Buckeye Dairy News : Volume 16 Issue 5

  1. U.S. Dairy Markets and Policy Update

    Dr. Cameron S. Thraen, Associate Professor and OSUE State Dairy Markets and Policy Specialist, Department of Agricultural, Environmental and Development Economics, The Ohio State University

    Policy Update: Margin Protection Program (MPP)

    On August 28, 2014, USDA Secretary Vilsack officially announced the start of the new Margin Protection Program (MPP). By the time you are reading this issue of BDN, you will have had the opportunity to participate in a workshop or conference detailing this program.  I will take this opportunity to repeat a few of the program’s key features.

    Item 1: If you elect to participate, you will be required to establish a production history (PH) based on the highest annual production from the calendar years 2011, 2012, or 2013.  Once established, your production history will be increased each year by the U.S. average production growth.  There is no penalty for increasing production over this level other than the stipulation that extra production will not be eligible for the coverage under the MPP.
     
    Item 2: Selecting coverage above the lowest level of $4/cwt will require you to pay a premium.  Premiums follow a two tier schedule.  For a production base at 4 million pounds or less, there is one schedule, and for those farms with a production history over 4 million pounds, there is a second more expensive schedule for production over 4 million pounds. 

    Item 3: For producers whose annual production is at or below 4 million pounds, the cost of coverage all the way up to $6.50 remains very reasonable, only becoming more expensive at the $7 to 8 levels.  For a producer whose annual production base is above the 4 million pounds, the cost is still modest up to the $5 level, but then increases rather significantly above that point. 

    Item 4: You will not be allowed to simultaneously use Livestock Gross Margin (LGM) Insurance and this MPP program.  There are rules in place that spell out very clearly how MPP and LGM-dairy will coexist.  You can continue to use all other tools, such as futures and options and forward pricing, through your cooperative to provide price risk management.

    Item 5: To participate, you must register with your local USDA Farm Services Agency (FSA) and complete forms CCC-781 to establish eligibility and production history and also form CCC-782 make program selections for 2014 and 2015.  You must complete and submit these signed forms at your FSA County Office no later than the end of business November 28, 2014.

    Item 6: At the time of registration, you will be able to elect a coverage percentage (25 to 90%, 5% increments) and a coverage level ($4 to 8, 50 cent increments).  During this initial period, you will be able to make this selection for the remainder of 2014 and all of 2015. A producer does not have to make this decision now but can wait until the following registration period.  However, once the decision is made to register and participate in the program, you are obligated to pay the $100 administrative fee each year through 2018.  Election of coverage percentage and coverage level are made each year and can be changed during the enrollment period for each year.  After November 28, 2014, the enrollment period will occur from July through September for calendar years 2016, 2017, and 2018.

    National U.S. Dairy Margin Update

    At the time of this issue of BDN, the concern looking forward is the falling U.S. cheese, butter, and skim milk powder prices and the likely impact on the MPP in the coming year.  At the end of 2014, U.S. dairy commodity prices are realigning with lower world prices, and it is natural to assume that this realignment will result in dramatically lower income over feed costs (IOFC) margins for 2015.  While it is correct that lower commodity prices will pull down the U.S. All Milk Price, this does not translate into a significantly lower IOFC margin.  Why?  Because the feed price side of the MPP margin has experienced an even greater decline with record grain harvest in the U.S.  To pull the U.S. All Milk Price low enough to trigger significant MPP payments, my analysis suggests that Class 3 and Class 4 prices would have to fall by at least $1.50/cwt over what the futures market is currently forecasting for 2015.  This would require U.S. dairy commodity prices falling below world prices quite early in 2015 -  an outcome not very likely.

    Margin Protection Program Forecast

    A look at the current MPP margin forecast based on the futures market prices as of October 24, 2014 shows the margin to stay above $9.50/cwt through the next 15 months. 

    Figure 1

    The table below shows that the probability of the MPP margin falling below each of the program trigger prices for each of the critical 2-month periods.  At this time, the probability that there would be a payment is quite low at the $8.00/cwt level for all of the 2015 production year.  At trigger price levels below this mark, the probabilities are even smaller.  Remember, at trigger levels above $6.50/cwt, the cost of margin protection becomes relatively expensive regardless of the magnitude of the production history.

    Table 1

    If you wish to follow the Dairy Markets and Policy DPMPP margin forecast, go to the DmaP website and click on MPP Decision Tool.  The information shown in the figure and the table are updated daily. (http://dairymarkets.org/MPP/)

    You can also access this information on the USDA FSA website: http://www.fsa.usda.gov/FSA/pages/content/farmBill/fb_MPPDTool.jsp

    If you would like to read or hear more about the MPP program, link into the Dairy Markets and Policy website (http://dairymarkets.org/MPP/), where you will find a wide assortment of support information on this new program.

  2. Quick Status on the Margin Protection Program (MPP)

    Dr. Cameron S. Thraen, Associate Professor and OSUE State Dairy Markets and Policy Specialist, Department of Agricultural, Environmental and Development Economics, The Ohio State University


     MPP Months in 2015

    Cam’s Forecast1
    Margin ($/cwt)

    USDA/FSA Forecast1 Margin ($/cwt)


    Expected Net Payment from the MPP Program

    January – February

    9.93

    10.42

    Negative at all Coverage Levels

    March – April

    9.10

    9.66

    Negative at all Coverage Levels

    May –June

    8.66

    9.46

    Negative at all Coverage Levels

    July – August

    8.94

    9.71

    Negative at all Coverage Levels

    September – October

    9.19

    10.38

    Negative at all Coverage Levels

    November – December

    9.04

    10.24

    Negative at all Coverage Levels

    1Cam’s margin forecast and USDA/FSA margin forecast are based on alternative statistical models.  Both forecasts shown use futures prices as of 10/27/2014.

    The information shown in this table is updated each Tuesday.  If you would like to receive an email copy of this table each week, please send a request to thraen.1@osu.edu.  Type ‘MPP Table Request’ in the subject line.

  3. 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 Ugly Side: Milk Prices

    As I write this column in late October, the Class III futures have just closed at $23.89 for October, $21.25 for November, and $19.20/cwt for December 2014.  For the next 12 months, the Class III milk futures are averaging $18.29/cwt, which (IF these are accurate predictors) should provide Ohio dairy producers with a mailbox price averaging around $19.00/cwt over the next 12 months.  The problem is that I don’t think that the futures markets will turn out to be accurate in this instance.  In my opinion, they are overly optimistic.  Here’s why.

    Last year, the U.S. exported over 16% of its milk solids production.  Increased exports have been a major factor contributing to our unusually high domestic milk prices over the last 10 months.  The problem is that our domestic prices for dairy products are currently not competitive with world prices.  National prices used for class calculations in September were $2.35/lb for cheese (US$ 5181/metric tonne – MT), $2.85/ lb for butter (US$ 6283/MT), $1.47/lb for nonfat dry milk (NDFM, US$ 3242/MT), and $0.67/lb for dry whey (US$ 1477/MT).  Compare these prices to those of our major competitors on the export markets.  Yesterday, the November Eurex butter (i.e., European butter) closed at € 2968/MT (US$ 3800/MT).  Meanwhile, New Zealand skim milk powder (SMP, the closest international standard for NFDM) is trading around US$2530/MT.  So there is no way that our domestic prices can remain at their elevated levels if we want to remain in the dairy export markets – which we must unless we find a lot of American bellies to swallow 15% more milk solids.  The cash markets have already reacted to the incoming surge of dairy products.  As of yesterday (10/28), cheese blocks traded at $2.14/lb on the Chicago Mercantile Exchange (CME), while the cheese barrels were trading at $1.92/lb.  Butter has fallen from its peak of $3.05/lb down to $1.80/lb yesterday.  NFDM is trading on the CME at about $1.25/lb, and dry whey is selling at $0.65/lb on the AMS.  I think that the cash prices we see on major exchanges (which are thin markets) will fuel through our average national prices much more quickly than the people trading futures contracts are anticipating.  If I were a dairy producer right now, I would set myself for Class III prices in the $17/cwt range before the end of the year, and $15/cwt prices within the next 6 months.  If I am wrong, then the outcome should be (more) pleasant than anticipated.  If I am right, then even $3.50/bu corn won’t be sufficient to maintain profitable margins for many producers.

    The Good Side: Nutrient Prices

    All is not doom and gloom!  Feed prices have taken a significant tumble in the last few months.  This brings significant opportunities not only to lock in very good prices on major commodities (e.g., corn and soybean meal) but also to evaluate how byproduct ingredients could fit your feeding program and lower your feed costs.

    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 October 20, 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 currently at a “fire sale” price of 2.6¢/Mcal.  This is important because a cow producing 70 lb/day of milk requires in the neighborhood of 33 Mcal/day of NEL.  So, supplying the dietary energy required to produce milk is currently very inexpensive.  For MP, its current price (77.6¢/lb) is nearly 3 times greater than its 6-year average (28¢/lb).  Although the protein markets (e.g. soybean meal) have been driven down in the last few weeks, their fall has been proportionally less than that of energy feeds (e.g., corn).  Hence, protein prices are still relatively expensive.  The cost of ne-NDF is currently discounted by the markets (i.e., feeds with a significant content of ne-NDF are priced at a discount), but the discount of -4.8¢/lb is less than its 6-year average (-9¢/lb).  Meanwhile, unit costs of e-NDF are also at over 3 times their 6-year average, being priced at 11.6¢/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 $1.22/cow/day (i.e., 10.5 lb × $0.116/lb).

    Using these nutrient costs, we can estimate how much it should cost on an average to feed for a certain amount of milk production.  Using a target cow milking 70 lb/day at 3.7% fat and 3.1% protein and eating 50.4 lb/day of dry matter, the average feed costs should currently be in the neighborhood of $5.85/cow/day, or $8.36/cwt.  These costs neither include the costs of feeding the dry cows nor the replacement herd. 

    Table 1.  Prices of dairy nutrients for Ohio
    dairy farms, October 20, 2014.
    Table 1

    Economic Value of Feeds

    Results of the Sesame analysis for central Ohio on October 20, 2104 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, October 20, 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, October 20, 2014.

    Bargains

    At Breakeven

    Overpriced

    Alfalfa hay – 40% NDF
    Brewers grains, wet
    Corn silage
    Distillers dried grains
    Gluten feed
    Gluten meal
    48% soybean meal
    Soybean meal – expeller
    Wheat middlings

    Bakery byproducts
    Corn, ground, shelled
    Whole cottonseed
    41% Cottonseed meal
    Hominy
    Meat meal
    Roasted soybeans
    Wheat bran

    Beet pulp
    Blood meal
    Canola meal
    Citrus pulp
    Feather meal
    Molasses
    Soybean hulls
    44% soybean meal
    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.  Also, 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, your nutritionist might be using some molasses in your rations for reasons other than its NEL and MP content.

    Appendix

    A few people have asked that I publish the results using the 5-nutrient group (i.e., replace MP by rumen degradable protein and digestible rumen undegradable protein).  A table containing these results is provided herewith.

    Table 4. Prices of dairy nutrients using the
    5-nutrient solution for Ohio dairy farms,
    October 20, 2014.
    Table 4
     

  4. Prevalence and Management Factors Associated with Staphylococcus aureus

    Dr. Luciana da Costa, Dept. Veterinary Preventive Medicine, Extension Dairy Veterinarian, The Ohio State University 

    Background

    Staphylococcus aureus is considered the most common contagious pathogen in many dairy farms worldwide, with herd prevalence estimated at 43 and 72% in the USA and Canada, respectively. Management practices, and especially milking procedures, play an important role in control and prevention of these intramammary infections.

    Material and Methods

    A survey was done among Ohio dairy farms to estimate Staph. aureus prevalence and to evaluate whether certain management practices are associated with finding the organism in bulk tank milk (BTM) of these herds. A mailed questionnaire was sent to 780 Ohio producers to survey them regarding general mastitis control practices in the herds, and their BTM was tested if permission was granted. Up to three BTM samples were collected from each participating dairy farm and cultured for detection of Staph. aureus. A herd was considered positive for the pathogen if at least one of the BTM samples was positive.

    Results

    The response rate to the survey was 49%. Of the 380 responders, 307 allowed culture of their BTM.
     
    Herd Characteristics - Responding herds were representative of typical Ohio dairy farms, with the majority (89%) having less than 200 cows, milking Holstein cows (80%), and housing them in free-stall barns (75%).

    Herd Prevalence of Staph. aureus - if only the first BTM sample per herd was considered, prevalence was estimated to be 48%, but it increased to 69% when all three BTM samples per herd were considered and interpreted in parallel.

    Milking Practices - Of the responding producers, 57% reported to check foremilk, 82% used pre-milking teat disinfection (pre-dip), 97% used post-milking teat disinfection (post-dip), 92% used single towels per cow, and 38% segregated known infected cows or milked those cows last. Only 49% of responding herds reported to pre-strip, pre-dip, use single towels per cow, and to post-dip (64% of them Staph. aureus positive). Herds that did not implement all these four practices as part of their milking routine (74% of them Staph. aureus positive) were at 2.0 times higher odds to be found positive for Staph. aureus in BTM than herds that did implement them [P=0.01, 95% confidence interval (CI)  for an odds ratio (OR) of 1.1 to 3.2].

    Farm Workforce - Owners were responsible for milking cows in 64% of the farms (69% of these herds were positive for Staph. aureus), while the remaining 36% of herds had hired employees assisting with milking (68% positive for Staph. aureus). In 10% of the farms, hired workers were reported to be solely responsible for milking of cows (80% positive for Staph. aureus). These herds had 2.3 times higher odds of having Staph. aureus detected from their BTM than herds where owners were involved in milking (P=0.08, 95% CI for an OR of 0.8 to 6.1).

    Conclusion/Implications

    Detected Staph. aureus prevalence was in agreement with other studies reported from North America. Repeated training and constant motivation may be crucial for implementation of proper milking procedures to maintain good udder health and milk quality in dairy herds.

  5. Students Rose to the Challenge for the 2014 Ohio Dairy Challenge Contest

    Maurice Eastridge, Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University

    The 2014 Ohio Dairy Challenge was held October 24-25 and was again sponsored by Cargill Animal Nutrition. Dairy Challenge provides the opportunity for students at Ohio State University to experience the process of evaluating management practices on a dairy farm and to interact with representatives in the dairy industry. The program is held in a contest format for undergraduate students whereby they are grouped into teams of three to four individuals. Veterinary and graduate students are invited to attend the farm visit and participate in a meeting later in the evening with the contest judges to discuss observations on the farm. The farm selected for the contest this year was the Pro Milk Dairy, LLC in Mt. Sterling, OH (Pickaway County). The dairy farm is a partnership, with the managing partners being Theo and Christiane Huegemann. The operation began in February 2014 and consists of 1100 Holstein cows. The parlor consists of a 60-cow-rotary Bou-Matic system and cows are milked 3 times-a-day. The forages consist of corn silage, brown midrib sorghum balage, and western alfalfa hay. There were 49 undergraduate students (13 teams), 22 veterinary students, and 11 graduate students that participated. The undergraduate teams this year were again divided into novice and experienced divisions for judging purposes. The contest started by the students and the judges spending about two hours at the farm on Friday afternoon, interviewing the owner and examining the specific areas of the dairy facility.  During Friday evening, the undergraduate teams spent about four hours reviewing their notes and farm records to provide a summary of the strengths and opportunities for the operation in the format of a MS PowerPoint presentation that had to be turned in on Friday evening. On Saturday, the undergraduate students then had 20 minutes to present their results and 10 minutes for questions from the judges. The judges for the novice division were:  Dr. Normand St-Pierre (Professor, Department of Animal Sciences, OSU) and Laura Weisz, Dr. Katie Cowles, and Michelle Burky, all with Cargill Animal Nutrition. The judges for the experienced division were: Ryan Aberle, Patrick Hart, and Mike Westphal from Cargill Animal Nutrition, and Dr. Maurice Eastridge (Professor, Department of Animal Sciences, OSU). The awards banquet was held on Saturday, October 25 at the Fawcett Center on the OSU Columbus campus. The top teams in the novice division were: First place – Kayla Oxendale, Logan Morris, and Candace Lease and Second Place – Sytske Miedema, Erica Holtsberry, Maggie Olthaus, and Wen Tze Ng. The top teams in the experienced division were:  First Place – Erin Williams, Joey Brown, Brandon Colby, and Devon Bokeno and Second Place – Caitlin Gehret, Taylor Kruse, Cayla Inkrott, and Olivia Houts. Students will be selected to represent Ohio at the 2015 National Contest and to participate in the Dairy Challenge Academy to be held in Syracuse, NY during April 9-11. Students from OSU also will be participating in the Midwest Regional Dairy Challenge hosted by Dordt College in Sioux Center, IA to be held February 11-13, 2015. The coach for the Dairy Challenge is Dr. Maurice Eastridge in the Department of Animal Sciences at Ohio State.

    First Novice
    First Place Team, Novice Division (left to right): Kayla Oxendale, Logan Morris, and Candace Lease.

    Second Novice
    Second Place Team, Novice Division (left to right): Sytske Miedema, Erica Holtsberry, Maggie Olthaus,
    and Wen Tze Ng.

    First Experienced

    First Place Team, Experienced Division (left to right): Erin Williams, Joey Brown,
    Brandon Colby, and Devon Bokeno.

    Second Experienced
    Second Place Team, Experienced Division (left to right): Caitlin Gehret, Taylor Kruse,
    Cayla Inkrott, and Olivia Houts.