Buckeye Dairy News: Volume 14 Issue 4

Dr. Normand St-Pierre, Extension Dairy Management Specialist, Department of Animal Sciences, The Ohio State University

I'll be breaking a few hearts here... Do you remember the report issued by the US Department of Agriculture on January 12th of this year?  In this report, the USDA increased the 2011-2012 production estimates for both corn and soybean.  On report day, March corn futures reached the 40-cent down limit; the drop extended to 60 cents the following day.  Some were betting on how low corn prices would get this fall once the projected large US corn crop would start hitting storage bins and grain elevators. 

Here we are, just a little over 7 months later, in the middle of one of the worse droughts in US history, facing low corn yields not seen for decades - and that's for those who have any crop to harvest.  How quickly things change in agriculture.  Which is why we basically cannot predict with any reasonable degree of accuracy either commodity feed prices or milk prices.  Once in a while, you will catch me making a forecast, but with the clear disclaimer that I really don't know more than the average Joe.  I do it for entertainment; I am right about half the time and wrong the other half, which is about what you get when you flip a coin...  But I am honest, whereas all pseudo-experts keep missing the mark and by a considerable margin.  What the futures markets are reflecting is what other clueless people think prices will be in the future.  Unfortunately, the current situation provides an example as to why production and price risk management are increasingly important.

All is not a disaster.  One benefit of a surge in feed markets is that it takes time for all feed to reach their new price equilibrium; some prices go up too quickly, while some others lag.  This means that in this insane feed market that we are currently facing, there are some feeds that are relative bargains.  This column should assist you in identifying some of them.

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 severely overpriced at 22.2¢/Mcal.  For MP, its current price (30.3¢/LB) is amazingly at about its 6-year average (28¢/LB).  Thus, we are currently in a period of very high dietary energy prices but average protein prices.  That's quite amazing when one looks at the late surge in commodity prices, including the soybean complex.  This is not intuitive at first.  Here is a simple example to help in understanding this.  Suppose that we are just valuing NEL and crude protein in feeds.  If we go from a situation where corn is at $100/ton and soybean meal is at $200/ton to one where corn is at $400/ton and soybean meal is at $500/ton, then we would be in a situation of increased dietary energy costs and decreased protein costs, although both commodities have gone up each by $300/ton.  This is about what has happened in feed markets as of late.

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 of 12.3 ¢/LB is about at its 6-year average (-9¢/LB).  Meanwhile, the unit cost of e-NDF is amazingly favorable, being priced at about -6¢/LB compared to the 6-year average (3.3¢/LB).  Of course, this is primarily driven by the current price of corn silage, which is based on the December corn futures last September (at the time of harvest), and alfalfa hay, which at least based on the USDA survey is still quite reasonably priced in Ohio ("reasonably" here meaning compared to the insane prices for other feeds).

Table 1.  Prices of dairy nutrients for Ohio dairy farms, mid-January 2012.

Economic Value of Feeds

Results of the Sesame analysis for central Ohio as of July 23 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 we simply don't have good market prices information (i.e., different quality of alfalfa hay - for these, the "corrected" values should be used).  One must remember that Sesame compares all commodities at one point in time, late July in our case.  Thus, the results do not imply that the bargain feeds are cheap on a historical basis.
For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis.

Table 2.  Actual, breakeven (predicted), and 75% confidence limits of 27 feed commodities used on
Ohio dairy farms, late-July2012.

Table 3. Partitioning of feedstuffs, Ohio, late-July 2012.

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. 

As of July 30, The USDA estimates that 48% of the US corn crop is in poor or very poor condition.  The grain markets eased up a bit last week, albeit at very high prices.  Where feed prices will land come fall is anyone's guess, but the odds of a significant decrease are in my estimate low.  This last statement is a disguised forecast; coming from me you may as well flip a coin...

Dr. Bill Weiss, Dairy Extension Specialist, The Ohio State University and Dianne Shoemaker, Field Specialist, Dairy Production Economics, Ohio State University Extension

With a "normal" corn crop, pricing a standing crop for silage can be "interesting".  Pricing a drought-stressed corn crop is even more interesting.  What is the actual nutrient content of the  crop?  How well will the crop ferment?   Will nitrate concentrations put the potential silage crop at risk?  There are many unknowns, with the biggest challenge being how to determine the dollar value to assign to that risk. 

The value of drought-stressed corn silage can be estimated using expected nutrient composition and the cost of the nutrients.  The average composition of drought-stressed corn silage in Table 1 is reasonable, but the composition of silage for a specific situation (e.g., hybrid, growing conditions, etc.) could be substantially different. The nutrient values were calculated based on numerous feed prices in central Ohio.   

Table 1.  Average composition of drought-stressed corn silage and current (January - July 2012) value of nutrients in Ohio.¹

¹DM = dry matter; Mcal = megacalories; eNDF and neNDF = effective and non-effective neutral detergent fiber, respectively;
and NEL = net energy for lactation.

The $213/ton of DM (±$20) or $75/ton (± $7) assuming 35% DM is the value for the corn silage when fed to the cow and includes harvest and storage costs and shrink.  It assumes that the fermented feed is excellent quality and will allow for high DM intakes and good production when fed in a balanced diet.  When corn is standing in the field, you do not know whether the resulting silage will turn out good or bad.   Making silage from drought- stressed corn has some additional risks that must be considered when pricing.  It could be high in nitrates, which in the worst situation will make the silage totally unacceptable as a feed (for additional information on nitrates see: http://ohioline.osu.edu/as-fact/0003.html). The silage may have much higher fiber and lower energy than anticipated.  We are using the composition of "average" immature corn silage for these calculations.  Drought stress can greatly affect the composition of the corn plant and therefore it's value. 

If you are purchasing standing corn, the purchase price must be adjusted to account for these costs and risks.  When you purchase standing corn, in contrast to buying fermented corn silage, the user of the silage (e.g., the dairy farmer) assumes those risks and the price of standing corn should be discounted to account for the risk. We cannot give you a value for risk; each buyer must determine that value for themselves based on the conditions of the crop they are purchasing and negotiate the final price with the seller.  

In addition, for more than 6 years, good corn silage (made from normally developed corn plants) has almost always been a "bargain" feed in that its market price is 15 to 25% less than the value of its nutrients.  Based on this historic relationship, corn silage with a nutrient value of $213/ton of DM (see Table 1.) would sell for about $170/ton of DM ($60/ton at 35% DM) - remember that this value is for good quality corn silage in front of the cow.  This normal relationship between corn silage selling price and corn silage value should also be considered in the negotiations.

Example:  Price of Standing Corn (assumed 35% DM)
_________________________________________________________________________________
Nutrient value of corn silage when fed to cow: $75/ton of 35% DM silage
Harvest costs     - $ 6 to 11/ton depending on yield¹
Storage costs     - $ 9/ton
Shrink (13%)     - $ 10/ton
Risk?                 - $???  (this could be substantial)

= Price of standing corn $48/ton at 35% DM (± $5) minus the value of risk. 

If you apply the typical selling price vs. nutrient value discount of ~20%, this becomes $38/ton at 35% DM. 
_________________________________________________________________________________
¹Lower cost for "normal" corn silage yields, higher cost for lower, drought-stressed corn silage yields.

For many people, both the price of corn silage as fed to the cow ($60 to 75/ton) and the price of standing corn ($38 to 48/ton ± $5) seems high (and they are). However, you have to consider replacement costs, i.e., what will it cost if you have to purchase other feeds to replace the nutrients provided by corn silage. These are the maximum prices a farmer should pay for purchasing corn silage or standing corn.

Calculating the Floor Price

                The lowest price (on a per acre basis) a seller (the grower) should be willing to sell standing corn as corn silage is equal to the estimated dollar return per acre if the crop was sold as grain.  The seller should first estimate the potential grain yield and multiply that by the estimated market price they think that they will receive when it is sold. The seller should then estimate potential silage yield (see slides 4-7 in "Pricing Corn Silage in 2007" at https://dairy.osu.edu/resource/OSU%20Dairy%20Pubs.html).  The estimated dollar return per acre for the crop sold as grain divided by the estimated silage yield per acre would be the floor price per ton of corn silage for these negotiations.  At a price below this floor, the grower would be better off harvesting and selling the crop as grain.  For "normal" corn, the cost of harvesting the crop as grain approximately offsets the value of nutrients that are removed with the corn plant that would be left in the field if the crop were not harvested as silage. Additional articles on pricing corn silage are available at https://dairy.osu.edu.

Mark Sulc, Professor and Interim Chair, Department of Horticulture and Crop Science and Stan Smith, Program Assistant, Fairfield County, Ohio State University Extension

Dairy producers are looking to grow more forage this autumn and early next spring because of the reduced forage yields resulting from dry weather this year. Supplemental forage can be produced yet this year by planting small grains or annual ryegrass on land coming out of wheat or corn silage. In this article, we discuss options for planting in early August (on wheat stubble ground, for example), in late August to early September (after corn silage removal), and after soybean harvest (late September to mid-October).

Before making any plans to plant supplemental forages, be sure to check the plant-back restriction interval for herbicides used in the previous crop. Corn herbicides, especially atrazine products, have a long rotation restriction interval for many of the forage options listed below. So check the labels for the herbicides you especially used this year.

Early August Plantings
The best options are to plant spring oat, spring triticale, or annual ryegrass (see section below on annual ryegrass). An increasing number of Ohio producers are gaining experience with August planted oat. Oat seed usually can be purchased at a more economical price than spring triticale seed, but either species will produce good dry matter (DM) yields within 60 to 80 days after planting. When planted the first two weeks of August and with adequate rainfall, oat and spring triticale can produce from 4000 to 5000 LB/acre of DM by mid-October. They will reach the boot stage of growth in October, which provides the best compromise of yield and forage quality. If harvest is delayed until November, the early August planted oat and spring triticale will be in heading stage and will yield 6000 LB/acre of DM or more. Early August planted oats or spring triticale forage will have crude protein (CP) content of 12 to 15% and neutral detergent fiber (NDF) of 38 to 50%, depending on planting date and stage at harvest.

Late August to Early September Plantings
Spring oat, spring triticale, and annual ryegrass can also be planted from late August to mid-September, immediately after an early corn silage harvest. These later planting dates will produce lower yields (1500 to 3000 LB/acre of DM) and harvest will be delayed into months with poor drying conditions (November to early December), but this would be an excellent option for grazing or green chopping. Forage quality will be very high with these later plantings - CP will range from 20 to 32%, NDF will be 30 to 38%, and NDF digestibility will be 75 to 85%. If an early spring forage harvest is desirable next year, winter triticale and winter rye should be included in a mixture, with the spring oat and spring triticale planted in late August and early September.

Late September to October Plantings
Wheat, winter triticale, and winter rye can be planted to produce good yields of high quality forage next spring. Rye will grow and mature the quickest in the spring and has the deserved reputation of becoming "like straw" in a short period of time once it turns reproductive in the spring. Wheat and winter triticale will be easier to manage next spring because they mature later and more slowly than rye. Wheat planting should be delayed until after the Hessian fly-safe date, which is September 22 in northern Ohio and October 5 in southern Ohio. Forage quality can be excellent for these species if harvested in the vegetative to boot stage of growth in the spring, producing from 2 to 4 ton/acre of DM, depending on stage of harvest.

Seeding Rates and Mixtures
Plant high quality seed of a named variety to ensure high germination rate and avoid unpleasant surprises regarding varietal identity and crop characteristics. Oat should be planted at 75 to 100 LB/acre and spring triticale at 90 to 110 LB/acre when seeded alone. Winter rye should be seeded at 110 LB/acre, while wheat and winter triticale should be seeded at 110 to 120 LB/acre. For mixtures of these small grains, the seeding rate of each component can be reduced to 70% of the full rate.

When planting in early August, field peas or soybeans could be added to the mixture to boost the CP content of the forage, an important consideration for dairy producers this year. While we have no data on planting such mixtures in August, we would expect the CP content to be increased by 3 to 4 percentage units when including field peas or soybeans with oats or spring triticale planted by August 10 to15. This should provide an extra value of $40 to $50/acre from the increased protein content of the forage. This needs to be compared to the extra cost of the legume seed included in the mixture. Field peas should be inoculated with N-fixing bacteria and sown in the mixture at 70 to 90 LB/acre. Soybean seeding rates for this application are not well-defined but perhaps should be included in the mixture at 60 to 70% of normal soybean seeding rates. If the legume seed cost is no more than $50/acre, then including the legume in the mixture should be cost effective for lactating dairy cows because the legume-small grain mixture should have lower NDF content, leading to higher forage intake and greater milk production.

Annual Ryegrass Option
Annual ryegrass is another possible option for producing high quality forage, especially for grazing in late autumn and early winter followed by forage harvests or grazing next year. Some varieties are more likely to survive the winter than others. The forage quality will be at least equal to and is usually higher than that of the small grain forages discussed above. Refer to the Ohio Forage Performance Trials for selecting varieties
(http://hostedweb.cfaes.ohio-state.edu/perf/). Plant 20 to 25 LB/acre of annual ryegrass seed and apply 30 to 50 LB N/acre either at planting or at early tillering stage. Additional nitrogen will be required next spring for good production.

We have planted annual ryegrass in early September for several years, and one can expect 800 to 2000 LB/acre of DM by late November and early December, with yields of 3 to 5 ton/acre of DM the following year from improved varieties with good winter survival and with adequate N fertilization rates. Some varieties planted last September at South Charleston, OH produced 6 to 7 ton/acre of DM in 2012. Annual ryegrass can be planted earlier in August, especially if soil moisture is favorable, which should provide higher yields in late autumn (up to 3000 LB/acre of DM).

Agronomic Management

• No-till planting of these supplemental forages will conserve moisture and provide firmer soil for either harvesting equipment or grazing animals in the fall.
• A burn down application of glyphosate is an important and cost-effective weed control practice prior to planting.
• When planted after wheat, oat, spring triticale, or annual ryegrass will likely require 40 to 50 LB N/acre at planting for best economic returns. Manure applications can replace some or all of the N fertilizer need, depending on the amount of readily available N in the manure.
• When planting after corn silage this year, it is NOT advisable to apply additional N because there probably is still sufficient carryover N in the soil from the corn crop. Applying more N after a corn this year has a high probability of resulting in toxic levels of nitrates in the forage at harvest this fall.

Harvesting/Grazing Options

• Chopping and ensiling these supplemental forages is the best mechanical harvest alternative, whether harvesting this fall and or next spring. Wet wrapping individual bales will work, but this is more expensive than ensiling into a permanent structure or long silage bags.
• Dry baling in the fall has been done in Ohio, but it's a challenge because the small grains dry about half as fast as grass hay. Ryegrasses are also slower to cure than other grasses. When cutting in early November, that typically means at least two weeks or more of curing time. Baling will result in lower forage quality compared with silage.
• For September planted forage, grazing will provide the most effective and affordable alternative for harvesting the forage. Ohio beef cattle producers have strip grazed oats all winter and actually began the calving season on them before the oats ran out in mid-March. So grazing through part of the winter could be an option for dry cows or heifers. Oats won't die until temperatures have been in the mid 20's for several hours. This means they'll still be green and alive in December most years in Ohio. The other forage options mentioned in this article will survive even longer before going dormant.

Additional information on annual forages and their establishment and management is provided in Chapter 7 of the Ohio Agronomy Guide, 14th ed., available at Extension offices and at http://ohioline.osu.edu/b472/0008.html. Good management is important to achieve success with these alternative forages.