Charmed by its endless sunny days and warm weather, you can't help but think that everything is bigger and better than anywhere else, California makes you rethink dairy production and see things differently. Recently, as I walked alongside a group of dairy farmers from Club Select 500 while visiting large-scale farms, I couldn't help but notice that all is not as good as it seems in the golden state.
In fact, one week of spring rains left the animals deep in mud and the fields completely inundated. The year 2011 has so far been far from ordinary with water accumulations 25% over and above any other year. But there is good news in the medium term; the land won’t need as much irrigation. In the short term however, flood waters are reason for concern: Bedding is drenched and keeping a low leukocyte count is a real challenge. Furthermore, the first hay cut has been postponed and the bad weather will have the same impact on sowing silage corn.
In 2009 and in terms of production, the price of milk went below $10 for 100 lbs ($22 per hectolitre) for several months. The result: 5% of California’s dairy farms ceased their operations and several others experienced serious financial problems. It’s sad to see stables that could house more than 5,000 cows completely bare!
Thankfully, the dairy market has since recovered. A Holstein farmer from California can now make around $18 for 100 lbs of milk, which is equivalent to $40 per hectolitre. And in the US context, this is very good, but in parallel, production costs have gone up, just like it has here, with the price of corn now at over $300 a metric ton and a significant increase in the cost of protein sources.
What can be learned from this? Well, now more than ever, these farmers are forced to rethink the cost effectiveness of their farms by focusing on superior productivity. In fact, their employees are given a bonus based on the business’ profitability – notably in terms of milk quality (a leukocyte count under 200,000), a low calf mortality rate and infrequent metabolic disorders for cows in transition. All of these factors affect the business’ profit margins.
A single week of rain in the vast land of dairy – with all of the ensuing consequences – helps us understand the challenges we face, regardless of where we are on the planet. And this is where lies the importance of aiming for greater cost-effectiveness on the farm, focusing on lucrative activities that can maximize the net margin and if necessary, diversifying sources of income. Could you even imagine a drop in milk prices, from $15 to $10 per hectolitre? This is an opportunity to have programs that support our sector, but we can’t lose sight of the markets and more specifically, we must remain competitive to make sure that we can deal with the unexpected.