The last six months or so haven’t been particularly great for dairy farmers as milk prices have been much lower than a year ago. The “mailbox price” of $24 or so per hundredweight that farmers saw in 2014 seemed like a distant memory in 2015 as prices bottomed out at $15 or even less for some farmers in the Northeastern U.S. The good news is that Class III milk futures suggest that the first third of 2016 may well have been the worst for milk prices due both to the domestic and the international supply-demand situation.
China has become the elephant in the corner of the room, especially now that the dairy market has become truly global. Most of the milk sold there is powdered milk. I was in Northern China a year ago and toured a soon-to-be-opened milk plant that was going to make powdered, as well as a modest amount of fluid, milk, and the plant was as modern as any in the U.S. But even with new processing plants it’s unlikely that China will be able to keep up with the growing demand for dairy products, and that’s good news for dairy farmers.
That said, dairy farm economics is more influenced by past events rather than what the near future holds in store. Therefore, even with lower fuel and fertilizer prices in 2016 and no significant increase in the price of seed corn and forage seeds, many farmers need to focus on cost control this spring. Following are some ways to maintain good crop yield and quality while reining in expenses.
1. Fertilize the crop, not the field
There are many crop fertilization strategies, some costing much more than others. One strategy is to fertilize the field, attempting to increase the soil analyses of all essential nutrients to high levels. This can be a very expensive way to grow crops, especially if you’re starting with low soil fertility. Though in some cases – including seeding alfalfa-grass – it’s important to have adequate soil test potassium levels, other plant nutrients including phosphorus can be more efficiently applied at planting. I remember a Cornell University trial at Miner Institute (Chazy, New York) where the agronomists discovered that when establishing alfalfa, 1 pound of phosphate fertilizer applied in the fertilizer band at seeding produced the same results (in stand establishment and forage yield) as 5 pounds of the same fertilizer applied broadcast and disked into the soil prior to seeding. However, on most dairy farms there’s a lot more phosphorus coming onto the farm as feed than leaving it as milk, meat and crop sales, and this has been the situation for many years. This results in what’s called a “positive phosphorus balance.” Since most dairy farms have a positive phosphorus balance, the soil test P level should be increasing. These increases are often slow since some of the phosphorus is tied up by the soil and not detected by any of the common soil test extractants.
Applying manure as a slurry or liquid makes manure much more useful as a nutrient source. That’s because you can apply it at a fairly high rate without having to worry about burying your forages with straw or other used bedding. For the last 20 years that I managed the Miner Institute crop operation, we didn’t apply phosphorus fertilizer to any alfalfa-grass or grass fields, relying entirely on topdressed manure as the nutrient source. And depending on the soil test P status of the field, we sometimes didn’t use any fertilizer phosphorus when establishing forage seedings. The plant doesn’t care where the nutrients come from – manure spreader or bag of fertilizer. Years ago, based on dozens of trials on both university farms and farmer fields, Cornell University proved conclusively that if soil test P is high, no P fertilizer is needed in the corn starter. Many farmers became convinced of this and started using a low rate of nitrogen in the fertilizer boxes of their corn planter but no phosphorus (and in some cases no potassium) fertilizer. How much money could you save this spring by limiting starter fertilizer use to only those fields where soil analysis indicates a need for it?
2. Getting stuff done on time
If you list the traits of the farmers with the most profitable enterprises, near the top of the list will be timeliness – getting stuff done when it’s supposed to be done instead of when the farmer gets around to it. It costs no more to plant corn on May 5 than on June 5, but early-planted corn is a winner almost every year. Similarly, mowing alfalfa in the late-bud stage will usually result in the ideal combination of yield and quality. Mowing the field a week later will cost at least as much in labor and equipment, but the quality of the crop will be somewhat less. When money is tight we need to focus on what will increase the value of the crop without increasing the production costs. Timing may not be everything, but it’s up there!
3. Price makers vs. price takers
Farmers sometimes complain that they have to buy everything at retail prices and sell at wholesale prices. Though true, farmers have some influence over what they pay for crop inputs. Many farm supply companies offer substantial discounts for early order and early pay, particularly for farm seeds. And though you might have to borrow the money to take advantage of early-pay discounts, this isn’t the case for early-order discounts. With low interest rates, the early-pay discount is usually somewhat more than the cost of borrowed capital. Also, by buying your fertilizer from the same dealer every year, for instance, you need to be aware that significant savings are possible by pricing your crop supply needs – particularly fertilizer – with several dealers. Miner Institute saved significantly by buying fertilizer from several dealers.