High Feed Prices Force Tougher Management Decisions on the Farm
April 28, 2021
When the feed truck pulls into Blanchard Family Dairy located in Charlotte, Iowa, owner-operator, Mitzie Blanchard takes a big sigh, knowing that another expensive bill is coming her way. With the feed truck coming every other day, the bills are nonstop.
Blanchard and three of her sons: BJ, Brian and Brent, and her nephew, Seth, have a herd of 1,300 cows, the majority of which are Holstein-Jersey crossbreds. The family also farms 1,300 acres, mostly corn, alfalfa and triticale, all of which goes back to feed the herd.
Blanchard says that she knows many other dairy producers can relate to the struggle of managing high feed costs, but at the end of the day, the cows still have to eat. "You can only make so many changes to the ration without it significantly impacting your production."
Cody Koster, a dairy risk manager with ever.ag, recommends dairy producers lock in feed prices if they still can. "Some companies will only let you lock feed prices in for a few months out, but I would still encourage producers to do that and also look at purchasing futures through the CME to protect yourself on the other end against these high feed prices."
Blanchard got burned with contracts she had last year due to high negative PPD's that were subtracted off her contracted price. "For every penny we received from government-aid last year, we lost in negative PPD's," Blanchard says. "If we had not received government money, we would not have made it."
Previous years allowed Blanchard to not worry about contracting grain, but 2021 spells a different scenario. "We are feeling the boom with these high grain prices and for now, we are just riding it out. Thankfully we do have some commodities locked in," Blanchard states.
Koster shares that his client's feed cost has dramatically increased anywhere from $1.25 to $1.75/cwt year-over-year; a majority of that increase coming since November. “For producers that need to purchase feed, it will certainly be a difficult year.”
Reevaluating the true cost of production is a must, according to Koster. "There is a big difference between cost of production and break even. Other areas can help you break even, whether that is selling beef cross calves or surplus breeding stock and especially for those guys who cash crop and can capitalize on the market," he adds.
While the Blanchards have capitalized on selling both beef-cross calves, as well as selling fresh young cows, they are also putting an extra sharp focus on culling decisions. "Our cull rate has nearly doubled since last year," says Blanchard, who sells to Prairie Farms, and is faced with a quota limit. "Trying to analyze how to manage feed costs and cut production is a double whammy."
Due to her quota limit situation and the rising feed cost, Blanchard has been forced to take a different approach to culling. The farm’s culling strategy used to be, "ship cows that don't pay their way." However, Blanchard shares that philosophy used to work and also allowed them to increase milk production, as cows were less crowded. "That philosophy doesn't work for us anymore," Blanchard says.
Today, Blanchard's culling strategy is to get rid of pounds of milk, which strategically must be well executed. "We need to get rid of milk, but we also have to get rid of heads to be fed."
As of last Thursday, cow slaughter is down 6.3% in the U.S., but according to Koster when you delve into cow slaughter regionally, the numbers drastically change. He reports that dairy slaughter has increased by nearly 13% in the Midwest and a handful of east coast states year-over-year.
A producer might question if they are better off losing some money milking a cow or losing more money feeding her as a dry cow, but Koster replies its farm-by-farm on what's best. "The follow-up question probably should be what kind of calf is she carrying. If you can get a $250 black calf out of her, she is worth keeping, even if you’re losing money on her in the short run," Koster replies.
While Blanchard has dried a few cows up earlier, she says that is a slippery slope because cows with a long dry period are at risk for having issues. "In the short term, it might work to dry low-end cows up earlier, but it just becomes a bottleneck that causes more problems in the long run," Blanchard says.
Earlier this year, Blanchard sold a lot of fresh two-year-olds for breeding stock to reduce their production. "This only works so far," Blanchard states. "You cannot afford to sell the future of your herd." The Blanchards now are forced to approach culling from a different angle; as they find the best solution to get rid of milk, but also reduce the number of cows they are feeding. "We really have to look at cows that don't have a long future in the herd and make that decision as quick as possible because she is costing us money every single day," Blanchard shares.
Blanchard, who currently is shipping 5,000 pounds a day over quota, is taking a harder look at culling the bottom 10% of her herd. "Culling the bottom end does not decrease milk production much, but it does save us a few dollars in feed costs," Blanchard says.
The best advice Blanchard offers to other producers faced with the same situation is to talk to your lender and continue doing what you do well—taking good care of your cows. "And stop spending money elsewhere, that is not needed."
Koster says that dairy nutritionists are working over-time trying to help come up with solutions to high feed costs. He also suggests calling on your dairy's outside team members who can help fine-tune the tough management decisions, like culling, that need to be made, especially now when faced with high feed costs.