Buckeye Dairy News: Volume 13 Issue 3

  1. MarketView…Livestock Gross Market Insurance Product and Price Forcasts

    Dr. Cameron Thraen, State Extension Specialist, The Ohio State University

    If you have been looking for the Ohio Dairy 2011 website and are unable to connect, this is because it is on the move.  Recent changes to the College of Food, Agriculture and Environmental Sciences (CFAES) and Agricultural, Environmental, and Development Economics (AEDE) website addresses have necessitated a new address for my Ohio dairy website.  The most reliable link to reach the dairy website is to bookmark the AEDE department’s new web address and then link to the dairy website by selecting ‘Programs and Research / Ohio Dairy Web.  The new AEDE website address is:  http://aede.osu.edu.   The direct link to Ohio Dairy Web 2011 is currently http://aede.ag.ohio-state.edu/programs/OhioDairy/  (note this direct link may change in the coming weeks).

    Dairy Margin Management and the Livestock Gross Margin Insurance Product

    Many of you are aware that the Livestock Gross Margin (LGM) Insurance program, after modifications to provide a premium subsidy up to 50%, exhausted all of its allocated underwriting funds with the sale of contracts at the March 2011 offering.  If this underwriting authorization is renewed, and there is an expectation that this will happen, the LGM-Dairy contracts will again be available for purchase beginning October 2011.  This product is also being put forth as an integral part of the next dairy title in the 2012 farm bill.  If you would like more information on the LGM program, you can find two papers on the Ohio Dairy website:  http://aede.ag.ohio-state.edu/programs/OhioDairy/LGM_Dairy.htm

    In this edition, I will cover two topics.  First will be a review of what we know about the premiums paid, payouts, and income distribution for the LGM - Dairy Insurance product.  Second, I will review a price forecast for the coming 6 months.

    A review of the LGM – Dairy program activity measures shows some interesting points. 

    1. During the 2011 insurance year, which runs from July 1, 2010 to June 30, 2011, 1,409 policies where purchased, covering 46.2 million cwt.  This represents approximately 2.4% of the total quantity of milk marketed by U.S. dairy farmers during the insurance year.
    2. The gross margin insured was $770.2 million for an equivalent of $16.66 per cwt.  The gross margin insured per cwt for the 2010 insurance year was $13.33.
    3. The total actuarial premium cost was $25 million for a per cwt cost of $0.54.
    4. The taxpayer funded subsidy on the premium cost was $10.7 million for a per cwt. subsidy of $0.23.
    5. The total indemnity paid back to LGM contract owners to date has been $58,000.  This represents $0.00125 per dollar of premium paid.  The loss ratio, total indemnity divided by total premium, equals 0.0023 or just over 0.2%.
    6. Breaking down the 2011 LGM insurance year, 48.9% of the total contracts were purchased during the months of July 2010 through January 2011.  These contracts generated 9.1 million in premiums and paid out zero in indemnity.
    7. For LGM contracts purchased at the February 2011 sales period, 28% of the total contracts were purchased, generating $9.1 million in premiums and incurring an indemnity of only $18,000.
    8. The last sales period, March 2011, sold 22.5% of the total contracts and incurred an indemnity of $40,000 on a total premium of $6.8 million.  This indemnity represents 68.9% of the total indemnity for the 2010-2011 contract year.
    9. Combining the insurance years 2010 and 2011, the total cost of the LGM-Dairy program comes to 31.5 million dollars.  Of this contract buyers premium obligation is 15.1 million, taxpayer premium subsidy is 10.7 million and taxpayer funded Administration and Overhead is 5.7 million dollars.

    A review of these points leads one to ask the following question.  Where do all the premium dollars paid in go?  If I include the 2010 insurance year, the surplus was $25.4 million.  As you can see from points 3, and 5, the net premium surplus for 2011 is $24,983,000.  What happens to all of this money?  According to the LGM documents, the program is designed, from a statistical position, to pay out as indemnities exactly what is paid in by way of premiums, plus cover the expense of the subsidy.  In the current 2011 insurance year, contract buyers paid in $15 million and taxpayers kicked in $10 million.  If a gross margin calamity did occur, contract owners would be paid back the full $25 million as an indemnity, in effect transferring the taxpayer contribution of $10 million to themselves.  This is not a bad bargain by any definition.  In effect, on average, LGM contract owners bought one dollar worth of insurance for 58 cents.  Also, keep in mind that the concept of ‘actuarially fair’ applies only to the existing contracts.  The general idea is that the statistical models show that given the current slate of futures-based milk prices, feed prices, and price volatility, it could happen, over the life of the contracts, that the indemnity would reach $25 million dollars.  If that happens, then the payout equals the pay in.  If it does not happen, and the existing contracts expire without a payout, then the $25 million is kept by the insurance companies and others in the insurance game.  Each new contract starts a new game.  There is no ‘carry-over’ of premium dollars.  Remember that the 2011 gross margin insured was $770 million, so if the actual loss exceeded the $25 million paid in, then the insurance underwriters would have to dig into their pockets for the balance.

    How much of this surplus $24.9 million dollars is used to pay the sellers commissions, plus some unspecified return to the owners of this LGM product, Iowa Agricultural Insurance Innovations Consortium, L.L.C. (mainly academics at Iowa State University)?  Read on for the answer.

    When the LGM premium is calculated, 3% is added to the cost.  This 3% is held in reserve by the Federal Crop Insurance Agency as a contingency fund.  In addition to this fee, a 22.2% fee is charged against the actuarial premium to cover administrative and operating expenses.  For the combined 2010-2011 insurance period, this A&O amounts to $5.7 million.  Contract buyers do not pay any portion of the A&O, which is funded entirely by the taxpayer.  This money is collected by the insurance companies, their underwriters, and their reinsurers to cover the cost of doing business.  Iowa Agricultural Innovators Consortium, LLC., the creators and owners of the LGM insurance product, earn an additional return based on a percentage of the gross actuarial premium.  This fee is negotiated with the Federal Crop Insurance Board of Directors and is not disclosed.  The Iowa Agricultural Innovators, LLC likewise earns money from both contract buyers and the taxpayer.

    I am supportive of the LGM contract concept; however, I do believe it is reasonable to ask substantive questions about the contract design and operation.  From our experience with LGM to date, and it is a short time span, it appears that this contract design is generating a substantial cash surplus.  The idea that over the long term premium pay-in and indemnity pay-out will just match is based on statistical computing models, and we all know that these can be wrong, sometimes very wrong.  Combining both insurance years 2010 and 2011, this premium plus subsidy equals $25,823,000.  Conceivably, there could be a disastrous turn of events, e.g. rapid rise in feed costs accompanied by a substantial fall in the Class 3 milk price, which would absorb this surplus as indemnity payouts.  As we move forward in 2011 and looking into 2012, this does not appear to be likely.  Therefore, a legitimate question can be raised.  In the event that there is no payout on the current contracts, what happens to the $25.8 million?  The answer is these dollars are kept by the insurance industry.  This is called Underwriter Gain and the $25.8 million plus the 5.7 million in A&O and fees earned by Iowa Agricultural Innovators, LLC. are retained by the insurance and underwriting companies.

    Now you have a better understanding of where your LGM premium dollar goes, the taxpayer contribution to this product, and what fees are earned in providing this product.  If this product becomes part of the dairy title in the next farm legislation, you will hear much more about LGM.

    Dairy Commodity and Milk Price Forecast for July 24 – December 17, 2011.

    My forecast for dairy commodity prices, milk component values, and the Class 3 price is:

     

    Commodity ($/lb)

     

    Milk Component Values ($/lb)

     

    Milk

    2011 Forecast

    Butter

    NDM1

    Cheese

    Whey

     

    Butterfat

    Protein

    Other Solids

    Nonfat Solids

     

    Class 3 ($/cwt)

    August

    1.986

    1.673

    1.952

    0.551

     

    2.218

    3.372

    0.365

    1.493

     

    19.927

    September

    1.917

    1.669

    1.901

    0.530

     

    2.134

    3.265

    0.347

    1.488

     

    19.208

    October

    1.870

    1.661

    1.882

    0.508

     

    2.069

    3.251

    0.323

    1.480

     

    18.803

    November

    1.829

    1.652

    1.849

    0.490

     

    2.018

    3.227

    0.303

    1.472

     

    18.444

    December

    1.846

    1.678

    1.877

    0.493

     

    1.985

    3.157

    0.292

    1.460

     

    18.053


    1NDM = Non-fat dry milk.

  2. Costs of Nutrients, Comparison of Feedstuff Prices, and the Current Dairy Situation

    Dr. Normand St-Pierre, Dairy Extension Specialist, The Ohio State University (top of page) pdf file

    The milk and feed markets have clearly gone up over the last few months – nobody has missed this.  With all these changes, however, it is too easy to loose track of what should be the overall feed strategy and where the average dairy producer stands in term of profitability.  First, let’s examine the feed markets in July and how feed prices translated into nutrient prices.

    Nutrient Prices

    As usual in this column, I used the software SESAME™ that we developed at Ohio State to price the important nutrients in dairy rations to estimate break-even prices of all major commodities traded in Ohio and to identify feedstuffs that currently are significantly underpriced.  Price estimates of net energy lactation (NEL, $/Mcal), metabolizable protein (MP, $/lb – MP is the sum of the digestible microbial protein and digestible rumen-undegradable protein of a feed), non-effective NDF (ne-NDF, $/lb), and effective NDF (e-NDF, $/lb) are reported in Table 1. Compared to its historical average of about 10¢/Mcal, NEL is now severely overpriced at 15.7¢/Mcal, although this figure is down from its peak of 17.4¢/Mcal in June.  For MP, its current price (27.6¢/lb) is just about at its 6-year average (28¢/lb).  Thus, we are currently in a period of very high dietary energy prices.  This is even more evident when one is reminded that less than 10 years ago, dietary energy (NEL) was priced at about 5¢/Mcal.  Thus, the current dietary energy cost is substantially above its long-run average.  The cost of ne-NDF is currently discounted by the markets (i.e., feeds with a significant content of non effective NDF are price discounted), but the discount is at about its 6-year average.  Meanwhile, unit costs of e-NDF are historically high, being priced at about 3¢/lb over the 6-year average.  Homegrown forages can be inexpensive sources of this important nutrient.

    Table 1.  Prices of dairy nutrients for Ohio dairy farms, mid-July 2011.
    Table 1

    Forage Prices

    I have received quite a few emails over the last few months inquiring about the method that we use to price forages in our Sesame analyses.  Alfalfa hay is priced using an average of alfalfa hay prices at the Farmerstown, Kidron, and Mount Hope auctions.  The price of corn silage is updated only once per year using the December futures as of the end of August.  The reason for a single annual update is simple.  For most of Ohio, the decision to harvest corn for silage or for grain is taken at the end of August.  Once the corn is chopped into silage, it is very difficult to convert it back to shelled corn…  The decision is thus made in mid to late August based on the farm forage requirements for the next 12 months but also based on the information on corn price available then – essentially the December corn futures.  Whatever happens to the corn grain markets afterward is irrelevant to the corn silage price.  In essence, the cows have bought the corn for silage in August; this crop no longer belongs to “the farm”.  Approximately 50% of the dry matter content of corn silage comes from the grain.  Using a little bit of algebra and assuming that the silage dry matter is 35%, then the value of the whole plant standing in the field can be calculated by simply multiplying the price of corn per bushel by 7.  To convert the value of the whole corn plant standing in the field into a price for the corn silage coming out of storage, one has to add harvesting costs ($5/ton), transportation ($3/ton), packing costs ($2/ton), inoculation and cover ($2/ton), and fermentation losses (a minimum of 10% of the value of the material put in a silo).  An example is probably helpful here.  Let’s say that the December corn futures is $6/bu as of the end of August.  Then the price of the corn silage at 35% DM during the next 12 months is:

                Corn price ($/bu) x 7               $6 x 7                        $42
                Harvesting costs ($/ton)                                             $4
                Transportation ($/ton)                                                $3
                Packing costs ($/ton)                                                 $2
                Inoculant & cover ($/ton)                                           $2
               
                Subtotal                                                                   $53

                Losses from ensiling:              10% of $53                $5.30

                TOTAL ($/ton)                                                      $58.30

    Economic Value of Feeds

    Results of the Sesame analysis for central Ohio in mid July are presented in Table 2. Detailed results for all 27 feed commodities are reported.  The lower and upper limits mark the 75% confidence range for the predicted (break-even) prices.  Feeds in the “Appraisal Set” were either deemed outliers (completely out of price), or had an unknown price (e.g., alfalfa hay of different qualities).  One must remember that Sesame compares all commodities at one point in time, mid July in our case.  Thus, the results do not imply that the bargain feeds are cheap on a historical basis.

    Table 2.  Actual, breakeven (predicted) and 75% confidence limits of 27 feed commodities used on Ohio
    dairy farms, mid-July 2011.
    Table 2

    For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis.

    Table 3. Partitioning of feedstuffs, Ohio, mid-July 2011.

    Bargains

    At Breakeven

    Overpriced

    Alfalfa hay – 44 NDF
    Bakery byproducts
    Corn silage
    Distillers dried grains
    Feather meal
    Gluten feed
    Soybean meal – expeller
    48% soybean meal
    Wheat middlings

     

    Alfalfa hay
    Corn, ground, shelled
    41% Cottonseed meal
    Whole cottonseed
    Meat meal
    Molasses
    Wheat bran

    Blood meal
    Beet pulp
    Brewers grains, wet
    Canola meal
    Citrus pulp
    Fish meal
    Gluten meal
    Hominy
    44% soybean meal
    Soybean hulls
    Roasted soybeans
    Tallow

    As usual, I must remind the readers that these results do not mean that you can formulate a balanced diet using only feeds in the “bargains” column.  Feeds in the “bargains” column offer savings opportunity and their usage should be maximized within the limits of a properly balanced diet.  In addition, prices within a commodity type can vary considerably because of quality differences as well as non-nutritional value added by some suppliers in the form of nutritional services, blending, terms of credit, etc.  In addition, there are reasons that a feed might be a very good fit in your feeding program while not appearing in the “bargains” column.  For example, molasses is often used to reduce ingredient separation in a TMR.  Molasses is also an excellent source of sugars.  Some nutritionists balance rations for sugars.  In those situations, molasses might in fact be a bargain.

    Current Dairy Situation

    We use the estimates of the nutrient costs to calculate the Cow-Jones Index (CJI), an index constructed here at Ohio State to measure the difference between milk revenues and the costs of providing the required nutrients at a production level of 65 lb/cow/day.  The Cow-Jones is conceptually very similar to income-over-feed costs, but it is calculated without making reference to any specific diet.  The reference cow used to calculate the Cow-Jones weighs 1500 lb and produces 65 lb of milk at 3.6% fat and 3.0% protein.  This cow has daily requirements of 31.3 Mcal of NEL, 4.64 lb of MP, 10.15 lb of e-NDF, and 3.38 lb of ne-NDF.  The cost of supplying these nutritional requirements has fluctuated in the last 6 years.  Dietary energy is currently quite expensive, and it currently costs nearly $5.00/day to provide the NEL required for the production of 65 lbs/day (Figure 1).  This means that, on an average, one has to pay $7.56 just to supply the NEL required to produce a hundredweight of milk.

    Figure 1

    Figure 1.  Costs associated with the supply of 31.3 Mcal of NEL and 4.64 lb of MP per day from January 2005 through July 2011.

    The change in the Cow-Jones Index over time is shown in Figure 2.  We cannot calculate the CJI for July yet because the component prices will not be announced until August 5 by the Order administrator.  As of June 2011, the cost for supplying all the nutrients amounted to $10.63/cwt.  The milk income was $19.38/cwt.  The difference is the Cow-Jones Index and was equal to $8.74/cwt. The break-even level for the Cow-Jones Index is approximately $8.00/cwt.  A Cow-Jones in excess of $9.00/cwt is indicative of good profitability in the dairy industry.  Thus in the month of June, Ohio dairy producers were operating slightly above break-even levels.  Of course, some people did lock in favorable feed prices last fall, making their current margins better than what the CJI would indicate.  Still, the fact that the nutrient costs in June amounted to nearly 55% of the milk revenues is very troublesome and foreshadows a very difficult financial environment if either the current feed prices are maintained throughout the fall cropping season or if milk prices were to fall from their current near record levels.

    Figure 2

    Figure 2.  Cow-Jones Index from January 2005 through June 2011.  Although milk prices have been substantially above their 6-year average so far in 2011, the large increases in feed prices have resulted in very modest profit margins so far this year.

  3. Nothing Stands Still: High Moisture Corn and Corn Silage is Different in Summer than in the Fall and Winter

    Dr. Bill Weiss, Dairy Nutrition Extension Specialist, The Ohio State University (top of page) pdf file

    The high moisture (HM) corn and corn silage fed today was  made 9 or 10 months ago, and they are not the same feedstuffs as they were last winter.  If HM corn and corn silage are properly made and well-preserved, the concentrations of the major chemically-defined nutrients such as crude protein (CP), neutral detergent fiber (NDF), and starch probably changed very little during the last 9 months of storage. However nutrient fractions measured by biological methods probably changed substantially.  A study from Europe reported that in vitro starch digestibility (an index of starch digestion in the rumen) in corn silage increased 30% (not percentage units) and in vitro protein degradability increased 20% over 10 months of storage (Newbold et al., 2006, J. Dairy Sci. 89:190).  Starch degradability in wetter silages (<30% dry matter) did not change greatly over storage, probably because it was very high initially, but starch degradability in drier corn silage (>35% DM) changed greatly. A study from Nebraska (Benton et al., Nebraska Beef Cattle Report, 2006) revealed that in situ DM disappearance in HM corn after 10 months of storage was 25 (corn with 24% moisture) to 33% (corn with 30% moisture) greater than it was after 1 month of storage.  Because starch is the major component of HM corn DM, the change in DM disappearance likely reflects a change in starch disappearance.  In situ protein degradation followed a similar pattern of change.  Researchers at the University of Wisconsin (Hoffman et al., 2011, J. Dairy Science 94:2465 ) studied changes in specific proteins in HM corn (approximately 30% moisture) over 8 months of storage and found that some specific proteins decreased by 50% over that time.  Those proteins are hydrophobic (very low solubility in water) and are part of the starch-protein matrix that make up corn starch granules.  The concentrations of these proteins probably have a negative correlation with starch degradability.  The results of these 3 studies indicate that a much larger proportion of starch in  HM corn and corn silages that have been stored for many months will be degraded in the rumen compared with newer HM corn and corn silage.  Cows fed aged HM corn or corn silage could be at increased risk for acidosis, and diet modifications may be needed to reduce this risk.  The concentration of total starch in a diet may have to be reduced as HM corn and corn silage ages or some dry ground corn will need to replace HM corn to prevent excessive amounts of starch from being fermented in the rumen.  The increase in protein degradability may mean that diets with older corn silage and HM corn may need additional rumen undegradable protein.  Sources of rumen degradable protein (e.g., urea) may not be needed when feeding older corn silage and HM corn.  Just because the concentration of starch or protein in a feed does not change, this does not mean its nutritional value remains constant.

  4. Economic Comparison of Reproductive Programs for Dairy Herds Using Estrus Detection, Ovsynch, or a Combination of Both

    Dr. Gustavo Schuenemann, Veterinary Preventive Medicine, The Ohio State University and Klibs N.A. Galvao, Department of Large Animal Clinical Science, University of Florida (top of page) pdf file

    Background

    Suboptimal reproductive performance leads to extended days open, increased culling due to reproductive failure, and decreased milk yield. Many factors influence the reproductive and productive performance of dairy herds, consequently, profitability. Choosing the most effective reproductive protocol for a given herd is a critical managerial decision. Two aspects were assessed: 1) The economic outcome of reproductive programs using estrous detection (ED), Ovsynch, or a combination of both, and 2) the impact of improving 10 percentage points (from 85% to 95%) in both compliance and the accuracy of ED on the timing to reach the new level of pregnancy and milk yield.

    Parameters Assessed

    The following reproductive programs were evaluated: 1) ED: ED only; 2) Pre-Ov: Presynch-Ovsynch for first AI, and Ovsynch for resynchronization of open cows at 32 days after AI; 3) Pre-Ov-ED: same as Pre-Ov for first AI, but cows undergo ED and AI after first AI, and cows not reinseminated by 32 days after AI or diagnosed open 32 days after AI are resynchronized using Ovsynch. Cows were not AI after 365 days in milk (DIM) and open cows were culled after 450 DIM. Culled cows were immediately replaced with a nulliparous heifer 280 days pregnant. Herd was maintained at 1000 cows (lactating + dry). Death losses were set at 6% and abortion at 11.3%. Dry period of 60 days. Net daily value was calculated by subtracting the costs with replacement heifers ($1,800/heifer), feeding costs ($0.25/kg of lactating cow diet; $0.25/kg of dry cow diet), breeding costs ($0.1/cow/day for ED; $2.5/dose Prostaglandin F2alpha; (PGF); $3.0/dose gonadotrophin releasing hormone (GnRH); $0.17/injection administration), and other costs ($3.5/d) from the daily income with milk sales ($0.31/kg milk), cow sales ($0.75/kg live weight), and calf sales ($200/calf). Simulation was performed until steady-state was reached (3000 days), then average daily values for the subsequent 2000 days was used to calculate profit/cow/yr. First AI conception rate (CR) was set to 30% (decreased by 2.5% for every subsequent AI), and ED was set to 60%. Accuracy of ED (95 or 85%), and compliance with each injection (95 or 85%) were evaluated. Inaccurate ED resulted in 0% CR. Missing a Presynch injection resulted in loss of 50% of the benefit (40% increase to first AI), and missing an Ovsynch injection resulted in decrease in CR by 70%.

    Results

    At 95% accuracy of ED and 95% compliance, the profits for ED, Pre-Ov, and Pre-Ov-ED were $403, $371, and $443, respectively. At 85% accuracy of ED and 85% compliance, the profits were $337, $277, and $378, respectively. The difference from 95% to 85% compliance and/or accuracy for ED, Pre-Ov, and Pre-Ov-ED was $56, $94, and $65, respectively. Combination of timed-AI with ED, with good compliance (95%) and accuracy (95%), will give you the best results. The ED is better than Pre-Ov with similar accuracy and compliance, but Pre-Ov   with good compliance is better than ED with poor accuracy. Of all programs, Pre-Ov was the most sensitive to changes in compliance and/or accuracy of ED.
     
    At 95% compliance and 95% accuracy of ED, the time length to reach the new level of pregnancy for ED, Pre-Ov, and Pre-Ov-ED was 3.4 months, 6.7 months, and 4.1 months, respectively. The time length to reach the new level of milk yield for ED, Pre-Ov, and Pre-Ov-ED took an additional 5.4 months, 8.8 months, and 7.5 months from pregnancy, respectively. According to the model, the new level of pregnancy should be evident around 3 to 6 months post-change with an additional 5 to 8 months for milk yield.

    Implications

    Assuming that the herd size remains constant, the timing to event (new level of pregnancy and milk yield) provides a timeline to monitor the expected true benefits when an improvement in reproductive management is made (compliance or accuracy of ED) at the farm level. Combination of Presynch-Ovsynch with ED resulted in the greatest profit, followed by ED and Presynch-Ovsynch only. The economic benefit of timed-AI protocols, such as Presynch-Ovsynch, depends on compliance with each injection. Dairy farmers should consider their accuracy of ED and compliance to reproductive protocols before implementing a reproductive program.

    Acknowledgements

    The information provided in this article was generated using an individual cow-based model to aid in decision making about reproductive management of dairy cows. The model was developed in collaboration with Drs. P. Federico (Capital University, Columbus, OH), A. De Vries (Department of Animal Sciences, University of Florida, Gainesville, FL), G.M. Schuenemann (Department of Veterinary Preventive Medicine, The Ohio State University, Columbus, OH), and K.N. Galvão (Department of Large Animal Clinical Sciences, University of Florida, Gainesville, FL).

    References

    1. P. Federico, A. De Vries, G.M. Schuenemann, and K.N. Galvão. 2011. An individual cow-based model to aid in decision making about reproductive management of dairy cows. J. Dairy Sci. 94:350.
    2. G.M. Schuenemann, P. Federico, A. De Vries, and K.N. Galvão. 2011. Timing to reach the new level of pregnancy and milk yield after an improvement in reproductive management in dairy herds. J. Dairy Sci. 94:257.
    3. K.N. Galvao, P. Federico, A. De Vries, and G.M. Schuenemann. 2011. Economic comparison of reproductive programs for dairy herds using estrus detection (ED), Ovsynch, or a combination of both. J. Dairy Sci. 94:257.
  5. Dairying by the Numbers - A Challenge to be the Best: Summer Activities

    Ms. Dianne Shoemaker, Dairy Extension Specialist, The Ohio State University

    The top 20% of dairy producers are really profitable.  Year in and year out, as a dairy producer, you want to be in the top 20% (measured by return on assets).  Interestingly, there is not one “recipe” to follow that describes the farms that make up that 20% in various farm business summaries.  Fortunately, being really good at one of a variety of management styles can land a farm in that top 20%.  A common thread, however, among farms we have evaluated was that they were all involved in conducting an annual farm business analysis.

    One of the biggest challenges for many participants in this year’s Ohio Farm Benchmarking Project has been finding production and financial numbers for the total operation...and then breaking them down by enterprise. 

    However, tweaking a few activities now can make the 2011 analysis next January a much simpler and even enjoyable activity.  Here are some suggestions:

    Tracking crop and feed activities:

    1. Crop acres – Review and record acres planted; itemize owned and rented acres, including what crops were planted on those acres.
    2. Crop yields – As crops are harvested, record yields of hay, haylage, silage, grain, straw, etc.  Wouldn’t hurt to record moisture levels of those crops as well.
    3. Crop input costs – This has been one of the biggest challenges for folks enterprising their crop production for the first time.  As those bills come in, this is the easiest time to separate seed, fertilizer, and spray costs by crop, not 9 months later.  This usually means that the person doing the bookkeeping has to chase down the crop production person and spend some time sorting through the papers and acres, but it is time well-invested.
    4. Beginning inventories – If you didn’t take a January 1 inventory of seed, fertilizer, pesticide, and other crop production inputs on hand, go back and reconstruct it now.  It will be a lot easier to do now than in another 6 months.  These will be current assets on your January 1, 2011 balance sheet.  You’ll do another inventory for your January 1, 2012 balance sheet. Make sure also you have all of your other beginning inventories up-to-date, including feed, dairy supplies, dairy cattle, equipment, machinery, etc.
    5. Feed purchases – As you purchase crops out of the field or through other markets, record weights and moisture levels as much as possible in addition to cost.

    We are wrapping up the 2010 Ohio analysis now and will have the Ohio summary completed by the end of the summer.  Funding is available to continue this project into 2011, and our goal is to complete the 2011 analysis earlier…which depends on our farms having good records ready to go.  Keeping track of the details now will make that happen.  The top 20% is waiting!

  6. het land van de Friese koeien en paarden (The Land of Friesian Cows and Horses)

    Dr. Maurice Eastridge, Dairy Extension Specialist, The Ohio State University

    The land is spotted with Friesian dairy cattle and horses, sheep, and green grass pastures – The Netherlands. A country with about 25% of its land below sea level and with dairy cattle and milk products deeply rooted into its culture and food system. Kaas (cheese) and yoghurt (yogurt) are staples for every meal of the day. The Friesian dairy cattle and horses orginated in The Netherlands and continue to dot the landscape, grazing the lush green pastures.

    Ten OSU students and my wife and I left for the Netherlands on Monday, June 13 and returned on Saturday, June 25, focusing on the dairy industry within the country. We visited four privately owned dairy farms, totalling about 1000 cows, one of which was an organic farm. We also visited two dairy research facilities (one industry-based and one university owned), totalling about 700 cows. The price for milk was equivalent to about $0.23/lb, with the organic milk valued at about $0.04/lb higher. We visited a goat dairy farm with about 650 does. The does averaged about 8 lb/day, 4.3% fat, 3.20% protein, and 2.3 kids/year. The does were milked in a rotary parlor. During our visit to the Terschelling island, we toured a sheep dairy that was milking about 94 ewes, yielding about 4.5 lb/day. This farm was making cheese from the milk and selling it at the farm and at some retail outlets.

    Utrecht University provides the only veterinary program in the country, accepting about 225 students into the veterinary program each year. It also is the only university outside the U.S. that is accredited by the American Veterinary Medical Association. Wageningen University provides one of the country’s leading agricultural programs. We also visited one of it’s dairy research facilities, Waiboerhoeve, especially focusing on nutritional, animal welfare, and environmental research. One of the environmental projects included the installation of flaps in the cracks of slatted floors so that manure could fall into the pit, but the flaps would flex back in place to reduce the escape of ammonia into the atmosphere (results inconclusive at the time of our visit).

    There is a lot of automation used on dairy farms in The Netherlands, driven much by the high cost of labor and the labor laws. Several of the dairy facilities we visited used robotic milkers, automated feeding of milk replacers to calves, and automated delivery of bedding (straw or sawdust) into animal pens.  Because of the extent of automation, we scheduled a visit to the manufacturing facility of the Lely Dairy Equipment company in Rotterdam. We observed the assembling and testing of robotic milking units (about 60 to 65 robots built per week), including a system for pasture herds, and learned that Lely either currently sell or have prototypes for animal activity monitors, milk feeding systems for calves, in-line milk composition assessment, TMR pusher, computer grain feeders for cows, and an automated manure scraper for slatted floors.

    The Netherlands is a major supplier of cheese, especially in the Europena Union. The highest amounts of exports are for Gouda cheese. The number of cows per farm and production per cow are increasing. The costs of production are rising and the quota system is planned for a phase out by 2015. So, lots of changes are occurring in the dairy industry, with the industry also being shaped by the environmental and animal welfare regulations and the public’s push for preserving the pastoral setting.

    Netherlands
    The OSU students who participated in the Netherlands Study Abroad Trip (Left to right):
    Kristen Wright, Patrick Twining, Kevin Crist, Krizia Melendez, Katie Cole, Amelia
    Nyhart, Sarah Finney, Sabrinia Eick, Brooke Barley, and Victoria Dawson.

  7. 2011 Graduates of the OSU Dairy Certificate Program

    Dr. Maurice Eastridge, Dairy Extension Specialist, The Ohio State University

    The Dairy Certificate Program was begun in 2009 by the OSU Department of Animal Sciences. The general requirements for the Program are completion of 37-38 credit hours in specified courses, completion of a dairy-related internship, and participation in the Dairy Challenge Program.

    The largest class since the Program’s inception was this year with the following graduates: Stephanie Adams (London, OH), Jason Hartschuh (Bloomville, OH), Alissa Hunter (Burgoon, OH), Andrew Lefeld (St. Henry, OH), Hanna Lemle (Monclova, OH), Jason Miley (West Salem, OH), and Chad Riethman (Minster, OH).

    Additional information about the Program is available on our web site at: https://dairy.osu.edu/undergrad_prog.htm. Questions about the Program can be directed to its coordinator, Dr. Maurice Eastridge (614-688-3059, eastridge.1@osu.edu).

    Dairy Certificate Graduates

    Pictured (left to right): Front row – Alissa Hunter and Hanna Lemle
    Back row – Chad Riethman and Stephanie Adams
    Not pictured: Jason Hartschuh, Andrew Lefeld, and Jason Miley

  8. Dairy Endowment Reaches Goal

    Dr. Maurice Eastridge, Dairy Extension Specialist, The Ohio State University

    The Peter W. Spike Dairy Judging Endowment Fund was established in 2005 in honor of Dr. Peter W. Spike, Professor Emeritus in the Department of Animal Sciences, to honor his career at The Ohio State University. Dr. Spike served as a leader, mentor, coach, and friend for Ohio’s dairy youth for 30 years before retiring from the University in 2005. He coached numerous successful 4-H and collegiate dairy judging teams and spent countless hours of dedicated service to dairy youth programs at the local, state and national levels. Given the generous gifts from alumni, friends, donations from artificial insemination organizations to the semen sale held during several years of the Spring Dairy Expo, and contributions by the Buckeye Dairy Club, the endowment reached its base level of $25,000 in May 2011.

    The annual distribution from this fund will be used to support the collegiate dairy judging program in the Department of Animal Sciences at The Ohio State University.  Funds also may be used to support the Ohio 4-H dairy program. THANKS to all of those you have contributed to this program and for support to educational programs for Ohio’s dairy youth.  

  9. Annual Banquet for the Buckeye Dairy Club and the Department of Animal Sciences

    Dr. Maurice Eastridge, Dairy Extension Specialist, The Ohio State University

    The Annual Banquet for the Buckeye Dairy Club and the Department of Animal Sciences at The Ohio State University was held on May 7 at the Der Dutchman Restaurant in Plain City.  It is held annually for recognizing students for their accomplishments as scholarship recipients, their involvement in co-curricular activities such as the OSU Dairy Cattle Judging Team and the Dairy Challenge, and their activities in the Buckeye Dairy Club; recognition by faculty and staff in the Department of Animal Sciences; and induction of dairy leaders into the Dairy Science Hall of Service. The scholarship winners were: AGS - Clair Jones – Emily Stayduhar; Lemmermen – Kevin Jacque; COBA/Select Sires Wallace Erickson –Matthew Borchers; Dairy Farmers of America – Ashlee Dietz; Wayne and Jane Dalton –Janet Josten; Bob Gano – Colby Brandon and Elizabeth Dean; Genex, Inc., Merle Starr –Margaret Alden; Ohio Agribusiness Association – Rachel Foureman; Salisbury – Melinda Miller; Ludwick – Kirk Massey; McMunn – Katie Stevens and Jamie Watts; Brakel – Emily Dudash and Lara Staples; and H.E. & Florence Kaeser –Laura Gordon and Rixt Miedema.

    The recognition to Buckeye Dairy Club members included: Outstanding Freshman – Kayla Hinds; Outstanding Sophomore – Ashlee Dietz; Outstanding Junior – Laura Gordon; Outstanding Senior – Linda Brahler. The Prestigious Member Award (plaque plus $500 scholarship) was granted to Katie Cole. The 2010 officers for the Buckeye Dairy Club are: President – Kelsey Holter; First Vice-President – Rachel Foureman; Second Vice-President – Larissa Deikun; Recording Secretary – Ashlee Dietz; Corresponding Secretary – Kayla Hinds; Treasurer – Kevin Jacque; Assistant Treasurer – Katie Cole; CFAES Student County Representative – Melinda Miller; and Web Page -  Megan Buechner.

    Another highlight of the program was the induction of Mr. Lewis Jones into the Dairy Science Hall of Service. Lewis has made major contributions to Ohio’s dairy industry – our THANKS to them for his many years of dedicated service.

    banquet

    Pictured: Dr. Maurice Eastridge, Mr. Lewis Jones, and Lewis’ wife, Carol.

  10. Current Dairy Youth Programs

    Mrs. Bonnie Ayars, Extension Dairy Program Specialist, The Ohio State University

    State fair is upon us.  However, I would like to report that we recently conducted our annual Ohio 4-H Dairy Quiz Bowl on July 5th.   If you think you might be smarter than our dairy 4-Hers, we encourage you to show up next year and test your wits.  A press release is featured on the opening page of www.4hansci.osu.edu/dairy.  Additional photos of the event are also posted on the resource page.  Check those out and see if you know any of our youth who participated.  Dairy Agenda Today is also featuring all of our news releases and is an additional source of "telling our stories."

    Also, if you have not seen us on Facebook, just check us out at Ohio 4-H Dairy Program.

    See you all at the fair.  We have two dairy skillathons, one on July 28th and the second on August 3rd from 2:00 to 5:00 PM.  Also, there are two dairy judging clinics that will take place on July 29th and August 5th with registration beginning at 3:00 PM and classes to begin at 3:30.  We welcome everyone.