INSIDE THIS ISSUE

Dairy Policy and Milk Marketing; Dr. Cameron Thraen, Milk Marketing Specialist, Ohio State University
Springtime! Time to Evaluate your Feeding Program from an Economic Standpoint; Dr. Normand St-Pierre, Dairy Management Specialist, The Ohio State University
Ohio's Dairy Industry in Review; Dr. Maurice Eastridge, Extension Specialist, The Ohio State University
Fly Control on Beef and Dairy Farms; Gene McCluer, Extension Educator, Hardin County, The Ohio State University
Labor Poster Requirements for Farm Operations; Dee Jepsen, Ag Safety and Health Specialist, The Ohio State University
Effect of Fuel Price Increases on Custom Farming Rates; Barry Ward, Extension Leader, Production Business Management, The Ohio State University

Announcements:

Tri-State Dairy Nutrition Conference, Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University
2005 North American Intercollegiate Dairy Challenge, Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University
Should Farmers Sign an Air Quality Compliance Agreement with EPA? Gene McCluer, Agriculture Extension Educator, Hardin County; Chris Zoller, Agriculture Extension Educator, Tuscarawas County; The Ohio State University
Wayne County Dairy Twilight Tour; Tom Noyes, Dairy Extension Educator, Wayne County, The Ohio State University

Calendar of Events

Dairy Policy and Milk Marketing
Dr. Cameron Thraen, Milk Marketing Specialist, Ohio State University, Additional milk marketing information by Dr. Thraen (top of page)

If you are a regular to my Ohio Dairy Website (http://aede.osu.edu/programs/ohiodairy/), you will be familiar with a chart that I post on the opening page each day. This chart appears under the heading 'Mideast Price Watch @ a Click.' On the chart, I show the current Class III futures price for the next 12 months and the average Class III prices where the averages are calculated over a 3, 5, 7, 10 and 14 year period. What is the point of posting this chart daily? What information do I wish to convey to you - the dairy farmer?

Despite all of the sophisticated, complicated, and oftentimes intractable quantitative models which will tell you precisely how much of your upcoming milk production you should hedge or protect with a price floor using the Chicago Mercantile Exchange (CME), only you can make that decision. The information on the website chart shows you the current opportunities relative the past average prices and puts this in the form of premiums or discounts. Premiums if the current Class III futures prices are above the past averages and discounts if below. If a chart is not to your liking with the click of your mouse button, you can also retrieve the information as a table. The table below is an example from May 19, 2005. The first 4 months provide information for 2006 (as 2005 is already history) and the remaining data show the premiums and discounts for May through December 2005. Entries in RED are discounts and show you that the current Class III futures prices are below that particular average. On this same web page, you can access a print version of this table that you can hang daily in your milk house office.

Currently, the futures market has turned from very robust to rather weak. There are still premiums available in this market but they are nothing like those available only a few months ago. Just back on March 1st premiums for May through August where all well over two dollars with most above $2.50/cwt! Hopefully, you took advantage of these premiums and priced at least some of your May through September milk with a direct hedge or an option contract. With rational expectation that milk production across the United States would come roaring back, spurred by record high prices the last half of 2003 and all of 2004, these price premiums where too good to pass-up. Or did you? Now, the reality of high milk prices curing high milk prices has taken hold in the markets and the premiums must be weighed carefully against their cost. The reality is that we will have plenty of milk and this is evident in the eroding premiums as we move further out into 2005 and then 2006.

Are there any opportunities still in the market for this year or have they all vanished? Take a close look at the pricing opportunities for November and December. Current Class III futures prices are above the long-term median price for these months. They may not remain there for long. I suspect that one more U.S. milk production report (June 16th) showing robust cow numbers and yields will all but end the good times for prices for at least the next 12 months.

Well, it is time to drag my horse back into the barn. If you like to stay up-to-date as to the opportunities (or lack thereof) for getting better than average prices for your milk, be sure to bookmark my Ohio Dairy Website (http://aede.osu.edu/programs/ohiodairy/) and visit daily. My current milk price outlook can be viewed on the web. I update this outlook each month. Check it out at http://aede.osu.edu/programs/ohiodairy/ProActivePricing/priceforecast.htm.

For a complete update on current market conditions, futures, and options markets, and policy issues of importance to Ohio and Federal Order 33 producers go to my web site, Ohio Dairy Web 2004, and click on Cam's Price Outlook.



Springtime! Time to Evaluate Your Feeding Program From an Economic Standpoint
Dr. Normand St-Pierre, Dairy Management Specialist, The Ohio State University (top of page)

Here are a few things that we know. The price of milk is dropping. It rains as soon as you start the first cut of hay. Feed prices keep changing. All of these events create headaches and opportunities. In this column, we concentrate on the opportunities offered from changes in commodity markets.

Springtime generally brings substantial changes in the relative price of feedstuffs. This year is no exception. There have been significant changes in the relative prices of many commodities lately. Now is a good time to re-evaluate your purchasing strategy. To help you with the process, we evaluated current commodity markets in Central Ohio using the software SESAME™ (available at www.sesamesoft.com). The appraisal would be slightly different for other Ohio regions, but not markedly so.

Compared to January 2005, prices of nutrients (Table 1) show:

1) An increase of 1.3¢ per Mcal of net energy lactation,
2) A drop of 4.1¢ per pound of degradable protein,
3) An increase of 4.1¢ per pound of undegradable protein,
4) A drop of 3.4¢ per pound of non-effective NDF, and
5) A drop of 0.6¢ per pound of effective NDF.

Therefore, as a general rule, it is currently wise to reduce the safety margins of dairy rations for net energy and undegradable protein. Meanwhile, the markets are willing to pay you for increasing your usage of rumen degradable protein and non-effective NDF. In practical terms, this means that there are some high fiber by-products that are currently real bargains. These are identified in Table 2.

In Tables 2 and 3, we report the results for 27 feed commodities traded or available in Central Ohio. Table 2 conveniently groups commodities into three groups: bargains, at breakeven, and overpriced. If all the ingredients in your rations are from the overpriced column, it is time to visit with your nutritionist. Details of commodity pricing is shown in Table 3. In this table, the column labeled "actual" is the price for tractor trailer loads (TTL) FOB Central Ohio. The "predicted" column is the calculated breakeven price per ton; lastly, the "lower limit" and "upper limit" are the 75% confidence range for the breakeven price.

Nutrient prices can be used to calculate a benchmark for feed costs. All these years of research have resulted in relatively precise nutrient requirements for milk production. Results of the calculations using the National Research Council (2001) requirements are presented in Table 4. The cost of feeding for a milk yield of 75 lb/day has gone up by 9¢/cow/day since January but is considerably less ($1.05/cow/day) than it was a year ago. Milk prices, although still decent from a historical perspective, are not as strong as they were a year ago, or even what they were last January. Consequently, income-over-feed costs (IOFC) has dropped $2.09/cow/day from last year, and $1.26/cow/day from January 2005. Historically, however, this benchmark averages $5.50 to 6.00/cow/day. Thus, IOFC is still strong relatively speaking and good profits should still be the norm for Ohio dairy operations.

Table 1. Prices of nutrients, central Ohio.

Table 2. Groupings of commodities, Central Ohio, May 2005.

Table 3. Commodity assessment, Central Ohio, May 2005.

Table 4. Nutrient costs and income over nutrient costs, Central Ohio.¹

¹Costs and income for a 1400 LB cow producing 75 LB/day of milk, with 3.6% fat, 3.1% protein, and 5.9% other solids. Component prices are for Federal Order 33, April 2005.
²NE_L = Net energy for lactation, RDP = rumen degradable protein, RUP = rumen undegradable protein, ne-NDF = noneffective neutral detergent fiber, and e-NDF = effective neutral effective fiber.

Ohio's Dairy Industry in Review
Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University (top of page)

Similar to other sectors of agricultural production, the dairy industry is undergoing constant change. There is less than 2% of the human population today involved in agricultural production, yet the growth in population is demanding an increasing supply of food. Therefore, food production enterprises have increased their number of productive units (acres or animals) and made advances in improving productive efficiency per unit.

Ohio's dairy industry has been following the national trends: decrease in number of farms, increase in number of cows per farm, and an increase milk yield per cow. The number of dairy farms has decreased by about 70% since 1970, but during this time period, the number of cows per farm has more than doubled from about 25 cows/farm to 58 cows/farm. This change in herd size in conjunction with the increase in milk yield per cow (about 2% per year), has resulted in a somewhat stable milk supply for the State, allowing the State to maintain its rank of 11th in the nation for total milk production. With this milk supply, plus milk from other states, the milk processing industry in Ohio has remained strong despite the decrease in total number of manufacturing plants (Ohio's ranks 5th for number of manufacturing plants). This processing capacity has helped the State to maintain a strong dairy industry and for the State to maintain its rank of being 1st in Swiss cheese production.

The dairy industry in Ohio is a major contributor to Ohio's economy. The value alone of the milk produced in 2003 was $588 billion, and for each dollar generated on a dairy farm, in excess of $2 is generated elsewhere in the economy. For every employee on a dairy farm, about 2.25 jobs are generated elsewhere in the State for processing dairy products and providing goods and services to the dairy industry. The economic development impacts of the dairy industry are significant.

There have been increased environmental and social concerns with the increasing size of dairy operations. This has occurred with the increased number of nonfarm people moving to live in rural residences and with more animals per unit of land base in given areas. Actually for Ohio, the number of agricultural acres per animal unit (based somewhat on animal size) has increased from about 5.7 to 7.6 acres (data exclude horses and poultry). The increase in number of animals within a given community and the extensive use of liquid manure systems have contributed to these concerns. Even though some large dairy farms are on a relatively small amount of acreage, the farmers contract with local crop farmers for feed production and for land application of manure to provide nutrients for the cropping system. Nutrient balance and manure storage and handling systems will continue to be major points of focus for dairy farms. Environmental stewardship and social responsibility are of focus by today's dairy farmers. However, new regulations for reducing the risks for water and air contamination are going to have cost implications to the dairy farmer without notable increases in the price they receive for their food product.

Within Ohio, the regional distribution of the dairy industry has begun to shift. Traditionally, the northeast and west central areas have been the most concentrated areas for dairy farms. In northeast Ohio, the number of herds is decreasing midst an increase in tourism and the increase in lot size for residences within a densely populated area of the State. The northwest area of Ohio in increasing in number of herds and they are of large size. This has been an attractive area because of the land base for feed production and the lower population density. With the new herds moving into Ohio and expansion of herds already in Ohio, the number of cows in the State increased between 2003 and 2004. There have been dramatic decreases in number of farms with less than 29 cows and 50 to 99 cows, but the number of farms with 29 to 50 cows has remained somewhat stable because of small increases in herd size by farms that sale manufacturing grade milk and with the possibly of only one family member needing to work off of the farm. The number of farms with 100 to 199 cows has also remained somewhat stable, but farms with 200 cows or more have been increasing in number; at the end of 2004, Ohio had 35 herds with 500 or more cows.

Ohio has the feed resources and dairy industry infrastructure to sustain a vibrant industry. The increase in number of large farms and increase in herd size of most farms will result in stable to upswings in number of cows and total amount of milk produced in the State. Although there has been consolidation in the processing industry and loss of some small processors, Ohio will continue to have more capacity to process milk than supplied from within the State. Increasing input costs, including changes in feed costs based on weather and other market forces, and volatility of milk prices require that dairy producers operate their enterprise in an economic manner. In addition, responsibilities for sustaining the environment and being attentive to social issues will have cost implications. Yet, the pride in providing a high-quality food source midst a desirable way-of life and the desire to work with animals will continue to be motivating forces for Ohioans to remain in the business of producing food.

Fly Control on Beef and Dairy Farms,
Gene McCluer, Extension Educator, Hardin County, The Ohio State University (top of page)

Generally speaking, sanitation around the barn remains the backbone of fly control. Removal of potential breeding sites will slow the build-up of fly populations. Pyrethrins can be used in misters or foggers for quick knockdown of active fly problems, but they don't offer residual control. These include, but are not limited to, Pyrethrins+Piperonyl butoxide, Ectiban, and Vapona. These products can often be purchased in concentrates or in aerosol cans for use in milk rooms (or the pickup truck). Always read the label before using in livestock facilities.

Residual fly sprays can be used on walls, ceilings, posts, and other fly resting places. This type of product can have from 1 to 7 weeks of control. It may be necessary to remove the cows for 4 hours or until the spray dries. Usually, the manufacturer cautions that you not contaminate feed or water. See specific labels for application recommendations. Products for this use include, but are not limited to: Countdown 2 or Countdown 25% WP, Grenade 10% WP, Atroban 11%, Ecitban 5.7%, Permectrin II 10%, Spinosyn, and Elector. The same materials may be used on fly resting sites outdoors.

For pastured cattle and control of stable flies, face flies, and horn flies, ear tags, dust bags and back or face rubbers may have a place. Make sure the products are labeled for lactating cows, dry cows, or whatever type of animals that are being treated. Baits also can have a place in the fly control program. For more details, see University of Kentucky fact sheet ENT-42 at: http://www.uky.edu/Agriculture/PAT/recs/livestk/recbeef/beeffly.htm.

Other resources that are helpful include several lists of insecticide products at Kansas State University. The products are listed according to insecticides and common chemical names at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciiiiccn.pdf. They are also listed in alphabetical order at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciitrade.pdf, and by method of application at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciiiform.pdf.

Labor Poster Requirements for Farm Operations
Dee Jepsen, Ag Safety and Health Specialist, The Ohio State University (top of page)

The State Safety Office has received questions about farmers being solicited by a poster service, and the mandatory poster requirements for farm operations.

We have reviewed the federal and state regulations and found this IS a labor regulation, and that farmers NEED TO BE IN COMPLIANCE. An informational flyer has been put together to help answer these questions and was sent to county Extension offices (click here for a copy of the flyer).

Here's a summary of the regulations:

• The poster requirements apply to ALL EMPLOYERS in the state of Ohio. So this is not an agricultural regulation, but one that affects businesses that hire employees. More specifically, it is regulated under the Ohio Department of Commerce, Division of Labor and Worker Safety.
• There are no exemptions for agricultural operations, and the requirements apply if at any time during the year an employee is hired (even for one hour).
• Three posters are mandatory:
  State of Ohio Minimum Wage (614-644-2239)
  Unemployment Compensation Coverage (877-644-6562)
  Ohio Fair Employment Practices Law (614-466-2785)
• If the farm hires minors, then the Ohio Minor Labor Law poster is also required. If the farm hires large labor forces (more than 500 man hours in a year) or migrant workers, and/or contracts with the federal government, there are several other poster requirements.

A useful website for farmers to know about is: http://www.dol.gov/elaws/posters.htm. This service walks farm employers through a series of questions to determine their exact poster requirement for federal compliance.

The solicitation many Ohio farmers received was from a service, of which a fee was imposed on the farmers to help get them into compliance for the type of poster they needed. While these service providers are legitimate and will certainly provide the posters meeting the regulations, they may not be tailored to the farm operation. In other words, the farmer will still have to decide which posters to have displayed.

We have also found these posters are FREE from the respective regulatory agency (see telephone numbers listed above). It will require a call to order the 3 required posters, but this is cheaper than the $60 charge from the poster service company.

Effect of Fuel Price Increases on Custom Farming Rates¹
Barry Ward, Extension Leader, Production Business Management, The Ohio State University (top of page)

Whether you're a custom farmer or someone in the market for custom farm work, rising fuel prices may have something to say about the price charged for your next custom farming job. Custom farming rates have changed very little in the last several years as tradition seems to govern many long-term custom rate arrangements. Well, we've charged Johnny Farmer $21/acre to harvest his corn for the last 3 years, so that's what it'll be this year. Times may be changing. Diesel fuel price increases during the last several months have caused many to rethink their custom farming rates.

Diesel fuel prices have increased significantly over the last 24 months at the farm gate. Survey work has shown that diesel prices in the spring of 2003 averaged around $1.10/gallon, while today's diesel prices for farm usage are about $1.85/gallon.

If we look only at fuel price increases as they relate to in-field operation of the farm equipment, we see a significant increase in the cost of many farm operations. This assumes we ignore the effects of fuel price increases to the manufacturing and cost of the implements, cost of oil and lube, and cost of driving or transporting the equipment to the field. The following list highlights the fuel requirements of farm equipment operations and increase in fuel cost from April 2003 to April 2005.

So what now? You may decide that changing custom rates will change other relationships with your customer that you may not want to forfeit. So you swallow the price increase and continue to spread your fixed costs over more acres. Or, you may decide that it's time to rachet your custom rates up a little to avoid a lower return to your time and management.

If you are having second thoughts about raising those rates, you might want to consider adding a "fuel surcharge" to your existing custom rate to offset the rise in fuel prices. This method may make it more palatable for your customer. Fuel surcharges have been used in the trucking industry and may be an option for custom farm operators. A base custom rate and a base fuel price are parts of this equation. As fuel prices increase from the base price, clients pay the difference between the base fuel price and the spot fuel price. This is a simple example that doesn't take into account higher machinery, fuel, lube, or transport costs.

Whatever you decide, understand that these cost increases are real and will impact the custom farming business, whichever side of the transaction you are on.

¹Reprinted from: Ohio Ag Manager Newsletter, May 2005 issue; http://ohioagmanager.osu.edu.

Announcements:

Tri-State Dairy Nutrition Conference
Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University (top of page)

The Tri-State Dairy Nutrition Conference (http://tristatedairy.osu.edu) held May 2-3, 2005 was very successful with about 469 in attendance. Maurice Eastridge and Amanda Hargett were the key organizers from Ohio for the Conference, and Bill Weiss and Normand St-Pierre from OSU were speakers. There were seven graduate students from Michigan State and Ohio State Universities who completed in the graduate research contest. The preconference was hosted by ELANCO Animal Health and was very well attended. Next year will be the 15th year for the Conference, and it will be held at the Grand Wayne Convention Center in Fort Wayne, IN during April 25-26.

2005 North American Intercollegiate Dairy Challenge
Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University (top of page)

The North American Intercollegiate Dairy Challenge (http://www.dairychallenge.org) is a national contest created to inspire students and enhance university programs nationwide. It is a dairy management contest that incorporates all phases of a specific dairy business in a fun, interactive, and educational forum and is supported financially through generous donations by industry and coordinated by a volunteer steering committee. The fourth annual National Contest was held on April 8-9, 2005 and was hosted by Penn State University. The event attracted 27 teams from the United States and Canada, challenging them to put their textbook and practical knowledge to the ultimate test - analyzing dairy farms. The format started with a walk-through at the dairy farms, followed by the opportunity to ask questions of the owners, and analyze farm-specific data. Student teams used this information to develop management recommendations, and then presented their management recommendations to a panel of five dairy industry judges. The placement categories for the contest are platinum, gold, and silver, with the team from The Ohio State University doing an outstanding job by placing in the platinum category. The students that represented Ohio at the National Contest this year were Mike Allerding, Kelly Epperly, Matt McVey, and Stacey Shipley, with Dr. Maurice Eastridge serving as their coach. In 2006, the National Contest will be held April 7 and 8 in the Twin Falls, Idaho area. The University of Idaho and Washington State University will be co-hosting the event.

Team representing Ohio State University at the National Intercollegiate Dairy
Challenge [Left to right: Front row: Milk Allerding and Matt McVey, Back row:
Kelly Epperly, Stacey Shipley, and Dr. Maurice Eastridge (Coach)]

Should Farmers Sign an Air Quality Compliance Agreement with EPA?
Gene McCluer, Agriculture Extension Educator, Hardin County; Chris Zoller, Agriculture Extension Educator, Tuscarawas County; The Ohio State University (top of page)

Public concern over air quality impacts from animal feeding operations is increasing in some areas of the US. The US Environmental Protection Agency (EPA) announced on January 21, 2005 that it had reached an agreement to study air emissions from livestock and poultry operations. The study will be done as a component of the Air Quality Compliance Agreement. This is a voluntary agreement between the EPA and individual animal feeding operations.

The Compliance Agreement involves payment of a "penalty" for past violations that may have occurred. Most local livestock operations are expected to fall well below the daily ammonia, dust, and hydrogen sulfide levels that the EPA is expected to regulate. However, on the days that manure is handled, these farms could produce enough ammonia to reach a level the EPA establishes for regulation.

An informational meeting sponsored by Ohio State University Extension has been scheduled for Wednesday, June 8th, at multiple locations across the state. Counties hosting the program include: Auglaize, Columbiana/Mahoning, Coshocton, Hardin, Knox, Lorain, Miami, Putnam, Shelby, Tuscarawas and Wayne/Holmes. At all locations, the program will begin at 7:30 p.m. and conclude at 9:30 p.m.

Questions asked by many producers include "What size operations should sign the Agreement?" and "What are the pros and cons of signing or not signing the Agreement?" Speakers will review the consent Agreement and identify the benefits and risks of participating or not participating in the EPA Agreement. Each producer must decide individually if they should or will participate. The deadline for animal feeding operations to sign the Agreement has been extended until July 1, 2005.

This program is geared towards dairy farms, but pork, beef, and poultry producers will also benefit from attendance and participation. Prerecorded presentations by Mike Brugger, OSU Extension Agriculture Engineer, and Peggy Kirk Hall, OSU legal educator and attorney, will begin at 7:30 pm. A live question and answer session will follow via a conference call/speaker phone with Peggy Kirk Hall and Lingying Zhao, OSU Extension Agriculture Engineer, responding to questions.

Please contact the location nearest you for additional details and to pre-register by Monday, June 6. Program Locations:

Wayne County Dairy Twilight Tour
Thomas Noyes, Extension Dairy Educator, Wayne County, The Ohio State University (top of page)

The annual Wayne County Dairy Twilight Tour will be held on Tuesday, July 12, 2005 at the Dotterer Brothers Dairy Farm located on St. Rt. 604 south of Rittman. The dairy operation is run by the families of Robert, Richard, and Gary Dotterer and they milk 250 Holstein and Brown Swiss cows. They also farm over 700 acres of corn, soybeans, and alfalfa, most of which is used by the dairy farm but some is sold as cash grain.

The cows are housed in several free stall barns and milked in a double-10 Boumatic parallel parlor. The cows are fed a TMR and the Brown Swiss have a rolling herd average of 22,000 LB of milk.

Dianne Shoemaker, Dairy Specialist at the OSU Extension Center at Wooster, will lead the discussion on how families can work together, and the Dotterer Brothers will describe how they manage a successful business.

The program starts with a barbecue at 6:30 p.m. and also includes a self-guided tour of the dairy farm. No reservations are required.

Calendar of Events (top of page)

June is Dairy Month - For more information, go to: http://www.adadcmideast.com

June 7 - Ohio Dairy Industry Forum (10:00 am - 2:00 PM), Ohio Department of Agriculture, Reynoldsburg, Ohio. Contact Tim Demland, 419-523-6295, demland.2@osu.edu.

June 8 - Program on Air Quality Compliance Agreement, 7:30-9:30 PM

June 10 - Tour of Matlink Dairy in Clymer, NY. Contact Denny Hall, 614-292-4188, hall.16@osu.edu

July 12 - Wayne County Dairy Twilight Tour, Rittman, Ohio. Contact Tom Noyes, 330-264-8722, noyes.1@osu.edu.

July 24-28 - Annual Meeting of American Dairy Science Association, Cincinnati, Ohio. More information at: http://www.adsa.org

August 3-14 - Ohio State Fair, Columbus. More information at: http://www.ohioexpocenter.com

August 16-17 - Tour of Fair Oaks Dairy Farm in Indiana. Contact Tom Noyes, 330-264-8722, noyes.1@osu.edu.

Web link to Milk Futures: http://www.cme.com/prices/delayed_intraday_quotes/futuresandoptions.cfm