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Buckeye Dairy News : Volume 15 Issue 4
Dairy Markets and Policy Watch, August through October 2013
Dr. Cameron Thraen, State Extension Specialist, Dairy Markets and Policy, and John Newton, Ph.D. candidate, The Ohio State University
Well, here we are again. The U.S. Senate passed its version of the farm bill, complete with all farm and nutrition provisions. The U.S. House of Representatives failed to pass its version of the complete farm bill, instead opting instead to strip out the food and nutrition aspects and pass a farm commodities only bill. President Obama immediately stated that he would veto any such legislation sent to his desk. Now the impass begins anew. You will very likely hear much about the coming dairy cliff once again as this 113th Congress struggles to get a joint farm bill completed and passed. On January 1, 2014, the provisions of the 1949 dairy price support program will become law unless held in abayence by either a new farm bill or another extension of the current farm bill. We shall have to wait and see.
In spite of the current wrangling, the safety net provisions of the dairy subtile of the Farm Bill, when signed into law, will very likely be based on a margin insurance type program. This puts the focus on an income over feed cost (IOFC) margin. The point has been made in past issues of BDN that an IOFC margin calculation based on U.S. average milk and feed values is pointless as such a calculation may bear little connection to an individual dairy operator’s actual milk price or feed cost. While it cannot be argued that calculating IOFC with using the USDA reported All Milk price, corn price, soybean meal price, and alfalfa hay price is representative of specific IOFC on any given dairy farm, this observation misses the point.
As a dairy farmer, you will be provided the opportunity to participate in an insurance type program with participation costs based on your dairy’s production size and premiums paid based on IOFC coverage levels selected. In return, you will be participating in potential financial payouts triggered by a macro measure of the IOFC for the entire United States dairy industry. This is purely a financial consideration. As a dairy farmer, you will have to decide whether or not to participate in this program, incurring cost and potential financial payouts, or to go another direction, relying on the private market instruments, such as futures market hedging, futures puts or calls, or possibly purchasing the USDA/Risk Management Agency underwritten Livestock Gross Margin-Dairy Insurance.
The focus of income support for agriculture, including dairy, will be on providing the opportunity to farmers to particiapte in an insurance type program, whether that be crop insurance or IOFC insurance. Therefore for dairy, it is important to be able to forecast this national IOFC margin for the coming production year. We have developed just such a forecast model for this IOFC. Our current IOFC forecast is based on a complex model which uses the Chicago Mercantile Exchange (CME) Group futures market price paths for feed inputs and milk price and the CME Group put and call option prices to capture anticipated price volatility. The IOFC time path over the coming 12 months suggests a steadily improving IOFC margin picture. Figure 1 shows the mean and upper 75% and lower 25% bands for this forecast, along with the actual values for January 2013 through June 2013.
The lower 25% boundary is the most pessimistic outlook, showing that a combination of low milk price and high feed input prices will result in an IOFC path staying under $9/ cwt in the coming 12 months. This reflects continuing higher feed cost not offset by a higher milk price. The optimistic 75% boundary depicts an IOFC time path reflecting stronger milk prices and moderate or lower feed input prices. The low point is for July 2013, just at $6.00/cwt and steadily climbs to an average of $10.60/cwt for September 2013 through January 2014. This time path reflects a return to abundance for crop growing conditions with a lower feed cost and higher late summer and fall milk prices. These margins are above the long run average of $8.35/cwt for the U.S. milk producing sector.
Figure 1. The 2013 to 2014 forecast income over feed cost.
You can find monthly updates for this IOFC forecast chart on my website: http://aede.osu.edu/programs-and-research/ohio-dairy-web.
The Costs of Nutrients and Comparison of Feedstuffs Prices
Dr. Normand St-Pierre, Extension Dairy Management Specialist, Department of Animal Sciences, The Ohio State University
There is no question that corn planting was a challenge throughout the corn belt this year. But, American farmers got it done and the corn is coming up nicely. Of course a lousy fall, with early frost could ruin the party, but right now, it looks as if the feed markets, especially energy feeds, will see a substantial drop in price this fall. Lower feed costs, coupled with the reasonably good milk prices that are in the forecast until December, should bring good positive margins for a few months. After a tough year for our industry, this will be welcome.
For now, feeding balanced diets based on economically priced feed ingredients can help maintaining positive margins. The idea is to maximize the use of underpriced feeds and to minimize the use of overpriced ones.
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 as of July 21, 2013. 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 6-year average of about 10¢/Mcal, NEL is still obscenely priced at 19.7¢/Mcal. This is important because a cow producing 70 lb/day of milk requires in the neighborhood of 33 Mcal/day of NEL. For MP, its current price (40.3¢/lb) is also greater than its 6-year average (28¢/lb). Thus, we are currently in a period of very high dietary energy and high protein prices. 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), and the discount of 13.7¢/lb is above its 6-year average (-9¢/lb). Meanwhile, the unit cost of e-NDF is about at its historical average, being priced at 1.1¢/lb compared to the 6-year average (3.3¢/lb). So, dietary fiber, whether physically effective or not, is currently not a significant cost factor from a historical standpoint. Of course, this may depend on how bad your crops were affected by the drought last summer and how well you managed to harvest the first cutting.
Table 1. Prices of dairy nutrients for Ohio dairy farms, mid-July 2013.
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. We don’t have good market prices for a few feeds, so we assigned them an actual price of $0.01/ton. One must remember that Sesame compares all commodities at one point in time, mid July in this case. Thus, the results do not imply that the bargain feeds are cheap on a historical basis. Some are just cheap relative to others.
Table 2. Actual, breakeven (predicted), and 75% confidence limits of 27 feed commodities
used on Ohio dairy farms, mid-July 2013.
For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis.
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. Also, there are reasons that a feed might be a very good fit in your feeding program while not appearing in the “bargains” column.
Table 3. Partitioning of feedstuffs, Ohio, mid-July 2013.
Brewers grains, wet
Corn, ground, shelled
41% Cottonseed meal
Distillers dried grains
Alfalfa hay – 40% NDF
Soybean meal – expeller
44% soybean meal
48% soybean meal
Handling Abrupt Changes in Silage Dry Matter Concentrations
Dr. Bill Weiss, Professor and Extension Dairy Specialist, and Lucien McBeth, former M.S. student, Department of Animal Sciences, The Ohio State University
Silages stored in bunker silos or opened bags can be exposed to rain and snow events which can abruptly, but transiently, change the dry matter (DM) concentration of the silage. We have recorded day to day changes in the DM concentrations of silages (both corn and alfalfa) on commercial dairy farms greater than 10 percentage units. Often, these large changes in DM correlate with a recent rain or snow event. Because diets are formulated on a DM basis but are mixed on a farm using as-fed concentrations, the DM concentration of silage can have a marked effect on diet composition. For example, if a simple diet was 50% silage and 50% concentrate on a DM basis and the silage was 45% DM and concentrate was 90% DM, the mixed ration would be 67% silage and 33% concentrate on an as-fed basis. If the silage suddenly changed to 35% DM because of a heavy rain but the as-fed diet remained 67:33 silage: concentrate, the diet would be 44% silage and 56% concentrate on a DM basis. Because silage was a primary source of fiber in this example, the diet actually being delivered to the cow would have less fiber than the formulated diet, and this could result in rumen acidosis, milk fat depression, and other issues. Changes in DM of silage caused by rain are abrupt but also short term and after a day or two, the DM concentration often returns to its original concentration. We conducted an experiment to determine whether diets should to be adjusted when silage DM abruptly decreased by 10% units for a 3 day period. One treatment was the control diet in which silage DM was constant during the experiment. The other two treatments were identical to the control except during two 3-day bouts (separated by 6 days) water was added to the silage to reduce DM by 10 percentage units. For one of the treatments with the wetted silage, no change in the as-fed diet was made (this means that less forage DM and more concentrate DM were fed than the control diet). For the other treatment with the wetted silage, the as-fed concentrations were adjusted so that on a DM basis, this diet was still identical to the control except the total diet was wetter. The amount of feed offered to the cows was increased when the wet silage was fed since each pound of as-fed diet contained less DM. This was done to prevent the cows from running out of feed.
The major findings from this experiment were:
Reformulation to account for the transient change in silage DM was not necessary. Average milk production and composition and feed intake were not affected over the 21 day experimental period.
Dry matter intake by cows on the two treatments that contained wetted silage usually decreased by 2 or 3 lb the first day the wet silage was fed, but by the second day, intake had rebounded and was generally similar to the control (Figure 1). On the first day after cows were changed back from the wetted silage to normal silage, intake by cows that previously had been fed wetted silage was significantly greater than control (by approximately 2 lb of DM). The amount of as-fed diet consumed increased the first day that the wetted silage was fed but did not reach maximum until the second day and remained higher than control for the next 2 days (this included the first day after cows were changed back to the normal diet). Previous studies have shown greater negative responses when silage DM was abruptly changed, but in those experiments, the amount of feed offered to the cows was not increased and the cows ran out of feed.
Milk yield by cows fed the wetted silages tended to decrease when the wet silage was fed (this was especially pronounced during the second bout of feeding wet silage). However because of the increase in feed intake on the day cows were changed back to normal silage, milk yield was much greater by cows that had been fed the wetted silage. Over the 21 day experimental period, no differences were observed in milk yield (Figure 2).
- When you suspect silage DM has decreased because of a rain or snow event, the amount of feed offered to the cows must be increased and remain increased for several days. If this is not done, cows may run out of feed, which in other experiments has significantly reduced milk yield. Additional feed should be provided for 1 or 2 days after the silage DM has returned to normal because cows compensate for lower intake when wet silage was first fed.
If longer term changes in DM concentration of silage have occurred (for example, a new cutting or different field), diets should be reformulated to account for changes in DM concentrations.
Figure 1. Difference in dry matter intake (DMI) between cows fed control diet (constant during the experiment) and cows fed the same diet except water was added to the silage and diets were either rebalanced (Balanced) or not adjusted for the change in DM (Unbal). The wetted silage was fed for two 3-day period (shaded boxes). * = statistical difference between treatments and control. Note the initial drop in DMI when first fed wetted silage and the high DMI by treatment cows on the days following the feeding of wetted silage.
Figure 2. Difference in milk yield between cows fed control diet (constant during the experiment) and cows fed the same diet except water was added to the silage and diets were either rebalanced (Balanced) or not adjusted for the change in DM (Unbal). The wetted silage was fed for two 3-day period (shaded boxes). * = statistical difference between treatments and control. Note the first episode of feeding wet silage had little effect but the second bout caused milk yield to drop. Also note the increased milk yield by treatment cows on the days following the feeding of wetted silage.
- Reformulation to account for the transient change in silage DM was not necessary. Average milk production and composition and feed intake were not affected over the 21 day experimental period.
Northeast Ohio Dairy Survey Results Released
David Marrison, Extension Agriculture Educator, Ashtabula County, The Ohio State University
A five county survey of dairy farms has been released by OSU Extension, Team Northeast Ohio, and county business development organizations. The survey collected data from dairy farmers in Ashtabula, Geauga, Lake, Portage and Trumbull counties during the spring of 2013. Forty-three percent of the 189 dairy farms surveyed replied to questions about their plans, prospects, and challenges.
The goal of the survey was to learn more about the concerns and attitudes of dairy farmers in the five-county region. The survey results will be used by the six organizations to consider measures to assist in increasing regional milk production and addressing issues of concern to dairy farmers.
The survey was conducted by the OSU Extension Office in Jefferson, Ohio. David Marrison, OSU Associate Professor, developed the questions with a team of dairy farmers and other experts from the five counties. Marrison also analyzed the survey results. “This is the most comprehensive report on dairy farms in northeast Ohio that we have assembled,” said Marrison. “We want to thank all the dairy men and women who took time to answer our questions and give us their comments on the problems facing dairy farming today. The results will be of great help to all of the survey sponsors as we consider how to help dairy farms increase milk production in the region. ”
Some of the notable survey results included data revealing that over 78% of the local dairy farms plan to continue to operate during the next five years in spite of the many challenges facing dairy operations. Almost 35% plan on increasing their herd size during the next five years, adding an additional 818 cows in the region.
The survey coalition was interested in learning more about what was limiting local dairy farms from expanding besides milk prices and input costs, such as feed and fuel. The top three reasons cited included: land available to grow crops (60.8%), inadequate labor or unavailable labor (31.4%), and access to financing (29.4%). Participants were asked about the facility improvements they plan on investing in over the next five years with the top three responses being: adding housing for heifers (55.0%), increasing cow comfort (51.7%), and improving their manure handling systems (35.0%). The top three management areas which improvement will be sought by managers over the next five years are: feed management (57.9%), genetic improvement (50.9%), and milking herd health management (45.6%).
Each farm also was asked to respond to general issues affecting their farm. Respondents were asked to rank the importance of related topics to dairy farms and then provide qualitative feedback on their greatest success in dairy farming, their greatest concern for the future of dairy farming in Northeast Ohio, and to provide advice on how to maintain or increase regional milk production. These responses can be found in the survey summary, which can be found at: http://ashtabula.osu.edu/topics/agriculture-and-natural-resources/program-files-pdf/DairySurveySummary2013.pdf .
Make Plans for Immediate Forage Needs
Dr. Maurice Eastridge, Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University
With the drought in 2012 in many areas, forage supply at this point is very limited. Quality also was an issue in many situations, especially with corn silage. In general, first cutting of haycrop forage this year resulted in good yields of typical quality forage. Yet, with the continuous, heavy rains in many areas of the midwest, second cutting was delayed which reduced quality. This delay may affect the number of cuttings available in 2013. In some areas, winter heaving of the alfalfa has caused major losses. With the heat and moisture this summer, growth of the corn for silage is well advanced. However, the limited forage supply from 2012, the delayed second cutting of haycrop, and the harvest of corn for silage is several weeks away, many farms will need to stretch their forage supply. Some things for consideration in stretching forage supply are:
- If quality of the corn silage can be maintained, milk production will likely be better if the amount of corn silage is reduced in the ration rather than running completely out of it. On the other hand, if quality of the silage can’t be maintained with the reduced feeding rate, it is better to have the ration re-formulated without corn silage than continuously feeding spoiled corn silage.
- Whole linted cottonseed (WCS) is the best concentrate source to use as a forage extender. Limit WCS to 5 to 6 lb/day per cow because of its unsaturated fat content. High fiber concentrate feeds, such as distillers grains, brewers grains, wheat middlings, corn gluten feed, soybean hulls, citrus pulp, etc., can be used to replace some corn and to limit the starch content in rations. However, review the prices of ingredients shared in this issue of Buckeye Dairy News.
- If corn silage is the sole forage or low forage diets are fed, careful balancing for effective fiber to stimulate rumination and providing adequate particle size of the forage becomes very important. A small amount of hay or straw can provide effective fiber to maintain rumen health with feeding such diets.
- If more rapidly fermented starch sources are used (e.g., wheat, barley, high moisture corn, and steam-flaked corn) than dry corn, replace no more than 50% of the dry corn or increase the amount of fiber in the ration.
- With low forage diets, always add a buffer to the ration at about 0.8% of DM.
At this time of the year, especially with the 2012 growing conditions, management of forage feeding is very critical for sustained high milk production and sound cow health. If additional forage is going to need to be purchased in 2013, now is the time to be acquiring it. Some options are solidifying agreements on purchasing standing forage, visit some of the hay auctions that occur regularly in local communities, or seek forage available outside the state, e.g. a web based listing of forage availability has been made available through the University of Wisconsin Cooperative Extension: http://farmertofarmer.uwex.edu/). Also, plan ahead by visiting with your nutritionist now so alternative ration formulations can be on hand in anticipation of changes in forage supplies.
An Investment to Build Upon: New “Dairy Freestall Housing and Equipment” Handbook Released
Mrs. Dianne Shoemaker, Field Specialist, Dairy Production Economics, Ohio State University Extension
Thirty-five dollars. That would buy a summer’s worth of my favorite ice cream treats at the Dalton Dari-ette, or about 9 lb of peanut butter M&Ms. Seems like a lot of money in that context. However, $35, the price of the new Dairy Freestall Housing and Equipment Handbook, is 0.035% or less than 4 hundredths of one percent of the cost of a $100,000 building project. Meaning what? Not one new construction (and not many of those come in under $100,000 anymore), or remodeling project should be started on an Ohio dairy farm without a $35 investment in the very nicely updated “Dairy Freestall Housing and Equipment Handbook”, MWPS-7. Once purchased, invest some time looking through the extensive information it puts at your fingertips and incorporate the information into your building plans.
I always keep two copies of the handbook, one to loan out and one to have on hand to answer questions. Dimensions for freestalls are a common question. This new edition does a nice job of giving dimensions not just for heifers and cows, but for increasing weights (sizes) of cows. Freestalls for dry cows should be bigger than freestalls for lactating cows in the same herd. As the cow progresses through her gestation, she and her calf simply take up more room and need more stall space to be comfortable. How much more? This depends on the size and average weight of your cows. Evaluate the cows, then check the charts!
In this eighth edition, general chapter topics have remained the same: Data Summary, Planning and Developing Total Dairy Facilities, Dairy Replacement Housing, Designing Facilities for the Milking Herd, Milking Center Design, Housing for Transition and Special Needs Cows, Building Environment, Manure and Effluent Management, Feeding Facilities, and Utilities. However, content in each section has more depth and has been expanded to include new and emerging technologies and issues that should be considered in the design of today’s dairy farms.
The dairy industry has changed tremendously in the last 30 years and so has the quantity and depth of information to help make investments in remodeling and new construction pay back for years to come. The eighth edition can be purchased on-line at https://www-mwps.sws.iastate.edu/. If you don’t want to pick it up in Iowa, a shipping charge will also be applied in which case it will cost slightly more than four hundredths of one percent of a $100,000 construction project.