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Buckeye Dairy News : Volume 13 Issue 1
MarketView...U.S. Dairy Outlook Brief March - May 2011
Dr. Cameron Thraen, State Extension Specialist, The Ohio State University
The USDA Milk Production Report, released February 18, 2011, contains some interesting numbers and charts on the trend in milk production for the United States over the last 10 years. This edition of MarketView will highlight a few of the major trends.
As you can see from the chart, milk production has resumed an upward trend after declining only a small amount in 2009. The impact of the fall in milk prices and higher feed prices back in early 2009 has all but vanished, as milk output has now returned to its long term upward trend.
Milk per Cow
Milk per cow over this 10-year period is also on par for the 10-year trend. Milk production per cow for all the United States exceeded 21,000 lb in 2010.
The number of milk cows in the United States ended 2010 down from 2009. This decline matches the reduction which took place over the years 2003-2004.
Number of Licensed Dairy Herds
The number of licensed dairy herds operating in the United States declined from 54,932 in 2009 to 53,127 in 2010. This drop of 1,805 dairy operations represents a 3.2% decline in the number of dairy licenses. All states gave up some dairy farms last year. Ohio licensed dairy farms dropped by 1.8% (60 farms) from the 3,310 reported for 2009 production year to the 3,250 reported for the 2010 production year.
To keep up with the daily dairy futures market and other important market news, visit the OhioDairyWeb 2011 website: http://aede.osu.edu/programs/ohiodairy.
Feed and Nutrient Costs in Dairy Production: Will it Get Any Worse?
Dr. Normand St-Pierre, Dairy Extension Specialist, The Ohio State University
The spot market for corn has broken the $7/bu mark; will it get any worse? If I could answer this question with 100% certainty, I would not be working for Ohio State… The fact is that nobody knows what feed prices will be in 6 months from now or even next month for that matter. There are too many unpredictable factors involved in the corn and other feed markets to make any price forecast anything else than… maybe a good guess. Meanwhile, dairy producers do not have to remain on the sideline and watch their profit margins disappear – assuming that profit margins even existed to start with. In fact, the more turbulent corn and soybean markets are nearly always accompanied with bargain opportunities for other feedstuffs. All feeds move somewhat in sympathy with the corn and soybean markets, but they do not all share the same “sympathy”: some are over-exuberant, while others drag their feet – a bit like teenagers at chore time.
An important thing to do when feed prices are rapidly changing is to ensure that most of the feed ingredients used in a ration are justified from a nutritional and economic basis. The economic viewpoint is obviously important. This can be done using a method that we have developed at Ohio State and have implemented in a software called Sesame. Using this method, feed ingredients are compared using the value of their nutrients. In dairy production, the economically important nutrients are net energy for lactation (NEL), metabolizable protein (MP), effective neutral detergent fiber (eNDF), and non-effective NDF (neNDF). Using this approach and market prices of feedstuffs in central Ohio effective at the end of January 2011, one can compute what each available ingredient was worth, and categorize ingredients as bargains (clearly under-priced), at break-even (market price reasonably close to their calculated ‘worth’), or over-priced (market price clearly exceeding the economic value of the nutrients). Results are presented in Table 1.
Readers who have followed this column over the months will notice a new format used to present the results. This new table summarizes the information in regards to the prices used for the analysis (i.e., the market prices), the differences between market prices and the calculated values (what we call ‘Deviation’), and a categorization of feed ingredients into 3 categories: bargains, at break-even, or over-priced. As usual, we caution the readers that these results are time and location dependent. Market prices may have changed sufficiently between the time this analysis was done and the time of publication to affect the outcome of certain feeds. Also, we never imply that a balanced ration can be made solely of bargain feeds or without any over-priced feeds. A reasonable strategy should be to minimize the usage of over-priced feeds and maximize the usage of bargain feeds within the confine of a balanced ration.
Table 1. Market prices, deviations from break-even values, and categorization of feed ingredients used in dairy, central Ohio market, week of January 31, 2011.1
1Deviation represents the difference between market price and the calculated value of a feedstuff. For example, a deviation of $10/ton for alfalfa hay means that the market price is $10/ton above the value of the nutrients in alfalfa hay. The Class column categorizes ingredients as follows: X = ingredient is significantly over-priced, O = ingredient is significantly under-priced (i.e., a bargain), and a blank column means that the ingredient is priced about for what it is worth.
Price of Nutrients
As explained in previous columns, a nice byproduct of this type of analyses is that the implicit prices of the economically important nutrients are estimated. Results for the end of January are shown in Table 2. The cost of both dietary NEL and MP are significantly above their 6-year averages, whereas the 2 fiber components are somewhat within their expected ranges.
Table 2. Estimated cost per unit of nutrients, central Ohio, week of January 31, 2011.
Returns to Dairy Producers: the Cow-Jones Index
Using a ‘standard’ cow producing milk at a level that approximates the national average, it is easy to calculate the cost of feeding this cow given the nutrient costs shown in Table 2. This ‘standard’ cow is a 1,500 lb cow producing 65 lb/day of milk at 3.6% fat and 3.0% protein. This cow requires 31.3 Mcal/day of NEL, 4.64 lb/day of MP, 10.2 lb/day of eNDF, and 3.4 lb/day of neNDF. The total daily cost to supply these nutrients is $5.39/cow per day, or $8.29/cwt of milk. The average cost of the ration dry matter is estimated at 11.1 ¢/lb. Using Federal Order component prices for January, this cow generates $8.91/day of gross milk revenues, which equates to $13.70/cwt. The difference between the gross revenues per cwt and nutrient costs per cwt constitutes an index of milk revenues minus feeding costs without having to define a specific diet. We have named this index the Cow-Jones Index, as it mimics the information of the Dow-Jones Index for the U.S. stock market. In January, the Cow-Jones Index for Ohio stood at $5.41/cwt. A Cow-Jones of ~ $8/cwt indicates that milk is produced at break-even, whereas a Cow-Jones exceeding $9/cwt is indicative of profitability in the dairy sector. We have monitored this index since 1998 after the Federal Order reform. Results since January 2005 are shown in Figure 1. Clearly, one can observe the devastating situation that dairy producers were put under during 2009. What has not been fully recognized is that 2010, although better than 2009, was in fact NOT a profitable year for dairy producers. The severe bleeding of equity that was experienced in 2009 did stop for the most part, but the average dairy producer was still operating with milk prices below his/her cost of production, basically making a living out of the depreciation. Obviously, this situation is not sustainable. Although the futures markets for Class III and Class IV milk prices are historically high at the time of this writing, it is unclear how much of the additional gross revenues that are expected in the coming months will be spared from the increase in feed costs. Effective risk management might be imperative.
Figure 1. The Cow-Jones Index from January 2005 through January 2011. A Cow-Jones under $8/cwt (the red zone) indicates that milk is produced at less than average break-even costs of production. A Cow-Jones exceeding $9/cwt (the green zone) indicates that the average production is occurring under profitable conditions. The yellow zone is one of transition.
Roundup Ready Alfalfa Available for Planting in 2011
In January, the U.S. Department of Agriculture announced the deregulation of Roundup Ready alfalfa after a 46 month environmental impact assessment process. The ruling means that U.S. farmers are free to proceed with planting the genetically altered alfalfa with no restrictions.
Opponents to this ruling have been vocal in their disapproval. They have voiced concerns that without any restrictions the biotech alfalfa will easily contaminate organic and conventional alfalfa seed production and increase the occurrence of glyphosate-resistant weeds. Based on their response, further court battles over this product may be in store.
Whether you agree or disagree with this decision, the fact remains that Roundup Ready alfalfa has been approved for planted this spring. For those considering use of this new technology, what factors should be considered? Where might Roundup Ready alfalfa be of benefit?
We know that good managers have been able to control weeds in alfalfa to acceptable levels with current herbicides and best management practices for years. We also know that glyphosate is effective on many types of weeds, so it adds another tool to the toolbox in the battle against weeds in alfalfa.
Glyphosate may be especially helpful during stand establishment because it causes less injury to seedling alfalfa than most other herbicides labeled for establishing that crop. So seedling stands of alfalfa should develop faster with less injury when glyphosate is used instead of other herbicides.
We participated in a 5-year study of Roundup Ready alfalfa conducted across 6 states from 2006 to 2010. At all locations, glyphosate was used to control weeds in the establishment year, and it did an excellent job of weed control with no crop injury. Controlling weeds with either glyphosate or alternative herbicides resulted in greater alfalfa yield and greater forage quality compared with not using herbicides. Controlling weeds increased crude protein content by 3 percentage units and decreased NDF by 3.8 units.
During the seeding year of our study, alfalfa yield was 0.44 ton/acre higher in the glyphosate treatment than in the alternative herbicide treatment, but total herbage yields and forage quality did not differ between the herbicide treatments. After the seeding year at nearly all locations, no herbicides were needed for weed control, even into the fifth year of the stands. The alfalfa stands were vigorous and provided sufficient competition to keep weeds from re-invading for the remainder of the studies.
Keep in mind that these studies were conducted with small plot equipment where wheel traffic was not an issue. Under normal farm production conditions, alfalfa stands tend to be weakened by wheel traffic, and weeds can re-invade sooner than under our experimental plot conditions. So glyphosate or other herbicides are more likely to be needed to manage weed competition as the stand ages under farm production conditions. The Roundup Ready technology will be useful in those situations, especially where troublesome perennial weeds take hold later in the life of the stand. Examples of such perennial weeds include thistles, curly dock, and dandelions. Winter annual weeds can also be controlled well by glyphosate.
Roundup Ready alfalfa is being marketed by several companies. Based on variety testing results from trials established in 2006 before the ban on Roundup Ready alfalfa, the yield potential of Roundup Ready alfalfa varieties compared very well with conventional elite alfalfa varieties.
Roundup Ready seed will be more expensive, so the benefits and need for glyphosate for weed control in your situation should be weighed against the extra seed cost to use this technology.
Roundup Ready alfalfa should be grown judiciously because of the risk of developing glyphosate-tolerant weeds. Resistant weeds are likely to develop more rapidly if we use, and only use, glyphosate on all crops. Just as crop rotation is important, so is rotation of herbicide chemistries. In addition, some customers won’t buy genetically engineered crops, so you need to know what your customers will accept.
Roundup Ready alfalfa will be a useful technology for some people but may not be for others. As genetically modified alfalfa use increases, we will learn whether the concerns regarding genetically modified organisms (GMO) contamination of conventional and organic alfalfa are valid and if they can be adequately addressed. I hope they can, because there are other GMO traits that potentially are very interesting for alfalfa producers. A good example is the development of alfalfa varieties with lower lignin, which are already being developed and have been shown to result in greater milk production in lactating dairy cows.
In summary, Roundup Ready alfalfa is here. If you decide to use this new technology, use it wisely as part of an overall well-managed system.
Dietary Calcium and Magnesium Deficiency in Dry Cows
Subclinical and clinical milk fever (hypocalcemia) are common and expensive problems on many farms. Cows with hypocalcemia often require veterinary treatment, have reduced milk yields, and are a much greater risk for other health disorders, such as mastitis, metritis, and displaced abomasum. Proper nutrition of dry cows can greatly reduce the occurrence of hypocalcemia. The two primary approaches to controlling hypocalcemia are: 1) feed diets that are marginally deficient in available calcium and just adequate in phosphorus and 2) feed anionic diets [i.e., diets with a negative or dietary cation-anion difference (DCAD)], usually with excessive dietary concentrations of calcium. A recent study reported in the Journal of Dairy Science (Volume 94, pages 1365 to 1373) provides an additional concern when excessive calcium is fed to dry cows. In this experiment, cows were fed diets with approximately 0.5, 0.9, or 1.3% calcium (dry matter basis) during the last 3 weeks of the dry period. The diet with 0.5% calcium slightly exceeded the National Research Council (NRC) calcium requirements. Calcium carbonate and calcium phosphate were used to adjust dietary calcium concentrations. All diets were approximately +20 mEq/100 g and all diets contained 0.3% phosphorus, 1.6% potassium, and 0.18% magnesium (dietary potassium, phosphorus, and magnesium exceeded NRC requirements). Hypocalcemia was not severe for any treatment, but plasma calcium concentrations were lowest (7.8 mg/dL) for the highest calcium diet and greatest (8.6 mg/dL) for cows fed the lowest calcium diets. The greatest effects of dietary calcium were on magnesium absorption. Cows fed the highest calcium diet had the lowest plasma concentrations of magnesium the first 7 days of lactation (averaged approximately 1.6 mg/dL, which is indicative of subclinical magnesium deficiency). The low plasma magnesium in cows fed high calcium diets during the dry period was caused by significantly reduced absorption of magnesium. The apparent digestibility of magnesium by cows fed the low calcium diet was 17% (this absorption coefficient is very typical for dairy cows). The apparent absorption of magnesium by cows fed diets with the intermediate or the highest concentrations of calcium averaged 4 and 0%, respectively. The bottom line from this research is that there is no benefit from feeding high calcium diets to dry cows when anionic diets are not fed, but if high calcium is fed, then dietary magnesium needs to be increased substantially. Cows consumed approximately 16 g/day of magnesium, and based on the reported quantities of magnesium excreted in the urine, cows fed the higher calcium diets would need to consume 22 to 40 g of magnesium to maintain magnesium status (approximately 0.25 to 0.45% magnesium). The results from this study may or may not be applicable to cows fed anionic diets. There is little risk of feeding diets with 0.45% magnesium to dry cows, suggesting that when high calcium diets are fed, regardless of whether a negative DCAD diet is fed, substantially increasing dietary concentrations of magnesium is the prudent course of action.
Wanted: Excellent Ohio Dairy Farms for 2010 Farm Financial Analysis
Ms. Dianne Shoemaker, Extension Dairy Specialist, Ohio State University Extension
Total cost of production per cwt, feed cost per cwt, and net farm income per cow. These are important numbers for every farm as they monitor profitability, develop and monitor risk management plans, and look for opportunities. These also are numbers that allow one farm to compare their production and financial management with similar farms.
How does your farm stack up against all of your competition? Against all farms your size? Against the top 20% (based on return to assets) of both groups? These are not difficult questions to answer if you become involved in the National Farm Benchmarking project this year.
Ohio is participating in this project led by the Center for Farm Financial Management at the University of Minnesota. While Ohio regularly contributes some farm data to the national database, we have the opportunity to expand the number of farms participating in financial analysis this year.
Through grant funding from the National Farm Benchmarking project, we are able to offer a full 2010 financial analysis, including enterprise analysis to 100 farms. Many of these will be dairy farms, but other types of farms are also welcome to participate. Analyses will be completed by either Extension or Farm Business Planning and Analysis (FBPA) personnel.
Participants in the project will work with their Extension or FBPA consultant to complete their farm’s analysis by June 2011. Maintaining each farm’s confidentiality is critical, and farm analyses are coded before submission to the database where data is only shared as group data (individual farms are not identifiable).
In July, Ohio’s farms are invited to participate in a meeting to review Ohio’s farm business summary and learn how to use an individual farm’s analysis, Ohio’s data, and the national database to enhance their farm’s financial and risk management.
A quick look at some historic dairy data, or: This is what “the pits” (2009) looked like…
Financials for 2009 looked about like we expected. It was a sorry year for many farms. While we are growing the Ohio database, we can get some useful information from other states that dairy under similar conditions to Ohio.
FINBIN data for Minnesota Dairy Farms, 2005 through 2009
Number of farms
Avg # of cows/farm
Feed cost/cwt of milk
Direct & fixed costs/cwt
Avg. milk price/cwt
Net Return over Labor & Mgt/cow
The FINBIN database can be accessed at http://www.finbin.umn.edu/
We invite and encourage you to participate in Ohio’s dairy summary for 2010. This is a prime opportunity with the benchmarking grant covering the $600 per farm cost of analysis. Questions? Contact Dianne Shoemaker at (330) 257-3377 to discuss this opportunity.
Extension and FBPA consultants who can help you with this project include:
Wayne County Extension
FBPA, Buckeye Career Center
Putnam County Extension
FBPA, Henry County
Wyandot County Extension
Defiance County Extension
Ann Gano McCleary
FBPA, Buckeye Career Center
FBPA, Miami Valley
Logan County Extension
Morrow County Extension
Portage County Extension
Erie County Extension
Midwest Dairy Challenge Held in Menomonie, Wisconsin
Dr. Maurice Eastridge, Dairy Extension Specialist, The Ohio State University
The seventh Annual Midwest Dairy Challenge, which ran February 9-11, 2011, attracted 68 students from 16 universities and colleges to the event hosted by the University of Wisconsin-River Falls.
This year’s contest was held in Menomonie, WI, and the temperature was -15oF on Thursday morning when the students visited the dairy farms. It drew students from the University of Wisconsin-Madison, Iowa State University, University of Minnesota, Michigan State University, University of Illinois, South Dakota State University, The Ohio State University, Kansas State University, University of Wisconsin-Platteville, Purdue University, University of Wisconsin-River Falls, Northeast Iowa Community College, UW Farm and Industry Short Course, Lakeshore Technical College, Chippewa Valley Technical College, and Northcentral Technical College.
The next day, the 16 teams of students were divided between two dairy farms located in the Menomonie area. All students are placed on aggregate teams. Students from The Ohio State University participating in the program were: Andrew Lefeld, Alissa Hunter, Melinda Miller, Stephanie Neal, and Teresa Smith. Their teams received either a gold or silver ranking. The judges chose two teams as platinum winners, the contest’s highest distinction. The individuals who comprised these teams are: Wesley Vanderstappen – Northeast Iowa Community College; Danielle Brown – UW-Madison; Ethan Ulness – UW Farm and Industry Short Course; Melissa Schmitt – Iowa State University; Karen Anderson – University of Minnesota; Heather Lammers – Lakeshore Technical College; Eric Sneller – Michigan State University; Scott Felten – UW Farm and Industry Short Course; and Joseph Ploeckelman – UW-River Falls.
The National contest will be held March 31 – April 2 in Hickory, NC and will be hosted by North Carolina State University. The following students will represent OSU at the contest: Andrew Lefeld, Alissa Hunter, Stephanie Neal, and Teresa Smith.
The North American Intercollegiate Dairy Challenge (NAIDC; http://www.dairychallenge.org) was established as a management contest to incorporate all phases of a specific dairy business. It strives to incorporate a higher-learning atmosphere with practical application to help prepare students for dairy industry careers. Supported financially through generous donations by industry and coordinated by a volunteer board of directors, the first NAIDC was held in April 2002.