The P5 provinces have agreed to reduce the negative tolerance range from the current -30 days to -15 days. On August 1, 2022, when the tolerance is changed, credits accumulated under the current negative tolerance will be lost. For example, a producer who is at -21 days on August 1, 2022 will lose the credits associated with six days of tolerance and will be repositioned to -15 days.
On August 1, 2022, the negative production quota tolerance range will be reduced from -30 to -15 days.
What you need to know:
For producers whose margin is below the future standard on August 1, 2022, these days will be lost forever. For example, a producer with 100 kg of quota at -21 days will go directly to -15 days, which is equivalent to 600 kg of fat not produced that will be lost. For a producer who would be at -30 days, 15 days will be lost, which means 1,500 kg of fat.
With a $12/kg feed margin, this represents a loss of $18,000. With this information in mind, it is important to plan well!
Moreover, a dairy planning confirms that the economic impact on the margin is around $18,000 – $19,000 (see figures 1 and 2).
“We have the tools to calculate the dead point, taking into account all the costs related to the extra cows.”
At this point, we need to know if we will have enough calving for this production or if we will have to plan to buy additional cows. There are only 6 months left! If we keep the previous example, we would have to produce 1500 kg more for 6 months (or 180 days), so 8.3 kg more fat per day. A cow with 50 kg of milk at 4.0 Kg per Hl produces 2 kg of fat per day, of course this cow will not produce 50 kg over 6 months. On the other hand, we can claim that a good cow could produce on average 1.4 kg of fat per day, the equivalent of 35 kg at 4 kg/hl of fat for the first six months of lactation. At this level, we would need 6 more cows. You will tell me “at $3000 per cow, we don’t make any money! We have the tools to calculate the dead point, taking into account all the costs related to the extra cows. The calculation is worth the cost! To better plan for the future, let’s take the opportunity to not leave money on the table. If we don’t take action, we won’t have the cows or the milk revenue.
In this last scenario, we are talking about minus 30 days tolerance, but no matter where you are, if you find yourself below -15 days, you need to address this situation immediately! A word of advice: aim for -10 days… because aiming for -15 days is playing with the line of non-deferrable. Your expert advisors can help you plan and calculate the best scenario for your situation, don’t hesitate to ask them!
Written by Hugues Ménard B.Sc. T.P.
Expert, agricultural business strategy, dairy sector Sollio Agriculture