With June Dairy Month arriving, dairy managers are recording huge financial losses; 2009 will not be a "kind" year for dairy farmers. Milk prices dropped nearly 40 percent starting in January reaching less than $12 per one hundred pounds (cwt) from $18 in December, 2008. To cover all production costs (feed, non-feed, and labor), Illinois dairy managers need $16 to $18 per cwt depending on herd size, debt load, labor efficiency, and feed costs. From February to June, 2009, the average Illinois dairy farm with 105 cows is losing over $10,000 a month (larger southwestern U.S. dairy farms lost over $300,000 a month).

Reasons for these huge losses include a decline in foreign exports (11 percent of U.S. dairy products were exported in 2008), stronger U.S. dollar (reduces export while raising costs), decline in the U.S. and world economy, and less dairy products being consumed with reduced incomes and job losses).

Illinois dairy managers have few alternatives to reduce daily losses on the farm. Feed costs represent 60 percent of the cost to produce milk. With a new forage crop year started, any and all ways to increase forage quality and quantity in dairy rations will be a plus. By-products feeds such as corn gluten feed, wet brewers grain, and distillers grain are "good" buys replacing soybean meal and corn as nutrient sources in rations while reducing feed costs. Illinois feeding guidelines include less than $6.50 per cwt of milk, target feed cost below nine cents per pound of dry matter, and raise feed efficiency over 1.6 (pounds of milk per pound of dry matter consumed). Carefully review feed additives included in ration; silage inoculants, monensin, buffers, yeast products, and organic trace minerals are excellent investments. Do not pull nutrients from the ration reducing milk yield, decreasing health and immunity, and/or lower fertility.

Several opinions are available for Illinois dairy farmers to reduce losses.

• MILC (Milk income loss contract) is a government sponsored program that provides some relief for smaller dairy farms (less than 150 cows). If the dairy manager has enrolled in the program, she/he received $1.51 per one hundred pounds in February, $2.04 in March, and $1.49 in April.
• Future milk prices (based on the Chicago Mercantile Exchange) are increasing in the summer with $15.00+ per cwt listed for October, November, and December (better, but below break even milk prices).
• Cooperative Working Together (CWT) has launched another herd buy-out programs reducing cow numbers by paying some dairy farms to leave the dairy industry. This project is funded by dairy farmers using check off funds in an attempt to reduce cow numbers and milk supply (there is an excess of 300,000 dairy cows currently in the U.S. leading to surplus milk).
• In some stores, the price of milk has dropped 50 cents a gallon while other dairy products remain constant. As consumers respond with more milk and dairy purchases due to lower prices, this helps to reduce surplus levels.

Other "wide card" factors will be the growing conditions in the summer dictating forage amounts and quality, price of corn and soybean meal in the fall related to ethanol production and yields, heat stress on dairy cattle which could reduce milk yield, world demand for dairy products and feed grains, and water restrictions in the western states (nearly 50 percent of the U.S. milk is produced in this region).

The 2008 report card for the Illinois dairy industry compared to 2007 is concerning as the average Illinois dairy cow produced 18,569 pound of milk annually (down 0.2 percent) while the U.S. average is 20,396 pounds per cow (up 1 percent). Illinois produced 1.89 billion pounds of milk (dropped 1.2 percent) while the U.S. dairy industry produced 289.9 billion pounds (up 2.3 percent). Illinois has 984 dairy farms (down 5.3 percent) compared to the total of 57,127 (down 3.4 percent). Illinois ranks 20^th in total milk yield, 21st in cow numbers, and 25th in milk yield per cow. Illinois dairy farms produces less than 30 percent of the milk and dry products consumed by Illinois consumers and continues to loss jobs and market share while having an abundance of feed and a huge consumer market base.

Take-home messages for Illinois dairy managers are to minimize equity losses, review feeding programs using economical feed ingredients, produce high quality milk leading to quality premiums, maintain high milk yields, and do not make "wrong" decisions in this summer (not getting cow pregnant or slow heifer growth for example) that results in long term negative impact in 2010. Dairy farming is a business; make smart business decisions and hang on as the dairy future looks favorable.

June Dairy Month is here and consumers have good news! The cost of dairy products has dropped in many markets as the price paid dairy farmers has dropped 40 percent at the farm gate (50 cents a gallon). While dairy managers are facing huge losses ($10,000 a month with a herd of 100 cows), consumers can buy milk in the Midwest below $2.50 a gallon and butter below $2.50 a pound. June Dairy Month focuses on dairy products, new dairy product recipes, and exciting displays in the dairy case.

Dairy products remain popular as they contain high quality protein with all essential amino acids and whey proteins important in weight control and loss. Milk contains high levels of calcium, potassium, magnesium, and phosphorous. A calcium deficiency called osteoporosis (bone deterioration) continues to be challenge to older U.S. consumers; 73 percent of calcium in a balanced diet can be provided by milk and milk products. Daily U.S. dietary guidelines include two serving of dairy products for children from 1 to 8 years of age and three dairy servings for children over 9 years of age and adults.

If you were the average U.S. consumers in 2007 (last year of available data), you consumed 81.5 pounds of reduced or low fat milk, 54.8 pounds of whole milk, 37.8 fat-free milk, and 17.9 pounds of flavored milk (total of 20.7 gallons a year). You also ate 31.9 pounds of cheese, 21.2 pounds of ice cream, and 4.4 pounds of butter. Dairy product "winners" in 2007 included a 4.8 percent increase in yogurt, 3.9 percent increase in source cream and dips, and 2.6 percent increase in cheese. Dairy product "losers" included a decrease of 7.4 percent in eggnog consumption and 4.8 percent decline in whole milk. These trends indicate changes in dairy products reflect consumers wanting lower caloric products such as yogurt, but sour cream and dips reflect flavor and snack choices. The advantage of a wide variety of dairy products allows consumers to pick their favorite dairy product based on fat content, caloric intake, flavor, taste, cost, and food recipe alternatives.

Consumer dairy choices, controversy, and prices enter in the shopping cart selection process. Another choice is the method of milk production on the farm. The first quarter of 2009 national American Farm Bureau Association supermarket price summary reported organic milk cost $3.71 a half a gallon, rBST labeled milk (from cows not inject with bovine somatotropin) at $3.19 per half gallon, and conventional/"green" milk at $2.16 per half gallon. "Green" milk is produced by dairy farmers using all approved technology to produce milk leading to a lower carbon footprint and more efficiency (more milk per cow at a lower cost to produce the milk).

Currently dairy farmers receive $11 to $14 per one hundred pounds while the cost to product this milk will range from $15 to $18 per one hundred pounds depending on region in the U.S., feed costs, herd size, and investments needed to house and management cows.

Supermarkets continue to be the primary source of purchasing milk (72% of all milk sold) while drug stores sell 3 percent of all milk sales. Federal school programs utilize 5.6 percent of all U.S. sales. Italian cheese is the most popular type of cheese at 14 pounds (total 31.9 pounds). No dairy products were purchased in 2007 by the government milk price support program. Mexico was our largest foreign customer to import dairy products. The U.S. exported nearly 11 percent of all 2008 dairy production with record exports improving the U.S. balance of payment.

The 2008 U.S. dairy industry had 57,127 dairy farm operations (a decline of 4.4 percent compared to 2007) with 9.32 million cows (up 1.4 percent compared to 2007) producing 189.9 billion pounds of milk (up 2.3 percent compared to 2007) averaging 20,396 of milk per cow annually. In comparison, the European Union of 27 countries has 24.3 million dairy cows producing 12,015 pounds of milk per cow. The continued improvements in efficiency in the U.S. dairy industry reflect higher milk yield per cow resulting in lower priced milk and dairy products for U.S. consumers.

This presentation is in conjunction with the PEAQ project.

This presentation is in conjunction with the PEAQ project.

The dairy industry is closely monitoring the H1N1 flu virus and potential implications for the U.S. livestock community. Both the U.S. government and World Health Organization (WHO) have stopped using the term "swine flu" to avoid confusion over the link to pigs. The influenza subtype involved in the outbreak is unique and not previously recognized in either pigs or people. The H1N1 virus is not transmissible to cattle, and cattle are not reservoirs of the virus, as swine and birds can be.

The dairy industry has responded to inquiries about the impact of H1N1 on the dairy supply chain. Below are talking points to help you address any inquiries from industry contacts and dairy producers.

1. The dairy industry is closely monitoring the H1N1 flu outbreak.
   • The dairy industry is working closely with our partners in government and agriculture to identify potential implications for the U.S. livestock community.
   • The dairy industry is posting H1N1 situation updates at www.dairyresponse.com – a resource for dairy farmers on animal health/animal disease outbreaks.
   • To date, no government recommendations have been directed toward dairy producers.
2. The dairy supply chain is safe.
   • There is absolutely no link to cattle, either in Mexico or the United States.
   • The virus is NOT transmissible to cattle, and cattle are not reservoirs of the virus, as swine and birds can be.
   • Raw milk is stored and transferred in closed systems, and pasteurization would kill the virus if it ever came in contact with milk.
   • Once pasteurized, milk is immediately packaged and is not subject to contamination.
3. The food supply remains safe.
   • H1N1 flu is not transmitted via food, according to the U.S. Centers for Disease Control and Prevention and World Health Organization. This includes the meat from pigs or chickens, or dairy products from cows.
   • This is not an animal health or food safety issue according to U.S. Department of Agriculture.

This presentation is in conjunction with the PEAQ project.

This presentation is in conjunction with the PEAQ project.

Milk Outlook

Milk prices continue to be a challenge, but the MILC program provides some assistance to smaller dairy managers as the February payment was $1.51 and March may be $1.93 to $2.06 per one hundred pounds (cwt). The Chicago Mercantile Exchange futures prices (class III) have also improved with May listed at $11.40, July at $13.37, September at $15.00, and November at $15.23 per cwt.

Continue culling unprofitable cows (under 45 pounds of milk) and fine tune input costs. Cull cow prices remain stable at 44 cents a pound as more cows go to market.

Another CWT herd buy-out program has also been announced with sign-up this spring until May 1st. A larger number of farmers are expected to submit bids deciding to leave the U.S. dairy industry. Dairy managers submit a price per 100 pounds of milk. If selected, they sell their herd of dairy cows as cull cows and can also sell replacement heifers. If the dairy manager enters the program, she/he can not re-enter dairy industry for one year.

Dairy Webinar 1: Managing the Dairy Replacement Herd

"Managing the Dairy Replacement Herd" webinar is designed to address the importance and renewed interest in heifer management. This heightened awareness is due to higher costs of raising heifers, the increased demand for higher milk production in younger cows, and the need to improve dairy cow longevity resulting in greater total productive life. The webinar will discuss the importance of quantity, quality and timing of colostrum intake, acquiring and monitoring suggested heifer growth rates, review of production costs, and improving the health and productivity of the replacement as a dairy cow. The profitability of dairy replacements can be significantly credited to the growth and health conditions in their first 22 to 24 months of life. The 40 minute webinar presentation will be conducted by Dave Fischer, Mike Hutjens and Dick Wallace, U of I Extension Dairy specialists.

Title: Managing the Dairy Replacement Herd

Date: Wednesday April 8, 2009

Time: 12:00 PM – 1:00 PM CDT

Register at: http://tinyurl.com/DairyReplacement

Dairy Webinar 2: Strategies for Cull Cow Management: Reducing your Risk of Antibiotic Residues.

The third University of Illinois Dairy Webinar is scheduled for May 1st from noon to 1 pm CDT. "Strategies for Cull Cow Management: Reducing Your Risk of Antibiotic Residues" is designed to address current issues in cull cow management. The heightened awareness of animal welfare issues with cows sent to slaughter and the potential for antibiotic residues in cull cows is driving this webinar. Following the National Milk Producer's Federation Top 10 Considerations for Culling and Transporting Dairy Animals to a Packing or Processing Facility will be discussed. Evaluating options for on-farm feeding of non-lactating market cows will be presented. The 40 minute webinar presentation will be conducted by Dick Wallace, Dave Fischer and Mike Hutjens, U of I Extension Dairy specialists.

Date: Friday, May 1, 2009

Time: 12:00 PM – 1:00 pm

Registration at: http://tinyurl.com/CullCowMgmt

With the arrival of 2009, dairy managers will be facing significant economic challenges. Milk prices at the farm gate will decline over 30% or $5 to $6 per one hundred pounds (Nov, 2008 was $19/cwt; Feb, 2009 may be $13/cwt). Reasons for this decline include the recession in U.S. and world dairy economies, stronger U.S. dollar, decline in eating out, and less export of dairy products.

Strategies to consider include:

1. Lower feed costs may replace $1.50 per cwt
2. Explore the use of by-product feeds to reduce feed costs (target 9 cents per pound)
3. Maintain milk yield and milk components
4. Increase quality premiums
5. Sign up for the MILC (milk income loss contract) can provide $1.20 to $1.50 per cwt

Consumers may see a drop of 50 cents per gallon as dairy farmers receive 5 to 6 cents less per pound of milk (8.6 lb of milk in a gallon of milk). Cheese prices could also drop 50 cent a pound, butter could decline $1.00 per pound.

With today's current milk prices and imput costs, Illinois dairy managers could lose $100 a month per cow. The average Illinois herd size is 102 cows representing over $10,000 loss per month. It may be summer, 2009, before milk prices increase return to break even prices.

The theme for the 2009 Illinois Dairy Days will be "Economic Expectations". Nine regional meetings will be held across Illinois to provide the latest research results and extension recommendations in a fast pace format. Titles and speakers are list below.

Feeding Challenges with Today's Milk Price—Mike Hutjens
Managing the Replacement Herd—Dave Fischer
Evaluating Economic Alternatives—Jim Endress
Economic Implications of Cull Dairy Cattle—Dick Wallace
Dairy Updates

• Impact of Technology on the Dairy Carbon Footprint—Mike Hutjens
• Manure—A Valuable By-Product—Dave Fischer
• Livestock Gross Margin for Dairy—Jim Endress
• Herd Health Update—Dick Wallace

Meetings start at 10 am (the Jerseyville meeting (Jerseyville meeting at 7:30 pm) and end at 2:30 pm with commercial booths. A registration fee and meal charge will be collected at the door. Copies of the 2009 Illinois Dairy Report will be provided free this year as industry companies have donated funds to support the publication. Visit the website at: http://www.livestocktrail.uiuc.edu/dairynet and click on calendar of events.

El Paso at the Community Center, Thursday, January 8
Arthur at the Yoder's Country Kitchen, Friday, Jan 9
Quincy at the Adams County Farm Bureau Building, Tuesday, Jan 13
Jerseyville at the Super 8 Motel, Tuesday night, Jan 13 (7:30 pm)
Okawville at the Community Club Building, Wednesday, Jan 14
Breese at the American Legion, Thursday, Jan 15
Elizabeth at the Community Center, Tuesday, Jan 20
Freeport at the Highland Community College, Wednesday, Jan 21
Harvard at the Stratford Inn, Thursday, Jan 22

Livestock Gross Margin Insurance for Dairy (LGM-Dairy)

The LGM-Dairy for Illinois dairy farms became available in August, 2008. It is a federally reinsured dairy insurance program run through the U.S. crop insurance program. It provides protection against unexpected declines in milk prices and increases in corn and soybean prices (defined as gross margin). No producer premium subsidy is available and dairy managers pay a premium. The allowable deduction amounts range from zero to $1.50 per one hundred pounds in 10 cent increments. Premiums depend on the amount of coverage selected, producers marketing plan, futures price, and price volatility. Advantages of the program include convenience to sign up, customization with flexibility on coverage, bundled options, no brokerage account, simple to enroll, guaranteed pricing, and availability in Illinois (32 states are eligible for this program). Dairy managers can study this program by going to these websites.

http://future.aae.wisc.edu.lgm_dairy.html (underline between lgm_dairy)
http://www.rma.usda.gov/livestock
http://www.uwex/ces/dairymgt/dairy.cfm

Marking Correct Feed Decisions

With milk prices dropping and feed prices changing weekly, dairy managers are making key decisions that impact profit margins. While "cheaper" feeding programs can be a plus, making correct decisions will be important. Three "golden rules" are listed below that apply when considering and/or making feed changes.

• Golden Rule #1: Never give up milk yield as income will be reduced faster than expenses. At today's feed prices, one pound of ration dry matter may cost 9 to 11 cents. One pound of dry matter can support 2 to 2.5 pounds more milk for Holstein cows (one pound above maintenance or the last pound of dry matter removed or added). By not feeding one pound of dry matter results in 10 cents savings, but this decision results in losing 36 to 40 cents of milk income per day per cow.
• Golden Rule #2: Maintain milk components, especially milk protein which is worth $3.27 a pound. Milk fat is valued at $1.82 a pound (September, 2008 prices). Low milk components can reflect changes in feeding program and/or reduced rumen function.
• Golden Rule #3: Guard against feed changes that affect the dairy herd long term (for example reduced fertility, heifer growth, and herd health). While milk response can be response after correcting over several weeks, getting cow pregnant and reducing somatic cell counts can take months to improve.