By MEGGIE I. FOSTER
Assistant Editor

URBANA, Ill. — With unstable commodity prices and a shrinking milk check, some dairy producers may struggle to meet growing operating costs through the winter months ahead, according to University of Illinois dairy specialist Mike Hutjens.

“The most dramatic change for dairy producers in the last few months has been in feed prices,” said Hutjens, who added that corn has dropped from $7 per bushel to $4 per bushel, with soybean and byproduct prices following closely behind. “Is this good news for producers, yes and no. It’s not good for milk prices, which has dropped $2 (per cwt.) each month, but it does help ease the cost of feed, which is 50 percent of a producers overall operating cost.”

On the contrary, Hutjens said that Class III milk prices have dropped from the $19-$20 range this past summer to $17.50 per cwt. and he worries the current trend will drop the Class III milk price to near or below $15 per cwt. in December.

On a typical 100-cow dairy in Illinois, Hutjens estimates that $18 per cwt. is needed to cover general operating costs.

“Our costs have increased so much in the past year and a half, so much more dramatically than the price of milk,” said Boyd Schaufelberger, a dairy producer from Greenville, Ill. “Not only the cost of feed, but also repairs, parts and utilities such as fuel have really driven up the cost of doing business.”

“The good news for Indiana and Illinois producers is they can put a $1-$2 premium on that with higher quantities, richer quality, including higher butterfat and protein.”

In order to stay afloat of the volatility, Hutjens best advice to producers is to cut costs and increase volume of production.
“There is no magic answer here, producers need to take a hard look at their cost of production, see where the prices are headed and try to increase their milk volume,” he said. “The worst thing producers could do right now is pull minerals out of their feed rations. Minerals are not an area to cut corners, they are an essential part of a dairy cow’s diet, especially if you expect any sort of productivity.”

An area of cost-trimming producers could possibly look at, Hutjens said, is feed additives.

“Feed additives are on the bubble, revisit them. An additive such as mycrotoxin binder prevents mold in silage so there is a risk there. Also, Rumensin increases feed conversion, reduces lactic acid buildup and reduces bloat risk.

“I don’t care what the milk price is, increasing feed efficiency is still a no-brainer. With feed additives the important thing is that they are delivering what you want them to.”

Schaufelberger, who owns a 100-cow registered Holstein herd in southern Illinois, said he doesn’t plan to do anything drastic, but offset some of the increased costs by continuing to operate his crop enterprise.

“Between the grain market and dairy farming, it more than offsets the increased costs of the dairy, it really helps spread out our risk a little bit,” added Schaufel-berger.

Additionally, Schaufelberger said he hopes to increase his volume of production, by increasing his cow numbers by 10 percent within the next 12 to 24 months.

“One way to do that is to grow within the herd, bringing more young heifers into production, and culling fewer older cows,” he said.
Hutjens worries that smaller 40, 50 and 60-cow dairies will suffer the most from reduced milk prices this winter.

“Some guys are going to have to decide if they want to milk for fun or sell the cows and get out of the business,” he noted. “Luckily a lot of smaller producers in Illinois also farm some of the most productive farmland in the Midwest, so they could decide to focus on the land and not work themselves 24/7 milking and farming.

“Larger herds may be able to survive through this until next summer, but the average-sized guy may be forced out.”

If that happens, and Hutjens expects some producers may take advantage of the Cooperatives Working Together (CWT) herd buyout program, the milk supply will be reduced and prices will improve. “But for now, it looks pretty ugly until late next spring,” he cautions.

Through the CWT’s voluntary herd retirement program, managed by the National Milk Producers’ Federation, producers wishing to get out of the dairy business can bid to have their cows removed from milk production.

For more information about CWT, go online at www.cwt.coop/index.html

But for producers not willing to give up so quickly, Hutjens offered another suggestion for reducing costs.

“The second most expensive aspect of milking cows is raising heifers,” he added. “So you could look at having someone custom raise your calves, or look at heifers that you aren’t getting bred and you’re wasting good semen on.

And yet another idea for producers to fight through the dairy storm is to cut “your own personal income,” he said.
Midwest budget guidelines for a family of four is suggest an income of $50,000-$55,000, so they might be able to adjust this lower for that this year. Basically you may need to reduce your costs or work for less.”

For producers looking for more answers, Hutjens encourages them to attend Illinois Dairy Days, focusing on economic expectations, a program scheduled for nine locations throughout the state of Illinois in January 2009.

“To help producers make correct management decisions, it is vital to have the latest information at hand,” he explained. “That is the driving idea behind this one-day program to help producers make the most of their resources and remain a productive part of the dairy industry.”

For registration details, visit http:// web.extension.uiuc.edu/adamsbrown or call Hutjens at 217-333-2624.

“I’ve been in this business long enough to know there is a cycle of profitability and loss, but we do our best to weather the cycle,” Schaufelberger explained. “In time profitability will return, but right now that’s not the case, so it’s time to tighten the belt where we can. No matter what happens, I think in the long term, the state of the dairy industry will sustain and continue to be competitive in the global marketplace.”