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On Cows and Markets

By E. W. Lang

I welcomed this last issue of Hoard's Dairyman with all the enthusiasm of a child when the Christmas Sears and Roebuck arrived each fall. It was the Hoard's issue with the World Dairy Expo cover subject and report on who won what among the cows and people who were there.

But it wasn't the show report that was of interest to me. The divine word of Genske, Mulder and Co., the esteemed and Certified Public Accountants to the industrial milk production industry, was reported in summary form by Hoard's Dairyman Western Editor, Dennis Halladay.

For some years I got a complete copy of the Genske Mulder publication on profits and loss among large dairies in several of the western United States. I used this to compare our 300, 400 then 600 cows for revenue and expense. The comparison was for my own review, but I generally delivered an abstract of sorts to a loan officer, and to the bank Chairman if our numbers were favourable, and if I was wearing dress pants, good shoes and a collared shirt.

I'd encourage you to read this Hoard's article about what's going on among the industrial dairies and be familiar with what is possible, as well as what can happen, with today's technology to commonly milk well over 2000 cows in one herd.

Compare these numbers to your own herd, then spend some time in silent contemplation. You might feel encouraged and find some favourable comparisons to show your lender. You may find a couple things you need to improve upon in your own herd, or you may become better prepared to summon the auctioneer when the time is right.

Regardless, you should be informed of what it actually costs to produce milk on today's industrial dairy farms, whether you milk 60 cows or 6000. And if you are unable to reckon your own costs for comparison...  Never mind.


The average Genske Mulder client had 2300 cows and losses were $354 per cow in 2018. That's over $800,000 for the year. Losses ranged from over $500 per cow in Arizona to only $167 on Washington State farms.

Cumulative losses among all lient dairies totaled $924 per cow for the last four (2015 through 2018) calendar years. The profitable year 2014 came in at $826 net income per head, so those dollars are now long gone, particularly when some of those dollars had to catch up from years prior to 2014.

Labour on all herds averaged $1.87 per cwt. Smaller dairies, particularly those with older facilities and located in wetter, colder areas have to add at least $1.00 and probably $2.00 to that labour cost. I suspect small and large herds have similar 'other costs' on a per cwt. basis, given what I have found over the last 19 years of my own comparisons.

Incidentally, if the current November Class III price of $19.55 per cwt. went on for 12 months, average net income on these industrial dairies would come over $1,000 per head for the year. As such, the average farm would be back to zero, in that they would have recovered the last four years of total losses. Many family oriented 40 to 400 and 800 cow herds would take at least a couple years of $19+ milk to get back to zero. Labour cost and older, inefficient facilities are a large reason for this.

Someone asked me a few months ago if it was possible for a giant dairy to produce milk in the mid west for $10 per cwt. Based on these accounting data, feed cost can come in at under $10 per cwt., but total costs have to include an additional $8 per cwt. when everything is included such as herd replacement costs and depreciation.

I'd further suspect that if someone says their cost of production is $16 or less per cwt., be it on a herd of 100 or 1,000 or 10,000 head, they are leaving some expenses out. Remember, we never write out a check for dairy farm depreciation, but we still pay it every day on every thing, rolling and fixed, living, and sometimes dead.

I would also like to comment onm the abundant dichotomy of the October 25 Hoard's Dairyman issue. The Net Income averages for many of largest dairies in the United States were reported along with a report on the largest dairy show in the United States. The culture and purpose of each industry segment now has almost no crossover, connection or correlation, one with the other, where 50 years ago there was at least some.

Hoard's World Dairy Expo review of each breed show named who was Premier Breeder and Exhibitor, who had Jr. Champion, Intermediate and Senior, as well as who served as judge. It would also have been interesting to see exactly how many minutes each judge took to finally name each Grand Champion, whose picture was included in each breed's show summary.

On the CME this week, pretty much everything that mattered to the milk producer was up for the week.

Barrel Cheddar was up 25 to $2.25 per lb., the highest price since September, 2014. Block cheese was up 15 at $2.12, and Butter ended the week at $2.06 per lb., down five cents. November Class III Milk ended the week at $19.55 per cwt., up 99 cents. All of calendar 2020 Class III averages $17.17 per cwt., up only one cent from Friday, last, but at least it's still up.

Also up are dairy product inventories in cold storage, particularly cheese. I'll spare your the disturbing recitative.

USDA further reported total dairy cow numbers in the U.S. as down, but production per cow up such that total milk production was 1.3% higher than last year. I blame DNA testing, nutrition, management, science and progress, generally, but not necessarily in that order.

On Wall Street, the NASDAQ and S & P 500 Indices are nearing record territory. I am selling the VOO which is an S & P 500 Fund and buying the VXX, currently trading at an all time low near $20 per share. The VXX is linked to a popular measure of the stock market's expectation of volatility, implied by S&P 500 index options. So, if there is a shock or surprise to world political or economic stability, generally the VXX goes up disproportionately, just as the S & P 500 goes down modestly.

I offer no prophesy or forecast on common stocks, and do wish to disclose that I am wrong fully half the time on individual market decisions, and have been for many years.