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Removing Cows from the Dairy Herd During Changing Market Conditions

Removing Cows from the Dairy Herd During Changing Market Conditions
By Michal Lunak
 
Making a decision to remove or cull cows from the dairy herd involves complex factors. It involves both economic and non-economic factors. Often, barn capacity is the sole factor to remove a cow from or keep her in the herd. When a high number of heifers are expected to calve producers will make space for them. When fewer heifers are scheduled to calve producers tend to keep cows in the herd as long as possible.
 
Maintaining a barn full of cows or a minimum herd size may be the goal to maintain cash flow. However, sometimes producers keep cows in the herd much longer than they should. When a cow’s milk production drops below daily feed costs this can result in significant losses and reduced profitability. At a minimum, a cow should remain in the milking string as long as she is covering her feed costs.
 
A quick way to evaluate a culling decision is to calculate break-even production level necessary to cover feed costs. The formula is based milk price per hundred pounds of milk (cwt) and feed cost per cow per day.
 
The basic formula is:
It is obvious that the break-even milk production will change with changing milk prices and/or feed prices. Table 1 demonstrates different minimum milk production per day with changing milk and feed costs.
 
Table 1. Break-even milk production to cover feed costs per cow per day with changing milk prices and feed costs.
Low milk prices and high feed costs cause higher break-even milk production as it requires more milk production when feed costs are higher or milk prices are lower. For example, when milk price is $12/cwt and feed cost is $6/cow/day, the break-even milk production required is 50 lb/cow/day. Here, the feed costs are a half of the milk price. If the feed cost suddenly increases to $9/cow/day with the same milk price, the break-even production increases to 75lb/cow/day.
 
On the other hand, if the feed costs are steady and milk price increases, the break-even production will be lower. At feed costs of $6/day/cow and milk price $20/cwt the break-even milk production is 30lb/cow/day.
 
When both feed and milk prices increase simultaneously, it is possible that the break-even milk production will be close to the one before market price changes or it will not change at all. For example, if the feed costs increase from $6 to $9/cow/day and the milk price increases from $12 to $18/cwt, the breakeven milk production is unchanged.
 
Feed costs are the largest expense on a dairy operation. Depending on the efficiency of the operation and market conditions, feed costs can account for more than 50% of the total production costs. Cows producing below the break-even amount of milk can be culled or dried off earlier. Daily costs for dry cows are much lower than for cows in the milking string.
 
With fluctuations in both feed and milk prices, evaluation of break-even milk production based on feed costs should be one criteria when culling decisions are made.
Source : psu.edu