Every Dairy Producer has an Incentive to Increase Butterfat Production.

Butterfat prices remain high and milk protein prices remain low.  The high butterfat prices have opened the market to justify amino acid and other tools to maximize butterfat production.   This post will cover butterfat production in the Federal Orders paid on the "Advanced" system.  Those Federal Orders do not pay specifically for protein and represent the most difficult place to justify techniques like balancing amino acids.

The Federal Orders paid by the "Advanced" process make up only 10% of the milk marketed in the U.S. Federal Orders or about 7% of the total U.S. milk production.  Chart I is a pie chart illustrating production of Federal Order Milk.  That milk in 2023 made up 69% of U.S. milk production with 31% coming from areas not in a Federal Order or de-pooled from a Federal Order.

Chart I - Pie of Milk Marketed under the
Class and Component System and
the Advanced System 

Chart II below shows the pricing of butterfat and milk protein through March 2024.  Butterfat prices are not declining and as a result the producer value of milk protein continues to be near record lows.  (See these posts for an explanation of the USDA formulas.  April 3, 2024 ; March 19, 2024; and February 13, 2024.)

Chart II - Recent Price Trends in Butterfat
and Milk Protein

Chart III below shows the revenue from butterfat for the Southwest Federal Order which is paid by the component system.  Monthly revenue for butterfat per cow is at $269.

Chart III - Revenue per Cow for
Southwest Federal Order

The four charts below show the same data for the four Federal Orders paid on the "Advanced" system.  the current revenue per cow ranges from $197 per cow to $223 per cow.  Taking Florida as an example, if they increased butterfat component levels and milk per cow to the level of the Southwest Federal Order, the revenue increase for a herd of 1000 cows would be $864,000 per year.

Chart IV - Revenue per Cow for
Southeast Federal Order

Chart V - Revenue per Cow for
Appalachian Federal Order

Chart VI - Revenue per Cow for
Arizona Federal Order

Chart VII - Revenue per Cow for
Florida Federal Order

Why does this huge difference in revenue exist?  Tables I and II below make the difference clear.  In Table I the 11 Federal Orders are ranked in order of percent butterfat for 2023. All four for the "Advanced" Federal Orders are at the bottom of the chart with the lowest percent butterfat in their milk.

Table I - Ranking of Federal
Orders by Precent Butterfat

Chart II below lists the 11 Federal Orders ranked by monthly milk per cow.  Again, the Federal Orders paid by the "Advanced" formulas fall near to the bottom of the rankings.  The Northwest Federal Order is low in this group only because they are at the top of the list in percent butterfat.

Table II - Ranking of Federal
Orders by milk per cow

SUMMARY

There is money on the table for the "Advanced" paid Federal Orders.  The trend of increasing butterfat prices and decreasing milk protein prices continue.  (See the February 13, 2024 Post to review the 20 year trends).  Breeding and feeding technology can make a huge difference!