Supply Management In The Era Of Sexed Semen

One thing the dairy industry has proven over and over again is that it has a greater ability to increase milk production than to boost demand for milk and other dairy products.

Indeed, dairy productivity is a pretty remarkable story. Milk production per cow has grown from 4,167 pounds per year in 1924 to over 20,000 pounds per year in each of the last three years.

Due to that amazing increase in milk per cow, the US dairy industry has gone from producing about 89 billion pounds of milk with over 21 million dairy cows in 1924 to producing over 189 billion pounds of milk with about 9.2 million dairy cows last year. Most industries would kill for such productivity increases.

But these productivity increases have come at a cost, or with some costs. Among other things, the number of US dairy farms has plummeted over the years, although it should be noted that, while many dairy farms went out of business involuntarily, many others went out of business because their owners no longer wanted to milk cows.

Also, because demand for dairy products has fluctuated greatly over the years (milk demand has generally expanded due more to population growth than consumption increases; per capita dairy consumption peaked at over 800 pounds in the 1920s, 1930s and early 1940s, and stands at around 600 pounds today), dairy producers have faced some rather dire consequences for their productivity.

These dire consequences have resulted in some mighty interesting and heated dairy policy debates over the years. These policy debates have resulted in “solutions” on both the supply side and the demand side of the equation, but none has been perfect, as evidenced by the disasterously low milk prices of 2009.

Sometimes, though, it is technology itself, rather than actual productivity increases or supply-demand imbalances, that leads to some interesting policy discussions. The easy example here is BST/BGH, which increases milk production per cow and happened to come along at a time when the dairy industry had already grown weary from battling chronic surpluses.

Now, there’s another new technology just starting to gain traction in the dairy industry, and this technology will actually increase the number of milk cows, not necessarily (but in all likelihood) milk production per cow. The new technology is sexed semen, and it was the subject of a very interesting session at the Wisconsin Dairy Products Association’s Dairy Symposium Monday (for details, please see our front page).

After listening to four speakers address this new technology, we reached one main conclusion, and that is that sexed semen will impact the dairy industry in a couple of pretty profound ways.

First, it looks like sexed semen will lead to increased milk production. Unlike most dairy production technologies, however, sexed semen won’t boost production per cow; rather, it will increase cow numbers.

Indeed, one Dairy Symposium speaker, Phil Plourd of Blimling and Associates, said an extra 300,000 heifers will come on board next year due to sexed semen. Blimling and Associates is predicting that milk production will rise 1.3 percent this year and 2.7 percent next year, and milk cows are a big part of that. So sexed semen will lead to a lot more milk, and quite possibly lower milk prices will be the result.

This additional milk production will not be a nationwide phenomanon. Rather, it was mentioned that sexed semen appears to be more popular in larger herds, and is being used a lot in California, particularly in Jersey herds, which could lead to a turnaround in California’s recent decline in cheese production.

Second, Plourd also mentioned an irony involving sexed semen: the dairy industry has the technology to fairly impressively ramp up milk production while at the same time there are increased calls for supply management for the dairy industry.

If nothing else, the dairy industry may finally find itself in a position to debate the merits of a new technology and a new direction in dairy policy, all at the same time.

No such debate occurred, that we can recall, during the years leading up to the commercial introduction of BST/BGH. As noted earlier, BST/BGH came along after the dairy industry had battled surpluses for a number of years.

That battle had included supply management, in at least a couple of forms: a whole herd buyout program and a dairy diversion program. But during the years that the dairy industry debated BST/BGH, not much was heard about supply management.

Now, with sexed semen, we have an emerging technology that will in all likelihood lead to higher milk production and lower milk prices, at the same time Congress and the dairy industry are debating the merits of supply management. If nothing else, projections about the potential impact of sexed semen could bolster arguments from the backers of supply management.

One side note here: in the 1980s, both supply management programs also included demand-boosting efforts. In 1983, Congress approved the Dairy Production Stabilization Act, which included not only a dairy diversion program (dairy farmers were paid $10.00 per hundredweight if they reduced marketings), but also authorization for the National Dairy Promotion and Research Board.

Two years later, the 1985 farm bill included not only the whole herd buyout program but also the Dairy Export Incentive Program, which aimed to boost US dairy product exports.

So maybe the current debate over supply management, in the new era of sexed semen, should also include some element of demand enhancement. Maybe the dairy industry needs to create a mechanism to provide dairy products to food banks, which recently have been experiencing record interest.

Sexed semen and supply management: expect to hear plenty more about both in the months and years ahead. r

Cheese Reporter welcomes letters to the editor. E-mail your comment to Dick Groves at dgroves@cheesereporter.com.

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