Dairies Are in a Cost of Production War
The rise in feed costs has made it a bigger challenge for dairy farmers to manage input costs. Recently Mike North, president with ever.ag, spoke with Chip Flory on AgriTalk at World Dairy Expo and said that yes, feed prices are obviously much higher than in years past and it’s going to be that way for some time to come.
“Frankly, feed costs are going to stay elevated, at least in my opinion, until next summer, as we start to entertain what the stocks are looking like going into 2023,” North says.
With dry conditions in Argentina and the uncertainty with Ukraine, North says it is hard to tell what the situation will look like until next summer.
“We're going to have elevated cost. Although protein might be a little bit of a different story,” he adds.
North says that a bit of inventory relief stems from a decent-sized canola crop from Canada, coupled with a slightly bigger balance sheet for beans.
“We might get a little bit of relief on that front, but corn is still going to be expensive in the eyes of the theater,” he says.
Producers have continued to feel the pains of higher labor costs and an overall higher operating expense sheet. The golden question is, ‘What is the magic milk price that can equal profit?’ North says that geographical location plays a factor in answering that question.
“As you go further west, you get into the Southwest especially and it’s not hard to find $23 cost of production,” he says.
Problems like water scarcity, running low on feed and higher freight bills to get that replacement feed aids to a higher cost of production.
“Labor is short and the environmental pressures are high,” he says. “It's a very expensive environment to operate in. We're feeling some of those ripples back here in the Midwest, too.”
North says that wages have increased 40% on the farm which makes dairies feel like they are in a cost-of-production war. Factor in feed to labor to pharmaceuticals to milking gloves and beyond - everything costs more.
Managing feed prices and all rising input costs is becoming not only a high priority for dairies across the U.S., but also a cost of production war that many producers are trying to win.
October 6, 2022