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| Price of milk sends shockwaves across Midwest |
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The price of milk is at record high levels. I’ve had reporters call and ask why that has happened. I even had one ask if the high price of corn, because of the production of ethanol, has caused the price of milk to go up.
People still don’t seem to understand that agriculture producers can’t just pass their cost of production along to consumers. The only way farmers can make the price of a commodity go up is to produce less of it, or to help create a larger demand.
The base price of milk is calculated each month from a formula. The price of cheddar cheese, whey, dry milk powder and butterfat are plugged into the formula to determine the price of fluid milk, the price paid to farmers. Prices are exceptionally high now for milk powder and whey because of a global supply shortfall. Also contributing to higher prices is the rapid growth of cheese consumption in the United States and a drought in Australia.
So you see, the price of corn, or the fact we are burning ethanol in our vehicles, has no place in the formula and no affect on what you pay for milk in the store.
Farmers need to find a way to reduce feed cost.
They have been feeding more coproduct feeds like distillers grain and less corn to reduce cost.
Last winter, the USDA interviewed more than 9,000 dairy, cow-calf, feedlot, and hog producers across 12 north central states ranging from Ohio to the Dakotas. The goal in this study was to establish baseline data about the increasingly important part of both the ethanol business and livestock production. Nearly 40 percent of the dairy and feedlot operators surveyed reported using ethanol coproducts during 2006, while just over 10 percent of cow-calf and hog producers reported using these products.
Feedlots that reported using coproducts were three times larger than those who did not, and those feedlots had been using coproducts for more than five years – well before the current ethanol boom. Cow-calf and dairy farmers also had considerable experience with coproducts (4.7 and 9.2 years, respectively) and were roughly twice as large as those not using coproducts. Hog producers using coproducts were the most recent adopters – the average hog producer had been using coproducts less than three years. But only the biggest hog producers had adopted – adopters were five times larger than non-adopters.
The majority of feedlots (52 percent) are getting coproducts directly from the plant, while the other types of livestock enterprises chiefly work through feed companies or other middle men to obtain co-products.
So, what is keeping operators from trying ethanol coproducts? The biggest reason stated by those who have yet to try them is availability – about one-fourth to two-fifths of producers in each livestock group cited this reason.
The next biggest reason for all the cattle-based producers was a lack of infrastructure and storage/handling facilities to deal with this type of feed. The second most important reason for hog producers was a concern about the nutritional value of ethanol coproducts for their operation. Only about 5 percent of all producers claimed that a lack of knowledge was holding them back from trying coproducts.
We would imagine over time that more livestock producers will feed more co-products and the survey next year will reflect that trend.
For guidance surrounding the price of co-products, visit
http://aede.osu. edu/people/roe.30/livehome.htm The spreadsheet includes weekly Eastern Corn Belt feed price series, including several ethanol coproduct prices, from the past several years.
The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Steve Bartels may write to him in care of this publication.
This farm news was published in the July 18, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee. |
| 7/19/2007 |
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