Highlighting the risk of the anti-milk price cycle

Traditionally when dairy farmers are hit with a declining milk price, some will try to cost cut their way out of economic pressure. Veterinary visits, fuel use and artificial inputs are all cut, but purchased feed often takes the biggest financial ‘hit’. ForFarmers’ Bruce Forshaw and Philip Ambler advise customers to take a cautionary approach.

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Anti cycle - ForFarmers UK

While wholesale cuts to purchased feed following a drop in milk price may help alleviate financial pressure in the interim, new insights from ForFarmers have highlighted just how damaging this approach can be to cow health, performance, and business viability in the long-term.

“To save money, farmers may well look to reduce expenditure on feed by making reductions to the quality or quantity of the feed they bring on to the farm,” explains ForFarmers Product Manager, Bruce Forshaw. “But the net result of blanket cuts is that when milk prices begin to recover, herds are on the back foot."

“Wholesale cuts to feed will result in reduced cow fertility, increasing days in milk and poorer animal performance. This means that when producers do renew expenditure on feed there is a significant time lag before cows experience improved milk yields.

And with each cycle of higher and lower milk prices that producers go through, this lag becomes more and more significant.

“We’re now witnessing less time between each cycle of high and low milk prices, so there’s less time to ‘catch up’ and make the most of higher prices when they occur,” continues ForFarmers’ Philip Ambler. “The net result of this is that once three or four milk price cycles have passed, the time lag between increasing expenditure on feed and getting a subsequent increase in milk yield is so pronounced that some producers end up producing more milk when price is low, and less when prices are high. They’ve become caught in an anti-milk price cycle."

“In businesses caught in the anti-milk cycle, I’ve seen cows 60 days into their lactation that should be giving around 50 litres, only managing 40. And that’s not the cow’s fault, she’s doing the best she can do. The problem is that long term cost-cutting to nutrition and general management has led to a marked drop off in the cow’s productive potential.”

In-depth insights

This negative-cycle effect has been witnessed in numerous businesses that ForFarmers has monitored over the course of the last four milk price cycles.

“We’ve been tracking 15 dairy customers and have had access to detailed financial accounts and decision planning data,” says Philip. “What the data shows is that the anti-milk cycle is a significant problem for many producers, and we need to help our customers manage the negative impact of lower milk prices in ways other than blanket cuts to feed expenditure."

“While this management process might involve some overall reduced expenditure on feed, what we encourage producers to do is examine where they are utilising their feed,” continues Philip. “It might be better to take the financial ‘hit’ to maintain current dry and transition cow diets to secure the long-term fertility of the herd, and instead cut back a bit on mid or late lactation cows.”

By taking this approach the hope is that while milk yield may decline slightly in the short term, in the long run, producers will safeguard cow fertility and lower days in milk.

“If producers are running an all-year-round calving herd, we need a third of those cows in the first 100 days of lactation,” concludes Bruce. “These are the cows that will be able to react quickly to increases in feed expenditure - producing more milk and exploiting milk prices when they are on the up again."

Keeping stale cow numbers down is a priority. Producers need to avoid getting into the dangerous, downward spiral that can occur when cuts to diets – specifically dry and transition diets – start to negatively impact conception rates and fertility. As soon as conception rates start to drop off and days in milk increase, it’s a difficult situation to work back from.”

Both Philip and Bruce stress the importance of good feed planning and having a clear feed strategy in place to help manage periods of low milk price.

“There is always going to be damage done when we’re at the bottom of a downturn, but we need to ensure that it’s contained and doesn’t impact the core, productive capacity of the herd,” continues Bruce. “We’d recommend assessing cows, ringfencing the key performers and prioritising their feed requirements. If feed cuts need to be made, we don’t want them impacting this group."

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“It’s also worth considering how you might better utilise existing forage stocks or grow extra forage on farm to help fill any feed gaps. It might be more cost-effective to invest in inputs or reseeding to get the extra forage and/or improved forage quality as an alternative to purchased feed.”

And while managing the financial and performance challenges associated with a declining milk price is undoubtedly difficult, what is clear is that the nature of modern milk-price cycles is here to stay, so learning to adapt is crucial.

“As challenging as it can be, producers need to have the right corrective strategy in place for the phase of the milk cycle that they find themselves in,” concludes Philip. “There is also the potential for shorter durations at the bottom and top of each cycle in the future, so businesses must be in a position where they’re agile and can quickly put in place the right management strategies, at the right time."

“To make sure that producers are in the best position when everything is on the up, we need to have a system and cows in place that can react quickly and exploit the short window of financial opportunity before the next, inevitable downturn. This isn’t an easy process, but the team at ForFarmers is always available to offer any advice or guidance that’s needed.

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