Part I – Making Money – Components

The prior post covered the impact of current component levels on producer revenue.  The impact is very powerful.  This post and the next three posts will cover opportunities to increase revenue.  The four posts will cover the following elements.

  • Part I – Making Money – Butterfat and Protein Components
  • Part II – Making Money – Milk per Cow
  • Part III – Making Money – Somatic Cell Counts
  • Part IV – Making Money – The Mix of Classes of Milk and the Statistical Uniform Prices

 

This post will compare component levels in the different Federal Orders and show which Orders have the highest component levels and which are growing component levels fastest.  The data is based on 12-month moving averages to eliminate volatility.  Because Class II, III, IV can de-pool, Federal Order data is skewed by significant de-pooling.  Typically, the highest paid Class has a lot of de-pooling and is not included in the Federal Order numbers.  In the last 12 months, de-pooling of Class IV milk has been significant.

BUTTERFAT by FEDERAL ORDER

Table I lists the 11 Federal Orders by the highest butterfat components to the lowest. All Federal Orders are paid for butterfat. The order has not changed significantly in a long time. The Northwest Order continues to maintain the highest levels of butterfat at 4.31%. Florida continues to have the lowest butterfat percent at 3.89%. Both Orders are small, but the .42% spread indicates a very different management approach. At current butterfat prices, the difference is worth $1.50 per cwt.

The four with the lowest butterfat levels are all paid on the Advanced formulas and have significant volumes of fluid milk, the highest paid milk.

Table I – Percent of Butterfat in Each Federal

Table II below shows how fast each Federal Order is increasing butterfat levels. Table II rankings are the inverse of the Table I. The Federal Orders with the lowest butterfat levels are rapidly increasing butterfat levels. Money talks! The Northwest Federal Order with the highest butterfat levels had a decrease from the prior year. Even with the butterfat increases in the Federal Orders paid on the Advanced system, they are still at the bottom of the Table I listing.

Table II – The Average growth in Butterfat Components over the Last Year

PROTEIN by FEDERAL ORDER

Seven of the Federal Orders are paid on the Class and Component formulas where Protein levels are paid specifically. The four that are not in this list are those paid by the Advanced formulas where only butterfat component levels influence revenue. The spread between the highest and lowest protein levels is .23%, much lower than the spread for butterfat.
Table III – Protein Percent in Federal Orders paid by the Class and Component Formulas
Protein levels (Table IV) are increasing fastest in the Orders that make the most cheese. The Upper Midwest, California, and Central are ranked at the top of the list in that order. Protein is required to coagulate and hold butterfat in the cheese. Class III milk for cheese makes up 56% of the Federal Order milk in the last 12 months. Currently, protein prices are much lower than butterfat prices, so there is a lower financial incentive. However, extra revenue is always a requirement for sustainability.
Table IV – Annual Increase in Protein by Federal Order

WHAT DOES IT ALL MEAN?

The tables above are based on averages of many herds and many cows.  While data is not available at the herd and cow level, the statistical variance would be much greater.  Having a higher protein level benefits cheese producers and it also increases the producer revenue.  All producers in the Federal Orders paid on the Class and Component formulas benefit financially from higher butterfat and protein component levels.

Using the tested and verified sciences to increase component levels is available to all.  Why would any producer not utilize these tools to increase revenue?

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