INSIDE THIS ISSUE
Futures Market Offers 'Premiums' to Cash: What you need to
know, Dr. Cam Thraen, Milk Marketing Specialist, Ohio State University
Controlling Feed Cost: What do you do when the protein market
goes ballistic?, Dr. Normand St-Pierre, Dairy Management Specialist,
Ohio State University
Selenium Yeast for Dairy Cattle, Dr. Bill Weiss, Dairy
Nutrition Specialist, Ohio State University
The 2003 Tax Legislation - How much will it affect your dairy
business and your family?, Mr. David Miller, Farm Management Specialist,
OSU Extension
On-Farm Assessment & Environmental Review (OFAER) Program,
(Article #5), Mr. David White, Ohio Livestock Coalition, and Dr. Maurice
Eastridge, Dairy Nutrition Specialist, Ohio State University
Robotic Milking: Are we there yet?, Dr. Normand St-Pierre, Dairy Management
Specialist, Ohio State University
2003 Dairy Farm Price and Marketing Management Practices Survey, Mrs.
Dianne Shoemaker, Dairy Extension Specialist, OSU Extesnion, and Dr. Cameron
Thraen, Milk Marketing Specialist, Ohio State University
Announcements, Mrs. Amanda Hargett, State Dairy Extension Associate,
Ohio State University
Calendar of Events
Futures Market Offers 'Premiums' to Cash: What you
need to know?, Dr. Cameron Thraen,
Milk Marketing Specialist, Ohio State University,
Additional milk marketing information by Dr. Thraen
In this offering for the Buckeye Dairy News, I am going to take a departure from the traditional policy and price outlook to show you how you can 'read' the prices being set on the Chicago Mercantile Exchange (CME) Futures & Option market and do a little forecasting on your own.
Ok, it has finally gone and happened. After an impressive run, which began back on July 31 of this year, the cash cheese market on the Chicago Mercantile Exchange has finally gone and taken the plunge! As I write this article the block cheese price has retreated $0.18/lb, from the high of $1.60/lb and the barrel cheese price $0.20/lb from its high of $1.57/lb. Of course, we all 'knew' that unless the whacky workings of the cheese market had gone completely off-kilter, these lofty prices just could not last. Good thing that it lasted long enough to set milk prices for August, September, and October, and Advanced prices for November! This shot in the arm moved the class III price steadily up from $9.75/cwt back in June to a welcomed $14.39/cwt for October. The Uniform Price in the Mideast Federal Order moved up from $10.63/cwt in June to $13.93/cwt for September and should be over $14.40/cwt when announced this week.
Now with cheese prices making a typical seasonal retreat back to what will likely be the $1.25 to 1.35/lb level, and the butter price trading in the $1.14 to 1.19/lb range, it may appear to you that all of the good times and market pricing opportunities are over for the foreseeable future (the next 6 months anyway). The good news is that this is just not the case. If you are a proactive pricer, that is, one who proactively takes action to secure your price when the opportunity appears, rather than waiting to see what the market will give you, then this column is just for you. By watching the Chicago Mercantile Exchange Class III futures prices and knowing what to expect as 'average cash prices', there may be 'premiums' or 'discounts' to what we might expect to receive in the cash market. Let me elaborate.
In Table 1, I show the average announced class III price, by month, for differing number of years used to compute the average. From these averages, I have computed the 'premium' or 'discount' that exists in the current CME futures class III prices. The premium is computed as the CME futures class III price (as of 11-05-2003) minus the average class III price using the following averages: (a) 3-year, (b) 5-year, (c) 7-year, (d) 10-year, and (e) 14 year periods.
Table 1. "Premium / Discount" currently in the Chicago Mercantile
Exchange (CME) Class III Futures Price for 2004.
|
January
|
February
|
March
|
April
|
May
|
June
|
|
| Class III Settle Price ($/cwt) |
11.50
|
11.26
|
11.29
|
11.26
|
11.26
|
11.90
|
| 3-year average |
0.95
|
0.98
|
1.11
|
0.73
|
0.05
|
-0.12
|
| 5-year average |
-0.09
|
1.23
|
1.03
|
0.79
|
0.50
|
0.35
|
| 7-year average |
-0.38
|
0.48
|
0.41
|
0.50
|
0.56
|
0.13
|
| 10-year average |
-0.46
|
0.11
|
0.00
|
0.08
|
0.20
|
-0.12
|
| 14-year average |
-0.38
|
0.21
|
0.17
|
0.08
|
0.05
|
-0.22
|
|
July
|
August
|
September
|
October
|
November
|
December
|
|
| Class III Settle Price ($/cwt) |
12.40
|
12.75
|
13.30
|
12.55
|
12.00
|
11.65
|
| 3-year average |
-0.69
|
-1.46
|
-1.87
|
-1.74
|
0.93
|
0.73
|
| 5-year average |
-0.66
|
-1.46
|
-1.93
|
-0.74
|
1.62
|
0.87
|
| 7-year average |
-0.85
|
-1.62
|
-2.08
|
-1.37
|
-0.05
|
-0.69
|
| 10-year average |
-0.86
|
-1.51
|
-1.96
|
-1.41
|
-0.24
|
-0.59
|
| 14-year average |
-0.75
|
-1.22
|
-1.59
|
-1.20
|
-0.48
|
-0.63
|
Let's take January as an example. If you think that this coming January will be very much like the average of the last three, e.g., 2001 to 2003, you can see from the entry in the table coinciding with the 3-year average that the current futures price is $0.95/cwt over the 3 year average class III price for January. If you wish to include more January cash class III prices, then look at the 5-year average in the next row down. The 'premium' is now a minus $0.09/cwt. No premium at all, but a discount. As you work down the column and take in even more January prices, you can see that the discount grows. Now you have to make a decision. Are the current conditions, supply versus demand, more likely to be represented by the last three years, five years, or 14 years? If you are thinking 'surely the January price cannot be less than $11.55/cwt, recall that in 2001, the class III price slid from a September high of $15.90 to 11.87/cwt by January of 2003! When the cheese market retreats, it can have a major impact on the Class III price. I am not saying that this is the current situation today, just that it can and has played out this way in the past.
Now look at the numbers in Table 1 for the February through April months. Up to the 7-year average, the current futures market Class III contract is offering a decent 'premium'. For example, February and March contain in excess, a dollar premium for the three and five year averages. At this time, buyers and sellers of Class III futures contracts do not see milk prices sinking toward the historical lows for these months.
As we get to the summer and early fall months of July through October, we can see that the current CME futures prices are all 'discounts' to what we have received, on average, during these months. This is exactly what you should expect. Futures prices for commodities that are not storable, such as milk, reflect the futures market participants' forecasts of what they expect the market price to be in the … what else? … future. And as the weather (and its impact on production) is the big uncertainty during the summer and early fall months (witness 2001 and 2003), these same market participants are conservative in forecasting bad weather and therefore unwilling to pay any premium at this time.
If you have access to a computer with an internet connection, you can find
this 'Premium / Discount' table displayed on my website: http://aede.osu.edu/programs/ohiodairy.
The table of premiums and discounts is updated after the close of trading each
day. If you would like to become more knowledgeable about the milk and dairy
markets, and would like to become a "ProActive Pricer", I will be
offering my course Pricing Milk and Dairy Products in the United States through
The Ohio State University - ATI, Wooster, Ohio, January 8 through March 13,
2004. This is a comprehensive course designed to broaden your knowledge of milk
and dairy product pricing, Federal Milk Marketing Order pricing rules, and the
factors that determine your milk check. The course provides practical hands-on
experience with the dairy futures and options markets and pricing. The course
meets each Thursday from 12:00 - 3:00 pm. If you would like more information
on this course, contact Jan Elliott, Business Training & Education, The
Ohio State University-ATI, (330) 287-7511, or email to elliott.3@osu.edu.
The course Pricing Milk and Dairy Products in the United States will not be
offered again until 2006, so do not miss this opportunity!
Controlling Feed Cost: What to do when the protein market goes ballistic?, Dr. Normand St-Pierre, Dairy Management Specialist, Ohio State University (top of page)
When it rains, it pours! Just when we thought that feed prices had reached their peaks in late summer, news of a short U. S. soybean crop reached trading markets, resulting in skyrocketing protein prices, especially high protein sources. With whole soybeans trading near $8.00/bu, it is unlikely that we will see much reduction in protein prices until the next soybean crop in the Southern hemisphere. Meanwhile, you can make tactical and strategic changes to your dairy rations and save some money. To do so, you first must understand how nutrients are currently being priced on the commodity market. The software Sesame is specifically geared to do this. Using 26 commodity prices (FOB, Central Ohio, TTL), we can extract the implicit prices of major nutrients in dairy diets. Results, as of early November 2003, are reported in Table 1.
Unit cost of net energy lactation (NEL) ($0.067 per Mcal) is within the normal
range experienced during the last decade. Thus, energy is currently not particularly
expensive and your dairy diets should probably not aim at reducing this nutrient
to its strict minimum. Rumen degradable protein (RDP), however, is very expensive
($0.12/lb), a net result of the high soybean meal price combined with most of
the protein market moving up in sympathy. The normal ration of a high producing
cow ration is generally balanced to supply 5 to 6 lb/cow/day of RDP. Thus, supplying
adequate RDP currently costs an average of $0.60 to 0.72/cow/day and represents
a significant increase in nutrient costs. On the other hand, the price of digestible,
rumen undegradable protein (RUP) is normal ($0.20/lb), and so are the prices
of non-effective (ne-NDF) ($-0.01/lb) and effective neutral detergent fiber
(e-NDF) ($0.05/lb).
Table 1. Estimates of nutrient unit costs.
| Nutrient name |
Estimates
|
|
| NEL - 3X (2001 NRC) |
$0.067
|
**
|
| RDP |
$0.122
|
|
| Digestible RUP |
$0.202
|
**
|
| Non-effective NDF (ne-NDF) |
$-0.012
|
*
|
| e-NDF |
$0.052
|
**
|
- A blank means that the nutrient unit cost is likely equal to zero.
- ~ means that the nutrient cost may be close to zero.
- * means that the nutrient cost is unlikely to be equal to zero.
- **means that the nutrient cost is most likely not equal to zero.
A good look at the ingredients used on your farm may reveal cost saving opportunities. Currently, the following feed ingredients are priced well-below what they are worth (Tables 2 and 3): bakery byproduct meal, ground shelled corn, corn silage, distillers dried grains, gluten feed, hydrolyzed feather meal (with strong reservation due to the considerable range in quality), hominy, and wheat middlings. There are also some feedstuffs that are overpriced: beet pulp, canola meal, expeller-soybean meal, 44% and 48% soybean meal, roasted soybeans, blood meal, and fishmeal. Blood meal is actually priced correctly when the value of lysine (an important amino acid) is factored in our evaluation. Fishmeal, however, is still considerably overpriced ($100 to 150/ton) even when methionine and lysine are factored in the evaluation. Canola meal is a classical case of the lemming syndrome (when everybody seems to be following everybody else in the wrong direction). Canola is cheaper than soybean meal on a per ton basis, but its value is only approximately 70% that of 48% soybean meal. Strategically, it is time to minimize the supplementation of RDP from plant proteins and optimize the use of non-protein sources (urea) and of processed grain by-products (gluten feed and wheat middlings). These recommendations should serve as guidelines. It may be justified to use an ingredient from the overpriced list to fit the specific conditions of a herd. As always, a properly balanced ration, based on sound nutrition must be used. But, the individual components (feedstuffs) making the ration can be changed (increased, decreased, or substituted) without impacting animal performance.
Table 2. Calibration set.
| Name |
Actual ($/ton)
|
Predicted ($/ton)
|
Lower limit ($/ton)
|
Upper limit ($/ton)
|
| Alfalfa Hay, OH Buckeye D |
140
|
148.44
|
125.24
|
171.63
|
| Bakery Byproduct Meal |
118
|
139.24
|
120.10
|
158.38
|
| Beet Sugar Pulp, dried |
150
|
112.73
|
94.87
|
130.59
|
| Brewers Grains, wet |
35
|
39.70
|
35.48
|
43.92
|
| Canola Meal, mech. extracted |
253
|
188.00
|
172.46
|
203.56
|
| Citrus Pulp, dried |
122
|
111.08
|
96.76
|
125.40
|
| Corn Grain, ground dry |
102
|
130.03
|
109.78
|
150.28
|
| Corn Silage, 32-38% DM |
40
|
49.37
|
41.43
|
57.31
|
| Cottonseed, whole w lint |
192
|
208.72
|
179.67
|
237.77
|
| Distillers Dried Grains, w sol |
145
|
176.87
|
162.26
|
191.48
|
| Feathers Hydrolyzed Meal |
275
|
341.29
|
317.34
|
365.23
|
| Gluten Feed, dry |
118
|
158.80
|
147.58
|
170.03
|
| Gluten Meal, dry |
316
|
317.11
|
287.49
|
346.72
|
| Hominy |
110
|
127.91
|
113.68
|
142.13
|
| Meat Meal, rendered |
290
|
277.78
|
258.34
|
297.22
|
| Molasses, sugarcane |
117
|
90.85
|
72.87
|
108.84
|
| Soybean Hulls |
115
|
101.22
|
75.41
|
127.04
|
| Soybean Meal, expellers |
321
|
269.00
|
248.75
|
289.26
|
| Soybean Meal, solvent 44% CP |
271
|
244.26
|
224.59
|
263.94
|
| Soybean Meal, solvent 48% CP |
281
|
264.65
|
247.64
|
281.66
|
| Soybean Seeds, whole roasted |
302
|
281.66
|
263.23
|
300.08
|
| Wheat Bran |
100
|
117.93
|
100.59
|
135.29
|
| Wheat Middlings |
98
|
128.29
|
113.33
|
143.26
|
Table 3. Appraisal set.
| Name |
Actual [$/ton]
|
Predicted [$/ton]
|
| Blood Meal, ring dried |
565.00
|
390.29
|
| Fish Menhaden Meal, mechanized |
585.00
|
330.22
|
| Tallow |
500.00
|
273.71
|
| Urea |
370.00
|
591.30
|
The estimates were derived using the software SESAME Version 2.05 written at
The Ohio State University. For additional information, please refer to Buckeye
Dairy News Volume 5, Issue 2, March 2003.
The estimates provided in Table 1 can easily be used to calculate the break-even
price of a commodity for which a nutritional composition is available (at least
approximately). To facilitate this calculation, we prepared a spreadsheet
that can be used either electronically or as a template for manual calculations.
In this example, we are assessing the break-even price of a dry (90% DM) food
by-product containing 14% crude protein, estimated at 40% rumen undegradability,
with 80% of the RUP being digestible post-ruminally, and 20% neutral detergent
fiber (NDF) of which only 10% is effective (i.e., induces chewing and rumination).
The nutritional composition is entered on a DM basis because this is the universal
basis used by laboratories to report chemical composition of feeds. Costs of
nutrients are entered on a per unit basis (per pound, except for energy with
per Mcal) exactly as they appear in the Sesame printout. Although diets are
balanced on a DM basis, commodities are sold on an "as is" basis.
Thus, the nutritional content must be translated to reflect the "as is"
amounts of each economically important nutrient per ton of feedstuffs. This
is exactly what the section titled "Amounts per Ton" does. Thus, one
ton of our by-product contains 1486.8 Mcal of NEL, 80.6 lb of digestible
RUP, 151.2 lb of RDP, 36 lb of e-NDF, and 324 lb of ne-NDF. The last section
(Value per Ton (as is basis)) calculates the value of each nutrient per ton
of by-product. Although the feed contains a moderate concentration of protein
(14%), more than 75% of its nutritional value (99.62/132.34) is actually derived
from its energy content. The value of the fiber (NDF) in this feed is very close
to zero ($1.87 minus $3.89) because so little of the NDF is rumen-effective.
Historically, ne-NDF has been implicitly priced at zero (or even small negative
values) on the Ohio market. Essentially, suppliers of ne-NDF (mainly grain by-product
feeds) are paying users of ne-NDF to use this nutrient.
Selenium Yeast for Dairy Cattle, Dr. Bill Weiss, Dairy Nutrition Specialist, Ohio State University (top of page)
A few months ago, the Food and Drug Administration (FDA) approved the use of selenium (Se) yeast for dairy and beef animals. Prior to this approval, sodium selenite and sodium selenate were the only approved sources of supplemental Se. In Ohio, all diets fed to dairy animals (calves, heifers, and dry and lactating cows) should be supplemented with the maximum legal amount of Se (currently 0.3 ppm). The question is, "Should you use inorganic Se (selenite or selenate) or Se-yeast?" The inorganic sources are substantially less expensive per unit of Se than Se-yeast, and based on clinical responses, they appear to work adequately in most situations. Based on enzyme responses, the Se in Se-yeast under normal conditions is 10 to 20% more available than inorganic Se. Under conditions that reduce Se absorption, Se-yeast may be substantially more available than inorganic Se. The most common situation in which Se absorption is impaired is when cows consume large amounts of sulfate. Dietary sulfate is usually not a problem; however, in certain areas of Ohio, water can contain very high concentrations of sulfate. In an experiment conducted at OARDC, sulfate intake equivalent to drinking water with approximately 300 ppm sulfate-sulfur (900 ppm sulfate) reduced absorption of Se from selenate by 20% compared to cows fed no sulfate.
Cows fed Se-yeast consistently have much higher concentrations of Se in milk, colostrum, and muscle than cows fed an equal amount of Se from inorganic sources. The increased Se concentration in milk and muscle may help improve human diets. Feeding Se-yeast to dairy cows during the dry period should improve the Se status of baby calves. The calf will be born with higher concentrations of Se in tissues, and colostrum from cows fed Se-yeast is very high in Se. Improved Se status of calves has been related to improved calf health.
In conclusion, replacing inorganic Se with Se-yeast will increase feed costs
probably by 2 to 4 cents per head per day. Under normal conditions, the improved
availability (10 to 20%) of Se-yeast will not greatly change Se status of cows.
Se-yeast should be considered in areas that have water with high concentrations
of sulfate. The addition of Se-yeast to diets for dry and prefresh cows may
improve calf health. The current regulation allows feeding both inorganic Se
and Se-yeast as long as total supplemental Se does not exceed 0.3 ppm of the
diet.
The 2003 Tax Legislation - How much will it affect
your dairy business and your family?, Mr.
David Miller, Farm Management Specialist, Ohio State University Extension
(top of page)
The Jobs and Growth Tax Relief Reconciliation Act of 2003 contains provisions for reducing capital gains rates, reducing the rates for taxation of dividends, widening the 10% tax bracket, increasing the standard deduction for married couples filing jointly, increasing the child tax credit, and reducing all tax rates by at least 2%. Business provisions include increasing the allowable limit for Section 179 expensing to $100,000 and a 50% first-year depreciation allowance. How will all these changes affect the 2003 tax bill for your dairy operation and your family?
To estimate the potential impact of the new legislation for various family situations, a dairy operation with the following income and expense figures was used. The farm has projected income of $350,000 consisting of $285,000 milk sales, $6,250 calf sales, $12,000 cull cow sales, $28,150 Milk Income Loss Contract (MILC) payments, $7,000 other agricultural program payments, and $11,600 other farm income. Projected farm expenses are $318,500 including depreciation. Net farm income would be $31,500 consisting of $19,500 from Schedule F and $12,000 of capital gains from the sale of the raised dairy cows.
For a married couple filing jointly (MFJ) with no other dependents, the "old" law tax bill would be $1,607 income tax plus $2,755 self-employment (SE) tax for a total bill of $4,362. Under the provisions of the new legislation, the total tax bill is $3,807, $1,052 for income taxes and $2,755 for SE tax. The new legislation saves $555 in Federal income taxes for this family situation. For a married couple filing jointly, but with two dependent children over the age of 17, the income tax reduces from $997 (old law) to $442 (new law) and the SE tax of $2,755 remains constant. Again the new law results in a savings of $555. A third scenario is the same married couple, but with two dependent children under the age of 17 who qualify for the child tax credit. Under these facts, the income taxes are reduced by $555, the same as before, but the child tax credit offsets all the income taxes and partially reduces the SE tax of $2,755 owed in both the old and new law scenarios.
Since most farm families also have some off-farm income, $10,000 was added to the net farm income of $31,500 to see how the families above would fare. The results are similar. For the married couple with no other dependents, the income tax savings are $659 ($2,711 vs. $2,052); for the family with two dependents over the age of 17, the income tax savings are $555 ($1,997 vs. $1,442). For the family with the two children under the age of 17, the tax savings is $555, but the child tax credit reduces the income taxes to $797 and $0, respectively, resulting in an overall decrease of $797.
A dairy farmer can further reduce taxable income and income taxes by using strategies such as pre-paying expenses or using Section 179 expensing. However, the objective of year-end tax management is to have at least enough taxable income to absorb the allowable exemptions and the standard deduction; $21,700 for MFJ with two other dependents and $15,600 for MFJ with no other dependents. In the scenarios where there is only farm income, an increase of $15,600 (MFJ and no other dependents) or $9,000 (MFJ and two other dependents) from Section 179 or pre-paying expenses would reduce taxable income to a level that just absorbs the allowable exemptions and the standard deduction in each case. With addition of the $10,000 off-farm income, the increased expense amounts of $25,600 or $19,000 are needed to reduce taxable income to zero. These increased amounts are well below the new $100,000 limit for Section 179, so this provision is of limited value to this dairy farm business. The same would be true of the new 50% first depreciation allowance.
How well does this dairy farm family fare under the new 2003 tax legislation?
There are tax savings but maybe not to the degree envisioned. Using the above
examples, the tax savings come from the increased standard deduction for married
filing jointly, widening of the 10% tax bracket, reducing the capital gains
tax rates, and increasing child tax credit. If incomes were higher for this
family, the tax savings would be greater and the business provisions of the
increased Section 179 and the special first depreciation allowance would be
of more value.
On-Farm Assessment & Environmental Review (OFAER)
Program, (Article #5), Mr. David White,
Ohio Livestock Coalition and Dr.
Maurice Eastridge, Dairy Nutrition Specialist, Ohio State University
(top of page)
The goals of the pro-active OFAER program are to promote environmental stewardship, minimize livestock impact on watersheds, improve the public's perception of livestock production, and move agriculture, particularly animal production agriculture, toward self-regulation.
The OFAER provides a critical overview of beef, dairy, poultry, and pork farms in areas relating to overall site management, livestock housing and feeding systems, manure management, nutrient management, livestock mortality management, and non-regulatory assessment of the livestock production site. The resulting confidential verbal and written report identifies strengths, challenges, and recommendations for use in the livestock or poultry operation as the farmer chooses.
The OFAER was developed in cooperation with the USDA- NRCS, Extension specialists, private agriculture consultants, livestock producers, and commodity organizations. On a national basis, the program is administered by America's Clean Water Foundation (ACWF), a national non-profit organization that received federal funding for the program. Environmental Management Solutions (EMS) of Des Moines, Iowa handles scheduling of the on-farm assessments and oversees the operation of the program. The Ohio Livestock Coalition (OLC) coordinates the program in Ohio and works in cooperation with ACWF and EMS to make sure farmers who wish to participate in the program properly complete the producer checklist prior to scheduling the on-farm assessment and review.
The EMS has trained a variety of agricultural professionals as assessors, with many of them being Extension agents, NRCS or SWCD professionals, private ag or environmental consultants, or agricultural, mechanical, or civil engineers. During an on-farm assessment, a team of two assessors with different backgrounds evaluate environmental risks, such as surface-water pollution, groundwater contamination, odor, and pests.
All sizes of farms are eligible to participate in the OFAER program, and it is open to beef, dairy, poultry, turkey, and pork operations. Data from the program indicates that environmental challenges are similar in type, no matter the size of the operation and that well-managed operations of any size can be environmentally successful. When risk areas are identified, producers find that by addressing such areas several valuable benefits occur - a reduction in potential liability exposure, an enhancement in community acceptance, and a savings in operating costs and expenses.
Unlike a visit to the physician's office, the OFAER program is of no cost to the producer. Also, when risk areas are identified on farms, most of these risks can be addressed by developing and implementing best management practices (BMP). Specifically, more than 90% of the risks identified have been addressed by BMP. Structural changes were needed to address only 9% of the identified risks. And, cost-share funding for such practices and structures may be available from the USDA - NRCS or the local SWCD office.
Ohio dairy producer, Jim Comp, has participated in OFAER and was featured in
the September 2003 issue of Dairy Herd Management.
To initiate an on-farm assessment, contact the OLC at dwhite@ofbf.org
or (614) 246-8288.
Robotic Milking: Are we there yet? Dr.
Normand St-Pierre, Dairy Management Specialist, Ohio State University
(top of page)
Imagine this: you get up in the morning and the cows are already milked. In fact, the cows milked themselves and they routinely do this three times a day. You no longer have to deal with kicking a lazy teenager out of bed or a hired hand who doesn't show up. This sounds good, doesn't it? In essence, this is what robotic milking was supposed to be. The reality has been somewhat different. A certain proportion of cows do not adapt well to robotic milking. There are still issues related to mammary health and increased somatic cell counts. The economics of robotic milking is largely dependent on numerous assumptions. In general, robotic milkers are not competitive with conventional systems in the US. Many of these issues will be resolved with time. Likewise, we expect to see a decline in the price of milking robots due to increased competition among manufacturers, larger production volumes, and more efficient manufacturing. During our last Ohio Dairy Management Conference in December 2002, Mr. Jack Rodenburg of the Ontario Ministry of Agriculture and Food presented an excellent summary of the Canadian experience with robotic milkers. For those who want to read more about it, you can either order your own copy of the proceedings ($15/copy) by contacting Mrs. Amanda Hargett (hargett.5@osu.edu) or by downloading the following document from our website (Robotic Milkers: What, Where, and How Much?).
But, why don't we see more milking robots in the United States? It is simply because all Grade A milk produced in the US must meet the requirements stipulated by the Pasteurized Milk Ordinance (PMO). The PMO is written by the Food and Drug Administration (FDA) and it sets the minimum standards to be implemented by regulators in each individual state. Readers with an interest in the details of the PMO can consult the latest version of the document at: http://vm.cfsan.fda.gov/~ear/pmo01toc.html. Within the PMO is a list of guidelines regarding manufacturing equipment for the harvest and transport of raw milk. These are called the 3-A standards. These set the minimum standards to be met by all milking equipments, including of course, the milking function of robotic milkers. Currently, robotic milkers face five challenges from the PMO regulations:
1. Inspection of fore-milk,
2. Detection of abnormalities,
3. Diversion of unacceptable milk,
4. Proper and effective preparation of teats prior to attachment, and
5. Separation of the milking area from the animal housing area.
The first three items raise considerable technical and regulatory difficulties.
On the technical side, the automatic screening of milk needs to be done very
rapidly under a robotic system. More importantly, engineers must be provided
with a clear physical definition of what is normal and what is abnormal milk.
Definitions that were sufficient under a conventional milking system where decisions
are made by a human being are no longer adequate under automation. It is expected
that the FDA will issue a new statement regarding the definition of normal and
abnormal milk in July 2004. This should clear the way for state regulators to
apply the PMO to robotic milkers.
Regarding the effective preparation of teats prior to attachment (item 4), the PMO requires that teats must be completely dry prior to the attachment of the milking unit. Of course, this is not actually met in the strictest sense of the word "dry" in most milking parlors, and it is not met at all by any of the current robotic systems. New interpretations of the word "dry" will have to be issued for robots to meet the PMO.
Lastly, the PMO requires a physical separation between the free stall area
and the milking center to prevent the introduction of unacceptable odors and
air contaminants into the system. Many of the designs associated with robotic
milkers are challenging the interpretation of the term physical barrier. There
again, regulators are forced to re-think or clarify their definitions.
2003 Dairy Farm Price and Marketing Management Practices Survey - Your help is needed!, Mrs. Dianne Shoemaker, Dairy Specialist and Mr. David Miller, Farm Management Specialist, Ohio State University Extension (top of page)
Please be on the lookout for this survey that will arrive in the mailboxes of most Ohio Grade A milk producers in late December. Many questions still surround the use of risk management practices and tools on Ohio's dairy farms. Are they being used? If not, why not? How effective are they? This survey will help us answer these and other related questions.
Whether you use risk management tools or not, please take 15 minutes to complete
the survey and return it in the postage-paid envelope included in the mailing.
We appreciate your willingness to increase our ability to serve Ohio's dairy
industry.
Announcements, Ms.
Amanda Hargett, State Dairy Extension Associate, Ohio State University
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2004 State 4-H Dairy Quiz Bowl
There is a change in the date for the State 4-H Dairy Quiz Bowl Contest. The
contest is going to be held Saturday, March 20, 2004, instead of Friday, July
9, 2004. More information will be coming from your Extension office in January.
2003 Ohio 4-H Dairy Quiz Bowl Team Competes at the North American International Livestock Exposition
LOUISVILLE, KY - The National 4-H Dairy Quiz Bowl, a premier event designed to test the knowledge of youth, took place at the North American International Livestock Exposition, November 8, 2003. Ohio's Team members were as follows:

Front row (left to right): (Coach) Jill Lokai, St. Paris; (Coach) Julie Martig,
Salem; (Team Member) Elaine Bodey, Urbana.
Back row (left to right): (Team Member) Brian Moff, Columbiana; (Team Member)
Heather Moff, Canfield; (Team Member) Brandon Thomas, Bremen.
2003 Ohio 4-H Dairy Judging Team Summary (Mike Hurst, Coach)
All-American Contest, Harrisburg, PA
Team Members: Seth Kohler (Fairfield County), Michele Lahmers (Ashland County),
Gus Rupp (Ashland County), Annie Specht (Tuscarawas County)
Team: 4TH/14 Overall, 3RD Oral Reasons, 2ND Linear Evaluation, 3RD Brown Swiss,
2ND Holstein, 3RD Jersey
Individual: Annie Specht - 2ND Overall, 2ND Guernsey, 2ND Jersey; Seth Kohler
- 1ST Guernsey
National Contest, World Dairy Expo, Madison, WI
Team Members: Seth Kohler, Michele Lahmers , Gus Rupp, Annie Specht
Team: 16TH/34, 9TH Oral Reasons, 8TH Ayrshire
Individual: Annie Specht - 6TH Oral Reasons, 6TH Ayrshire, 10TH Guernsey; Gus
Rupp - 12TH Holstein; Michele Lahmers - 15TH Brown Swiss
National Contest, North American International Livestock Exposition, Lousville,
KY
Team Members: Paul Keener (Wayne County), Ashley Mattox (Fairfield County),
Amanda Scheibe (Wayne County)
Team: 11TH/21, 9TH Holstein
Individual: Amanda Scheibe - 6TH Holstein, 20TH Overall
OSU Dairy Cattle Judging Team, North American International Livestock Exposition,
Louisville, KY (Dr. Peter Spike, Coach)
Team Members: Kurt Wolf (8th -Brown Swiss, 10th Holstein), Kelly Epperly, Nathan
Goodell and Andrea Keener (5th Overall, 9th-Reasons, 2nd-Ayrshire, 1st-Holstein)
Team: 3rd/18, Oral reasons- 6th, Ayrshire - 10th, Brown Swiss- 3rd, Holstein
- 1st, Jersey - 8th.
Individual: Kurt Wolf - 8th Brown Swiss, 10th Holstein; Andrea Keener - 5th
Overall, 9th-Reasons, 2nd-Ayrshire, 1st-Holstein
Calendar of Events
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November 18 - In Search of Milk….Feedbunks, Freestalls, and What is Left Behind.
Wayne County, Contact Tom Noyes, 330-264-8722.
November 18 - Dairy Promotion and Media Workshop. Ft. Jennings, OH. Contact
Tim Demland, 419-523-6294.
November 19 - In Search of Milk….Feedbunks, Freestalls, and What is Left Behind.
Richland County, Contact Duane Rader,
419-747-8755.
November 20 - In Search of Milk….Feedbunks, Freestalls, and What is Left Behind.
Tuscarawas County, Contact Chris Zoller,
330-339-2337.
November 21 - In Search of Milk….Feedbunks, Freestalls, and What is Left Behind.
Ashtabula County, Contact Dave Marrison,
440-576-9008.
December 2 - Ohio Dairy Industry Forum MPC Information Session, ODA Bromfield
Building. Contact Tim Demland, 419-523-6294.
December 4 - Dairy Excel Managing for Success Workshop-Session 1. Wayne County,
Contact Tom Noyes, 330-264-8722.
December 11 - Dairy Excel Managing for Success Workshop-Session 2. Wayne County,
Contact Tom Noyes, 330-264-8722.
December 11 - Dairy Heifer Replacement Program, Mt. Victory, Hardin County,
Contact Gene McCluer, 419-674-2297.
December 17 - Agricultural Policy and Outlook Meeting. Stark County, Contact
Denny Weilnau, 330-497-1611.
December 17 - Agricultrual Policy and Outlook Meeting. Wayne County, Contact
Terry Beck, 330-264-8722.
December 18 - Dairy Excel Managing for Success Workshop-Session 3. Wayne County,
Contact Tom Noyes, 330-264-8722.
January 6 - Dairy Excel Managing for Success Workshop-Session 1. Tuscarawas
County, Contact Chris Zoller, 330-339-2337.
January 13 - Dairy Excel Managing for Success Workshop-Session 2. Tuscarawas
County, Contact Chris Zoller, 330-339-2337.
January 20 - Dairy Excel Managing for Success Workshop-Session 3. Tuscarawas
County, Contact Chris Zoller, 330-339-2337.
Web link to Milk Futures: http://www.cme.com/prices/delayed_intraday_quotes/futuresandoptions.cfm