Buckeye Dairy News: Volume 16 Issue 2

  1. Milk Prices, Costs of Nutrients, Margins and Comparison of Feedstuffs Prices

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

    The Good Side: Milk Prices

    As I write this column in mid March, the Class III futures have just closed at $23.30/cwt for March and $23.50/cwt for April.  Last month, the Class III milk settled at $23.35/cwt, an increase of $2.20 over January and $6.10 over February of last year.  For the balance of 2014, the Class III futures are averaging $20.35/cwt.  On the feed side, corn has inched up with Chicago Mercantile Exchange (CME) May futures now at about $4.79/bu, with no noticeable changes all the way to next December.  Soybean meal futures for May are currently trading around $456/ton, steadily dropping to $369/ton by next December.  Using prevailing cash prices for feeds, we estimate that the feed costs to produce a hundredweight of milk in Ohio are in the $10.50 to $11.00/cwt range.  This leaves milk margin over feed costs somewhere between $13.00 and $15.00/cwt, resulting in net margins between $5.50 and $7.50/cwt.  At this rate, a black and white cow producing 22,000 lb/year would net between $1200 and $1600 for the average Ohio dairy producer, or 3 to 4 times what is considered an average year.  I am not endowed with unusual powers, yet I know that dairy producers feel a whole lot better now than in 2009!

    The Not so Good Side: 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 as of March 17, 2014.  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 priced above average at 13.3¢/Mcal.  This is important because a cow producing 70 lb/day of milk requires in the neighborhood of 33 Mcal/day of NEL.  Thus, although corn prices are considerably less than at this time last year, pricing of the energy in feeds is still above the 6-year average, but not by as much as what it was last year.  For MP, its current price (58.8¢/lb) is about 2 times greater than its 6-year average (28¢/lb).  Thus, we are currently in a period of slightly above average energy prices, but considerably above average 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 priced at a discount), but the discount of -12.1¢/lb is close to its 6-year average (-9¢/lb).  Meanwhile, unit costs of e-NDF are also at over 2 times their 6-year average, being priced at 8.4¢/lb compared to the 6-year average (3.3¢/lb).  Fortunately, a dairy cow requires only 10 to 11 lb of effective NDF, so the daily cost of providing this nutrient is only about $0.90/cow/day (i.e., 10.5 lb × $0.085/lb).  So from a historical basis (i.e., using averages from the last 6 years as the bases of comparison), feeds and their nutrients are expensive, but not as much as last year.

    Table 1.  Prices of dairy nutrients for Ohio dairy farms, mid-March 2014.
    Table 1

    Economic Value of Feeds

    Results of the Sesame analysis for central Ohio in mid March 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 those for which we didn’t have a price.  One must remember that Sesame compares all commodities at one point in time, mid March in this 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-March 2014.
    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-March 2014.

    Bargains

    At Breakeven

    Overpriced

    Alfalfa hay – 40% NDF
    Bakery byproducts
    Brewers grains, wet
    Corn, ground, shelled
    Corn silage
    Distillers dried grains
    Gluten feed
    Hominy
    Soybean meal – expeller
    Wheat middlings

    Whole cottonseed
    41% Cottonseed meal
    Feather meal
    Gluten meal
    Meat meal
    Tallow
    Wheat bran

    Beet pulp
    Blood meal
    Canola meal
    Citrus pulp
    Molasses
    Soybean hulls
    44% soybean meal
    48% soybean meal
    Roasted soybeans

    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.

    Appendix

    A few people have asked that I publish the results using the 5 nutrient group (i.e., replace metabolizable protein by rumen degradable protein and digestible rumen undegradable protein).  Table 4 contains these results.

    Table 4. Prices of dairy nutrients using the 5-nutrient
    solution for Ohio dairy farms, mid-March 2014.
    Table 4

  2. Free-stall Stocking Density Affects Productivity

    Rory Lewandowski, Extension Educator Wayne County, The Ohio State University Extension

    I was recently asked about the effect of stocking density in a freestall barn on dairy cow productivity.  The incentive to utilize a stocking density above 100% (more than 1 cow per freestall space) is driven by economics; the fixed cost of the building and production facilities is allocated over a greater number of cows.  However, this must be balanced by the impact upon cow comfort and cow behavior.  Cow comfort and cow behavior have an economic correlation with milk production.   Peter Krawczel from the University of Tennessee and Rick Grant of the William H. Miner Agricultural Research Institute in New York co-authored a very good article on this topic and I’ll summarize some of their work to answer this stocking density question.

    Let’s start with these basics: dairy cow health, welfare, and productivity are related to the time that cow has to rest, eat, and ruminate.  Normal daily behavior of a dairy cow is to rest 12 to 14 hours, eat for 3 to 5 hours over the course of 9 to14 “meals” per day, and ruminate 7 to 10 hours.  Much of that rumination time occurs during resting time.  Then, of course, there is time allocated to milking, drinking, socializing, and other management activities.       

    Krawczel and Grant summarized the findings of a range of studies and research that looked at the effect of freestall stocking density on dairy cow resting time, feeding, and rumination.    Resting time can be defined as the time the cow spends lying down in a stall.  It is perhaps the most important factor to evaluate because it impacts other cow behaviors and cow productivity.  The most pronounced negative impact upon cow resting or lying time can be seen when stocking density reaches 120% and greater.  Cows will prioritize rest over feeding.  In overcrowded situations, cows will spend more time standing idly waiting for a free stall space to become available so that they can lie down and rest.  To make matters worse, cows deprived of normal lying time by a reduction of just 2 to 4 hours will attempt to recoup that lost resting time over the course of the next 40 hours.  Therefore, when a stall becomes available, cows actually spend more time lying down resting, resulting in longer wait times for other cows.

    The reduction in lying down time and increased standing time waiting for a stall to become available was found to have other detrimental health impacts, namely: 1) greater strain on hooves when cows are forced to stand on concrete for extended periods of time, in some cases leading to higher incidence of lameness, 2) increased levels of blood cortisol as a stress response and associated with suppression of the immune system, and 3) less blood flow to the uterine horn when standing as compared to lying down, possibly having an impact on fetal growth.

    If overcrowding is accompanied with a decrease in feed bunk space per cow, then there are further negative impacts.  A common recommendation is to provide at least 23 to 24 inches of bunk space per cow.  In one study, increasing the bunk space to 40 inches per cow reduced the number of aggressive interactions per cow and increased the percentage of cows feeding during the first 90 minutes after delivery of a fresh batch of total mixed ration.  However, in most cases, if stocking density is increased above 100%, no additional feed bunk space is made available, so there tends to be overcrowding at the feed bunk as well.  In this situation, studies have shown that feeding time decreases and aggression increases.

    Krawczel and Grant concluded that milk quality also was affected by overcrowding.  Milk fat was reduced, somatic cell count increased, and the number of clinical cases of mastitis increased.  They stated that overall milk production was not statistically affected, although they speculated that the short duration of most studies and/or the small number of cows involved may have affected the ability of those studies to detect changes in milk production.  While I have not been involved in this type of research, my personal opinion leads me to believe that if a cow is under stress from overcrowding, the impact of reduced resting time, reduced feeding time, and increased aggression over a prolonged period of time will be decreased milk production.
    For those who are interested, the entire article by Krawczel and Grant, including references to all the studies and research cited, can be found at: http://go.osu.edu/extensiondairycowcomfort.

  3. Comparison of Profitability Among Ohio Dairy Farms Based on 2013 Production

    Sarah Finney, Animal Sciences Student and Maurice Eastridge, Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University

    Profitability of dairy farms is often considered the difference between the milk price and the cost of producing 100 lb of milk.  Obviously, some farms end up being more profitable than others with similar size and practices, so what is the difference?  Where is this extra profitability coming from?  What are the top 25% farms doing that makes them more profitable than the others?

    The 2013 Holstein herd production data from Ohio Dairy Herd Improvement (DHI) records were divided into quartiles based on energy-corrected milk (ECM) production (Table 1).  Median actual (not ECM) milk yield per cow was 53, 61, 67, and 75 lb/day for quartiles 1, 2, 3, and 4, respectively.  Milk fat was 3.8% for quartiles 1, 2, and 3, and 3.7% for quartile 4, with milk protein at 3.1% for quartiles 1, 2, and 3, and 3.0% for quartile 4.  Herd size was relatively similar for the first two quartiles, with the average for all herds at 166 cows.

    The income over feed costs (IOFC) were calculated for each quartile using the USDA approach of assuming a feed efficiency of 1.4 lb milk per pound of feed and the price of a 16% crude protein (CP) dairy mix based on 2013 feed prices. Farms were assumed to be feeding 37.9, 43.6, 47.9, and 53.6 lb/day of feed dry matter (DM) from the lowest to the highest quartile, respectively.  Feed cost was determined to be approximately $0.10/lb (as-fed basis, assuming 88.2% DM) based on the price of 16% CP feed.  This resulted in daily feed costs of $4.14, 4.76, 5.23, and 5.86/cow/day for quartiles 1, 2, 3, and 4, respectively. Average herd parameters, such as milk, fat, protein, and other solids production, for each quartile were entered into the Cow-Jones Index (St-Pierre, N.D. 2008. Managing measures of feed costs: Benchmarking physical and economic feed efficiency. Proceedings Tri-State Dairy Nutrition Conference. http://tristatedairy.osu.edu) to determine income over nutrient costs. 

    Table 1. Holstein herds using the Dairy Herd Improvement recording system in 2013 stratified into quartiles based on energy-corrected milk (ECM) yields and calculation of income over feed costs and the Cow-Jones Index.


    Quartile

    ECM Yield
    (lb/yr)


    Herd Size

    Median ECM
    (lb/yr)

    Income Over Feed Costs
    ($/cwt)

    Cow-Jones Index
    ($/cwt)

    1

    < 22,272

    105

    20,580

    5.54

    3.53

    2

    >22,272 and <24,576

    102

    23,456

    6.38

    4.38

    3

    >24,576 and <26,744

    164

    25,624

    7.00

    5.02

    4

    >26,744

    293

    28,292

    7.56

    5.48

    Based on the average prices for milk components in 2013, the milk price was $18.26/cwt for the first quartile compared to $17.89/cwt for the fourth quartile. The total nutrient costs differed by $1.78 between the top and bottom quartiles ($6.15/cwt for quartile 1 and $7.93/cwt for quartile 4). The IOFC increased $2.02/cwt of milk and the Cow-Jones Index increased $1.95/cwt when comparing quartile 1 to 4. Although the actual costs for IOFC and Cow Jones differed, the magnitudes of change from one quartile to another were similar. The increase in IOFC ranged from 8 to 15% and 9 to 24% for the Cow-Jones Index from the incremental increase in quartile of milk. Using a 100-cow herd as an example and the median milk yields in Table 1, there would be $16,217/yr additional IOFC for a herd in quartile 4 vs 1. Many factors can certainly affect the milk yield of dairy herds, but management practices and cost control are fundamental factors that affect profitability on dairy farms. Increasing milk yield, while managing cost control, is key to diluting maintenance costs (thus increasing efficiency of output) and increasing profitability of dairy farms.

  4. Dairy Youth Program Updates

    Ms. Bonnie Ayars, Dairy Judging Teams Coach and Extension Youth Specialist, The Ohio State University

    Spring Dairy Expo

    March Madness is a term we use to refer to basketball, but those of in the dairy industry could also use it to explain the 3 very full days of Spring Dairy Expo.  It will take place at the Ohio Expo Center March 27 to 29.  Sales and shows will take center stage as well as many junior activities that include showmanship and the Ohio 4-H and FFA Dairy Judging Contest.  There is also a complimentary dinner provided by ADA on Friday evening.   Expo also has national attention focused on us since Holstein Association USA is holding their annual judges conference on Thursday with many out of state participants attending.

    The Buckeye Dairy Club plays a very important role in managing their annual sales and judging students are in charge of the parlor.  Spring Dairy Expo is not only an event but also a destination where the dairy industry can connect with students and the next generation.

    If you have never been SDE, you should visit and observe the work of volunteers committed to the goal of sustaining Ohio’s dairy industry.  There is something for everyone!  For more information and the schedule of events, go to http://www.springdairyexpo.com/schedule.html

    Youth Dairy Judging Clinic

    On Saturday, March 15, a youth dairy judging clinic was held here on campus with participants from all areas of Ohio that included both 4-H and FFA members.  Of the 100 attending, the group was split into experienced and less experienced judges.  Each received a packet of resources to guide them through the day’s educational portion and then they demonstrated what was learned while evaluating  three Jersey classes from the Waterman Complex.  Coaches and volunteers also were given a short summary of details and forms for the Ohio 4-H contest on Saturday, March 29.  Older kids even presented a set of reasons to guest officials from the university judging teams and the younger ones were taught about note taking, questions, and the organization of reasons.

    As the instructor of such a group, it is good to see so many working on terminology, decision making, and communication skills.