You are here
Buckeye Dairy News : Volume 19, Issue 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
In the last issue, the October Class III price closed at $14.82/cwt and was projected to remain relatively unchanged in November, followed by a $2/cwt rise to $16.88/cwt for the month of December. The Class III price for the month of November and December actually closed at $16.76 and $17.40/cwt, respectively. For the month of January, the price is expected to stay stagnant at $17.45/cwt and drop 72¢/cwt in February to $16.73/cwt. Although prices rose at the tail end of 2016, domestic demand in the state of Ohio is currently sluggish and total milk produced has risen. As a result, there is no added bonus from the producer price differential for milk checks in the months of November and December and Ohio farmers should expect their mailbox price to be around $15.40 and $16.80/cwt, respectively; much below the actual prices listed above.
The recent surge in the milk prices can be attributed to increased export prices and the demand for nonfat dry milk in Asia. This is reflected in the nearly 50¢/lb rise of the milk protein prices since October. However, US milk exports and Oceania and EU domestic prices are rising at similar rates. Total production across the US is also rising. To say the least, there is quite the level of uncertainty where the milk price will head for 2017. In the coming months, I expect prices to stay the same or decrease based on the historical trends of the milk price (Figure 1; USDA) during election years and when new presidents are inaugurated. Given nutrient prices, this is not as bad as it sounds and dairy farming should remain relatively profitable regardless.
Figure 1: Average milk price paid ($/cwt) to farmers in the Federal Milk Marketing Order by month since 2007.
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 January 25, 2017. 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.
Although milk prices are currently at a standstill, nutrient prices are still low and will more than likely continue to decline. For MP, its current price ($0.38/lb) has stayed the same from November’s issue ($0.37/lb) and is lower than the 5 year average for MP ($0.43/lb). The cost of NEL decreased 2¢/lb to 9¢/lb, while the price of e-NDF and ne-NDF are nearly identical to last month at 4¢/lb and -8¢/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. For November’s issue, the average income over nutrient costs (IONC) were estimated at $8.05/cwt and $8.46/cwt. for a cow milking 85lb/day and eating 56 lb of DM. For January, the IONC for our 70 lb/day and 85lb/day cows are estimated to be at $11.57/cwt and $11.94/cwt, which should be highly profitable. Using actual component averages for Ohio (3.9% fat and 3.2% protein) cows averaging 70 lb/day and 85 lb/day should be making even more money at $12.13/cwt and $12.50/cwt, respectively. Bottom line, as long as there is no sudden spike in nutrient prices, a drop in milk prices may not excessively harm the profitability of Ohio dairy farmers.
Table 1. Prices of dairy nutrients for Ohio dairy farms, January 25, 2017.
Economic Value of Feeds
Results of the Sesame analysis for central Ohio on January 25, 2017 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 January 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 26 feed commodities used on Ohio dairy farms, January 25, 2017.
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, January 25, 2017.
Alfalfa hay – 40% NDF
Corn, ground, dry
41% Cottonseed meal
Distillers dried grains
Soybean meal - expeller
48% Soybean meal
44% Soybean meal
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 contents.
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 the Table 4 below.
Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, January 25, 2017.
Introduction of Dr. Luis Moraes, A New Faculty Member at Ohio State
Dr. Maurice L. Eastridge, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University
Dr. Luis Moraes joined the Department of Animal Sciences at The Ohio State University on December 15, 2016. He grew up in Brazil where his family owns and manages a beef cattle operation. Dr. Moraes has been always involved with agriculture through his family business and received a Bachelor of Science degree in Agronomic Engineering from the University of Sao Paulo at the ESALQ campus. Following his graduation, he moved to California where he received two Master of Science degrees, one in Animal Biology and one in Statistics, and a PhD in Animal Biology, all from the University of California-Davis. He worked as a postdoctoral researcher at the UC Davis in the Department of Animal Science until he joined the faculty at Ohio State as an Assistant Professor. His research focuses on the application of statistics, mathematics, and economics to the animal sciences. He is particularly interested in the use of economic optimization models for dairy management. While at UC Davis, he developed linear and goal programming models that simultaneously minimized diet costs and methane emissions. He has also worked on the application of statistical methods for describing nutrient utilization in cattle. For instance, multivariate mixed models, nonparametric growth curves, and Bayesian methods are examples of techniques that he has used to better understand energy and protein metabolism in growing and lactating cattle. At OSU, his research plans are to develop mathematical models that incorporate nutrient management information into diet optimization. Further, he will continue to develop and apply statistical modeling techniques for the extraction of meaningful information from animal science data and for the improved understanding of biological processes. His office is at 2029 Fyffe Court, 221A Animal Science Building, Columbus, OH 43210 and he can be contacted at 614-292-6507 or email@example.com.
2017 Ohio Forage and Grasslands Council Conference
Dr. Mark Sulc, Professor and Extension Specialist, Department of Horticulture and Crop Science, The Ohio State University
The Ohio Forages and Grasslands Council Annual Conference will be held February 3, 2017 from 8:30 a.m. to 3:30 p.m. at the Ohio Department of Agriculture in Reynoldsburg, OH. The program theme is “High Quality Forages.” The keynote speaker will be Dr. Kim Cassida, Forage Extension Specialist at Michigan State University, who will discuss “Managing Grass-Legume Mixtures” based on extensive research and experience in Michigan and her prior work in West Virginia. She and Dr. Jeff McCutcheon (OSU Extension, Southeast Region Director) will discuss “High Energy Pasture for Grass-Finished Beef” and two Ohio producers, Bill Lawhon of Knox County and Jeff Ramseyer of Wayne County, will expand on that topic by discussing how they utilize annual and perennial forages in their grass-based beef operations. Lin Karcher, a dairy producer in Meigs County, will discuss the transition to grass-based dairy production. Don and Megan Burgess of Hancock County will discuss how sheep breed affects utilization of annual forages in their operation. Todd Hager of Allen County will discuss his commercial hay operation that includes baling cover crops within grain crop rotations and reprocessing big square bales of alfalfa into small squares prior to marketing. A six-state evaluation of “Reduced Lignin Alfalfa” will be discussed by Angie Parker (Ohio State University Graduate Research Assistant) and Dr. Mark Sulc and Dr. Dave Barker (The Ohio State University) will provide a Research Update on several projects, including optimizing animal intake on tall fescue pastures, revising potato leafhopper thresholds for leafhopper-resistant alfalfa and alfalfa-grass mixtures, and effects of different harvest schedules on alfalfa-grass mixtures.
Details of the program and a registration form is available at http://www.afgc.org/ohio.php.
Dairy Program Updates
Ms. Bonnie Ayars, Dairy Program Specialist, Department of Animal Sciences, The Ohio State University
One might think that 4-H winds down during the winter months, when in fact the homework is in place for all that will follow when spring arrives. Many dairy judging opportunities take place around the state and all can help to lead up to Spring Dairy Expo when the state 4-H and FFA contest will take place on April 1 (no kidding). Spring Dairy Expo (springdairyexpo.com), March 30 - April 1, serves as the transition from one season to another and also allows dairy enthusiasts to gather for shows, sales, showmanship contests, and social gatherings.
Here at the University, there also are many recognition programs that take place for students and alumni. On March 4, the CFAES Alumni Awards Luncheon will take place at the Fawcett Center and you will note some familiar dairy names within that group. On April 8, the Animal Sciences Department Recognition Banquet will be held at the 4-H Center on the OSU Columbus campus. Each year, the dairy judging program recognizes the anniversary teams of 50, 25, and 10 years, along with current members. There are a few members on the 50 year team for which I could use updates and addresses. If you know of Tom Criblez or Harold Meeusen, please help me to make sure they have a formal invitation.
To finish out April, Dairy Palooza programs will be held at the Wayne County Fairgrounds on April 22 and then at the Auglaize County Fairgrounds on April 29. The website is updated and filled with information at ohiodairypalooza.com. Please encourage youth and adults alike with dairy interests to attend these workshops AND Quality Assurance training will be provided. We also have adult programs based around updates that will assist advisors in planning effective meetings.