Buckeye Dairy News: VOLUME 23, ISSUE 1

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

    April F. White, Graduate Student, Department of Animal Sciences, The Ohio State University

    Milk prices

    In the last issue, the Class III futures for November and December were at $23.10 and $16.09/cwt, respectively. Class III closed at $17.08/cwt in December, with protein at $3.03/lb and milk fat at $1.59/lb. Protein is ~$2 lower than in the previous issue. The Class III future for January is ~$1/cwt lower than December at $16.12/cwt, followed by a further decrease to $15.56/cwt in February.

    Nutrient prices

    It can be helpful to compare the prices in Table 1 to the 5-year averages. The price of NEL and MP are about 22 and 21% higher compared to the 5-year averages ($0.08/Mcal and $0.39/lb, respectively). When comparing the nutrient costs to this time last year, however, NEL and MP are about 42 and 36% higher than January 2020 ($0.07/Mcal and $0.35/lb, respectively), while peNDF is 40% lower than its January 2020 price ($0.1077/lb).

    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 January’s issue, the income over nutrient cost (IONC) for cows milking 70 lb/day and 85 lb/day is about $8.73 and $9.18/cwt, respectively. These are both more $6/cwt lower than the estimates in the previous issue and are reflective of the lower protein and fat prices currently reporting. Both estimates are likely to be at least marginally profitable. 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.

    Table 1. Prices of dairy nutrients for Ohio dairy farms, January 26, 2021.

    Economic Value of Feeds

    Results of the Sesame analysis for central Ohio on January 26, 2021 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. For this issue, a price for ring-dried blood meal was not reported, so blood meal was added to the appraisal set in order to provide a price prediction range.

    Table 2. Actual, breakeven (predicted) and 75% confidence limits of 26 feed commodities used on Ohio dairy farms, January 26, 2021.


    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, January 26, 2021.

    Bargains At Breakeven Overpriced
    Bakery byproducts Whole cottonseed Mechanically extracted canola meal
    Corn,ground,dry Soybean meal - expeller Tallow
    Corn silage Wheat bran Fish meal
    Distillers dried grains Whole, roasted soybeans Blood meal
    Feather meal 48% Soybean meal Molasses
    Gluten feed Alfalfa hay - 40% NDF Solvent extracted canola meal
    Hominy 41% Cottonseed meal 44% Soybean meal
    Wheat middlings Beet pulp Soybean hulls
    Gluten meal   Citrus pulp, dried
    Meat 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 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 the Table 4 below.

    Table 4. Prices of dairy nutrients using the 5-nutrient solution for Ohio dairy farms, January 26, 2021.

  2. Thank You

    Dr. Bill Weiss, Professor, Department of Animal Sciences, The Ohio State University

    I came to The Ohio State University in January 1981 as a Ph.D. student working with Dr. Russ Conrad on the nutritional value of heat-damaged forages for dairy cows. About a year after I graduated, Dr. Conrad retired and a faculty position at OARDC in Wooster in the Department of Dairy Science (this was before we became Animal Sciences) opened up. It was my dream job, mostly research in dairy nutrition plus some Extension work. I applied for the position, and apparently, I convinced them I could do the job and have been doing this job for the past 33 years.

    But all good things have to come to an end, and it is time for me to move on to other adventures.  Therefore, I will be retiring at the end of January 2021. During my tenure at OSU, I have met and worked with lots of dairy farmers, nutritionists, veterinarians, and Extension agents (now educators). These relationships were very much two-way streets. I hope I provided you with useful research and helpful answers and I know you never failed to stimulate my thinking about a problem you encountered or perhaps just an observation you made. Those problems and observations often lead to years of research, and sometimes, we even came up with an answer to a problem or question. You were always willing to help when I needed research samples or data or had a group of visitors or students that wanted a tour of a dairy farm or feed mill. It has been a great 33 years; thank you for helping me have a successful career.

  3. Technology and Data Management on the Dairy Farm – Miniseries

    Jason Hartschuh, Extension Educator, Agriculture and Natural Resources, Crawford County, Ohio State University Extension

    Session 1: February 17th ,12:30 pm, register at go.osu.edu/precisiondairy1

    Session 2: February 24th ,12:30 pm, register at go.osu.edu/precisiondairy2

    From milking parlors, to robots, to sophisticated software….Farmers are increasingly using technology to make management decisions on farms. Dairy farming has evolved greatly over the last few decades. If there was ever an industry in need of new technologies to become leaner and greener, it’s dairy farming. Many different kinds of technologies exist in the market today. The sheer number of various technologies and the information produced by them can be overwhelming and confusing. Technologies monitoring various parameters are available to farmers and often these technologies fall into categories including nutrition, production, animal health, fertility, and environment. The decision to adopt a technology depends on factors such as management style, familiarity with computers, ease of use, type of housing system, and perceived benefit to cost ratio. Farmers have many considerations before adopting and implementing dairy technologies. Farmers must consider their unique objectives, as well as family needs.  Technology and increased access to data are enabling dairy farmers to make smarter day-to-day decisions to improve cow health, production, and on-farm efficiencies.

    According to dairy tech expert Dr. Jeffrey Bewley, “technology can help farmers in many aspects on the farm and the farmers who can capitalize on the value of the data will have a competitive advantage in the future.”

    Bewley, an expert in dairy analytics and technology and currently working at Holstein Association USA, will delve deeper into the role of technology on dairy farms on February 17th starting at 12:30 p.m using the virtual meeting tool Zoom; to register visit: go.osu.edu/precisiondairy1.

    Join us again virtually on February 24th at 12:30 pm for a dairy farmer panel on utilization of technology on the farm. A panel of dairy farmers from across Ohio that use precision dairy farming technology in both robotic and parlor operations will be joining us to answer questions about how these technologies benefit their operation. The farmers on our panel each have unique experiences using technologies produced by many different manufactures. They will share with us how their farm management has changed to incorporate the technology to improve cow management, health, and production; to register visit: go.osu.edu/precisiondairy2.

    Each session has a separate registration you will need to complete in order to receive the Zoom registration link. Both programs are free of charge.

  4. Dairy Numbers Considered: A look at 2019 and 2020

    Dianne Shoemaker, Dairy Farm Management Specialist, Ohio State University Extension

    The first half of 2019 was miserable, but as cow numbers finally trended down, milk prices gained strength with Class III increasing steadily from $13.96/cwt in January to $19.37/cwt in December.  The industry looked forward to 2020 and a long-awaited opportunity to rebuild cash reserves.

    The Federal Order 33 Statistical Uniform Price (Table 1) averaged $15.85/cwt in 2020, $1.36 lower than 2019’s $17.21/cwt.  USDA’s 2020 Ohio All Milk Price (AMP) averaged $18.18/cwt, $0.55 lower than 2019’s reported $18.72/cwt.  Ohio’s 2019 AMP is comparable to the average milk price received by farms in the 2019 Ohio Farm Business Summary, $18.62/cwt. 

    Table 1: Federal Order 33 Milk prices and USDA All Milk Prices 2019 and 2020 ($/cwt).

     

    2019

    2020

    Class III Price

    16.96

    18.16

    Producer Price Differential

    0.26

    -2.31

    Uniform Price

    17.21

    15.85

    Ohio All Milk Price

    18.72

    18.18

    US All Milk Price

    18.60

    18.30

    Actual, on-farm milk prices vary from farm to farm based on component production, quality, and quantity. An unexpected factor in 2020 will be how individual Class III processors handled the massive negative producer price differentials in June, July, October, and November milk checks.  Some Class III processors passed on the full deductions to their producers. Others passed at least some of the higher value of Class III milk back to their producers.

    What annual averages cannot convey is the financial roller coaster experienced by farms in 2020 illustrated in Figure 1. The second-highest Class III price of $24.54/cwt posted in July (eclipsed only by September 2014’s $24.60/cwt) was battered down to a $16.52/cwt Uniform Price by a record negative $8.02/cwt Producer Price Differential in Federal Order 33. June, October, and November’s prices weren’t far behind.  Most risk management tools are not designed to deal with producer price differential risk.

    Figure 1. Class III, Producer Price Differential (PPD) and Statistical Uniform Price (SUP), Federal Order 33, January through December 2020.

    How did 2019 look for Ohio’s Dairy Farm Business Summary Farms? Twenty-one farms participated in the 2019 analysis. We will look at data for 17 conventional farms with completed analyses. Herd sizes ranged from 60 cows to nearly 1,200 cows, with four herds milking more than 700 cows (average = 853), four milking 460 to 699 cows (average = 553), six herds milking 130 to 300 cows (average = 170), and three herds milking less than 110 cows (average = 88).

    Net return per cow averaged $249 per cow, ranging from two farms generating more than $1,000 per cow to four farms generating net losses per cow up to $800. Positive net returns are needed to make principal payments, generate family living, pay income tax liabilities and  provide funds to reinvest on and off the farm. Farms generating negative net returns must either use up cash reserves, take on additional operating debt, or accumulate unpaid bills. None of these options are sustainable over multiple years of low or negative returns.

    Table 2 summarizes average cow numbers, milk sold per cow, feed cost and total cost per hundredweight, milk price received and net returns per cow for all farms, and those same numbers for the 4 farms that generated the highest average net return per cow.

    Table 2: 17 Conventional Ohio Dairy Farms, 2019.  High 20% sorted by Net Return per Cow.

     

    All Farms

    High 20%

    Number of cows

    406

    282

    Milk sold per cow

    25,010

    28,319

    Feed cost ($/cwt)

    $10.47

    $8.94

    Total cost ($/cwt)

    $19.30

    $17.24

    Milk price ($/cwt)

    $18.62

    $18.90

    Net Return ($/cow)

    $249

    $897

    The highest cost on dairy farms continues (and will continue) to be feed costs. On average, 54% of total costs were feed costs. For the high 20% farms, 51% of their total costs were committed to feeding the herd. These feed costs are comprehensive and include the feed for cows, calves, and heifers and includes all purchased feed, and home-grown feed which is valued at the crop’s cost of production. Because feed fed considers beginning and ending inventories and quantities and costs of feed produced, it also includes the cost of feed losses from field to feed bunk (shrink). The only feed cost that might not be included is feed costs that are included in custom heifer raising fees. This cost would be included in the custom heifer charge and in total cost of production.

    The high 20% farms sold more milk per cow at a slightly higher milk price, which cost them more than $2/cwt less to produce than the average for all farms. While the four farms that generated negative net returns actually received an average milk price of $19.75/cwt, which was higher than the average price received by all farms and the high 20% farms, it was substantially lower than their $23.23/cwt direct and overhead cost of production and could not be “made up” by any additional dairy income received, which includes sales of cull cows and heifers, bull calves, and breeding stock.

    If we learned anything in 2020, it was that the unexpected and unanticipated can happen without notice. The 2019 analysis showed that some farms made decent returns and others struggled. The 2020 analysis will show the same. That is good news and bad news, depending on which group you will fall in. The trick is getting and staying in the group that makes decent returns, even in years that we would characterize as not the best. Another piece of good news is that the farms that make the high 20% are not the same every year. Why is that good news? Because those farms are consistently in the top 30 to 40% and are positioned to have high 20% years.

    How do farms get there and then stay there? Farm owners and managers must have real, accurate, accrual adjusted numbers. Then these accurate financial analysis numbers are intentionally used to evaluate the farm’s position and progress and used again to set goals and make informed management decisions.  

    Farm owners, managers and bookkeepers are now gathering, or have already assembled, information needed for income tax preparation and starting 2021’s bookkeeping. It is also time to get analysis started and finished. Much of the same information is used. Get started with your farm’s financial analysis starting with your 2020 business year. Find the Ohio Farm Business Analysis Technician closest to you at https://farmprofitability.osu.edu  or contact Dianne Shoemaker at shoemaker.3@osu.edu to start your 2020 analysis now.  All analyses must be completed by the end of May to receive personalized benchmark reports.

  5. New Video on the Ohio State Dairy Program

    Dr. Maurice Eastridge, Professor and Extension Dairy Specialist, Department of Animal Sciences, The Ohio State University

                   The Dairy Working Group, a group of OSU Extension professionals, has developed a new video to highlight the dairy program in the College of Food, Agricultural, and Environmental Sciences at The Ohio State University. Its purpose is to bring attention to the research, Extension, and teaching programs at Ohio State with focus on dairy cattle, including the Columbus and Wooster campuses and programs across the State. Dairy is third in agricultural receipts in the State, ranking behind corn and soybeans, and Ohio has an expansive dairy processing sector, including ranking first in swiss cheese production. The dairy programs at Ohio State focus on farm and animal management, food production and processing, dissemination of the research to the industry, and training students for opportunities in the dairy industry. The video can be viewed at: https://youtu.be/6TTYnf2b4dE

  6. Are You Ready for Death to Knock on Your Farm Business Door?

    David L. Marrison, Extension Educator, Agriculture and Natural Resources, Coshocton County, Ohio State University Extension

    As we each traverse through our lives, we all are presented with moments that make us pause and reflect on how precious the time is we have been given here on earth. This past year has been filled with such moments for many.

    I personally had one of these moments at the end of 2016 when I was flying out of Columbus to teach two days of farm transition workshops for North Carolina State University.  As our flight began its ascent to head south, the plane started shaking and I heard terrible back firing noises from the right engine. When I looked out my window over the wing, I was surprised to see the engine on fire. The next 15 minutes were quite nerve racking and soul searching for everyone on board. My quick disaster calculations had us only having a 50% chance of surviving at best.

    Over those 15 minutes, I had time to think of all the things I had not completed and what the ramifications of my impending peril would be. Some of the things which flashed through my mind included: Why didn’t I finish the new version of my will?  Does anyone know the combination to the safe?  Does anyone know where to find all my passwords to all the accounts? Does anyone know where I hid the bars of gold and silver (that’s, right, I don’t have any). Thankfully, we were able to land on a runway cleared just for us, complete with emergency vehicles. I credit the entire flight crew for handling this situation with a great deal of calm and professionalism. They were literally life savers.

    What will be your trigger or moment which will cause you to pause and think about your mortality? Granted, death is a topic that many are not comfortable talking about. However, our challenge as farm managers is to make time to undertake succession planning which will make life easier for our farm business and family once we are gone.

    One of the hypothetical questions we pose in our OSU Extension farm succession workshops is, “What knowledge would you need to pass on if you knew you had only 2 months to live?” This exact scenario happened to our family and our dairy farm over a decade ago when my father was diagnosed with pancreatic cancer.

    I am grateful that we had the seven weeks with my dad to make preparations. I challenge you to think how your farm and family would react to the loss of the principal operator.  What knowledge and skills need to be transferred to the next generation so they can be successful without you? If there is no farming heir, what will happen to the farm? Will it be sold? Or does the family transition from owner-operator to an owner-landlord role?

    To help jump start your family’s conversation, OSU Extension is pleased to offer a virtual three part “Planning for the Future of Your Farm” workshop on February 15, 22, and March 1, 2021, from 6:30 to 8:30 p.m. via Zoom. This workshop is designed to help farm families learn strategies and provide tools to successfully create a succession and estate plan that helps you transfer your farm’s ownership, management, and assets to the next generation.

    Topics discussed during this series include: Developing Goals for Estate and Succession; Planning for the Transition of Control; Planning for the Unexpected; Communication and Conflict Management during Farm Transfer; Legal Tools & Strategies; Developing Your Team; Getting Affairs in Order; and Selecting an Attorney.

    This workshop will be taught by members of the OSU Farm Office Team featuring Peggy Hall and Jeffrey Lewis, Attorneys from the OSU Agricultural & Resource Law Program, and David Marrison, Co-Leader of the Ohio Ag Manager Team.

    Because of the program being held virtually, it is a great opportunity for parents, children, and grandchildren to join together, regardless of where they live in Ohio or across the United States to develop a plan for the future of your family farm.

    Pre-registration is required as one packet of program materials will be mailed to participating families. Electronic copies of the course materials will also be available to all participants. The registration fee is $40 per farm family. The registration deadline is February 10. More information and on-line registration can be accessed at go.osu.edu/farmsuccession

    We at OSU Extension hope many of you will join us to start your plan or use the webinar series as a chance to review and refresh your existing plan. Confront death before it knocks on your door.

    More information about this series can be obtained at go.osu.edu/farmsuccession or by contacting David Marrison at the Coshocton County Extension Office at 740-622-2265 or by email at marrison.2@osu.edu.

    CFAES provides research and related educational programs to clients on a nondiscriminatory basis. For more information: go.osu.edu/cfaesdiversity.

  7. Ohio Dairy Risk Management Series Held in November 2020 Offered a Range of Important Information to Dairy Producers

    Ben Brown, Farm Management Specialist, Department of Agricultural, Environmental, and Development Economics; Dianne Shoemaker, Dairy Farm Management Specialist, OSU Extension; and Chris Zoller, Extension Educator, Tuscarawas County, OSU  Extension

    Offered in three sessions during November, OSU Extension, in partnership with the Ohio Dairy Producers Association, delivered a dairy risk management webinar series covering three important topics: milk pricing and producer price differentials, outlooks for domestic and international milk product markets, and dairy risk management tools. Slides and recordings for all presentations can be found at https://farmoffice.osu.edu/events/archived-videos.

    Session one was presented by Mark Stephenson from the University of Wisconsin discussing milk pricing and producer price differentials. Due to COVID-19 disrupting supply chains and a change in the 2018 Farm Bill using the average of Class III and Class IV milk prices instead of the higher of the two to set Class I milk prices, Ohio dairy producers experienced several months of historically large negative producer price differentials (PPD). According to Dr. Stevenson, these negative PPDs could continue for a couple more months and producers need to be aware of these when making business planning decisions. Dr. Stephenson’s presentation can be found at https://www.youtube.com/watch?v=fpGfd5c0pi4.            

    Session two highlighted domestic and international markets. William Loux from the U.S. Dairy Export Council started off the session with a presentation on dairy supply and demand outside the United States. International demand for US dairy products is up in 2020, driven primarily by China and the Middle East/ North Africa Region. Southeast Asia also saw large year over year increases in dairy product imports. Loux pointed out there are a couple things to watch for in the next couple of months: COVID-19 resurgence, Brexit and the ability to trade with England, and the subsidization of dairy exports by India. He concluded by saying it is a good sign that the US continues to export dairy products in strong numbers, even with US dairy prices above world dairy prices. His session can be found at https://www.youtube.com/watch?v=fJsHMSkcHVc

    Also in session two, Mike McCully from the McCully Group provided price expectations for US dairy markets over the next 12 months. Key points from his presentation included product specific outlooks with cheese prices being strong on solid demand, butter prices being extremely weak on burdensome supplies and milk prices being relatively stable. He continued that the outlook is mixed, with dairy markets having a bearish tone heading into the first quarter of 2021 on growing milk supplies and concerns over demand, but the second half of 2021 being more bullish given an expected reduction in milk supply growth and possible demand improvements. Mike’s full presentation can be found at https://www.youtube.com/watch?v=NAy6Xy-Nb7s&t=119s

    Session three focused on risk management tools for dairy producers. OSU Extension Educator Chris Zoller provided an overview of USDA’s Dairy Margin Coverage (DMC) program, which is authorized through the Farm Bill every year. Producers wishing to sign up for DMC need to contact their FSA office prior to December 11 to enroll for 2021. Chris’ presentation can be found here: https://www.youtube.com/watch?v=ZR_4SukNX2I&t=24s

    Dr. Kenny Burdine, Associate Extension Professor, University of Kentucky, also presented during session three.  Dr. Burdine discussed Livestock Gross Margin Insurance- Dairy and gave a brief overview of using futures and options in milk price protection. Dr. Burdine suggested USDA’s DMC Program as the first level of protection for smaller producers, with Livestock Gross Margin Insurance- Dairy being the second level of protection. Kenny’s presentation can be found here: https://www.youtube.com/watch?v=PdjEijnDCMw

    Session three concluded with a presentation by OSU Extension Educator Jason Hartschuh on Dairy Revenue Protection Insurance offered through the Risk Management Agency. Jason reviewed six decisions for dairy producers to consider and provided examples of how to use the program. Additional information about this topic can be found at dairy.osu.edu under Dairy Revenue Protection. Jason’s presentation from the webinar series can be found at https://www.youtube.com/watch?v=B38TVJkrlQU

    For any additional questions or thoughts for future risk management webinars, please reach out to Dianne Shoemaker at shoemaker.3@osu.edu, or Chris Zoller at zoller.1@osu.edu, or your local OSU Extension Office.

  8. Beef Sire Selection Program Being Offered to Dairy Producers

    Garth Ruff, Beef Field Specialist, Ohio State University Extension

    Dairy producers over the past few years have faced a variety of challenges: low milk prices, increased feed costs, and often a surplus of heifers to enter the herd. In an effort to manage heifer numbers and add value to bull calves, breeding dairy cows to beef sires has become a more popular and common practice than ever before.

    With the increased focus on producing a higher value beef animal, it is important to understand what contributes to that value in terms of muscling, yield, and performance. Furthermore, we know that not every beef sire is the right fit for beef on dairy production, and it is important to identify those bulls with less desirable traits as well.

    Join Ohio State University Extension on March 10 at 12:00 pm for a program titled “Beef Sire Selection for the Dairy Herd.” In this program, Allen Gahler, Extension Educator in Sandusky County and member of the OSU Extension Beef Team, will discuss which beef cattle EPD’s and traits to consider to maximize the value and marketability of crossbred beef on dairy calves.

    This webinar is free to anyone interested in the topic and we ask that you register online at https://osu.zoom.us/webinar/register/WN_Wk8Gb-GWQJipBkj96Q287Q or go.osu.edu/2021beefschool.