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Buckeye Dairy News : VOLUME 20, ISSUE 5
Milk Prices, Costs of Nutrients, Margins, and Comparison of Feedstuffs Prices
Alex Tebbe, Graduate Research Associate, Department of Animal Sciences, The Ohio State University
Milk Prices: Where are we now and where are we heading?
In the last issue, the Class III component price for May and June were similar at $15.18 and $15.21/cwt, respectively. For the month of July, the Class III future was projected to rise slightly to $15.36/cwt and then decrease over a $1/cwt to $14.08/cwt in August. The Class III component price for the month of July actually closed at about $1/cwt lower than its future at $14.10/cwt, whereas the August Class III component price closed higher than its future price at $14.95/cwt. Class III futures for September are about the same at $14.85/cwt, followed by a $1.50 jump in October to $16.33/cwt.
For almost 4 years now, the annual Class III milk price has averaged around $15 to 16/cwt (4 year average of $15.32/cwt). Compared to the record year of 2014 (year average of $22.30/cwt), this price is obviously a disappointment. The low price is simply because average milk production and cow numbers keep growing. Back in 2014, production averaged 22,260 lb/cow/year with nearly 9.34 million cows in the U.S. As I write today, average production is just over 23,360 lb/cow/year with over 9.40 million milk cows. Doing the math, this amounts to a 5.8 million ton difference in annual milk production between 2014 and today – has the demand for dairy products gone up that much as well? The answer, no.
For the milk price to go back up, cow numbers need to decrease. The USDA does expect cow numbers to come down in 2019, but this will be a slow process. This being said, the average Class III average price will probably continue to go down and be in the $14.50 to15.50/cwt range for the remainder of this year and maybe even the first part of 2019. Times will continue to be tough for dairy producers.
Nutrient Prices: Two thumbs up CC
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 many commodities traded in Ohio, and to identify feedstuffs that currently are significantly underpriced as of September 25, 2018. 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.
Per usual, commodity and nutrient prices have went down as crops are being harvested in the majority of the Midwest. For MP, its current value has dropped $0.05/lb, from July’s issue ($0.40/lb) and is about 38% lower than the 5 year average ($0.48/lb). The cost of NEL is also lower than July (9¢/Mcal) and lower than the 5-year average (11¢/Mcal). The price of e-NDF and ne-NDF are not very different from July at 8¢/lb and -6¢/lb (i.e., feeds with a significant content of non-effective NDF are priced at a discount), respectively. Needless to say, now would be a good time to start locking in good prices on commodities and reformulating rations to enable feeding bargain feedstuffs long term.
In this issue, I also calculated a new corn silage price for the 2018 growing year: $44.60/ton (35% dry matter). This price is about $1.40 more than the 2017 growing year ($43.20/ton) but is still a bargain compared to other common ingredients. The price I calculated is based on the crop value as if it was harvested for corn grain rather than silage. Because corn silage is dual purpose and provides marked amounts of both NEL and e-NDF for dairy cows, the true value of corn silage to the producer should actually be around $66.60/ton, about 50% higher than my calculation. However, corn silage quality varies considerably based on location (e.g. weather and growing conditions) and harvesting and storage conditions, as well as the corn hybrid planted. Using the 75% confidence intervals defined in Table 2 are better predictors of what corn silage may actually be worth to producers because of this real world variability. The intervals still do not contain the calculated value based off corn grain (i.e., the $44.60/ton estimate). Bottom line, corn silage should be a no brainer for making up the majority of the forage component for rations during the upcoming year, but only if you have stored enough – running out of corn silage in August will be a huge financial burden.
To estimate the cost of production at these nutrient prices, I used the Cow-Jones Index for cows weighing 1500 lb and producing milk with 3.7% fat and 3.1% protein. For this issue, the income over nutrient costs (IONC) for cows milking 70 lb/day and 85 lb/day is about $9.15/cwt and $9.53/cwt, respectively. These IONC may be overestimated because they do not account for the cost of replacements or dry cows; however, they should be profitable when greater than about $9/cwt. The IONC for September are also better than July ($8.41/cwt and $8.85/cwt, respectively). Overall, profits for dairy farmers in Ohio are marginal to breaking even.
Table 1. Prices of dairy nutrients for Ohio dairy farms, September 25, 2018.
Economic Value of Feeds
Results of the Sesame analysis for central Ohio on September 25, 2018 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 or were adjusted to reflect their true (“Corrected”) value in a lactating diet. One must remember that SESAME™ compares all commodities at one specific point in time. 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, September 25, 2018.
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. These shifts (i.e., feeds moving columns to the left or right) in price are only temporary changes relative to other feedstuffs within the last two months and do not reflect historical prices.
Table 3. Partitioning of feedstuffs, Ohio, September 25, 2018.
Bargains At Breakeven Overpriced Corn, ground,dry Bakery byproducts Alfalfa hay - 40% NDF Corn silage Beet pulp Blood meal Distillers dried grains Feather meal Mechanically extracted canola meal Gluten feed Soybean hulls Citrus pulp Gluten meal 48% Soybean meal 41% Cottonseed meal Hominy Wheat Middlings Fish meal Meat meal Whole, roasted soybeans Molasses Soybean meal - expeller Solvent extracted canola meal Whole cottonseed 44% Soybean meal Tallow Wheat bran
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 a 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.
Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, September 25, 2018.
Manure Spill Prevention
Mr. Rory Lewandowski, Extension Educator, Wayne County, Ohio State University Extension
Typically, dairy farms have an opportunity after corn silage harvest to pump down lagoons and get manure hauled and applied. Hopefully, all goes well, without any accidents or manure spills, but hope is not a spill or accident prevention plan. Livestock operations that store, haul, and apply manure need to have an emergency response plan to handle manure spills and escapes. Preventing manure spills is one important component of that plan. A good start to preventing manure spills is to understand some common reasons manure spills occur, as well as where in the process from storage to application spills commonly occur.
At the 2018 Manure Science Review in late July in Hardin County, Glen Arnold, OSU Extension Manure Management Specialist, gave a presentation on manure spills and escapes. During his presentation, Arnold said that manure spills/escapes occur at three different locations and/or phases of manure management. One area is on the farmstead itself, close to farm buildings and facilities. Most of these manure incidents are actually escapes and are the result of manure pit overflows, manure pond overflows, and/or lot runoffs. Manure spills can happen during the transport of manure. As farms and applicators strive to do a better job of matching up manure nutrients with fields needing those nutrients, manure is getting transported longer distances. During transport, manure spills are the result of flipped manure tankers or semi-truck tankers, manure hose leaks, or improperly secured manure loads. The third area where manure spills/escapes happen is on the field, during or shortly after the manure application. These spills are the result of surface runoff or rapid movement through the soil profile and into field tile.
Kevin Erb, from the University of Wisconsin Extension in a webinar on the topic of manure spills, said that generally manure spills happen for one or more reasons. One is mechanical failure of equipment used in the handling and application of manure. Often these cases are truly accidental due to unforeseen situations and circumstances. Another reason is the improper application of manure or improper storage management. Improper application is over application of manure based on field conditions or field fertility level. Improper storage management includes not monitoring storage closely enough, resulting in an overflow situation. Finally, manure spills can occur due to negligence. Negligence can be defined as failure to exercise reasonable care or maybe even knowingly increasing the risk of a manure spill. This could be something like failure to maintain equipment in good working order, performing tasks when under serious sleep deprivation, or ignoring a manure plan or weather forecast.
Identifying the where/when manure spills/escapes occur is useful, especially when combined with an analysis of why manure spill/escapes happen. Taken together, they identify areas of risk that include both manageable factors as well as those factors outside of the farm’s or applicator’s control. With each of these causes, the farm manager needs to identify what can be done to minimize risk, including such things as periodic and regular equipment checks/maintenance, emergency shut-offs, employee/applicator training, work schedules that provide adequate rest, up-to-date manure management plans that guide application rates, weather monitoring, and record keeping.
Manure spills/escapes happen despite planning, preparation, and best intentions. Therefore, the farm needs an emergency plan. The plan should spell out what to do, who will do it, and who to contact in case of a manure spill/escape. Quick response can minimize detrimental effects; delays make a bad situation worse. In his presentation, Arnold said that your spill plan should contain cell phone numbers of key people who can help and you need to know who responds to text messages. You should know: Who has equipment to block a ditch or stream? Who has equipment to pump manure out of a stream or ditch? Who has tile plugs? Who can transport the spilled product you are cleaning up? When manure gets into a stream, be prepared to pump 20 to 25 times the volume of the manure that entered the stream according to Arnold. Where will this pumped product go? How will you get oxygen back into the stream and who has that equipment? As part of their preparedness, some farms keep a manure spill kit available. A list of some materials and resources to include in a manure spill kit is available at: http://tiny.cc/manurespillkit.
A publication entitled “Emergency Action Planning for Livestock Operations” by Purdue and Michigan State Universities lists four “C’s” of a manure spill response plan: 1) control the source of the spill/escape, 2) contain the spill, 3) clean up the spill, which involves assessing the extent of the damage and restoring the affected area, and 4) comply with reporting requirements. That publication, along with other manure spill response resources, is available on-line at: http://articles.extension.org/pages/28679/manure-spills-and-emergency-planning.
Transitioning of Herds to Automatic Milking Systems
Dr. Maurice Eastridge, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University
Interest in the use of automatic milking systems (AMS) continues to be high, even in a stressed dairy economy. Some of the primary reasons reported for this change in milking technology include: 1) reduction in labor, especially hired labor, 2) more flexible life-style, and 3) potential improvement in cow heath and milk yield. At present (September 2018), we have about 2140 dairy farms in Ohio and 52 farms with AMS, with about 143 AMS on Ohio farms. Thus, about 2.4% of the dairy farms in Ohio have the AMS. The vendors are primarily Lely and DeLaval, with one farm now having installed the GEA system. Although the adoption rate in Ohio is growing, it is certainly less than in Europe, Canada (6.8% in 2015), and several other states in the US. One of the aspects of adopting the AMS system that can be challenging, at least for a few weeks, is the transition period from the conventional milking system to the AMS.
A study conducted by four major universities in Canada titled “Producer experience with transitioning to automatic milking: cow training, challenges, and effect on quality of life” was reported in the 2018 October issue of the Journal of Dairy Science. Producers (n = 217 responses) from 8 Canadian providences using the Lely and DeLaval AMS were surveyed during 2014 and 2015. Overall, 42% of the producers trained animals to the AMS before the first milking. Feeding in the AMS was often practiced during training, but spraying of teats was less frequent. During training, small groups of cows (< 20) were commonly used. For producers who used a training program, it typically took 7 days to train a cow or heifer. It was estimated in the study that it would take 30 days to adapt a herd to an AMS, and the length of this duration was not different for those herds that did or did not train animals prior to the first milking in the AMS. About 2% of the cows within the herds were culled for not adapting to the AMS, with the range being 0 to 40%.
Some of the challenges experienced by dairy producers in the transition to the use of AMS included:
Challenge Some common solutions expressed
Learn to use AMS Time and patience, help from dealer
Cow training Time and patience, creating small groups for training,
recruiting extra help during training period
Feeding Working with nutritionist
Trusting the AMS Time and patience
Other challenges stated included: demanding during the first few days/weeks, changing health management, non-AMS transition issues caused by converting from tiestall to freestall, building modifications, technical issues, feet and leg issues, being on call, lack of support, decreased milk quality, finances, and employee management and training. Overall, producers positively scored all improvement and expectation statements, indicating a high level of satisfaction with the AMS.
Obviously, changing to an AMS system requires a lot of planning. Initially, the mission and succession plans for the dairy operation need to be clarified and the financial plan fully developed. During even the initial phases, it is important to visit with equipment dealerships to discuss cost, service, and start up help provided and to visit operations whereby the use of the AMS has been in effect for different periods of time, e.g. 6 months, 1 year, 3 years, etc., to learn how transitioning occurred, any development of problems over time, and dependability of service from the dealer. Once the decision is made to install an AMS but prior to the transition, plans need to be made for the practices used during transition (e.g. training), personnel needed during the transition, and time of year relative to when other major events will be taking place on the farm or for the family. With all of the challenges in the transition, time and patience were the major points identified. A well-organized plan can provide for a more smooth transition and working closely with the dealer, nutritionist, and other professionals before and during the transition can reduce the risk and duration for challenges during the transition.