Aug. 26, 2005

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DALLAS – Drought conditions are still evident in parts of Texas, despite the recent rains, said Dr. Ellen Jordan, Texas Cooperative Extension dairy specialist. That means dairy producers should take action now to deal with forage shortages.

In Texas, dairy country includes the Northeast -- where Jordan said drought conditions are still the worst -- the area around Stephenville, and the Panhandle.

Jordon offers these tips to help dairy producers survive the drought.

First, feed a balanced, least-cost ration, she said.

"Do not over-feed cows but do feed to maximize net returns or minimize costs," Jordan said. "Feeding for maximum production per cow is not synonymous with maximizing net returns or minimizing total costs."

Second, cull the herd to get rid of unprofitable cows.

Third, control replacement levels and, if necessary, sell off some heifers to control feed expenses.

Fourth, substitute commodities if necessary. Consult Extension agents for help in commodity location and ration formulation.

Fifth, book hay, silage or commodities for future delivery at a negotiated price.

Sixth, learn about the options in futures contracts traded on the Chicago Board of Trade and New York Exchange, which offer dairy producers the opportunity to lock in prices for commodities needed in three, six or nine months.

"Dairy producers interested in using this strategy should seek advice from someone familiar with the futures market and the process of hedging through options contracts," Jordan said.

Seventh, control other expenses as much as possible.

The first seven tips are aimed at preventing a worst-case scenario, Jordan said.

"There are some producers who will find dealing with drought creates enough financial stress that they may consider exiting the business, particularly since cattle prices are high," she said. "But I don't expect to have a huge number of producers finding themselves in this position."

For those who do, the eighth tip is: If the operation does not cash flow, consider cutting losses by selling out.

"Consider this option only after it is discussed by the family unit," Jordan said. "Discuss all alternatives to dairying in a realistic manner, weigh the viability of these alternatives and seek outside council and advice if necessary."

For that outside council, Jordan recommends Extension agents and specialists as sources of information to help make decisions during periods of career transition. Accountants, lawyers and the clergy also are sources of information and feedback.

"The dairy industry in Texas is currently doing fairly well," Jordan said. "They've had a year of very good prices although prices have taken a downturn in recent months.

"We're the No. 9 milk producing state in the country. We have 320,000 head of dairy cows in just under 800 herds with roughly $1 billion in sales annually. Right now we're seeing enough expansion in milk production in other parts of the country that we probably won't see milk shortages or increased prices."

For additional information on drought strategies visit the Web site: http://texasdairymatters.org