Buckeye Dairy News : Volume 18, Issue 6

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

    Mr. Alex Tebbe, Graduate Research Associate, Department of Animal Sciences, The Ohio State University

    Milk Prices

    In the last issue of Buckeye Dairy News, the September Class III price closed at $16.63/cwt and then was projected to drop a mere 3¢/cwt in October. The Class III price for October actually closed much lower than expected at $14.82/cwt. The advanced Class III price for November is projected to remain relatively unchanged from October at $14.78/cwt and then rise over $2/cwt. to $16.88/cwt for the month of December. 

    These current prices will average around $14.50/cwt for the 2016 year. The future, however, is looking bright for the year to come, despite the political and economic changes on-going in the US and the rest of the world.

    Nutrient Prices

    Nutrient prices continue to be low when looking at the 5-year averages. According to our price estimates of net energy lactation (NEL, $/Mcal) and metabolizable protein (MP, $/lb; MP is the sum of the digestible microbial protein and digestible rumen-undegradable protein of a feed), the year of 2016 is 3¢/Mcal and 2¢/lb, respectively, lower than since 2011 (13¢/Mcal and 43¢/lb, respectively).

    As in previous issues, these feed ingredients were appraised using the software program SESAME™ developed by Dr. St-Pierre at The Ohio State University to price the important nutrients in dairy rations, to estimate break-even prices of all commodities traded in Ohio, and to identify feedstuffs that currently are significantly underpriced as of November 28, 2016. 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.  For MP, its current price ($0.37/lb) has decreased slightly from September’s issue ($0.52/lb) in response to a high yielding 2016 harvest. The cost of NEL, e-NDF, and ne-NDF are nearly identical to last month at 11¢/lb, 5¢/lb, and -13¢/lb (i.e. feeds with a significant content of non-effective NDF are priced at a discount), respectively.

    To estimate the cost of production at these nutrient levels, I used the Cow-Jones Index with a cow milking 70 lb/day at 3.7% fat and 3.1% protein eating 50 lb/day of DM. In this model, the average income over nutrient costs (IONC) for September’s issue were estimated at $9.49/cwt and $9.94/cwt for a cow milking 85lb/day and eating 56 lb of DM. These IONC were calculated under the combination of low nutrient prices and decent milk prices and should be highly profitable. Milk price has decreased slightly since, and in this issue, our 70lb/day and 85lb/day cows are estimated to be making less at $8.05/cwt and $8.46/cwt., respectively, which still should be profitable.

    Table 1. Prices of dairy nutrients for Ohio dairy farms, November 28, 2016.

    Economic Value of Feeds

    Results of the Sesame analysis for central Ohio on November 28, 2016 are presented in Table 2. Detailed results for all 26 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 November 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, November 28, 2016. 

    For convenience, Table 3 summarizes the economic classification of feeds according to their outcome in the Sesame analysis. Feedstuffs that have gone up in price or in other words moved a column to the right since the last issue are red. Conversely, feedstuffs that have moved to the left (i.e., decreased in price) are green.

    Table 3. Partitioning of feedstuffs, Ohio, November 28, 2016.

    Bargains

    At Breakeven

    Overpriced

    Bakery byproducts

    Alfalfa hay – 40% NDF

    Beet pulp

    Corn, ground, dry

    Canola meal

    Blood meal

    Corn silage

    Gluten meal

    41% Cottonseed meal

    Distillers dried grains

    Soybean meal - expeller

    Citrus pulp

    Feather meal

    48% Soybean meal

    Fish meal

    Gluten feed

    Whole cottonseed

    Molasses

    Hominy

    Tallow

    Soybean hulls

    Meat meal

    Wheat bran

    44% Soybean meal

    Wheat middlings

     

    Whole, roasted soybeans

    As coined by Dr. St-Pierre, 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

    For those of you who use the 5-nutrient group values (i.e., replace metabolizable protein by rumen degradable protein and digestible rumen undegradable protein), see Table 4.

    Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, November 28, 2016.

  2. A Quick Look at the 2015 Ohio Dairy Farm Business Dairy Summary

    Mrs. Dianne Shoemaker, Field Specialist, Dairy Production Economics, The Ohio State University Extension

    2015 was not a kind year for many Ohio farms. Class III milk price averaged $15.80/cwt with the Federal Order 33 Producer Price Differential adding another $0.40/cwt, resulting in an average statistical uniform price of $16.13/cwt for the year. This is the minimum price that all Grade A shippers should have received for milk at test.  2014 was a much different year with an average statistical uniform price of $22.34/cwt. This dramatic drop in milk price resulted in net return per cow dropping from $1,266/cow in 2014 to $36.42/cow in 2015. For the first time in 5 years, the average net return for the high 20% of herds (sorted on net return per cow) dropped below $1,000 to $905/cow, down from a 5-year high of $1,976/cow in 2014. 

    There were 40 dairy enterprises included in the 2015 summary. The summary includes 37 conventionally managed herds and 3 organic herds, with 3 conventional herds utilizing robotic milkers. These farms chose to invest their time to analyze the business performance of their farms, dairy, and crop enterprises. 

    Table 1. Average of selected performance indicators of Ohio dairy farms participating
    in the Ohio Farm Business Analysis and Benchmarking Program, 2011 through 2015.1

    1Home grown feeds were valued at cost of production.
    *Including other revenue adjustments (less the value of cull cows or heifers, bull calves, and breeding stock sold per cwt).
    **Does not include a labor and management charge.

    Table 2. Selected performance indicators of Ohio dairy farms participating in the Ohio Farm Business Analysis and Benchmarking Program, 2011 through 2015.  Averages are shown for the high 20% farms sorted by net return per cow.1

    1Home grown feeds were valued at cost of production.
    *Including other revenue adjustments (less the value of cull cows or heifers, bull calves, and breeding stock sold per cwt).
    **Does not include a labor and management charge

    2016 has continued to be a challenge for Ohio dairy farms with the Statistical Uniform Price averaging only $14.82/cwt through October. Benchmark reports that are included in the Dairy Summary are a useful tool that can help farmers identify areas of concern and opportunity as they work to survive this extended period of depressed milk prices.

    The complete 2015 Ohio Farm Business Summary and benchmark reports for dairy, crop, and whole farm business analysis will be posted soon on the Ohio Farm Business Analysis & Benchmarking Program Website at http://farmprofitability.osu.edu.

  3. 2016 Ohio Dairy Challenge Contest Huge Success

    Dr. Maurice L. Eastridge, Professor, Department of Animal Sciences, The Ohio State University

    The 2016 Ohio Dairy Challenge was held October 21-22 and was sponsored by Cargill Animal Nutrition, Elanco, Purina Animal Nutrition, Renaissance Nutrition, Sexing Technologies, and VitaPlus. 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 Three Flags Dairy in Forest, OH owned by Geert and Wiesje Kruiter. The Kruiter family started milking at the facility in 2010, and there are about 715 cows in the operation. Cows are milked 3 times-a-day in a double 16 herringbone parlor. The forages grown on the farm include alfalfa and grass silages, corn silage, and small grain silage. There were 69 undergraduate students (19 teams) and 16 graduate and veterinary 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:  Allan Chestnut (Cargill/Provimi), Bob Hostetler (Renaissance Nutrition), Dr. Andrew Kniesly (VitaPlus), and Michelle Lahmers (Cargill Animal Nutrition). The judges for the experienced division were: Ryan Aberle (Cargill Animal Nutrition), Dr. Mark Armfelt (Elanco), Laura Homan (Cargill Animal Nutrition), Dr. Dwight Roseler (Purina Animal Nutrition), and Dr. Maurice Eastridge (Professor, Department of Animal Sciences). Dr. Shaun Wellert with ATI also assisted with the program. The awards banquet was held on Saturday, October 22 at the Fawcett Center on the OSU Columbus campus. The top two teams in the novice division were: Sarah Hartzler, Allison Mangun, and John Paulin; Hannah Donley, Lydia Flores, Ella Jackson, and Kate Sherman. The top team in the experienced division was:  Angie Evers, Brianna Justice, Jacob Triplett, and Brittany Webb. Students will be selected to represent Ohio at the 2016 National Contest and to participate in the Dairy Challenge Academy to be held in Visalia, CA during March 30 - April 1, 2017. Students from ATI participated in the Northeast Regional Dairy Challenge held November 3-5, 2016 in Glen Falls, NY and students from main campus will be participating in the Midwest Regional Dairy Challenge hosted by University of Wisconsin-Madison during February 8-10, 2017. The coach for the Dairy Challenge program at ATI is Dr. Shaun Wellert and Dr. Maurice Eastridge is the coach for the Columbus campus.

    Novice Division (left to right): Sarah Hartzler, John Paulin,
    and Allison Mangun.

    Novice Division (left to right): Ella Jackson, Kate Sherman,
    and Lydia Flores (Hannah Donley, not pictured).

    First Place Team, Experienced Division (left to right):
    Jacob Triplett, Brittany Webb, Bryanna Justice, and Angie Evers.

  4. Managing Farm Financial Stress

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

    Farmers are facing a tough agricultural economy. Grain, livestock, and dairy producers are all coping with prices that result in slim to breakeven profit margins.  For a number of farms, operating in the red is their reality.  Unfortunately, the price outlook for most agricultural commodities does not offer much hope in the near future.  Farming under these financial conditions is causing stress among farm families and within farm operations.  Some farmers are wondering how much longer they can continue to operate their farm, or if they should continue.

    Recognizing the level of stress that exists in the farm community, a program entitled “Managing Farm Financial Stress” has been scheduled for Friday, December 16 at Fisher Auditorium, 1680 Madison Avenue on the OARDC campus in Wooster.  The program will provide participants with tools and information that can help them manage through the current financial situation and make sound decisions regarding their farm operation.  Registration begins at 9:30 am. The program begins at 10:00 am and will conclude at 3:15 pm.  There is no charge for this meeting and lunch and refreshments will be provided.  Program and lunch expenses are being covered by sponsorships from Farmers National Bank, WG Dairy, Commodity Blenders, Gerber Feed, and the Wayne-Ashland Dairy Service Unit. 

    The program features a general session in the morning with afternoon break-out sessions offering participants their choice of three different tracks.  Morning topics and speakers include:

    • Mental Wellness: Recognizing and managing/coping with the stress of financial hardship; Jim Foley, Director of Community Education and Prevention; Counseling Center of Wayne and Holmes Counties
    • Gathering and Using Farm Financial Information; Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics
    • Dairy Price and Market Outlook; Cam Thraen, OSU (Emeritus) Dairy Market Specialist 

    Afternoon breakout tracks feature multiple presentations focusing on Financial Management, Legal Considerations, and Healthy Family, Healthy Farm.  Participants will have the opportunity to attend three presentations/discussions and can mix and match between themes.  Specific presentation topics and presenters include:

    • Calculating your Cost of Production and Using Cost of Production Benchmarks; Dianne Shoemaker, OSU Extension Field Specialist, Dairy Production Economics
    • Working with Your Lender to Re-structure Debt; Lender Panel with representatives from Farmers National Bank, Farm Credit Mid-America, and Wayne Savings Community Bank
    • Exiting the Farm Business, Tax Implications for Exiting the Farm Business, and Moving Ahead with Helpful Business Structures; Robert Moore and Ryan Conklin, Wright and Moore Law Co. LPA
    • Moving Towards Mental Health; Jim Foley, Counseling Center of Wayne and Holmes Counties
    • Moving Forward with a Farm Advisory Team; Mark Thomas, Stark County Dairy Farmer
    • Healthy Family Communication; Rory Lewandowski, Extension Educator, Wayne County

    The meeting is open to farmers and anyone working with farmers and farm families.  As mentioned previously, there is no charge to attend, but pre-registration is requested by calling the Wayne County Extension office at 330-264-8722 by Friday, December 9 to ensure enough meals are prepared.