Does Dairy Need Fewer Cows?

In the June 5, 2019 post, based on domestic consumer consumption trends, the milk needed to satisfy this consumption is growing at about one-half percent annually.  With domestic fluid milk consumption decreasing, cheese consumption increasing, and other dairy products mixed, there is an overall need for milk production to grow only slightly.  This post examines why the domestic dairy industry may need fewer cows every year, not more.  The analysis is based on full year analytics from 2014 to 2019.

The factors measured include the following:

• Increases in milk per cow have increased steadily for decades.  The rate of increase is about one percent per year on the average.

• Increases in butterfat levels in milk have also increased, lessening the need for more milk volume. The annual rate of increase in butterfat per cwt. of milk is also near one percent per year.

• Increases in milk protein levels in the milk are also helping fill the needed demand.  While the growth in milk protein levels has been slower than milk per cow or butterfat increases, the protein levels in milk are also growing.

• Lower Somatic Cell Counts (SCC) will improve cheese yield.  SCC have been declining by about two percent per year.

Combining these factors suggest that cow numbers should decrease each year.  In early 2019, cow numbers were decreasing.  However, as milk prices increased at the end of 2019, cow numbers again began to grow.

MILK PRODUCTIVITY

The increase in milk volume per cow has been a long term trend that is likely to continue (Chart I).  Improved genetics, feed, and management practices contribute to the steady increases in milk volume per cow.  The rate of productivity increases can vary depending on conditions, but over time, the growth remains at about one percent annually.  This trend is one of the best methods to reduce the cost of producer milk.  If fewer cows can deliver the same amount of milk, almost all variable producer costs will decline accordingly.

Chart I - Milk per Cow

BUTTERFAT

Butterfat level increases (Chart II) gained significantly with higher butterfat prices from 2015 to 2018.  The techniques used to increase butterfat are very cost effective.  Butterfat prices are now declining.  As butterfat prices decline, the revenue for higher levels of butterfat is still positive and should continue this growth.  However, history says that lower butterfat prices may reduce the growth of butterfat levels.  The revenue/cost analysis typically supports the continued and expanded practices needed for growing butterfat levels. But, with lower milk and butterfat prices, some producers will remove feed additives that support butterfat development.

The increases over the last five years added almost one percent more butterfat/cwt. of milk annually.  Combined with the increases in milk volume, this should satisfy the need for domestic butterfat, with no additional cows.

Chart II - Butterfat Percentage

Table I below shows the growth in butterfat by Federal Order.  Butterfat is paid in all Federal Orders, so there is a financial benefit for producing milk with more butterfat.  Overall, butterfat levels have increased over the five-year period for every Federal Order.  Some areas have done better than others, and there is still opportunity for higher levels of butterfat.

Table I - Butterfat Increases by Federal Order

MILK PROTEIN

Techniques for increasing milk protein are known, but the implementation has been slow.  Higher protein levels are very important for cheese producers and they typically pay bonuses above the Federal Order payments for protein in milk.  While the numbers in Chart III are positive, there is much additional potential to be gained.

Chart IV - Milk Protein

Milk protein levels for the seven Federal Orders that pay for protein are shown in Table II below.  As with butterfat, all Federal Orders show gains over the last five years.  The largest gains were in the Pacific Northwest and the Southwest Federal Orders.  The Upper Midwest showed only slight gains and has the second lowest protein levels of any Federal Order.  That is surprising because the Upper Midwest has 88 percent of its milk going to cheese where protein is needed and protein payment bonuses are exist.

Table II - Protein Increases by Federal Order

SOMATIC CELL COUNT

Over time, SCC have dropped significantly.  This is an important parameter for herd health and is important for efficient cheese production.  With lower SCC, less milk is needed to produce cheese.

Chart IV - Somatic Cell Count

Federal order payment for lower Somatic Cell Counts is present in only four of the Federal Orders.  The data from these four Federal Orders involves money and is therefore carefully measured and considered accurate.  However, many milk processors pay producers additional bonuses outside of the Federal Order pricing for lower Somatic Cell Counts.

All of the Federal Orders listed in Table III have found ways to lower SCC.  Improved genetics and sanitation efforts have helped reduce SCC.  Some producers have cell counts well below the averages listed in Table III.  Continued progress will continue to make more and better cheese available with less milk.

Table III - Somatic Cells Counts

SUMMARY

Milk is a commodity.  The only way for a producer to survive and succeed is to be a low-cost producer with strong revenue.  Increasing component levels brings increased revenue.  Doing it with fewer cows is one factor in lowering cost.  The mind set for producers should be to increase cow productivity and add cows only when there is demand for significantly more cows.