Missouri Dairy Business Update
Volume 2, Number 2
February 2002

Dairy Policy Update:

Dairy policy in Washington took a big step last week as the Senate passed a new farm bill with changes in dairy policy. As of Monday, February 18th the House has not passed a farm bill yet, so the final version isn't law yet.

According to Ken Bailey's Weekly Dairy Market Outlook newsletter the dairy title includes:

• Extending the dairy price support program at the current $9.90/cwt. level;
• Authorizing a new national Johne's disease control program;
• Extending the Dairy Export Incentive Program (DEIP);
• Increasing Market Access Program (MAP) funds;
• Fixing the statutory mandatory inventory and price reporting language by the USDA, and;
• Requiring dairy importers to pay into the National Dairy Board for promotion and research.

The Milk Marketing Administrator's Office in Kansas City recently put out two interesting maps showing where the milk is produced in Missouri and how that is changing with time. Keep in mind, that this just shows Grade A milk flowing to regulated handlers, but that is about 85% of the milk in Missouri.

 

Missouri Milk Marketings, May 1999	Change in Missouri Milk Marketings, May 1999 vs. May 2001

Using the data from the Milk Marketing Administrator's Office, we created the graphic below that depicts the changes in Grade A milk shipped in December over the past 20 years and the changes in dairy farm numbers over the last twenty years by regions in Missouri. The regions are the same ones the Missouri Agricultural Statistics Service uses.

Take a minute to examine this chart. The regional contrasts over time really are striking.. The SW region lost 362 dairy farms and the SC region lost 363 dairy farms. However, the SW counties lost 25% of their 1981 level of milk production, while the SC counties actually gained 3% in milk production from 1981 to 2000. In the NE, milk production has jumped by 211% in 20 years, with the net addition of just 2 farms.

 

Map of Regional Changes in Missouri's Dairy Industry

To learn more about the modern Missouri dairy industry and how it is changing with time, check out the recently completed Missouri Dairy Audit. The audit was developed over the last six months by the Commercial Agriculture Dairy Focus Team to enable Missouri's dairy leaders to more accurately focus on the future.

The Missouri Dairy Audit is 67 pages. The link above allows you to download the entire pdf file or to browse through parts of it while you are online.

The USDA's regular monthly Livestock, Dairy and Poultry Situation and Outlook report which came out February 13th had this to say about the dairy heifer market this year:

"The dairy industry's heifer woes are expected to ease in 2002-just not very much. On January 1, 2002, there were 1 percent more heifers expected to calve during the coming year than there were a year earlier. Replacement heifer prices rose considerably in late 1999, encouraging farmers to save as many heifer calves as possible. However, the potential increase in the heifer inventory was quite limited because farmers were already close to the realistically possible maximum. A few more heifers and a bit less pressure to expand herds may result in a little easing in replacement heifer prices this year. However, the pent-up demand for heifers will keep replacement markets tight."

"The tight heifer markets of recent years were caused by very strong demand for replacements-not by small heifer supplies. The January 1 ratio of replacement heifers to milk cows, at almost 45, was a record. This ratio also was above 44 in 1999 and 2001, the only times ever except during the Dairy Diversion Program in 1985. Rising average culling rates and the need to fill newly expanded facilities created the extraordinary heifer demand that has outstripped the supply."

The report also updated the USDA milk price forecast for 2002. The Class III milk futures from the Chicago Mercantile Exchange as of February 15th are listed below, along with the USDA quarterly forecast for the rest of the year.

Milk Price Forecasts for the rest of 2002

	Class III Futures as of Feb. 15, 2002	USDA Class III Milk Price Forecast
Mar 02	11.04
Apr 02	11.30	2nd Quarter $10.80 to 11.40
May 02	11.49
Jun 02	12.06
July 02	12.93	3rd Quarter $11.10 to $12.00
Aug 02	13.18
Sept 02	13.32
Oct 02	12.70	4th Quarter $12.00 to $13.00
Nov 02	12.36
Dec 02	12.08

An excellent reference for grass-based dairying in Missouri has been revised and is now available from the extension publications office for $21. Order online from Extension Publications or call toll free at 1-800-292-0969 and ask for "The Dairy Grazing Manual" M-157.

The latest dairy grazing research from the SW Research Center grass-based dairy has been summarized recently by Extension Dairy Specialists Stacey Hamilton and Tony Rickard. The summary information is below, or you can download the whole paper by clicking on the title below:

"Economics of a Missouri Pasture-based Dairy Can a Small Farm Survive?"

Structure and basic production data of University of Missouri SW Research Center for 1999, 2000 and 2001.

	1999	2000	2001
Cow numbers	49.1	59.1	60.4
Total farm area (acres)	84	84	84
Dairy grazing area (acres)	79	79	79
Grain fed during year (lb/cow/day)	12.4	14.2	12.1
Hay fed during year (lb/cow/day)	11.4	11.5	11.2
Other forage fed during year (lb/cow/day)	0	0	0
Number of days grazed	188	244	230
Weight of cows after calving	1022	1030	1061
Age of cows (months)	25	32	38
Cull rate (percent) Total	32	19	22
Outside Calving Window (%)	12	16	16
Other Cull (%)	20	3	6
Milk shipped per cow (lb)	10,146	12,714	12,952
Milkfat (%)	3.95	3.96	3.74
Protein (%)	3.4	3.24	3.22
Somatic cell count	223,000	51,800	129,182

Income, expenditure and operating margin for University of Missouri SW Research Center seasonal MIG dairy 1999, 2000 and 2001 (includes dry cow expenses; excludes heifer expenses).

	1999		2000		2001
	$/cow	$/cwt	$/cow	$/cwt	$/cow	$/cwt
Income:
Milk Sales	1348	13.29	1738	13.67	2141	16.53
Cattle Sales	179	1.76	205	1.61	239	1.84
Total Income:	1527	15.05	1943	15.28	2380	18.37
Expenditures:
Concentrates	299	2.95	330	2.59	305	2.35
Forages	106	1.05	174	1.37	254	1.96
Labor*	54	0.53	54	0.42	51	0.40
DHIA	0	0.00	14	0.11	12	0.09
Semen/Breeding	23	0.23	21	0.16	14	0.11
R.E./P.P. Taxes*	7	0.07	6	0.05	7	0.05
Milk Marketing	90	0.89	114	0.90	117	0.90
Repairs/Truck*/Fuel*	107	1.05	66	0.52	74	0.57
Vet/Med	41	0.40	53	0.42	37	0.29
Parlor Supplies	52	0.51	55	0.43	38	0.29
Utilities	46	0.45	38	0.30	41	0.32
Insurance*	17	0.17	17	0.13	24	0.18
Miscellaneous	33	0.33	15	0.12	42	0.33
Total Cow Expenditures	874	8.61	931	7.32	1016	7.84
Fertilizer	7	0.07	29	0.23	70	0.54
Seed/Spray	27	0.27	32	0.25	39	0.30
Custom Hire*	0	0.00	19	0.15	15	0.12
Fuel*	3	0.03	9	0.07	11	0.09
R.E./P.P. Taxes*	5	0.05	5	0.04	6	0.04
Fence/Water	5	0.05	4	0.04	9	0.07
Total Forage Expenditures	47	0.46	99	0.78	150	1.16
Total Operating Expenditures	921	9.07	1030	8.10	1166	9.00
Operating Margin	606	5.98	913	7.18	1214	9.37