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Rising costs demand smart farming

Christian Poggensee Published on 31 August 2012

Higher fuel costs are steadily becoming the new norm for consumers in Canada and much of the world. The International Energy Agency (IEA) reported that economic troubles in Europe and effects elsewhere will trim total global oil demand this year by about 100,000 barrels per day compared with their forecast in May 2012.

However, recent world crude oil prices have been pushed upward over geopolitical concerns about potential supply constraints.

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Predicting the cost of oil is contingent on many factors, yet it’s hard to deny the dramatic trend of rising fuel costs – today’s oil prices are more than four times what they were a decade ago.

The situation is not likely to change in the years to come as demand for oil from growing economies like China, Brazil, India and the Middle East remains high.

Furthermore, disruptions in supply could cause oil prices to spike, fueled by geopolitics or extreme weather conditions.

So what does this mean to a dairy farmer? One could assume that the result of higher fuel costs – making planting, harvesting and transporting more expensive – is lower farm profitability.

If an average dairy producer’s margins continue to get smaller, the risk of going belly-up becomes greater.

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Some dairy producers – especially those trying to retain the tradition of farming in their family – are frustrated about being squeezed out of a business by global politics and even their own nation’s agricultural policies.

Given the volatile price of oil, the high demand of corn for fuel, and the anticipated effect of the U.S. drought on corn exports, feed costs have the potential to reach unprecedented levels.

According to a recent study by the University of Missouri, 65 percent of milk production costs are attributed to feed, making it extremely hard for producers to overlook the impact of world politics and energy policy on farming.

So now what? If the price of fuel is going to account for a growing share of a producer’s operational costs, how can he get it back?

Two words: Smart farming.

The consolidation of Canadian dairy farms in the last decade is challenging producers to meet an economic future defined by scale and efficiency.

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A key to dairy producers’ success depends on their ability to harness automation and information technology to create an on-farm integrated productivity and profit-driving system that embraces more than milking.

For an equipment manufacturer, it’s about empowering today’s dairy farmers with the decision tools and automation technologies that seamlessly integrate products, services and knowledge for better-quality milk, herd management, productivity and profit.

Smart farming requires a holistic approach. From GPS in the combine, to the barn where robots milk the herd, all the way to the farm management system in the office, collecting and analyzing cow-related and production-related data – every business decision a producer makes has the potential to affect his profitability.

There are great examples of producers paving the way towards better dairy profitability using innovative farm management practices. This summer, Dairy Farmers of Canada recognized four dairy producers credited with using exceptional on-farm management practices that exceeded the objectives outlined by the organization’s sustainability strategy.

These farms employed a mix of proven and creative solutions to reduce their emissions, promote the efficient and sustainable use of natural resources, and improve the socio-economic performance of their farm.

While some people view “sustainability” as just a buzzword, it’s important to remember that farm profitability is a pillar of sustainable dairy farming. Practices which optimize the balance between milk production and input costs keep dairy families farming.

Trying to forecast the price of fuel, corn or milk in the near or distant future is anybody’s game, but milk production is a specialty whose success is dependent on the decisions of dairy producers – large and small.

Smart farming is about embracing innovative ideas and technologies that help to create a more productive and sustainable future.  PD

Christian Poggensee

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