OMRO, Wisc. (RFD NEWS) — Higher levels of butterfat and protein are becoming an increasingly important part of dairy farm profitability as demand grows for products such as cheese, butter, and yogurt.
CoBank Lead Dairy Economist Corey Geiger joined us on Friday’s Market Day Report to discuss his most recent research, which found a significant revenue difference between herds with higher and lower milk component levels.
Looking at the Upper Midwest federal milk marketing order, Geiger says the top 10% of herds generated about 70 cents more per cow per day than the bottom 10% at an average production level of 24,390 pounds of milk.
For an elite herd averaging 90 pounds of milk per cow per day, that difference grows to about 95 cents per cow per day, or roughly $345 per cow annually.
“This is the biggest thing a dairy producer can do to improve their profitability,” Geiger said.
Revenue Adds Up Across Herds
The difference in component revenue can become significant as herd size increases.
For a 100-cow dairy, an additional $345 per cow would represent about $34,500 in annual revenue. For a 1,000-cow dairy, the difference would be about $345,000 per year.
Geiger says the research is based on real dairy data and gives producers another way to evaluate where improvements in herd performance can have the greatest financial impact.
Rethinking Dairy Performance Metrics
Geiger says traditional measurements such as rolling herd average don’t tell the full revenue story in today’s dairy market.
“I even said, we need to put a tombstone on rolling herd average, and the new metric should be pounds of components per day,” Geiger said.
He says about 90% of U.S. milk is priced using multiple-component pricing, with butterfat and protein among the two most important components.
That means the amount of butterfat and protein a herd produces can be an important part of evaluating its financial performance, rather than focusing solely on total pounds of milk.
World Dairy Expo Highlights
Geiger also discussed this week’s World Dairy Expo, which he called the event’s 59th edition.
He said attendees came from more than 100 countries, with agricultural leaders from Washington, D.C., also attending.
USDA Secretary Brooke Rollins was at the event, and Geiger moderated a 40-minute session with Rollins that included House Agriculture Committee Chair G.T. Thompson. U.S. Senator Tammy Baldwin was also scheduled to appear.
The event also features dairy cattle from across North America, with the Holstein show underway during the interview.
Geiger says the event brings together producers, industry leaders, and others from across the dairy sector.
LEARN MORE: www.cobank.com/knowledge-exchange
