Seasonality of milk production
Seasonality of Milk Production – Implications for Milk Pricing
In an attempt to reduce costs and maintain farm incomes, many dairy farmers are looking at ways of increasing milk production from grass. The ultimate means of maximising production from grass is to calve cows as close as possible to the grass growing season. A significant number of farmers are considering adjusting their calving patterns to have cows calve in spring from January to April. This technical note looks at the financial, marketing, and practical implications of such management decisions.
Milk pricing systems
Historically, under the milk pricing system adopted by the Milk Marketing Board for Northern Ireland, milk produced during the autumn and winter months attracted a price premium over milk produced during the spring and summer months. Over the past few years, farmers have not seen an appreciable price premium for milk produced during the autumn and winter. To justify the extra costs of winter milk production, a price premium is necessary for both autumn and winter milk production.
Additional costs of autumn and winter milk production
Cows calving during the autumn and winter are producing their peak milk yields from silage or end of season grass, which has a lower potential production than spring grass. Additional concentrate supplements need to be fed to cows calving in the autumn and winter compared to cows calving in spring. The data in Figure 1 illustrate the total annual level of concentrates that need to be fed to cows calving during each month of the year to achieve a milk yield of 5,500 litres.
Figure 1. Level of concentrates per cow by month of calving
Milk compositional quality varies with month of calving. Milk protein levels are generally highest from cows calving in late spring and milk butterfat levels are generally highest from cows calving during early summer. The milk price premiums associated with milk compositional quality and the concentrate requirements are included in the gross margins per litre calculated for cows calving in each month of the year as shown in Figure 2. These gross margins assume a flat year round base price for milk of 20.0 ppl and a concentrate price of £140 per tonne.
Figure 2. Gross margin per litre by month of calving
To make up for the deficit in gross margin per litre from cows calving in late summer and through the winter period, the difference in weighted average milk price needed for each month of calving relative to March calving, which returns the highest margins, is shown in Table 1.
To achieve the required difference in weighted average milk price, monthly base prices for milk need to vary by at least 6.0 ppl with peak prices required during the September through to January period and lowest prices during April, May and June.
The analysis of the extra costs of autumn and winter milk production has been restricted to concentrate use and milk compositional quality and as such takes no account of differences in overhead costs or differences in the quantity of silage used by cows calving in different months. Such cost differences are more a reflection of differences in farm resources and management practices regarding late and early season use of grass respectively than they are of season of calving.
| Apr | May | Jun | Jul | Aug | Sep | Oct | Nov | Dec | Jan | Feb | Mar | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Required difference in weighted average milk price (ppl) by month of calving |
0.2 | 0.9 | 1.3 | 2.2 | 1.9 | 2.0 | 1.7 | 1.3 | 1.0 | 0.6 | 0.3 | 0.0 |
Table1. Weighted average milk price differentials required by month of calving
Seasonality of milk production – should changes be made to calving patterns?
In the situation where milk-pricing schedules are not delivering sufficient monthly milk price differentials to cover the extra costs of winter milk production, farmers should carefully consider their milk production system.
Questions that need consideration include:
- Is the farm layout, land type, and dairy stock suitable for a grass based spring calving system?
- Is the level of management suited to spring calving systems?
- What will happen in future to monthly milk price differentials given Agenda 2000 proposed cuts in intervention prices?
- Can altering herd calving pattern reduce overhead costs?
Seasonality of milk production - physical resources on the farm
- Land
The first physical resource to be considered is land. After the end of June more grazing area for milkers is required in a spring calving system. For example an 80 cow herd with a tight autumn calving pattern will require 12 - 16 hectares grazing for milkers in July - October while a spring calving herd will require 23 - 28 hectares of grazing for the same period. - Quota
Is milk quota the most limiting factor on your farm? If it is then spring calving may be more appropriate. Spring calving has the potential to maximise margin per litre. If land and consequently cow numbers are more limiting then autumn calving may be more suitable. With higher inputs and outputs, autumn calving has the potential to maximise margin per cow and per hectare. - Labour
Labour is another physical resource to consider when deciding on when to calve cows. A spring calving system is unlikely to be an option if there are other enterprises in the business with a high labour demand in the spring, for example, a March lambing ewe flock or arable enterprises. - Capital
An autumn calving herd may require more capital tied up in buildings and equipment.
Seasonality of milk production – level of management
- Fertility
How well do you manage fertility? A tight calving pattern is critical in a spring calving herd. Every effort must be made to avoid May/June calvings, which may mean more culling will be necessary in the spring calving herd. Twenty days slip in calving pattern costs 0.7 ppl. - Replacements
Young stock rearing is another area to be considered when taking into account the season of calving. Replacements should be between 360 KG and 390 KG at bulling and 600 KG at calving (two years). It can be more difficult to reach these target weights with spring born animals unless they are kept indoors on silage and concentrates for a longer period of time, especially during poor grazing seasons. - Grassland Management
Top class grassland management throughout the grazing season is vital for a spring calving herd. An autumn calving herd is less dependant on grazing as cows will be stale or dry from July onwards. Silage quality is critical for the autumn calving herd. Remember an additional 1,000 litres of milk from forage is equivalent to an improvement in margin of 1.0 ppl. - Seasonality - milk production summary
Based on concentrates at £140/tonne and a price differential between winter and spring milk of four pence per litre the net cost of autumn versus spring calving is in the region of 0.7 ppl. While this is a significant amount of money, improved technical and business management of your current system can give a higher and quicker return as shown in Table 2.
Meal costs range* |
1.2 ppl to 4.1 ppl |
|---|---|
|
AI fees range*
|
0.3 ppl to 0.9 ppl
|
|
Overheads range
|
4.0 ppl to 10 ppl
|
Table 2. Range in costs on Northern Ireland Dairy Farms
*Comprehensive Business Services, Milk Manager Results
Seasonality of milk production – marketing considerations
Marketing constraints must be considered before producers decide to implement major changes in their production systems. How will proposed changes affect the marketing of your product? Will the same market exist for your product after you have implemented the proposed changes? Global milk demand is expected to decline. Cheese consumption is increasing but cheese exports are constrained by GATT limitations on export subsidies. Intervention stocks of skimmed milk powder are set to increase and increased butter production is expected to result in surplus supplies.
The latest Agenda 2000 proposals if implemented, will gradually decrease support prices for dairy products by 15 percent, from their present level, by the year 2005. This will tend to move EU milk prices down towards world prices. In such circumstances it is sensible to look for ways to produce milk at lower cost. One such method is to switch to summer milk production from grass. At present considerable quantities of milk produced in the summer are processed into butter or skimmed milk powder that ends up in intervention stores. Under the Agenda 2000 programme it is proposed that intervention prices for these products will also be lowered by 15 percent by the year 2005.
The answer to the problem of falling milk prices is not simple. A switch to summer milk production could lead to an increase in production of products, which are already in surplus. In that case a bigger differential between summer and winter milk prices could develop.
Technical Note prepared by:- Martin Mulholland and Sam Thompson, Greenmount Campus and Ronnie Hutchinson, Supply Chain Development
Copies of this leaflet can be obtained from Greenmount College. Tel: 01849 426772
ISBN 1 85527 363 2
DANI November 1998
