Farmers who gathered for the Professional Dairy Producer of Wisconsin annual business conference in Madison on Tuesday (March 12) had a chance to take a world tour of sorts as they heard from dairy producers hailing from Mexico, New Zealand and England.
A variety of interest rates and investment impediments, climate conditions and dairy demand were part of the picture presented by the three dairy producers from all parts of the globe. Dairy farmers in two of the countries can't produce enough milk to fill domestic demand while the dairy industry in the third country is built upon export demand.
Jane Dyson farms in Oxford, England. She and her husband Neil are fourth-generation farmers and work alongside her parents.
Dyson, who has an agricultural degree, worked as a dairy consultant for a few years before returning home to manage her family's 480-cow dairy farm, which includes 650 acres of cropland.
She said bST and rumensin use are banned in England and the European Union.
Because of the strong consumption of milk in her country, dairy farmers there are not able to produce enough to fill domestic demand. "We are only 80 percent self-sufficient in dairy production," she said.
Most of England's dairy production is concentrated in the western part of the country where the climate is the mildest and the soils are well-draining. But that's not where her Holly Green Farm is located.
It is 40 miles outside London on heavy clay soils. They are 250 feet above sea level and have annual rainfall of about 22 inches per year.
Their maximum temperature is 85 degrees Fahrenheit and minimum temperature is 15 degrees.
Their farm is situated on the edge of a village where cows are housed in freestalls with mattresses and automatic barn scrapers. Cows produce an average of 18,400 pounds per cow on twice daily milking with 4.07 percent fat and 3.37 percent protein.
They operate under a milk quota system that was introduced in 1984 across the entire European Union. The quotas are based on 1981 production plus one percent, she said, but that system is due to end in March 2015.
Though the United Kingdom has had "the most flexible interpretation" of the quota program in the EU, Dyson said it has been expensive and "hasn't done much for milk prices."
Her farming operation has a liquid milk contract so they do not get paid any kind of premium for their protein. The maximum allowed somatic cell count (SCC) is 250,000. In January their milk brought payments of $21.70 per hundredweight.
Dairies like hers participate in a program of Assured Food Standards, which allows their products to carry a red tractor logo. The program has 137 different standards that farms must meet, covering facilities and housing, feeding, health and welfare of animals and a host of other areas. (She said tail docking is not allowed.)
Inspections to comply with these standards are done on the farms and 50 of the standards are judged to be key in the program.
BSE AND FMD
Because of the problems her country had with BSE and foot and mouth disease (FMD), there are strict standards on traceability and cattle movement.
Since 1986 there have been 183,000 cases of BSE - known by some as "mad cow disease". Variant CJD, a similar brain-wasting disease in humans, has resulted in 176 deaths in England.
When this disease broke out, beef consumption dropped by 25 percent but recovered within two years, she said.
As if one three-letter disease weren't enough, the United Kingdom was also his with FMR. The outbreak of foot and mouth disease resulted in the slaughter of six million cattle and sheep and came at a huge personal cost to farmers. "Many in the farm community hit rock bottom morale," she said.
It resulted in tighter regulation of sheep and cattle.
Dyson said as she looks ahead she sees a number of conditions dominating the dairy industry in her country. The supply chain is dominated by only a few handlers, but there is good consumption of dairy by consumers.
Dairy farmers are in pretty good condition because low milk prices have led them to institute cost controls on their farms.
"A lot of regulation has been forced upon us and it has changed the system, but it has always been possible to adapt."
Jaime Suarez is part of a family dairy with 3,700 cows at two locations in Mexico's Queretaro province where cows are milked three times a day. The farms employ 160 workers.
Even with 1,100 acres of land, the farm still buys most of its feed, said the fourth-generation Mexican dairy farmer. After his great-grandfather came from Spain, the family established a dairy in Mexico City, where they bottled their own milk in glass bottles.
In the 1970s they doubled their production and in 1998 moved to Queretaro north of Mexico City.
Mexican dairy farms have quotas that come from their processors, not the government, he said.
Mexico is a country that can't produce enough milk to fill its domestic demand. Farmers produce 11,000 million liters of milk per year, he said, while consumption is 15,100 million liters.
The price paid to farmers ranges from $15.23-$25.38 per hundredweight and the average cost of production on farms is $20.31 per hundredweight.
"From the consumer point of view the only thing that matters is price," he said. "They don't even read the labels. They don't know if it's organic or bST-free."
From the environmental standpoint there are practically no regulations, he said, and there are no problems with manure handling. There are no restrictions on the type of fertilizers used and there no restriction on distances from residential areas.
Dairy farmers who want to invest in their businesses pay a steep price in the lending arena. There is no such thing as agricultural lending, but business credit goes at interest rates of 15-20 percent and personal credit interest rates are as high as 24-48 percent.
Mortgage rates range from 9.5-13 percent while deposit investments pay back only 3.5-8 percent. "It's really expensive to get money in Mexico. Most banks don't have ag branches and don't like to lend to farms or ranches.
"They don't want to end up owning ranches or dairies. Federal money with subsidized rates can be obtained but it's very difficult."
Still, Suarez considers the future of the dairy industry very bright in Mexico. Companies like Coca-Cola are backing investment in dairy plants to boost their stable of "healthy products" and the company has plans to increase processing capacity from 250,000 liters per day to 4 million liters per day in about five years.
"They understand they will need to increase prices to producers to keep milk coming their way," he said.
As the price of feed continues to rise, Suarez said it has hit his farm hard. Last year, his feed prices rose 60 percent.
"The prices are outrageous. It's really hard to get it done."
Andy MacFarlane worked for eight years as a farm consultant and then in 1989 purchased his first farmland.
Eleven years later, along with his wife Tricia and his brother John, he converted the sheep, beef and grain farm to a 770-cow dairy unit. Since 2000 they have added partners and three other dairy units to their operation.
The smallest dairy has 770 cows and the largest has 3,000 cows.
MacFarlane still works as a registered farm consultant and has governance roles at New Zealand's specialized agricultural university.
New Zealand is located east of Australia - three hours by airplane - and MacFarlane said the latitude is similar to Madison. However, the climate is similar to the state of Oregon because of the ocean's effect.
About 56 percent of the island nation is farmed and 14 percent of it is dairy. "It has as many cows as people with 4.5 million of each," he said.
Most dairy cows in New Zealand produce about 15,000 pounds of milk (fat-corrected to 3.5 percent) and dairy farmers there are paid on a solids basis only. "We get penalized for volume."
Cows are milked 270 days a year and are all dried off at the same time. They calve in August and September, which correlates to February and March in the northern hemisphere. The dairies there are based on grass.
MacFarlane's farm has a staff of four and uses irrigation to maintain pastures and cropland. Ninety percent of what the cows eat is grass. "On our farm we feed no grain whatsoever."
Fodder is used as part of the overwintering diet. The herd is made up of some purebred Jerseys and some purebred Friesians, he said, but the majority of the animals are crossbred - with three-quarter Friesian blood and one-quarter Jersey.
These cows are hardy, walking up to a mile-and-a-half each day from pasture to parlor.
SET TO EXPORT
New Zealand's dairy system is set up for export. Ninety-seven percent of the milk produced is exported, he said, and over half of that goes as powder.
Though New Zealand dairy farmers produce only 2 percent of global production they control 35 percent of cross-border trade, he said. There are no subsidies or direct support for dairy farmers there.
These export products are held to the toughest standards of any of the countries they sell to. Europe and Japan have some of the highest standards and so does China, since coming out of the melamine scandal.
China imports a lot of dairy products because the Chinese "don't trust their own milk" after baby formula was tainted with melamine.
Though 30 years ago New Zealand didn't require very high environmental standards, MacFarlane said that today it does. "You can't supply milk to a dairy company without a nutrient management plan and water management plan."
Most of the capital spending on his farm goes into areas that improve environmental outcomes and MacFarlane said he has spent $200,000 a year in recent years.
Unlike the situation for Mexican dairy farmers, MacFarlane said dairy credit is readily available from four major Australian banks and Rabobank.
New Zealand dairy farmers are the third most indebted in the world, behind only Denmark and The Netherlands, he said. Interest rates are 6 percent for five years.
His dairy industry features a lot more volatility because it depends so heavily on world trade. As currencies fluctuate around the world, it affects dairy prices.
There's a high generational turnover in dairy farming, he said, and the average age of farmers is 40. "There is no shortage of young people coming into dairy."
Most dairy farms are limited to about 1,000 cows because of the walking distance required from pastures. Farms generally have one employee per 200 cows.
MacFarlane said farmland sells for about $16,000 an acre.
As an industry there is an objective now to have every farm owner and/or manager have a degree or university diploma, he said. Today about 8 percent of dairy farmers have a degree and 25 percent have a vocational certificate.