a quality gene-linked to the production of “growth hormone”.    Once we had DNA testing, and Genomic indexing put higher weights on “health and fitness” traits, these sires tend to have Strong features (within “aAa” observation).    The combined direction for the two qualities mentioned is to produce larger cows at younger ages (outgrowing older facilities).   

The biggest genetic impact on calf size is (as suggested earlier) mother’s expected mature size.   Without selection in favor of shorter gestation (and low energy density feed in third trimesters) we would generally be seeing larger calves from Holstein heifers;  thus there is risk in breeding Holstein heifers to calve before two years of age.    The general “safety” rule is to wait to breed heifers until they are 55% of their expected mature weight.      Measure your cows to figure it.

Breeding for easier calving

Every breed has difficult calving individuals  (no single breed “insures” calvings will always be easy—although Jerseys come pretty close).    When we approach these cows using the “aAa” breeding guide, we can identify what causes problems and identify the kind of bull that prevents heifers having the same problems.

The “aAa” breeding guide regulates the frame proportions in your cows.   This can really be seen in the pelvic structures of cows produced from “aAa” matings.    At Mark Yeazel’s “Ja Bob” herd dispersal one year ago, a retired sire analyst (serving as a ringman) told me “I can always tell when a dairyman has used “aAa”, their cows will have a correct Rump structure”.     Herds bred for Genomic “Net Merit” are showing tight hips, which narrows rump width regardless of how “Open” the rear skeleton appears.   (Over multiple generations, basing selection purely on Genomic ranking might turn “dairy” cows into beef-framed cows!).    

Basically, after three generations of Genomic selection based on a single selection index without regard to physical mating, your herd will begin to show “inbreeding depression”.    Research into inbreeding lists lost natural fertility, more calving difficulty, and higher stillbirth rates as some of the consequences.    Single trait selection is known to be the true cause of “inbreeding losses”.   Because “aAa” guides you to a “heterosis” physical mating, it is the industry’s most reliable and practical method to avoid “inbreeding depression” effects, including difficult heifer calving.

The synergy of growing row crops with pasture grass to feed beef cattle

 

More than any other typical American farming operation outside the communities of the Amish, beef cattlemen with any acreage can also rotate land use with crops, and have each half of their operation benefit from the other.

Animals on a farm, especially when pastured, leave behind residues that directly stimulate soil biology.     Cattle can graze any dedicated pastures, but will also do a great job of gleaning stubble after combining.     When pastures run down, there will be a bumper grain crop that first year after termination from all the organic matter built up from grass and legume root systems.

Whether grain prices rise or fall, whether animal values do the same, they rarely do at the same time;  there is that counter-cyclical effect having both will produce for your income opportunities.    

Grain farms with cattle (and rotation of land between the two) will require less purchased fertilizer to get the same yields.   Double cropping just adds to that, extending grazing opportunities into the winter months, lowering feed costs.

“Beef up” your permanent pastures

 Byron Seeds  has introduced new mixes, designed with the seed varieties that are best able to secure rooting when interseeded into existing pastures, and that will improve both the quantity and the nutrient content of pasture when grazed.

This series is called “Diversity” and includes:

Renovator.     Multi-species mix, designed for new seedings or adding diversity to an existing pasture.    Tall fescue, meadow fescue, ryegrass, orchardgrass, timothy, festulolium…    50-lb bags, $205 per bag, seed 20 to 30 pounds per acre.
Diversifier.     All legume species mix, can be broadcast in season.   It has red & white clover, crimson clover, alsike clover, alfalfa, and birdsfoot trefoil.    50-lb bags, $280/ bag, seed 5 to 8 lbs per acre into existing pastures than are thinning.

When  is  a  “heritage  breed”  the  better  option?

ALBC (American Livestock Breeds Conservancy) defines a “heritage” breed as one with a critical population size.    However, when random DNA tests show 70% of all beef-type slaughter cattle have some Angus in them, while 95% of all dairy-cross  beef has some Holstein in them, it can seem as if all breeds other than Angus (and Holstein) may as well be viewed as in the “heritage” category.

Are you one of the many customers we have who are pursuing a non-black origin breed for replacement breeding or beef marketing purposes, or intentionally use  crossbred “club calf” bulls to produce showable steers?    Have you chosen direct to consumer marketing, of package beef or freezer beef?    You are on the “road less travelled”, and as Robert Frost said in this historic poem, it can make all the difference…

The Angus breeding population may be the largest of all cattle breeds on the earth and with global distribution, a pretty healthy diversity of bloodlines still exists.   In the world of EPDs, of course, genetic “ranking” (now with Genomic enhancement) concentrates sire demand around the trait leaders.     The breeder wishing to get noticed in Angus, either spends the most money to “buy into the clique”, OR-- sets out to breed “fixers” to the common breed problems.   

I have noted that in grazing publications the “Pinebank” herd has a strong “rep”.   This is a New Zealand, grass-based Angus breeding operation in which cows must walk great distances daily to gather grass for calf milk or weight gain.    More and more you hear of issues with “feet” in the Angus breed--, of pasture bulls getting lame in breeding season, for example.     Many breeders have gone to Pinebank for cattle with foot integrity.     Bill Hodge of Sustainable Genetics who is based in Carrollton, GA is an example of those who imported embryos from Pinebank.

We currently offer semen on HAR Pinebank 708 211, one of the Sustainable bull offerings.    He was born in the USA from imported “Pinebank” ancestry.

Murray Grey

This growing breed is the result of the repeated cross of a white Shorthorn bull on an Angus cow (named for the Murray river in Australia, where these matings took place).    The breed, which has a silver-grey hair color, has a perfect “freezer beef” carcass size and some bloodlines will “finish” on grass!

Double-cropping with corn to increase total yields and soil fertility

CONCEPTIONS Beef cow-calf newsletter                Sept-Oct  2024

Mark Curry          (989) 984- 7027    Route services and sales

Sue Palen             (989) 277- 0480    Office manager/  “Cattle Visions”  orders coordinator

Greg Palen           (989) 277- 6031    “Byron”  Certified Seed specialist/  AI technique refreshers

Mich Livestock Service, Inc     “For the Best n Bulls”     “For High Energy Forages”
110 N Main St   (PO Box 661)   Ovid,  MI  48866                    phone (989) 834- 2661
         website: www.michiganlivestock.com          email to: greg@michiganlivestock.com

You may have seen the leaders in the  “free circulation” (advertiser funded)  farm magazines;  “cover crops may depress yields in following grain crop”…    The study quoted was paid for by a chemical (herbicide and fertilizer) company,  so “consider the source”.    NRCS has been pushing the cover crop (green manure) concepts for years, for the benefits:   increased organic matter,  increased rainfall capture,  less soil compaction,  breaking pest cycles in year after year corn or soybeans,  feed to soil biology over winter (increasing nutrient transport from soil into the root zone).

What holds us back?

Animal and Plant geneticists have a common failing; in making decisions from data the easiest route to yield gets taken, rather than the most efficient (cost effective) pathway.   In row crops, this has meant choose longer day varieties.  Planting early  in spring, then harvesting later in fall, means insufficient time to grow that second crop (or winter cover crop) and get the full benefit.   It also means seeding into the time of year when weed pressure is greatest, thus ever-higher spraying costs.

Two best choices

Cereal Rye  is known to require the least fall growing time before killing frosts,  so under typical crop management is the “green manure” many farmers use.   Recent crop yields, however, show that Winter Triticale is more likely to produce a second income stream (it can be made into baleage or left to harvest as feed grain) and it can be harvested within a time window wherein corn can still produce a full crop!  

Grow your own nitrogen reliably    

Lots of corn producers had in the past broadcast an annual clover at harvest time, hoping for a bit of nitrogen fixation and spring plant survival so that a “plowdown” of clover would feed the new corn crop through its germination and sprouting.

Trouble is, annual clovers (for example, Dixie red clover) might only have 10% of the fall seedings regrow in the spring after a hard winter.   This allowed weeds to start up and draw down the nitrogen intended for the corn.

Byron Seeds has been studying all the clover varieties around the world and now recommends  Majestic Crimson Clover  for this purpose.     It puts its roots down securely in the fall, fixing nitrogen into the soil as it grows, and trials show it up to 75% winter survival.    For you that means more “free” nitrogen and spring weed suppression, plus added spring nitrogen fixation until you terminate it to plant.

Lake City (MSU) experiment station years ago did a multi-year study of broadcast clovers and found you could get from 50 to 200 units of nitrogen released over the following two crop years.   What would that amount of nitrogen cost to buy?   But in addition, you avoid the compaction that chemical nitrogen application causes—you get the added organic matter/ water holding capacity from the extensive root system of any clover.      The total benefit greatly exceeds the cost of seeding it.

Genetic “value” or Profitable “least cost” production - which has become your breeding focus??

 

As managers, we tend to be consistent in our thought process for selecting inputs, whether for our crop farming or our animal feeding.    When it comes to “genetic selection” we will generally follow in the same path we follow as farmers.

High input technology management of dairy farms assumes that maximizing yield brings us profits.    It may come as a surprise that, according to Economists, when you are producing a “commodity” product, profits flow to the least-cost producers who “optimize” their production, rather than to volume producers who seek that maximum incremental yield.

Business is not that complicated.     Profit is what pays the bills and sustains your operation.     Higher milk yields come at a higher increment of added input costs,  and there is always a point where profit in that increment disappears.

 

Mich Livestock Service Inc.    “For the Best in Bulls”  and the forages that will feed the cows.
PO Box 661    Ovid,  MI  48866      ph (989) 834-2661       email “greg@michiganlivestock.com”

The Basics of Dairy Economics

 From the
CONCEPTIONS  Dairy route newsletter                                  Sept Oct 2024

Mark Curry    (989) 984- 7027     Route services and sales

Sue Palen       (989) 277- 0480     Office manager and Product specialist

Greg Palen     (989) 277- 6031     “aAa” Breeding Guide/ Certified Seed Specialist

Mich Livestock Service, Inc    “For the Best in Bulls”   and    “High Energy Forages”
110 N Main St  (PO Box 661)   Ovid,  MI  48866    office ph (989) 834-2661   fax (989) 834- 2914 

 

You have heard the old joke:  “Question:  what do you call a church basement full of farmers?” Answer:  a WHINE cellar!”      We whine about things we cannot control --  such as the weather, the prices we pay for inputs we use, the prices we get for what we produce.    We look at every new idea and new technology, hoping to find the magic bullet for profitability.    Meanwhile, the reality of successful farming is  doing the basic things well… every day.    You cannot spend your way to prosperity  (in spite of what all the politicians claim every election cycle!!)

First:  THE  PRICE  OF  MILK
Milk is a “commodity”, made that way by government pricing policy and cooperative pooling.   The many ways you can differentiate milk at the farm are negated by FMMO class definitions and the dilution of putting it all on the same truck route, making it a “generic” raw product.   Economists tell us that raw materials of any kind fall into this category.    Producers have lost control over its pricing, as its “wholesale” price is determined after initial processing allows processors to establish its “value” based on which markets they choose to serve.

Profits for any “commodity” raw material are NOT earned by increasing volume of production (even though your producer cash flow increases) but by controlling COST of production.   Only those who produce below average costs earn profits, as the raw commodity markets rarely pay more than average cost of production.     Produce one pound (one gallon) (one bushel) more of any farm commodity than the wholesale processors require, and the price of ALL we produce will fall to absorb that surplus increment of industry yield.    This is economic truth.

Second:   THE  COST  OF  PRODUCTION
You can divide the dairy industry into two groups:  dairy “farmers”  (those producing the feed their cows will eat)  and milk “factories”  (those who buy all their feed from neighboring crop farmers and commodity brokers).  

Theoretically, the dairy “farmer” should have cost advantages over the milk “factory”, as those crop farmers on whom factory farms depend hope to have a profit margin in the feed they sell to them.    But this logic breaks down once we realize that feed crops also have a “commodity” character.     Milk “factories” avoid the heavy iron capitalization that modern crop farming has.

Third:  CATEGORIES  OF  COSTS
Many years ago the Minnesota FHA district hired a major CPA firm to study their dairy farms, which had the highest levels of defaulting and “troubled” loans of all FHA districts nationally.   The CPAs broke dairy farm costs into four operating units:  (1) producing milk, (2) raising herd replacements, (3) growing forages, (4) growing grains.    The results were:
Producing milk.    High Minnesota production levels generated a 25% profit margin
Raising replacements:    While showing an average 5% profit margin, only half of all the dairies actually raised heifers profitably.     In those dairies cows left faster than heifers could grow up.   (Note this time period was prior to the commercial availability of gender-selected semen.)
Growing forages:   The average farm had a 20% loss, ie, cost more to grow and harvest than their commodity market value.     The CPAs said these farmers had too much machinery cost per acre, compared to the industry average for crop farming.
Growing grains (primarily, corn and soybeans):   The average farm had a 10% loss.    However, the CPAs noted that the loss would have been more like 30% if not for federal crop subsidies.

To summarize, the typical FHA financed dairy farmer made milk OK, but lost more than milk checks generated on his breeding and farming practices.    Household income came mostly from sale of deacon bull calves and culled cows.    (Is that any different than today’s economics?)

Cost control solutions:   GENETIC  SELECTION  for both CROPS and ANIMALS

“Peer pressure” in the dairy industry is that you select from the HIGHEST YIELDING corn, soy, alfalfa and annual forage varieties… just like crop farmers do.    In this, the peer pressure says you FERTILIZE at high levels, to insure the highest yield per acre.    Then we pile all this volume of feed in front of our cows, expecting them to eat more in order to produce more.    Without realizing it, we are buying into the “more yield makes a profit possible”, a direct contradiction of “lower your costs” commodity economics.     
Within plant genetics there is a wide variation in the nutrient density and fiber digestibility of any crop you choose to grow.    The high yielding varieties may require your cow to eat a pound of dry matter for every pound of milk she gives you.    But if you choose more nutrient dense, higher fiber digestibility varieties, you could get 50% more milk per pound of dry matter!!    In fact, you are less likely to run out of feed by spring if you grow the varieties with the highest concentration of available nutrients, rather than chasing after higher tonnages.

                      This is ultimately why we prefer to sell Byron Seeds forages and corn.
After feed, your next major cost is providing replacements.    In traditional dairy designs we had one heifer on hand per cow of milking age.    Heifers today consume 25% of the average gross milk value each cow produces (and in that Minnesota study, 25% was an average profit margin).    This is financially unsustainable, even with current deacon calf and cull cow salvage prices at all time highs.     Cows need to live longer productively than they do today to generate profitability at any level of attained herd average.    

Another way to look at that is, if it costs $ 1642.50 to raise a heifer calf to production (estimate $2.25 per day over 730 days of heifer raising) then it takes $ 6570.00 of milk sales for each one you raise (32,850 pounds of milk at a net $20/cwt you receive from milk checks) when you only get the average 25% profit over production costs.     Note this:  using premium priced gender-sorted semen has NO impact on lowering the cost of replacements.    If anything today getting a salable deacon bull calf generates a lot more income than an extra heifer calf.        

Comparative culling rates:
At 2.5 lactations per cow, you will cull 40% of the milking herd annually.     At this level you will get fewer heifer calves per cow lifetime than is required to maintain herd size.    This is still the national average for dairy farms, explaining why there is a market for gender-selected semen.

At 3.0 lactations per cow, you will cull 33% of the milking herd annually.    At this level, and with good calf management, you may have just enough heifers to maintain herd size.
At 4.0 lactations per cow, you will only cull 25% of the milking herd annually.    At this level you not only have enough heifers, you will produce more milk oer cow from the higher percentage of matured cows producing at matured levels of milk.   Zoetis’ “wellness trait” research says the cows who are still productive at maturity produce 30% more milk  than heifers typically do.

The Genetics Industry has had an obsession over selection for faster maturity of production, and the theories they use to promote Genomic selection have accelerated this.    The CDCI recently declared that they are eliminating “Mature Equivalent” (ME) factoring of lactation records for sire evaluations, basically because the majority of cows today only complete two lactations. The peak lactation yield is their second lactation.    After this, cows of modern genetics are just aging rapidly and production declines.     This kind of genetic selection basically has raised the cost of replacements higher than ever before.     Chad Kreeger, the largest online source for cows in the upper Midwest, says there is a replacement cow shortage, and prices have moved above the $3000 average mark for the first time in his career.

                      This is why we believe in sire selection based on cow family maturity.
                      This is also why we believe in the “aAa” breeding guide.

If you wish to lower your cost of replacements, you have to change your breeding programs so that matings are focused on producing “balanced physiques”  adaptable to ever-changing cow environments; and sire selection is based on “longevity of productivity” so that higher mature levels of lactation production can be realized.     Under this approach, you will again have more replacements than you need (Grandpa’s typical experience) and you can sell the extras at what is now a profitable price over the costs of raising them.    

Cows from these kinds of longevity cow line genetics break the cycle of inbreeding depression that Genomic lines express in their short, higher-cost herdlives.    Your cost of production will go down right alongside costs of reproduction and rearing replacements.    You will become that “least cost” producer whose dairy generates a dependable profit not matter the price of milk.