What can a Producer do to Improve Revenue?

This blog has now received over 100,000 reads, which is well above the initial goals.  One question that has been asked frequently is "What should a producer do to improve revenue?"  Producers always have a keen eye on costs, but the mathematical complexities of the revenue line often seem daunting.  Hopefully, some of the content posted on this blog has been helpful in demystifying the milk payment process. This post will focus on one particular technique that can help build revenue.

One of the trends in dairy is a significant shift in the usage of milk.  Turning the calendar back a few decades, the U.S. dairy business was characterized as a lot of small producers making milk for full fat fluid milk, consumed within the U.S.  Typically, production, processing, and consumption all occurred within a 100 mile radius.  Between then and now, the nature of dairy consumption has changed significantly.  Per capita consumption of fluid milk has dropped drastically.  The fluid milk that is consumed is mostly reduced fat milk.  Today, the leader is 2% fat milk and the trends indicate that within a few years, the leader will be 1% fat milk.  There is also a growing practice of adding nonfat dry milk to bring the solids back to the original level when fat is removed.

Cheese consumption continues to grow at a rate around 2% per year.  Other products, like yogurt, are growing significantly.   An additional big change has been the growth in exports.   They have grown from just a few percent to as high as 16% of milk solids produced.  Within a few years this could easily grow to 20%.

What all these trends share is an emphasis on milk solids.  Cheese requires a specific ratio of protein and fat to allow economic production.  This frequently requires boosting protein levels with nonfat dry milk or other protein concentrates.  The growing category of Greek yogurt requires high levels of protein.  Exports are nearly 100% solids, as shipping water internationally is cost prohibitive.

To match the changes in milk, the growth in milk production has occurred primarily in the Federal Milk Marketing Orders paid on components.  California producers may soon join Federal Order component payment processes.

One of the techniques for improving component levels is balancing amino acids in feed to match the cow's needs for efficient production of components.  This practice is largely accepted in areas like Wisconsin.  Nutritional needs including amino acids can be identified in new nutritional software programs that have been developed and refined over the last decade.  Production of rumen-protected amino acids has increased availability of quality products.  Amino acid balancing has been commonplace in poultry diets for at least 50 years, but developing the supplemental amino acids with coatings to protect them in the rumen has taken a lot of talented people quite a long time to accomplish.  Today, there are many products that meet these requirements.

One of the tools for financially evaluating the benefits of amino acid balancing is the companion site to this blog.  The evaluation tool is available at milkpay.com.  It is also available as an app for smartphones and tablets under the name "milkpay."  The website and the apps are updated monthly for current component prices and the current Producer Price Differentials.

 There is also growing technical support from nutritionists and consultants who have gained significant real world experience in balancing amino acids.  I would suggest contacting Dr. Brian Sloan,  Dr. Chuck Schwab, Dr. Daniel Luchini, or Dr. Shane Fredin for assistance in identifying the professionals available in your location.