DENVER, Colo.—Tough conditions in the dairy industry are prompting U.S. dairy farmers to rely increasingly on genetics to improve their profit margins, according to a new research report from CoBank.
Milk prices are down 40 percent from their highs in late 2014, and lower slaughter prices have also hurt the industry. As a result, many American dairy farms are currently operating at or below break-even margins.
“Producers are left with two ways to bolster margins – increase milk productivity or obtain higher premiums for bull calf sales,” said Trevor Amen, animal protein economist with CoBank and author of the report. “Recent advances in genetics make both of these possible, and at a much more affordable cost than in years past.”
Farmers have a number of genetic tools at their disposal including sexed semen, genomic testing, in vitro fertilization, estrus synchronization techniques and management software technology. In addition, some dairy producers are crossbreeding dairy cows with proven beef sires to add value to the bull calf crop, enabling the capture of market premiums in the beef market.
“These strategies can provide much-needed advantages for dairies,” Amen said.
Amen notes that while genetic advancements and breeding programs can offer dairy producers distinct advantages, breeding programs should be customized for each farm, and may not work for all dairy producers.
“The objective should be to continue to improve production efficiencies and add value to both the dairy and beef cattle supply chains,” concludes Amen.
Until recently the effects of falling milk prices were somewhat muted by record high cattle prices, Amen said. Record-high beef cattle prices boosted dairy producer’s margins by as much as one-third in mid-2015 through the sale of cull cows and bull calves. Now, calf and cull cow sales are responsible for less than 10 percent of margins.
A video synopsis of the report, “Dairies Use Genetics to Manage Through Beef Price Decline” can be found on CoBank’s YouTube Channel. The full report is available to media upon request.