Much of this is due to the variability in the feed and milk prices and the dairy producer’s lack of ability to cope with these volatile market changes, says Kevin Hoogendoorn, the producer of a new app, Zisk.
The free Zisk app, available for both iPhone and Android, was developed in Iowa by a duo with more than 35 years of combined experience working directly with dairy farms.
Users of the app simply enter the total number of cows in the herd, enter their typical milk check basis over Class III price, and the app calculates the projected profit on the dairy for the next 12 months.
The app utilizes multiple algorithms that incorporate the expenses of running a dairy along with a continuously updating live feed from the Chicago Mercantile Exchange to calculate feed costs.
Alerts can be created, for example when the milk price hits $19.00; alerts can be set for a variety of parameters including soybean meal and corn prices.
Fear of tools
Based on the volatility of a dairy’s profit/loss potential, Hoogendoorn says dairy operations don’t utilize available tools to control their profit/loss, due to several factors.
The dairy farmer is managing a large, complex operation and doesn’t have the time to consider what affect the markets are having on it each day, he said.
He added that the current price management mechanisms are very complex and require a lot of study before they can be fully understood, which leads to dairy farmers fearing almost all marketing mechanisms.
Farmers are also worried about locking in low milk prices due to their unfamiliarity with futures and options trading, he added.
Historically, the only market management tool dairymen have been familiar enough with to use is hedging milk with their processor, Hoogendoorn said, adding the results have been extremely variable, leading to more fear based on the fact that they have “lost” money at times by hedging.
Hoogendoorn told DairyReporter the response to the free app, which updates every 10 minutes, has been positive, due to its simplicity and ease of use.
An interview with Hoogendoorn can be heard on this week's Dairy Dialog podcast.