Dairy Prices Still Low
February 17, 2016
UC Davis’ Bees Butler on Low Dairy Prices
By Laurie Greene, Editor
As previously reported, the dismal below-production-costs dairy prices in California—the #1 dairy state—as well as in the rest of the nation, emanate from excessive inventory and slumping sales, particularly in the export market.
Leslie (Bees) Butler, a UC Davis Cooperative Extension specialist and lecturer in the Department of Agricultural and Resource Economics, explained why dairy producers don’t cut back on milk production. “It is easier said than done,” he said, “and for many producers, it comes down to an income problem. Most production units are set up on a certain sort of ‘scale,’ if you like. So if I am all set up ready to milk, let’s say, 800 cows, or 1000 cows, and then you come along and tell me, ‘Well, you ought to reduce it a bit.’”
“Quickly, I, the dairyman, have to think of what I can do,” said Butler. “There may be a couple of things I can do. First, I can get rid of some cows, my lowest producing cows. You can do that, but it would be a temporary solution to the problem. The second is don’t add those high-producing heifers back into the herd, but they are the most efficient cows. So as you do add them in, you have to cull more lower-producing cows. Many heifers are much better producers than their mothers, so it just reduces the lifecycle of the poor mom.”
“And of course, cash flow in the dairy business is so important,” emphasized Butler. “You know there is a limit to how much a dairy farmer can reduce his income without impacting too seriously his ability to pay off loans, etc.”