Optimal dairy farm adjustments to increased utilization of corn distillers dried grains with solubles.

The purpose of this paper was to identify effective dairy farm management adjustments related to recent structural changes in agricultural commodity markets because of expanded biofuels production and other market factors. We developed a mathematical programming model of a representative dairy farm in New York State to estimate the effects of changes in the relative prices of important feed components on farm profitability, identify optimal adjustments for on-farm feed production, crop sales, and dairy rations that account for expanded utilization of corn distillers dried grains with solubles (DDGS), and point out potential implications of these adjustments on whole-farm nutrient planning. We mapped out an effective farm-level demand curve for DDGS by varying DDGS prices relative to other primary feed ingredients, which allowed us to compare DDGS utilization at alternative market conditions. Had the relative prices of major feed ingredients remained at their historical averages, our results suggest that there is only modest potential for feeding DDGS through supplementation in rations for dry cows and heifers as a substitute for soybean meal. However, the relatively lower DDGS prices experienced in 2008 imply an expanded optimal use of DDGS to include rations for lactating cows at 10% of the total mixed ration. Despite these expanded opportunities for DDGS at lower prices, the effects on farm net returns were modest. The most important considerations are perhaps those related to changes in the phosphorus (P) levels in the dairy waste. We showed that including moderate levels of DDGS (10%) in rations for lactating cows did not significantly increase P excretion. However, if the rations for dry cows and heifers were supplemented with DDGS, P excretion did increase, resulting in sizable increases of plant-available phosphorus applied to cropland well beyond crop nutrient requirements. Although our results show that it is economically optimal for the dairy producer to incorporate DDGS into these rations, some operations will be unable to accommodate the additional P because of existing nutrient management recommendations, soil P status, and the number of acres available for manure spreading.

Measuring the financial risks of New York dairy producers.

The financial risks of a group of New York dairy producers were measured from 1988 through 1997 and were decomposed by source of risk by two procedures. Decomposition of the variance suggested major contributors to variability in returns to New York dairy farms were variabilities in purchased feed quantities and milk production; milk price variability contributed substantially less. Similarly, decomposing the Gini measure of income dispersion indicated that milk revenues and purchased feed expenditures contributed most to farm return inequality over time. Controlling feed costs and maintaining high and stable milk production appear to be the principal approaches that dairy producers can use to control their financial risks.