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Buckeye Dairy News : VOLUME 22, ISSUE 3
Milk Prices, Costs of Nutrients, Margins and Comparison of Feedstuffs Prices
April Frye White, Graduate Research Associate, Department of Animal Sciences, The Ohio State University
In the last issue, the Class III futures for March and April were at $16.23 and $15.73/cwt, respectively. The Class III component price for March closed very close to the predicted price at $16.25/cwt but was more than $3/cwt lower in April at $13.07/cwt. The Class III future for May is lower than April component prices at $12.22/cwt, followed by a sizeable increase to $17.52/cwt in June. Longer term market outlooks are starting to normalize, but prices may continue to be volatile as the global market starts to recover.
When comparing the prices in Table 1 to the 5-year averages, the current prices of nutrients are acceptable.The price of net energy of lactation (NEL) is about 48% lower than the 5-year average ($0.08/Mcal). However, the price of metabolizable protein (MP) and effective neutral detergent fiber (eNDF) are about 10 and 20% higher compared to the 5-year averages ($0.42/lb and $0.08/lb, respectively). The price of MP is about 30% higher than March ($0.36/lb), but the price of NEL and eNDF are both 3% and 30% lower than the last issue ($0.06/Mcal and $0.17/lb, respectively). This is reflective of the increased cost of several high protein feed ingredients, as well as the lower prices of several high energy feed ingredients, shown in Table 2.
To estimate profitability at these nutrient prices, the Cow-Jones Index was used for average US cows weighing 1500 lb and producing milk with 3.9% fat and 3.2% protein. For May’s issue, the income over nutrient cost (IONC) for cows milking 70 and 85 lb/day is about $7.13 and $7.56/cwt, respectively. This is more than $3/cwt lower than estimates from March ($10.61 and $11.13/cwt, respectively). The current IONC is likely not profitable for Ohio dairy farmers. As a word of caution, these estimates of IONC do not account for the cost of replacements or dry cows, or for profitability changes related to culling cows.
Overall, milk price has dropped to a greater degree than the prices of feeds, and prospects to pay down debt may be limited in the near future.
Table 1. Prices of dairy nutrients for Ohio dairy farms, May 26, 2020.
Economic Value of Feeds
Results of the Sesame analysis for central Ohio on May 26, 2020 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 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 26 feed commodities used on Ohio dairy farms, May 26, 2020
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 based on current nutrient values, 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 value) 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, May 26, 2020.
Bargains At Breakeven Overpriced Corn, ground, dry Soybean hulls Corn silage Bakery byproducts Blood meal Distillers dried grains Wheat bran Fish meal Feather meal 48% Soybean meal Beet pulp Gluten feed Gluten meal Molasses Hominy Sovent extracted canola meal Whole cottonseed 44% soybean meal Wheat middlings Tallow Soybean meal - expeller Whole, roasted soybeans 41% Cottonseed meal Alfalfa hay - 40% NDF Meat Meal Mechanically extracted canola meal
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, May 26, 2020.
Economic Assistance Available for Dairy Farms
Dianne Shoemaker, Extension Farm Management Specialist, Ohio State University Extension
One hundred and fifty days. In only 150 days we have gone from anticipating a solid year of recovery for the dairy industry to seeing an April Class III price of $13.07 per cwt, the lowest Class III milk price in 10 years, with May announced at $12.14 on June 8th. In that same time period major market disruptions occurred for nearly every commodity with impacts all along the food chain. The response to the anticipated economic impact at the farm level has been swift, with a variety of options available to assist dairy farms. We will touch on a few of them here, including links for additional information. Every farm should review these options and see if there are opportunities to assist with cash flow shortfalls.
PPP - Paycheck Protection Program
At the end of May, there were still funds available for the PPP. This low-interest loan program, authorized by the CARES Act (Coronavirus Aid, Relief and Economic Assistance Act) is administered through the SBA (Small Business Administration) to assist small businesses, including farms. The maximum loan amount is calculated as up to 2.5 months of qualifying payroll expenses as well as sole proprietor income. While loan proceeds can be used for any business expense, if it is used for specific expenses including payroll, utilities, mortgage interest or some rental payments within a specified time period, some portion or all of the loan may be forgiven. Farms must apply through an SBA approved lender. Find approved lenders and more information at http://sba.gov. Recipients must apply for loan forgiveness. Applications for forgiveness are now available, but specific guidance on eligible items and time periods continues to be announced.
EIDL – Economic Injury Disaster Loan
This is another CARES-authorized SBA program which is currently open only for farm applications at the sba.gov website. Farm businesses and agricultural cooperatives with no more than 500 employees may apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19. An “emergency advance” component provides an advance of up to $10,000 even if the loan is not approved. The advance may be forgiven if the farm does not also have a PPP loan that is forgiven. Clarification is pending. Approved loans will incur 3.75% interest for terms up to 30 years. Collateral will be required for larger loans. Applications taken on-line only. Find more information at http://sba.gov.
CFAP – Coronavirus Food Assistance Program
The intent of this program is to directly assist farms impacted by the effects of the COVID-19 outbreak. Sign-up began at your local FSA (Farm Service Agency) office on Tuesday, May 26th and continues through August 28th. FSA offices currently work with clients via email, fax, and phone by appointment.
Two funding sources are being used for this program, CFAP ($9.5 billion), and CCC, the Commodity Credit Corporation, ($6.5 billion). The sources and uses are being tracked separately by FSA, but the payments will be combined and distributed to farms as a single payment. Payment limits have been raised for this program only, to $250,000 per farm or up to $750,000 for farms that are set up as corporations, limited liability companies, or limited partnerships (corporate entities). If these entities have up to three shareholders who meet eligibility requirements, they may be eligible for up $750,000 of assistance. Eligibility requirements include gross farm income levels, wetland, and conservation compliance, and for individuals involved in multiple-shareholder situations, time spent actively working or managing in the farm business. Once a farm has been approved, they will receive a first payment of 80% of the total calculated payment up to $200,000 per entity (80% of the $250,000 payment limitation). If there are still funds available, the remaining 20%, or a prorated amount based on remaining funds available, will be paid at a later time.
The CFAP program is based on the change in futures prices between the weeks of January 13 – 17, and April 6 – 9, 2020. Commodities that experienced a decline of greater than 5% are included in this program. For dairy, that decline was around 33%, or $5.88 per cwt., calculated by USDA as the weighted average of the Class III price (60%), and the Class IV price (40%) which was selected as a reasonable representation of the trend of the US all-milk price.
Dairy markets took a severe beating since January and only recently trended upward in June – and will only actually settle at decent price levels going forward if supply aligns with demand. We cannot keep milking more and more cows.
The program’s dairy (milk) section will yield the greatest assistance to qualifying farmers. Cull cows, bull calves and dairy steers are included in the cattle section. Farms that sell qualifying grain crops which were subject to price risk in the first quarter of 2020 will also find assistance in that section.
CFAP Dairy Calculation
Milk produced in January, February, and March (first quarter 2020) that was not priced through a forward contract, is eligible for assistance. The formula for dairy is:
- The CARES rate of $4.71/cwt represents the price loss in Jan, Feb, and March.
- Part two of the equation applies a projected 1.4% production increase.
- The CCC rate represents anticipated price losses in April, May, and June.
These program payments are not subject to sequestration deductions.
The increase in payment limitations for this program has increased the assistance available to larger farms. Using the simple example above, a herd with 500 milking cows shipping 80 pounds per cow per day would have a calculated total payment of $227,050, leaving an opportunity to apply for some assistance based on cull cows and bull calves sold between January 15 and April 15, 2020 before reaching the $250,000 payment limit.
Dairy cull cows qualify for assistance in the “Slaughter Cattle – Mature Cattle” category. The definition for these animals is “culled cattle raised or maintained for breeding purposes, but which were removed from inventory and are intended for slaughter.” For animals sold between January 15 and April 15, the payment rate is $92 per head. The dairy breeding stock herd is not eligible for a per-head payment.
Bull Calves, Dairy Steers
These animals, because they are going into beef production channels, qualify as either “Feeder Cattle less than 600 pounds” or “Feeder Cattle more than 600 pounds”. Cull heifers sold for beef production would also be included in these categories depending on weight. Animals less than 600 pounds are eligible for $102 per head (CARES Act rate) if they were sold between January 15 and April 15. Animals greater than 600 pounds sold in the same time period are eligible for assistance at $139 per head (CARES). For farms that finish steers (or heifers for beef) that meet weight requirements of 1,400 pounds liveweight or more with an average carcass weight greater than 800 pounds intended for slaughter are eligible for $214 per head (CARES rate). The CCC rate applied to these animals is based on the highest inventory between 4/16/2020 and 5/14/2020. If the farm keeps an inventory of animals for beef production, the highest inventory of animals between 4/16/2020 and 5/14/2020 is eligible for a $33 per head payment. For cull cows, it appears that the highest inventory will be the total number of cows culled between 4/16 and 5/14. For bull calves, the highest inventory between 4/16 and 5/14 would be equal to the largest group of calves sold in that time period.
Feed and Grain
Clarifications issued by FSA indicate that corn silage converted to bushels of grain is eligible for the CFAP program as well. Farms that also sell grain and other eligible commodities can make application for those commodities.
Applying for CFAP
Farm Service Agency offices are working with farms via phone, fax, US mail, and internet. Most FSA offices will ask for supporting documentation for milk and livestock sales at the time of application. Participating farms should also keep records of those sales for at least three years.
At the FSA office, information is collected via a user-friendly spreadsheet found along with additional program information at https://www.farmers.gov/cfap. Farmers who have not previously applied for FSA programs can find information for first-time applicants at this web site or call 877-508-8364 for additional assistance. While documentation is not collected at time of application, it may be requested for verification or spot checking during the next three years.
Dairy prices have taken tremendous hits, which were painfully obvious in the April final milk checks. The Class III milk price of $13.07 is the lowest since April 2010 and even with a positive producer price differential of $1.15, well below cost of production. May will be more of the same.
These programs will help with some of the resulting cash shortfall. Find more information about all these programs and others that may assist with COVID-19 related employee-related leave and unemployment issues at http://dairy.osu.edu and http://farmoffice.osu.edu.
Dairy farms are facing huge challenges this spring and have to make many unanticipated decisions. Our OSU Dairy Working Group is responding with DIBS (Dairy Issue Briefs) to help inform those decisions. These “breaking news” DIBS are posted regularly at http://dairy.osu.edu
Should You Consider Reducing Mineral Supplementation in Periods of Low Milk Prices?
Dr. Bill Weiss, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University
The cost of mineral and vitamin supplementation is low compared to the cost of providing adequate energy and protein to dairy cows. However, that does not mean those costs should not be scrutinized closely in periods of low milk prices. Calcium and salt are so inexpensive they should be fed in slight excess (e.g., about 20%), totally independent of milk prices. Magnesium and supplemental phosphorus are expensive, but deficiencies can be quite costly. In most situations, you should not buy any additional supplemental P once lactating cow diets contain 0.35 to 0.38% P (diet dry matter basis). However, diets with byproducts, such as distiller grains, wheat midds, and corn gluten feed, often have P concentrations greater than those levels but that P is inexpensive. Magnesium is almost always deficient in basal diets and will need to be supplemented. Cows have very little Mg reserves so if diets are deficient, deficiency signs can develop quickly. Furthermore, basal diets often contain excess potassium which inhibits Mg absorption, increasing the risk of deficiency. In most situations, diets with 0.20 to 0.25% Mg is adequate for lactating cows. The quality of magnesium oxide (most common form of supplemental Mg) varies widely. Be leery of very cheap magnesium oxide because the Mg may not be available to the animal. Feeding products that increase the DCAD (concentration of potassium + sodium – concentrations of chloride + sulfur, expressed as milliequivalents per kg of diet) often increase milk fat yield. Based on a study from University of Maryland, for every 100 unit increase in DCAD (mEq/kg), milk fat yield is expected to increase about 0.75 lb/day. Compare the cost of the buffers to the value of milk fat when determining whether to include buffers in the diet.
Trace mineral supplementation should be evaluated closely during periods of low milk prices. Often these minerals (copper, manganese, iron, selenium and zinc) are over supplemented and simply reducing supplementation rates so that total (basal plus supplemental) minerals are approximately equal to NRC recommendations will cut supplementation costs. In most cases, diets should have 10 to 13 mg/kg (ppm) Cu, 35 to 40 ppm Mn, and 40 to 50 ppm Zn. Supplemental Se should be fed at 0.3 ppm (this does not include basal). Supplemental iron is almost never needed and should be removed from the diet. Cows store trace minerals in the liver so even if these rates are not quite adequate, short term deficiency is very unlikely because of mobilization from the liver. For most cows, in the short term (weeks to a few months) copper supplementation could be reduced below NRC because of liver stores. However because of the effects zinc may have on bacteria within the digestive tract, it should not be reduced much below the concentrations stated above. In the short term, Mn could be reduced to around 25 ppm for lactating cows, but dry cows should be fed at least 40 ppm to maintain normal fetal development. Essentially every study conducted evaluating the economic benefits of selenium supplementation show a very positive return on investment and all diets should continue to be supplemented with 0.3 ppm Se. Another cost consideration is form of trace minerals. The sulfate forms are commonly fed and are usually the least expensive source of minerals. Several commercial forms of organic trace minerals are available, but they almost always cost more than sulfates. Positive responses to high quality organic Zn are likely and some of these responses have longer term implications, such as on hoof health. If you are currently feeding organic Zn, you may want to consider using 50% organic Zn and 50% sulfate Zn to reduce costs but continuing to include some organic Zn is a good idea. Several studies have shown that a blend of organic and inorganic trace minerals works well. Organic Cu should be used when antagonists, such as high sulfur water or high sulfur diets are fed, but if antagonists are not a problem, copper sulfate is probably adequate. The value of organic Mn is not clear and manganese sulfate is likely acceptable. In most situations, selenite or selenite are acceptable forms of supplemental Se, but because of transfer to the fetus, dry cows should be fed a blend of selenite and high-quality selenium yeast.
Because of supply issues, the prices of several vitamins are much higher than typical. Often vitamins are over supplemented; however, most data show that feeding vitamins A, D, and E at about NRC levels (approximately 70,000, 25,000 and 500 IU/day for lactating cows) is adequate. The first recommendation to reducing vitamin costs is simply reduce supplementation to those rates. If additional savings are needed, vitamin A could be reduced below NRC because liver stores are probably adequate in most cows to last several months. Cows do not store large amounts of vitamin D and E in forms readily available to the cow so supplementation should not be reduced much below the above recommendations. An exception is grazing cows because fresh pasture is an excellent source of vitamin E, and sun exposure allows the cow to make vitamin D. For grazing cows, supplementation rates for vitamin D and E could be cut in half without any issue.
Supplemental biotin increases milk production and improves hoof health. Unfortunately, the price of biotin is quite high now because of manufacturing issues. Hoof health has long term implications; therefore, if you are feeding biotin to improve hoof health, I would not remove it from the diet. Studies with beef cattle suggest that 10 mg/day (rather than the standard 20 mg/day) may be enough; therefore, consider leaving biotin in the diet but at half the normal supplementation rate.
Milk Production of Ohio Dairy Herds (2016 through 2019)
Dr. Maurice L. Eastridge, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University
It is always important to monitor the yield of milk and the composition of milk, especially for the individual farmer, because the income of the dairy farm depends on this source of revenue. The yields of fat and protein are the primary determinants of the price received by farmers. The proportions of fat and protein are useful in monitoring cow health and feeding practices within a farm. The income over feed costs (IOFC) and feed costs per hundred of milk are important monitors of costs of milk production.
The average production of milk, fat, and protein by breed for Ohio dairy herds during 2016 through 2019 using the Dairy Herd Improvement (DHI; http://www.dhiohio.com) program are provided in Table 1. Not all herds on DHI are included in the table below because of the different testing options offered by DHI, some herds opt for no release of records, lack of sufficient number of test dates, and given that some of the herds consist of other breeds than the ones shown. In comparison, the average of milk yields from USDA data for all cows in Ohio during the same time period are provided.
Table 1. Number of herds, milk yield, milk fat, and milk protein by breed for Ohio herds on DHI during 2016 through 2019.
Ayrshire 2016 9 16,919 3.83 3.25 2017 6 16,145 4.00 3.25 2018 4 16,346 4.29 3.25 2019 3 16,225 4.53 3.22 Brown Swiss 2016 17 20,216 4.22 3.45 2017 16 19,840 4.25 3.49 2018 13 19,817 4.21 3.46 2019 10 19,989 4.24 3.52 Guernsey 2016 6 17,606 4.73 3.41 2017 5 17,063 4.76 3.45 2018 5 15,800 4.60 3.39 2019 5 14,787 4.52 3.37 Holstein 2016 272 25,202 3.69 3.08 2017 245 25,625 3.87 3.18 2018 198 25,506 3.79 3.09 2019 171 25,843 3.85 3.11 Jersey 2016 62 17,600 4.85 3.65 2017 62 17,865 4.82 3.58 2018 44 17,438 5.04 3.65 2019 37 17,673 4.88 3.64 Mixed 2016 24 23,481 3.90 3.21 2017 21 24,441 4.02 3.22 2018 17 22,852 4.21 3.31 2019 15 24,233 4.19 3.40 Ohio1 2016 2,512 20,875 --- --- 2017 2,337 21,284 --- --- 2018 2,220 21,359 --- --- 2019 1,868 21,614 --- ---
1Data available from United States Department of Agriculture, National Agricultural Statistics Service.