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.