Cows Accused of Working Too Hard
MADISON, Wisconsin – American dairy farmers have run into a peculiar economic phenomenon in which producing more milk means more work, higher operating costs and, somehow, less money for the person doing the milking. According to University of Tennessee’s dairy market analysis, September milk production across the 24 major dairy states rose about 2.7% from the previous year. Meanwhile, Iowa State University Extension reported continuing pressure on dairy margins as milk supplies grow and farm operating costs stay high. The weekly price movement is tracked in USDA’s Dairy Market News, a report farmers read with the same hope they bring to a lottery ticket. The situation has left dairy farmers wondering whether the industry’s business model was designed by somebody who particularly disliked dairy farmers.Record Milk Production Pushes Dairy Margins Lower
A Wisconsin dairy producer recently called his herd to an emergency financial meeting. He congratulated the cows on their outstanding production. Then he explained that their higher milk output had helped create a market in which farmers were struggling to stay profitable. The cows looked confused. One Holstein asked whether management was accusing employees of working too hard. “That’s exactly what I’m saying,” the farmer said. “You’re doing a wonderful job, and it’s ruining me.” The herd asked for clarification. Under ordinary business principles, higher productivity improves earnings, assuming demand and revenue cover costs. Dairy economics seems to run on a special arrangement in which more production helps push prices down. A particularly sharp Jersey proposed cutting milk output until prices recovered. The farmer rejected the suggestion because his existing bills still needed paying. The cow said management seemed unable to make up its mind. Walt Brenneman, a retired dairy economist in Eau Claire, put it plainly. “Every farmer in the country makes the same sensible decision at the same time, and the sum of all those sensible decisions is a pile of milk nobody wants to pay for. That’s not a mystery. It’s arithmetic with a barn.”
Dairy Economics: Diversifying Into Actual Money
Agricultural economists explain that dairy profitability depends on milk prices, feed expenses, labor, financing, energy, transportation and production efficiency. Farmers say the explanation is accurate but unnecessarily long. Their preferred definition is: “Everything costs money, and the milk check isn’t big enough.” One dairy consultant suggested improving efficiency through better herd management, targeted feeding and milk-quality monitoring. The farmer explained he had already done all of that. The consultant suggested producing more milk. The farmer asked whether the consultant had listened to the first part of the conversation. On a 300-cow herd, a 2.7 percent jump works out to about eight cows’ worth of extra milk, according to one farmer’s notebook, for a milk check that came in roughly the same. Another adviser proposed diversification, which prompted a serious discussion about training cattle to produce something more valuable than milk. The options included cash, investment-grade gold and replacement tractor parts. A university researcher cautioned that cows are biologically incapable of producing currency. The farmer replied that they had become remarkably good at consuming it.Dairy Profit Margins and the Financial Display Above Every Stall
A local producer has proposed installing a financial display above each milking stall. Instead of showing milk production, the screen would show how much money the animal had earned after feed, veterinary care, utilities, depreciation and labor. Early testing went badly. Several high-producing cows registered strong gross revenue but modest net returns. One cow displayed a figure so alarming that the farmer switched off the monitor to protect herd morale. An agricultural economist recommended looking at long-term margins instead of fixating on daily milk prices. The farmer agreed, noting that he had been examining long-term margins for thirty years and would appreciate seeing a positive one. Minutes from a Wisconsin cooperative board meeting, passed around the parking lot afterward, record a motion to “discuss the milk price” (carried), a motion to “do something about the milk price” (tabled) and a motion to adjourn for chili (carried unanimously and with feeling).Dairy Farmers Demand a New Definition of Success
The industry keeps looking for ways to improve efficiency, manage price risk and respond to consumer demand. Those strategies matter, especially while expenses stay stubbornly high. The federal Dairy Margin Coverage program exists for exactly this squeeze, though a farmer still has to fill out the form while the cows wait. But dairy farmers say the profession needs a different way of measuring success. Producing record quantities of milk is impressive. Producing record quantities of milk while losing money is merely an expensive hobby involving manure. One Wisconsin farmer summed it up while watching his herd file into the parlor. “My cows work twice a day. I work all day. The milk truck comes every morning, and the bills come every afternoon.” He thought about the industry’s future. “Maybe we should stop measuring pounds of milk and start measuring whether the farmer can afford lunch.” The cows approved the proposal unanimously. They had already eaten.Five Observations on Milk, Margins and Overworked Cows
- “You’re doing a wonderful job and it’s ruining me.” That’s the worst performance review in America. I’ve been fired with kinder words and a muffin.
- Every farmer makes the same smart decision at the same time. That’s not a market, that’s a flash mob where everyone loses money in unison.
- The consultant says make more milk. The farmer says, did you listen to the first part? Nope. Consultants are paid by the hour to not hear the first part.
- A screen over every stall showing net income per cow. Imagine if we did that to people. Half of us would have to turn off the monitor to protect morale. My monitor would be in a drawer.
- Chili beat the milk price at the board meeting. Chili got a unanimous vote. That’s the only item on the agenda that ever pays out.
My Jersey heard about this and went on strike Monday morning. Trouble is, she was the only one in the barn making any sense. Daddy always said you can’t get blood out of a turnip, but the co-op found a way to get it out of a milk check. If more milk means less money, I’m fixing to get rich off the cow that kicks the bucket every morning. Udderly ridiculous, and I’ll still be out there at 4 a.m. doing it.