COLLEGE PARK, MD - The
dairy farm industry continued to
be affected by the broad regional
and national market demand and
supply forces together with federal
government supply adjustment
and price support programs in
1985.
Consolidation of the production
sector into fewer but larger dairy
herds has been accompanied by
actual and potential mergers in the
numbers of milk processing plants
serving the whole Northeastern
region.
Total production of milk in 1985
has increased in Maryland, New
York, Pennsylvania and Vermont,
the four leading Northeastern milk
producing states. Increased
production has resulted from
higher average levels of output per
cow as well as increased numbers
of milk cows on farms.
The Maryland farms with herds
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What does ’B6 have in store for dairymen?
of 50 or more dairy cows now ac
count for 50 percent of the dairy
farms but they report 86 percent of
the milk cow inventory.
Dairy farms with 100 or more
milk cows reported over 50 percent
of the milk cow inventory on
slightly less than 20 percent of the
Maryland dairy farms or ap
proximately 400 farms.
A typical 100-cow dairy farm
with approximately 300 crop acres
and 50 or more replacement
heifers being grown out to freshing
utilizes nearly three man
equivalent of farm labor. This
results in average labor intensity
ratios of over 33 cows per worker
and nearly 100 crop acres per
worker.
However, some Maryland dairy
farmers with 100 or so milk cows
are being operated with only two
man-equivalent of farm labor. This
results in average labor intensity
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ratios of 50 cows per worker and
150 crop acres per worker.
This type of adjustment has
occurred in Maryland dairying
since the 1950’s as dairy farmers
sought to increase their net farm
incomes and restrain increases in
average total costs of milk sold to
dairy processing plants.
Economic and financial survival
during the 1980’s and into the 1990’s
will require a continued focus on
cost reducing practices and ad
justments as has been the case
since average blend milk prices
stopped increasing in 1981.
The labor costs per unit of dairy
farm output have been lowered or
restrained in recent years by in
creasing the amounts of digestible
nutrients produced per worker
from the cropping system and the
amounts of milk sold per worker
from the dairy enterprise system.
In the short-run, increased crop
yields per acre and increased
pounds of milk sold per cow have
been the most profitable response
for Maryland dairy farmers to
make.
However, in the long-run,
changes in farm plant and
equipment with increased crop
acreages rented or purchased and
with increased numbers of milk
cows have been major sources of
dairy farm productivity and
profitability gains.
High interest rates on loans
available to dairymen have cur
tailed the trend toward herd
consolidations which result in
improved labor efficiency and
capital efficiency.
Lower feed prices in 1985 and
expected in 1986 will enable
Maryland farmers to feed their
milk cows more effectively and
more profitably than would have
occurred with high feed prices and
values.
Nationally, an average 1984
commercial dairy enterprise with
a herd of 60 dairy cows and 12,495
pounds of milk per cow generated
a return above cash expenses and
replacement costs of nearly
$15,100. The deterioration in ex
ternal economic conditions im
pacting on the dairy farm is
demonstrated by a higher return of
almost $23,000 in 1981 for a 53 cow
herd producing an average 12,183
pounds of milk per cow.
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Therefore, the rise in total en
terprise output between 1981 and
1984 was not large enough to offset
the price-cost squeeze dairymen
found themselves in during 1985.
The continued financial squeeze
is expected in 1966 and beyond as
dairy production is brought into
better adjustment with the existing
and potential wants and needs of
consumers with the abilities to
purchase and satisfy those needs.
Maryland commercial dairy
herds averaged larger in size and
output per cow during this 1981-85
than the U.S. average. However,
the price-cost squeeze has had a
major impact on net reutms above
cash expenses and replacement
costs. Farmers with excessively
high debt to asset ratios will
continue to be under financial
pressure in terms of cash flow
generation required to handle debt
servicing requirements.
The federal milk diversion
program was temporarily suc
cessful in reducing national milk
output, but milk production rates
are now higher than 1983 rates and
milk price supports have declined
by $1 per cwt. since March 1985.
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