Spend Matters welcomes a guest post from Mark Kozlowski of Mintec.
With last year’s terrible drought pushing cattle feed prices to a record level, you would be forgiven for thinking that 2012 was a difficult year for US dairy farmers. However, despite widespread reports of herd liquidation from the beef industry, the US dairy herd actually increased marginally year-on-year in 2012, with the total volume of milk produced over 200 billion pounds for the first time.
While the US dairy herd stood at almost 12 million in 1970, it has now shrunk by almost 25% to just over 9.25 million. Yet, the average milk yield per cow has almost doubled over this same period. Since 2003, milk production has increased by 18%, though the size of the dairy herd has held more or less steady, increasing by less than 2%.This trend applies as well to Europe, where dairy cattle numbers are falling while milk production is increasing.
There are a number of factors that have led to the increased efficiency of dairy cattle. One of the most significant is improved cattle nutrition, as better knowledge of nutrition requirements has led to both increased reproductive performance and higher milk production. High-performance feeds for dairy cattle are usually a combination of hay, straw, cereal grains and oil seeds.
Genetics also play an important role in the efficiency of a dairy herd, with Artificial Insemination (AI) becoming common practice on most dairy farms. AI is cheaper and easier than keeping a bull, and it allows the producer to choose from a wide range of bulls to suit the needs of his herd.
Despite increased milk production last year, milk prices rose sharply last summer, in large part due to the increase in feed costs. However, prices began to fall back in Q4 as feed costs began to fall. The price and level of milk production also affects the price of dairy products such as cheese and butter, whose prices closely tracks that of fresh milk.
Current forecasts for 2013 show that the dairy herd is set to fall. Total dairy production, however, is expected to continue rising (albeit at a slower rate than over the previous two years), and hence milk production can be expected to continue becoming more efficient.