Pasture-based dairies not immune to high feed costs, extension expert says

Despite favorable milk prices in most of 2007 and 2008, soaring feed, fuel and fertilizer costs challenged the profitability of dairies nationwide, even those that are pasture-based.

The same is true for the research grazing dairy that was started in 1999 at the Southwest Research Center near Mt. Vernon.

Prior to 2008, feed costs (concentrate, hay and pasture) accounted for about 60 percent of the cost of producing milk at the Southwest Center.

In 2008, expenses increased by over $300, and all of the increase can be attributed to higher grain and hay costs. As a result, feed accounted for over 70 percent of the total cost of producing milk in 2008.

"Keep in mind that total expenditures refers to out of- pocket costs. Replacement heifer costs, depreciation, return to management, and principal and interest payments come out of operating margin," said Tony Rickard, a dairy specialist with University of Missouri Extension.

However, there is more to the story than simply higher feed costs.

A research dairy is different in certain respects from a production dairy. Research projects often last for several years and then finish only to be replaced by another project. Protocols sometimes involve major changes, some of which can be costly and time consuming.

"Beginning in the autumn of 2006, we began a major pasture renovation process to convert the existing pastures from a patchwork of cool and warm season species to either a soft-leaf novel endophyte tall fescue or perennial ryegrass. Drought that fall resulted in a complete stand failure," said Rickard.

Staff planted summer annuals in 2007 to provide some pasture for the herd, and tried re-establishing the tall fescue and perennial ryegrass. While better than the 2006 attempt, the stands were still not adequate for research purposes.

Thankfully, the third attempt at re-establishing the pastures seems to have gone well.

"All of this points to the importance of abundant, high quality pasture to reduce feed costs and the overall cost of producing milk. When pasture is not available, either due to drought or research constraints, and we are forced to feed more expensive grain and harvested forages, pasture-based dairies lose their advantage," said Rickard.

It is interesting, if not a little disconcerting, to note that the cost of producing milk between 2001 and 2006 has averaged less than $10/ cwt for pasture-based dairies; this compares to $14-15/cwt for confinement dairies.

Today, projections are for costs to be closer to $12-13/cwt for pasture- based and $16-18/cwt for confinement dairies.

This does not bode well with milk prices expected in the $10-13/cwt range for 2009 according to Rickard.

"Our response to that challenge at the Southwest Center dairy will be to emphasize the use of high quality pasture while minimizing the use of harvested forages and grain. We do not think we will completely eliminate grain feeding, but hope that we will find the appropriate level that will optimize profitability," said Rickard.

Remember that profit is income over expenses; when milk price is low, reducing costs is critical. Remember, maximum profit does not necessarily come from maximum milk.

For more information contact one of these two MU Extension Dairy Specialists: Dr. Stacey Hamilton, (417) 637-2112 or Dr. Tony Rickard, (417) 847-3161.

The University of Missouri research facility, officially named the Southwest Missouri Agricultural Research Center, is located two miles south of Mt. Vernon, Mo. It was established in 1959 with the purchase of an 898-acre site representing soil types in this region. Results of research conducted at the center are communicated to the public through various programs, field days, publications and specialists working within University of Missouri Extension.