From the parlor pit 9-23

[jrsiajdranch]

We have gotten about a half inch of rain this morning and look to get more, so I have a little time to catch up on some reading and thought I would post some things from a NASS report released yesterday.  I want to warn you the report is a wake up call to the direction our industry is headed.  It also details why we feel so punch drunk.

I think it is a very good look back at the previous 9 years and that is something Goverment does well.  Goverment doesn't do well at looking to the future.  We as farmers are often thought of as eternal optimists but I think gov. has rose colored glasses permantly applied as their lenses.

Here is a link to the whole report.

http://usda.mannlib.cornell.edu/usda/current/USDairyIndus/USDairyIndus-09-22-2010.pdf

I am now going to pull out some of what I thought where the money quotes.

Quote 1.

Although the overall number of milk cow operations has declined since 2001, the number of operations with 500 or more head of milk cows has increased. Since 2001, the number of operations with 500 or more head increased by 20 percent, from 2,795 to 3,350 in 2009 (Graph 1). The largest size group, places with 2,000 or more head, showed the greatest percentage change from 2001, increasing from 325 places in 2001 to 740 in 2009, a gain of 128 percent (Graph 2). While larger operations were growing in number, smaller operations declined in number. Places with less than 500 head went from 94,665 in 2001 to 61,650 in 2009, a decline of over 33,000 operations, or 35 percent (Graph 3).
As large operations have become more numerous, the share of inventory accounted for by large operations has also increased. In 2009, operations with 500 or more head accounted for 56 percent of total milk cow inventory compared with only 35 percent in 2001. Operations with 2,000 or more head accounted for 30 percent of inventory in 2009, up from only 12 percent in 2001. Places with less than 500 head accounted for 44 percent of total milk cow inventory in 2009, down from 65 percent in 2001 (Graph 4).
As with inventory, the share of milk production accounted for by large operations has steadily increased. Operations with 500 or more head accounted for nearly 60 percent of all milk produced in 2009, up from 39 percent in 2001. Production on places with 2,000 or more head has increased from only 13 percent in 2001 to 31 percent of total milk production in 2009. Smaller operations continue to produce a smaller share of production. Places with less than 500 head accounted for nearly 41 percent of milk production in 2009, down from 61 percent in 2001 (Graph 5).

Quote 2

Over the last decade, the United States average annual all milk price has fluctuated between $12.18 to $19.21 per cwt (Graph 11). Since 2005, the general trend in the annual milk-feed ratio has been down due in large part to increased feed costs, although low milk prices in 2006 and 2009 were a major factor (Graph 11). The price of corn increased by 110 percent from 2005 to 2007, while the price of alfalfa hay increased by 59 percent from 2005 to 2008 (Graph 12). Corn, alfalfa hay, and soybeans are common ingredients of a typical dairy ration. Corn and alfalfa hay are the primary feed items used to calculate the milk-feed ratio, while soybeans are a smaller component of the ratio calculation. The milk-feed ratio is the pounds of 16 percent protein mixed dairy feed equal in value to one pound of whole milk. In other words, the milk-feed ratio is an indicator of the quantity of 16 percent mixed dairy feed that can be purchased with a pound of milk. The milk-feed ratio is considered an indicator of the profitability of milk production. If the ratio is equal to 3.0 or greater, it is generally considered profitable to buy feed and produce milk. The last time the annual milk-feed ratio was at 3.0 or greater was in 2005. In 2007 and 2008, despite an all milk price that reached historically high levels, the milk-feed ratio still remained below 3.0 because of high feed prices (Graph 12). The milk-feed ratio dropped again in 2009, despite lower feed prices. The decline in the milk-feed ratio was primarily due to a 30 percent drop in the all milk price from 2008 to 2009.

Here's the money quote #3

The milk-feed ratio, an indicator of the profitability of milk production, has been on a general downward trend since 2005 due to a combination of higher feed prices and lower milk prices.

What does all this mean?  I am not entirely sure.  I have seen the trends which describe in detail,   the larger farm size and the continuing shift to the western states of America.  I know that on average that the larger farms with their ability to adopt and implement technology are certainly larger producers but I am not entirely certain they are more efficient.  I still think (or hope) that there is a place for the smaller midwest style of dairy farm.  The problem with them is this the larger farms as a whole have a much younger work force from management on down to laborer than does the typical small dairy.  Therefore as the small dairy continues to go out of business it is a fact that large dairies will predominantly be the ones to engulf those cattle. 

I do not set trends and in most cases I let others be the first users of technology to work out the bugs I would say I am the third wave of folks who jump on the band wagon.  These larger farms are usually first to expiriment because they have a resource that will allow them to use technology first and then improve yields in the modern confinment system to allow for more milk.   And in all honesty right now they scare me to death!  I enjoy milking my 100 or so cows,  I enjoy doing the majority of the labor,  I enjoy the working with family,  I may enjoy myself right out of business if this keeps up though. 

Now mind you I am not depressed or downhearted I am just looking at facts.  And the facts don't look good for an under 500 head dairy.  And in fact in the most recent downturn the 300 - 500 cow dairy was the most vulnerable.  I am sorry for such a long post today I hope the info keeps you informed.

Here is one last little story though about the milk wars of north texas.

http://www.wfaa.com/news/local/Milk-price-war-breaks-out-in-North-Texas-103406824.html

BTW if you were to say that there is 9 LBS. of milk in a gallon of milk that would work out to 11/CWT

ALdi's and the other stores are taking a bath.  BUt like the spokesman said they are using it as a loss leader and hoping to make up the loss with other sales.  I wish that would happen nation wide then we could get this milk used up.  Thers a thought why not increase demand instead of decreasing supply?  BE SAFE. JR