The Florida Dairy Business

Volume 1 Issue 5

As expected, milk prices paid to Florida dairymen are falling. The blend price was down 1.31 in December compared to November, and the mailbox price paid to the DRU was down .96. The December premium increase of .27 helped to buffer the fall. The January and February Class I prices and premiums are listed in the accompanying table. All reports agree the drop in the Basic Formula Price (BFP) over the last few months was an over reaction and prices will stabilize with limited increases in milk production expected.

The BFP roller-coaster of the last several months has provided the opportunity to discuss the BFP, classified pricing, the blend price, etc. in this newsletter. As a result of mandates in the 1996 Farm Bill, this system will likely be very different after January 1st, 1999. The USDA is identifying possible alternatives to the current system, including eliminating the BFP altogether. Other changes include reducing the number of federal orders, making changes in the number of classes in the classified pricing system, modifying Class I differentials, and perhaps pooling Class I differentials nationally. Anyone of these items taken separately, or all taken together, will likely have a significant impact on how your milk is priced in the future.

A special conference for Florida dairymen and others is being held on February 18th to discuss current USDA proposals for this reformation process and to discuss the impact on the Florida dairy industry. Market economists from the Southeast, the Federal Order Administrator for the Florida and Southeast Orders, and an industry panel will detail the issues, answer questions, and participate in discussion.

Unbiased information will be presented, there is no charge, and lunch will be provided. If you are interested in how your product will be priced in the future, attend this conference. It will be an easy way to get complete and current information on the reformation process. See page 3 of this newsletter for more information.

- Michael DeLorenzo

Personnel costs

Personnel costs (wages, benefits and insurance) of the first 20 participating dairies averaged $2.66 per cwt. in 1995. That was 16% of total revenues. The range was more than a dollar per hundredweight higher and lower. This variation is due, in part, to differences between dairies. Labor costs were lower on dairies limited to milking enterprises and higher on dairies that have additional enterprises, such as cropping and heifer raising. Still, there is variation on dairies structured similarly, thus, there are opportunities for improved cost control.

Cows per person

A factor that seems to influence labor cost variation is cows per person (hired labor plus management staff). Participating dairies averaged 60 cows per person in 1995, with eight dairies in the 30’s, while 3 dairies had more than 100 cows per person.

Size of lactating herds did not have a clear effect on cows per person. Seven dairies of less than 400 cows had an average of 69 cows per person, while seven dairies of 400-1000 cows averaged 44, and seven dairies of more than 1000 cows averaged 68 cows per person. More dairies in the program should help sort this out.

Milk sold per person

Probably a more useful indicator of production efficiency with respect to labor inputs is milk sold per person per year. Units are hundred weights of milk sold per year. Data in the table shows the decreasing cost as milk per person increases.

Data in the table suggests that as volume per person increased, personnel costs per cwt. decreased.

How does your dairy compare? The Dairy Business Analysis Program is available free to producers. Contact your county Extension Agent or call Mike DeLorenzo (352-392-5594) for more information.

- Russ Giesy & Mike DeLorenzo

February

14  State Holstein Sale,  Tampa, FL

15 Dairy Judging Contest,  Tampa, FL

18  Milk Marketing & Policy Conference

27 Central Florida Fair,  Orlando, FL (02/27-03/09)

April

08  Dairy Production Conference,  Gainesville, FL (08-09)

10  Nat’l Conf. for Heifer Growers, Atlanta, GA (10-12)

PLANNING COMMITTEE

Geoff Benson

Mike DeLorenzo

Hal Harris

Bill Thomas

SPONSORING ORGANIZATIONS

Clemson University

Georgia Farm Bureau

Georgia Milk Producers

North Carolina Dairy Producers Assoc.

North Carolina Farm Bureau

North Carolina State University

South Carolina Farm Bureau

South Carolina Dairy Association

The Protiva Group

The University of Georgia

University of Florida

PURPOSE OF CONFERENCE

Subjects to be covered include:

- How will the Basic Formula Price be set?

- Is there any justification for increasing Class I differentials?

- What is the future of base plans?

- What will decoupling do to our milk price?

* This program is planned to answer these questions as well as provide leaders of the Southern dairy industry a detailed understanding of current proposals for merging Federal milk marketing orders and other alternative proposals for order reform. Geographic marketing areas, the Basic Formula Price, fluid milk pricing and other order provisions will be discussed.

* This forum will also provide leaders with the opportunity to provide input to USDA’s Dairy Division on the needs of the Southern dairy industry.

* All parts of the industry are encouraged to attend: producers, processors, support sectors, government and university personnel, and cooperative management.

Registration: To register please contact:

Dana DeLacure
P O Box 110920
UF Dairy & Poultry Sci.
Gainesville FL 32611-0920
(352) 392-5594

A Conference for Dairy Industry Leaders

PROGRAM: