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Corn pressuring dairy margins

Jeff Caldwell 10/11/2011 @ 9:30am Multimedia Editor for Agriculture.com and Successful Farming magazine.

This fall's corn harvest hasn't exactly been a bin-buster everywhere, and those lower yields are expected to tighten margins in another sector that's already felt a lot of pains in the last few years.

The dairy industry's primary feedstock will likely be in tighter supply this fall and into this winter, putting more price pressure on that industry's margins, according to Purdue University Extension dairy specialist Mike Schutz.

"Because of the drought, corn and forage yields are down and silage is lower quality, but the costs remain high," Schutz says in a university report. "The per-ton value of silage is based on yields and corn prices. With corn trading above $6.50 per bushel, delivered silage prices are about $65 to $75 per ton despite the frequent lower quality. This is in comparison with the $30 to $40 per ton prices producers were paying in recent years."

And, the danger doesn't end with a shorter potential milk supply, Schutz says. Quality issues like mycotoxins in this fall's crop will mean a lot of testing and will require a close eye on toxin levels in order to prevent milk from being infected.

"Total rations with as little as 20 parts per billion of aflatoxins could result in milk residues," Schutz says. "This tends not to be as much of an issue for corn silage, but it is an issue for corn grain."

And, as for that silage, it will be important to watch moisture levels and make sure it's in good shape when you put it into storage, Schutz says.

"Dairy producers really need to remove the opportunities for oxygen to get to the silage, and they can do that by covering piles and removing the excess air," he says. "Replacements for corn and silage, such as distillers grains, alfalfa and other energy supplements, will be expensive, so farmers really need to monitor feed storage. Dry distillers grains can be affected by molds and aflatoxins, as well, so it's critical to keep an eye on those feeds, too."

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