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January 2014
Volume 16, Issue 1

INSIDE THIS ISSUE

U.S. Dairy Update: Exports and Policy Top the List, Dr. Cameron S. Thraen, Associate Professor and OSUE State Dairy Markets and Policy Specialist, Department of Agricultural, Environmental and Development Economics, The Ohio State University
It’s Game Time.  Are You In It?, Dianne Shoemaker, Field Specialist, Dairy Production Economics, The Ohio State University Extension
Youth Dairy Program Updates, Ms. Bonnie Ayars, Dairy Judging Teams Coach and Extension Youth Specialist, The Ohio State University

Announcements

 


U.S. Dairy Update: Exports and Policy Top the List (top of page) pdf file
Dr. Cameron S. Thraen, Associate Professor and OSUE State Dairy Markets and Policy Specialist, Department of Agricultural, Environmental and Development Economics, The Ohio State University

U.S. Dairy Export Industry

As I write this article for Buckeye Dairy News, it is remarkable that U.S. exports of milk, measured on a skim solids basis (ssb), are now exceeding 15% of total U.S. production.  For a recent dairy outlook presentation I put together, you may find a few points interesting and perhaps surprising.  First, a look at what it means to export over 15% of total milk solids.  Back in 1997, when milk production in the U.S. was just over 150 billion pounds, our exports totaled 4.5% of production.  At that time, it required about 16 days of national production from just over 400,000 dairy cows to meet this demand.  The U.S. average milk price in 1997 was $13.34/cwt.  Now jump to the present day.  In 2013, the United States Dairy Export Council (USDEC) estimates that the equivalent of 15.6% of national milk production was exported to others around the globe.  To accomplish this feat, it took over 56 days of production from 1.4 million dairy cows.  The U.S. average milk price for 2013 was $19.80/cwt.  Another astounding fact is that U.S. milk production increased by 33 billion pounds from 2003 to 2013, and during this period, U.S. exports grew by 22 billion pounds.  Export demand has absorbed 66% of the growth in U.S. milk production over the past 11 years.  U.S. dairy exports in the form of whole milk powder, skim milk powder, whey, and lactose flow to Mexico, Canada, South America, the Middle East/North Africa, Southeast Asia, China, Japan, and South Korea. In 2013, the market value of this trade has been put at over 5 billion dollars.  This is truly outstanding and a nod to the superb job that USDEC and other organizations in the U.S. dairy industry have been doing over the past 15 years to transform the U.S. dairy industry into a truly dynamic export industry.  At this juncture in 2014, it appears that the influence of U.S. export demand on market prices and the farm price for milk will only strengthen in 2014.

Dairy Policy and the Farm Bill


I will open with this quote from U.S. House representative Frank Lucas, chair of the U.S. House Senate farm bill conference committee, upon the completion of Conference Committee draft legislation:

 "If I expire in the next three days, I want a glass of milk carved on my tombstone—because it's what killed me,"  Frank Lucas, as quoted in the National Journal. http://www.nationaljournal.com/congress/frank-lucas-is-thrilled-that-this-whole-farm-bill-thing-is-finally-over-20140127

By the time you read this, the text of the bill and those provisions pertaining to the dairy safety net and the other dairy provisions will have been widely reported, so I will only add a few comments.  As readers of BDNews may recall, John Newton and I wrote earlier that a compromise solution was available to end the deadlock over the Dairy Security Act as passed by the U.S. Senate, and the Dairy Freedom Act, as passed by the U.S. House of Representatives.  This compromise included a modified Milk Income Loss Contract (MILC) program, with the production cap increased to 4 million pounds, and the addition of an insurance program with a coverage level capped at $6.50.  We argued that with this combination of programs, there would be no need for a supply management program, one of the more contentious issues in the entire farm bill negotiations.

After much debate, some of which included the MILC – Insurance idea, the proposed dairy safety net comes close to this concept.  MILC is in fact terminated and is replaced with an insurance type program.  Supply stabilization is also off the table. With the proposed insurance program, participating producers will establish a base production history (bph) based on the highest annual production from the 2011, 2012, or 2013 calendar year. Once established, a farm’s production base will be allowed to increase by the U.S. average production growth.  Production over this level will not be eligible for the program.  Premiums follow a two-tier schedule.  For a production base at 4 million pounds or less, there is one schedule, and for those farms with a production base over 4 million pounds, another more expensive schedule is used.  Those producers whose annual production is at or below 4 million pounds, the cost of coverage all the way up to $6.50 remains very reasonable, only become more expensive at the $7 to $8 levels.  For a producer whose annual production base is above the 4 million pounds, the cost is still modest up to the $5 level, but then increases rather significantly above that point.  For a comparison, a producer with a bph of 4 million pounds will be able to purchase $6.50 coverage at a cost of $0.09/cwt, while a producer with a bph over 4 million pounds would pay $0.29/cwt. 

There are other provisions for new farms, farms with multiple owners, and owners with multiple farms.  Producers will not be allowed to simultaneously use Livestock Gross Margin Insurance and this program.  The program will not start until September of 2014 and decisions on coverage will be made on an annual basis.  Also in time of severe milk price stress, the Secretary of Agriculture is directed to implement a dairy product purchase program to augment commercial demand with the intent of increasing the milk price.  Much of the operational details for this program have now been passed along to the Secretary of Agriculture and the USDA, which in my opinion, is a change for the positive.

If you would like to hear more about the proposed program, tune in this Friday, January 31, to the Dairy Markets and Policy (DMAP) website (http://www.dairy.wisc.edu/) and listen to a podcast by Dr. John Newton.

 

It’s Game Time.  Are You In It? (top of page) pdf file
Dianne Shoemaker, Extension Field Specialist, The Ohio State University

We need to change how we think of January and February.  Tax time.  That never has a very positive feel to it.  Instead, let’s think of it as scorekeeping time.  Tally up the points; assets and income for the home team.  Liabilities and expenses are the opposing team’s points.  At the end of the 2013 game, who won the game?  While it is not quite that simple, farm business analysis is a way of keeping score on many business levels.  If it was a good year, a few of the opposing team’s points are allocated to Uncle Sam….and that is a good thing.

So as we enter the 2013 scorekeeping season, how did Ohio’s dairy farms fare in 2012, the last completed season?  To find out, we’ll look at 40 farms that participated in the Ohio Dairy Farm Analysis Program.  Results of these dairy enterprise analyses are summarized in Table 1. 

Table 1. 40 Ohio dairy farms, 2012 dairy enterprise analysis. Homegrown feed
valued at farm’s cost of production.
Table 1
*Includes other revenue adjustments, labor, and management charge.
** Before labor and management charge.

Table 2. Ohio Dairy Farm Business Analysis Summary,
comparison of 2011and 2012 results, average for all farms,
homegrown feed valued at farm’s cost of production.
Table 2
*Includes other revenue adjustments, labor, and management
charge.
** Before labor and management charge.

So how do we characterize 2012?  Better than 2010, when net return per cow was in double digits, but not as good as 2011 as can be seen in Table 2.  So what happened?  Feed prices were certainly high both years, but milk prices were substantially different.  The Statistical Uniform Price, that is the Class III price plus the producer price differential for Federal Order 33 was fully $1.92/cwt less in 2012 that 2011.  One dollar of that was due to the producer price differential, only $0.18 in 2012 compared to $1.18 in 2011.  The balance came from a Class III price averaging $17.44 in 2012 compared to $18.37 in 2011.  Even though the feed cost per cwt for the 40 farms in 2012 averaged $11.78, 82¢ less than the previous year, that reduction, and some additional reductions in expenses couldn’t, on average, compensate for the substantially lower milk price and a decline in milk sold per cow. 

It should be noted that many, but not all, of the farms were the same (2011 and 2012), and new farms chose to participate in the analysis in 2012.  Clearly, there are farms doing very well, and some must chart a new path if they want to continue milking cows as seen in the range of net farm returns from a loss of greater than $1100 to a positive $1750 per cow (Table 1).  Eight farms, representing the top 20% based on net return per cow, averaged a positive $1,145 per cow, $914 per cow more than the average of all farms.   These farms continue to have more dollars available to pay unpaid labor and management, principal, reinvest in the business, invest off the farm, and pay taxes! 

So, it’s nice to know how you did, but how does this scorekeeping help plan for the future?  Each farm that completed an analysis also received a benchmarking chart which showed how their dairy enterprise compared to all the other Ohio dairy farms in 40 income, expense, and production areas.  These analyses are also available for crop enterprises and the whole farm economic analyses.  These comparisons easily help answer the questions: “how am I doing compared to other dairy farms”, and “is it an item that is worth spending my time and resources addressing?”

While it is tax time, it is also time to check the score on the business side of the dairy.  Completing a farm business analysis is an excellent investment in the future of your business.  Check out the forms at our website at http://farmprofitability.osu.edu/.  Cost to the farm is only $100 as this program is supported by Farm Business Management and Benchmarking Grant Funding from the USDA National Institute of Food and Agriculture.  If you have questions, please email Dianne Shoemaker at shoemaker.3@osu.edu or call at 330.533.5538.   It is February already.  Game on.

Youth Dairy Program Updates (top of page) pdf file
Ms. Bonnie Ayars, Dairy Judging Teams Coach and Extension Youth Specialist, The Ohio State University

OHIO STATE FAIR OFFERS NEW LIVESTOCK SHOW

The Ohio State Fair will now offer a Dairy Feeder Calf show from July 28 through July 30 in the Cooper Arena.  For more details, here is the link.
http://www.ohiostatefair.com/index.php/news-a-media-48/item/592-new-dairy-feeder-calf-show

FORT WORTH STOCK SHOW DAIRY JUDGING CONTEST

On Sunday, January 19th, three young ladies from OSU competed in the Ft. Worth Stock Show Dairy Judging Contest in Ft. Worth, Texas. The team of Jacquelyn Sherry, Robin Alden, and Lara Staples placed 5th in the largest contest to date for this event.  Teams traveled from California, Michigan, and many points between to compete.  Robin finished in 3rd place overall, 5th in reasons, and Jacquelyn was 14th overall.  We were 5th in two breeds and Robin was the high person for the Brown Swiss breed.   Additional activities included tours of the area, stock show activities, and farm workouts.

OHIO AND DAIRY JUDGING


When it comes to being Ohio Proud, it is worth mentioning that 4 of the 2014 World Dairy Expo official judges are from the Buckeye state.  Not only were they born and raised here, but their involvement with the dairy industry has led them in many directions of notable interest. 
Spring Dairy Expo will also be the host for the Holstein Association USA Judges Conference on March 27. More details about this are available through Holstein USA.

DAIRY 4-H ACTIVITIES AND EVENTS


If you are interested in all of the dairy 4-H activities for 2014, the Ohio 4-H Dairy Calendar of Events is posted online at www.4hansci.osu.edu/dairy.  Of notable interest are the dairy judging workshops that are being held in February and March in preparation for the Ohio 4-H Dairy Judging Contest on March 29th.  Ohio FFA will once again return and collaborate with this contest as one of their Career Development Events.

 

Announcements (top of page) pdf file

Dr. Maurice L. Eastridge, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University

The Department of Animal Sciences will hold its annual Recognition Banquet on Saturday, March 22, Doubletree Hotel, 175 Hutchinson Avenue, Columbus. The recognition banquet will honor and celebrate our students, co-curricular teams, and alumni. In addition, the recipients of the 2014 Animal Science Hall of Fame and Dairy Science Hall of Service will be recognized. The Dairy Science Hall of Service award has existed since 1952 and has been an important venue to recognize the contributions by special individuals to the Ohio dairy industry and toward the inspiration of students. The objectives of the award are to recognize worthy men and women who have made a substantial and noteworthy contribution toward the improvement of the dairy industry of Ohio, elevated the stature of dairy farmers, or inspired students enrolled at the Ohio State University. All nominations should be mailed by Friday, February 21 to: Dr. Maurice L. Eastridge, The Ohio State University, Department of Animal Sciences, 221B Animal Science Building, 2029 Fyffe Court, Columbus, OH  43210-1095, (614) 688-3059, FAX (614) 292-1515, Email: eastridge.1@osu.edu.

The annual Tri-State Dairy Nutrition Conference will be held April 14-16, 2014 at the Grand Wayne Center, Ft. Wayne, IN. The purpose of the Conference is to disseminate current information on the feeding of dairy cattle to individuals who provide nutritional advice to dairy farmers. Typically, there are about 450 people in attendance, 14 speakers, and about 50 exhibitors. Other events include student presentations, dairy management software workshop, a preconference hosted by Prince-Agri, a private consultant dinner, and a veterinary dinner. The agenda and registration information are posted at http://tristatedairy.osu.edu.