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Buckeye Dairy News : VOLUME 21, 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
Low Milk Prices: How Long Will This Last?
In the last issue, the Class III component prices for November and December were at $15.52 and $14.50/cwt., respectively. The Class III component prices for the month of November and December actually closed much lower at $14.44 and $13.78/cwt. Class III futures for January and February are about the same as December component prices at $13.80 and $14.00/cwt. Overall, current milk prices are not good, and producers will have to continue pinching pennies if they want to make any money.
Historically, it is not abnormal for milk prices to temporarily go down during the beginning of the year. However, producers can partially counteract low milk prices because the beginning of the year is also when cows should be producing the largest volumes of milk and milk components. These trends then suggest that milk prices will start to increase in March and April as milk production plateaus. But, how much will they increase?
According to some economists and the USDA, the 2019 milk price is predicted to be around $1/cwt more than 2018 (OH Class III average of $14.60/cwt). This is primarily because steady, above average beef prices are encouraging US cow numbers, and therefore, total milk supply to both decrease. The USDA forecast also predicts domestic demand to be fairly stable in the future. Looking at the Chicago Mercantile Exchange futures, they are currently trading around $15.40/cwt, which also suggests that the $1/cwt greater forecast for 2019 could be accurate. If I were to guess, I expect the Class III milk price to stay under $15/cwt until May or June and then go over $16/cwt by the end of summer.
Nutrient Prices Continue to be Low
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 January 27, 2019. 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.
When looking at commodity and nutrient prices on a historical basis, they are low. For MP, its current value has increased $0.05/lb from November’s issue ($0.39/lb) but is slowly approaching the 5 year average ($0.48/lb). The cost of NEL is 1¢/Mcal lower than November (6.7¢/Mcal) and about half as expensive as the 5-year average (11¢/Mcal). The price of e-NDF and ne-NDF are not very different from last month at 7.6¢/lb and -1¢/lb (i.e., feeds with a significant content of non-effective NDF are priced at a discount), respectively, which are also close to their 5-year averages (7¢/lb and -2¢/lb).
To estimate the cost of production at these nutrient prices, the Cow-Jones Index was used for average US 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 $8.07/cwt and $8.45/cwt, respectively. If we use current fat and protein averages for Ohio dairy farms (4.0% fat and 3.25% protein), the IONC are better at $8.74/cwt and $9.11/cwt. Regardless, these IONC are worse than November ($9.78/cwt and $10.17/cwt, respectively). These IONC may also 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. This suggests profits for dairy farmers in Ohio are currently at or below breaking even.
Table 1. Prices of dairy nutrients for Ohio dairy farms, January 27, 2019.
Economic Value of Feeds
Results of the Sesame analysis for central Ohio on January 27, 2019 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, January 27, 2019.
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 in Ohio, January 27, 2019.
Bargains At Breakeven Overpriced Corn, ground, dry Bakery Byproducts Alfalfa hay - 40% NDF Corn silage Beet pulp Mechanically extracted canola meal Distillers dried grains Blood meal Citrus pulp Gluten feed 41% Cottonseed meal Fish meal Hominy Feather meal Molasses Meat meal Gluten meal Solvent extracted canola meal Soybean meal - expeller Soybean hulls 44% Soybean meal Wheat middlings 48% Soybean meal Tallow Whole cottonseed Whole, roasted soybeans 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 Table 4.
Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, January 27, 2019.
Cold Weather Dairy Calf Care
Mr. Rory Lewandowski, Extension Educator Wayne County, Ohio State University Extension
Cold winter weather presents some additional challenges to keeping dairy calves healthy, comfortable and growing. The biggest challenge is the increased nutritional requirement for body maintenance, especially for dairy calves in unheated facilities. Nutritional maintenance is what is required to keep all body systems functioning normally while maintaining a healthy body temperature and neither gaining nor losing weight. Cold weather nutrition requires understanding the concept of lower critical temperature. Lower critical temperature is the lower boundary below which the animal needs additional nutrients, primarily energy, to meet maintenance requirements. If the nutrient level is not increased, then the animal must burn fat reserves to meet the need. The lower critical temperature for calves from birth to 7 days of age is 55°F. Between 7 and 30 days of age, the lower critical temperature is in the 48 to 50°F range. For older calves, the lower critical temperature increases to 32°F.
Cold weather nutrition for young calves is critical for a couple of reasons. One is the fact that calves are born with only two to four percent of their body weight as fat. This means that if diets are not meeting maintenance needs, the calf can quickly burn up fat reserves. Calves stop growing and worse, the immune system of the calf becomes compromised leading to sickness. Livestock depend upon an insulating hair coat to provide protection from the cold and to moderate that lower critical temperature. That is one reason that the lower critical temperature for older calves is higher as compared to younger calves, but it takes time and energy to grow and develop that hair coat. Breed of calf will also influence cold weather nutritional requirements because small breed calves, for example, Jerseys, have approximately 20% larger surface area per unit of body weight than a large breed calf, such as a Holstein.
A rule of thumb for feeding calves housed in unheated conditions in cold weather is that for every 10°F below 32°F, the calf needs 10% more milk to meet its nutritional needs. At 0°F, this requires 32% more milk. The best strategy to meet this need is to add an additional feeding. For example, if normally the calf is fed 3 quarts twice a day, add an additional 2-quart feeding. If milk replacer is used, it should contain at least 20% protein or in the 26 to 28% range for accelerated growth programs. The fat content should be at least 15%, and higher fat content milk replacers of up to 20% fat are preferred as temperatures decline. The solids content of liquid milk replacer can be increased in cold weather from a typical 12.5 to 16%, but be careful in going above this content as diarrhea can result, and recognize that the calf may not be receiving enough water. Always offer calves clean, fresh water in addition to milk or milk replacer. Another key to feeding calves in cold weather is to provide all liquids at 105°F target temperature for consumption. With regard to free-choice water, this means offering water several times per day in cold weather. Beginning a few days after birth, offer calves free access to a calf starter grain mix with a minimum protein content of 18%.
There are a couple of other management practices that help to increase calf comfort and aid in keeping calves growing and healthy in cold weather and these involve bedding, providing extra layers of cold protection and ventilation. Straw is the best bedding choice for calves. To provide the most effective thermal insulation, it has to be deep and dry. Calves can nestle down into the straw during cold weather. The goal is to provide enough bedding so that when the calf is nestled down, you don’t see its legs. Dryness is important to keeping the calf warm. Test the dryness of the bedding by kneeling down into it. If your knees get wet, more bedding is needed. Calf jackets offer a good option to add another layer of insulation and cold protection for calves, especially calves under a month of age. Calf jackets should have a water repellent outer shell, an insulation that wicks moisture away from the calf, fit the calf well, be easy to wash and dry, and constructed to withstand outdoor environments. Do not forget about ventilation during winter months in closed structures. The goal is to provide adequate air turnover to prevent ammonia accumulation while avoiding any direct drafts on the calf. A general recommendation for winter weather is four air exchanges per hour.
Cold weather calf care requires more time and labor, but it is necessary to keep calves comfortable, healthy, and growing.
Dairy Cost of Production
Mrs. Dianne Shoemaker, Farm Management Specialist, Ohio State University Extension
The more things change, the more they stay the same. Sadly, milking cows in 2018 was like a flashback to 2016. The average Class III price plus the Federal Order 33 Producer Price Differential (the Statistical Uniform Price or SUP) for 2018 was $15.21/cwt…a whopping 18¢ higher than 2016. 2017 provided a small measure of relief with the SUP averaging $16.57/cwt.
How much are you paying for the privilege of milking cows?
Sadly, more cows and more milk in domestic and foreign markets, as well as a relatively strong dollar and uncertain policy, continue to wreak havoc on milk markets.
Controlling expenses continues to be an important factor in the search for short and long-term profitability of dairy farms. The challenge continues to be controlling costs without negatively affecting production, reproduction, growth, and animal and personnel welfare. With that in mind, regular review of overall costs is in order.
The more things change…
The more they stay the same. Feed, labor, depreciation, and supplies were the top four expenses for all farms and the top 20% of farms in 2017 (Table 1). These were consistently the top four expenses for the last four years.
What is the take home? For most herds, the four highest costs will be feed, labor, depreciation, and supplies. How much potential - and realistic - savings are there for your farm? We cannot cut costs only to negatively impact current and future health and production.
Depreciation of machinery, equipment, and buildings is a hard number to change. This number (7% of the cost-basis balance sheet inventory value for machinery and equipment, 15% for titled vehicles, and 5% for buildings and improvements) represents normal wear, tear, and use of these items in the course of business for the year. The biggest opportunity to impact that number is before machinery, equipment, and buildings are purchased. Is a purchase a want or a need? Is it realistic to expect cows to pay for this item or improvement? How much will it cost per cwt or per cow? What benefits and economic returns will it provide?
The best tools for comparing your farm to other Ohio farms are the benchmark reports included in the Ohio Dairy Enterprise Analysis Summaries which can be found at http://farmprofitability.osu.edu. Directions on the charts explain their use. Bottom line, you can see the range of income and expense items for other Ohio farms. Specifically, these allow farms to set realistic goals for trimming expenses.
Combine this review with an evaluation of net return per cow. Is it positive? This has been a challenge for farms in this extended down price cycle. If it is positive, is it high enough to cover all the demands for principal, family living, income taxes, etc.? Finding the balance will be the ongoing challenge for today’s dairy farm businesses.
Choose 2019 to be the year you focus on really knowing your farm business’s numbers. Money may be tight, but the $100 invested in analyzing your 2018 business year will be the best $100 you spend this year. Technicians are available to work with farms now through the end of May. Contact Dianne Shoemaker at firstname.lastname@example.org or 330-533-5538 to get started.
Table 1. Average expenses, dollars per hundredweight, and percent of total direct and indirect expenses, for 25 conventional Ohio farms and high 20%1 of farms, Ohio, 20172
Avg. all Farms % Total Expenses3 High 20% % Total Expenses Feed $9.58 51.15 $9.33 52.74 Hired Labor 2.44 13.03 1.59 8.99 Breeding Fees 0.36 1.92 0.45 2.54 Veterinary 0.63 3.36 0.55 3.11 Supplies 0.82 4.38 0.78 4.41 Contract Production 0.51 2.72 0.24 1.36 Fuel & Oil 0.27 1.44 0.23 1.30 Repairs 0.52 2.78 0.37 2.09 Custom Hire 0.29 1.55 0.25 1.41 Utilities 0.44 2.35 0.41 2.32 Hauling & Trucking 0.58 3.10 0.55 3.11 Marketing 0.33 1.76 0.62 3.50 Bedding 0.35 1.87 0.22 1.24 Total Direct Expenses $17.12 $15.59 Farm Insurance 0.14 0.70 0.14 0.80 Depreciation 0.75 4.00 1.26 7.12 Interest 0.41 2.19 0.49 2.77 Miscellaneous 0.32 1.70 0.21 1.19 Total Overhead Expenses (OH) $1.61 $2.10 Total Direct & OH Expenses $18.73 $17.69
1Farms sorted by net return per cow.
2Ohio Farm Business Summary Dairy Enterprise Analysis,
including Benchmark Reports 2017; The Ohio State University.
3Percent of total direct and overhead expenses.
Considerations When Fat-Reduced Corn-Distillers Grain with Solubles Is Fed to Dairy Cows
Dr. Chanhee Lee, Assistant Professor, Department of Animal Sciences, The Ohio State University
Corn dried distillers grains with solubles (DG) is a common feed ingredient for lactating cows due to its high protein and fiber contents. Because of its lower price compared with soybean meal (SBM), inclusion of DG in a diet can lower feed costs. However, production responses to a DG diet can vary dependent upon its inclusion rate. Typical DG contains high fat (10 to 13% on a dry matter (DM) basis) and polyunsaturated fatty acids. So, if a diet includes high DG (20 - 30% of dietary DM), feed intake and fiber digestibility can be negatively affected and milk fat depression of cows often occurs.
Reduced-fat corn dried distillers grains with solubles (RFDG; 5 to 8% fat on a DM basis) are another type of DG and produced by partial fat removal from DG. Because of low fat content of RFDG, negative effects that were observed with DG (e.g., milk fat depression) are assumed to be alleviated when RFDG are fed compared with DG. However, little information is available about RFDG, such as its safe inclusion rate without affecting production of lactating dairy cows. According to a few previous studies, RFDG was included in dairy rations up to 30% (DM basis) by replacing SBM, corn, and/or some forages and did not have negative effects on production of dairy cows (e.g., feed intake, milk yield, and milk fat yield). However, most experiments were conducted in a short-term Latin square design (2 weeks of diet adaptation followed by 1 week of production observation). Therefore, we conducted an experiment to examine effects of RFDG at about 30% in dietary DM on production of dairy cows. In this experiment, 12 cows per treatment were used and production was monitored for 11 weeks.
In this experiment, the diet containing SBM and soyhulls was used as Control and RFDG replaced the soybean products for the 30% RFDG diet. Although the 30% RFDG diet did not affect milk yield (Table 1), it significantly decreased milk fat and protein yields. Importantly, the decrease in DM intake and milk fat yield became severe as the experiment progressed (11 weeks). In this experiment, although the inclusion of RFDG in a diet replacing SBM lowered feed cost, the income from milk and component yields also decreased due to milk fat and protein depression (Ohio prices of feeds and milk components when the experiment was conducted in 2017 were used). As a result, the income-over-feed-cost was lower for cows fed the 30% RFDG diet compared with the SBM diet. This experiment indicates that inclusion of RFDG in a ration at 30% (DM basis) can negatively affect production of cows, especially milk fat, and may decrease producers’ profits. The full version of the experiment can be found in the Journal of Dairy Science (2018; 101:5971-5983).
If RFDG is available as a feed ingredient in your farm, the following are the tips that you may need to keep in mind and check before and during feeding RFDG to your cows. First, producers need to know what type of corn distillers grain with solubles they have (DG or RFDG). Potential risk of negative production effects (e.g., milk fat depression) is lower for RFDG compared to DG because of lower fat concentration when included at the same level in a ration. However, when purchased, corn distillers grain with solubles may not be labeled as DG or RFDG. Then, check the fat level on the tag and if the fat level is below 8%, then it is RFDG. Second, if what you have is RFDG, we suggest it to be included at a maximum of 15 to 20% in a ration (DM basis). A diet with 25% of RFDG may be okay, but this needs scientific confirmation. Third, when you include RFDG in a diet, monitor production of your cows closely (feed intake, milk yield, and milk fat yield) for at least 5 to 6 weeks. In our study, the decreases in DM intake and milk fat yield of cows fed the 30% RFDG diet become more severe as the experiment progressed, indicating that negative production effects may not be realized in the first 2 to 4 weeks. Fourth, if your ration contains monensin, be careful when RFDG is included in the ration. Inclusion of monensin in the 30% RFDG diet further decreased feed intake, milk yield, and milk fat yield compared to the control diet in our study (Table 1).
Table 1. Dry matter intake and production of lactating Holstein cows fed a diet containing about 30% reduced fat distillers grain (RFDG) with or without monensin.
Diet Items Control 30% RFDG 30% RFDG with monensin Dry matter intake, lb/day 58.1 55.9 53.7 Milk yield, lb/day 89.8 90.9 86.2 3.5% Fat-corrected milk yield, lb/day 94.2 83.8 75.9 Milk fat, lb/day 3.41 2.71 2.38 Milk protein, lb/day 2.90 2.81 2.64