Buckeye Dairy News: Volume 5 Issue 2

Dr. Maurice Eastridge

The 12th annual Tri-State Dairy Nutrition Conference (TSDNC) will be held April 8 & 9, 2003 at the Grand Wayne Center in Fort Wayne, IN. The objective of the Conference is to disseminate current information on the feeding of dairy cattle primarily to individuals who provide nutritional advice to dairy farmers. Feed industry personnel, nutrition consultants, Extension personnel, veterinarians, and interested dairy producers are encouraged to attend. The record attendance for the Conference occurred last year at 535. The Conference is sponsored by The Ohio State, Michigan State, and Purdue Universities and allied industries. The registration fee is $130 per person (discounts available for groups of 10 or more) and is due by March 21. The late registration fee is $155. The registration fee includes refreshments during breaks and the reception, one breakfast, and a copy of the Proceedings. Additional copies of the Proceedings will be available at $20/copy.

A free pre-conference program is sponsored by Mycogen Seeds with the theme of "Impact of Quality Forages". This program occurs from 8:00 am - 12:00 on April 8. Registration for the TSDNC begins at 11:00 on April 8, with the program beginning at 1:00 pm. The Conference concludes at 12:30 pm on April 9. The themes this year are Nutrition and Animal Health, Carbohydrates, Effective Fiber Sources, and Current Issues. Three speakers are from Canada, and other speakers are from IL, KS, PA, WI, MI, OH, and IA. For additional information or to register, contact Amanda Hargett at OSU (614) 688-3143 or go to our web site: http://tristatedairy.osu.edu. Additional information also is available by contacting: Dr. Maurice Eastridge, The Ohio State University, (614) 688-3059; Dr. Herbert Bucholtz, Michigan State University, (517) 355-8432; or Dr. Timothy Johnson, Purdue University, (765) 494-4810.

Dr. Normand St-Pierre

From feeds to nutrients

In appearance, dairy cows are feed converters. They ingest feeds and produce milk. But, we know that the amount of milk produced per unit of feed ingested is not constant across all feedstuffs. This is because fundamentally, feeds are carriers of nutrients. It is these nutrients that cows really need to produce milk. Cows have requirements for nutrients and not for feeds. Cows do not need hay but need effective fiber. Cows do not need corn but need energy. Thus, in essence, when you buy a feed you actually are buying a mixture of nutrients.

From apples to oranges

Imagine that a bag of fruits sells for $6. There are 3 apples and 1 orange in it. Neither do we know the price of one apple, nor do we know the price of one orange. All we know is that 3 apples and 1 orange cost $6. Next to this bag, we find a basket of fruit with 1 apple and 3 oranges. It sells for $10. Just looking at the basket, we don't the price of one apple; neither do we know the price of one orange. However, if we combine the information from the bag of fruit with that from the basket of fruit, we can determine the price of one apple and one orange. You may have forgotten the algebra required to do this, but by trial and error, you would eventually determine that one apple costs $1 and one orange costs $3.

When feeding cows, feedstuffs are the equivalent of the bag and the basket. Nutrients are the equivalent of the apples and oranges. If we have enough feedstuffs (bags and baskets) being traded and if we know their prices, we can calculate the implicit cost of nutrients (apples and oranges). With many feedstuffs and many nutrients, finding the best solution is not trivial, which is why we wrote a software program, Sesame, to do this for us. Check with you local Extension office to inquire about a training workshop in your area for how to use this software.

The cost of nutrients: Ohio, March 2003

We used the nutrient composition table from the National Research Council (2001) for 24 feedstuffs available in Ohio. Prices used were wholesale prices for North Central Ohio for the first week of March 2003, with the addition of $20/ton to account for mixing and delivery charges. These prices approximate a farm delivered price in large, bulk quantities as commodities or blends of commodities. For nutrients, we selected Net Energy for lactation (NEL), rumen degradable protein (RDP), rumen undegradable protein (RUP), effective neutral detergent fiber (e-NDF), and non-effective neutral detergent fiber (ne-NDF). Other nutrients (e.g. minerals, such as phosphorus) may also have a value, but their contributions to the price of the selected commodities are generally small and negligible.

Estimated costs of nutrients are reported in the following table. The numbers in this table are costs expressed in dollars per unit. For example, the cost of one mega-calorie of NEL is about $0.07. Similarly, the cost of one pound of digestible RUP is about $0.22 and one pound of e-NDF is approximately $0.10.

Take note that based on current market conditions, RDP and ne-NDF both have an implicit cost of $0.00. That is, the current market does not attribute any cost to these two nutrients.

Now that we know the unit costs of nutrients, it is very easy to calculate the break-even price (i.e., the market value of the nutrients) for each commodity. This price is reported in the following table in the column labeled "Predicted".

Sesame uses statistical procedures to estimate the cost of nutrients. This enables the software to calculate a "probable" range for the break-even prices. Take bakery by-product meal (bakery waste) as an example. The current market price is $115/ton and the break-even price is estimated at $126.96/ton, with a probable range of $112.82 to $141.10. Thus, bakery by-product meal is currently priced under its break-even price but not enough to make it a real bargain. Gluten feed would be an example of a bargain feed, whereas soybean hulls are currently grossly overpriced. The same information is reported visually in the following figure.

Feeds located above the top red line (very top line) are considered overpriced; those between the two red lines (very top and very bottom lines) are priced according to their respective nutrient content; those under the bottom red line (very bottom line) are bargains.

This does not mean that a balanced diet (ration) can be made exclusively of bargain feeds. What this implies is that opportunities to reduce feed costs exist by maximizing the use of bargain feedstuffs while minimizing the use of overpriced ones. A nutritionist equipped with a valid ration balancing software is still required to determine the amounts of feedstuffs to be mixed to produce a sound ration.

Mr. Robert Fleming

About a year ago, I wrote: "Several trends are quite clear in the broad area of farm management. More farms are using hired labor, family or non-family, regularly to accomplish their goals. Farm labor laws, while still retaining some exceptions, are becoming more consistent with non-farm laws and regulations. Human resource management is important in the long-run success of the farm, regardless of the size or type of farming operation." Let's review some major employment rules for agricultural labor including dairy farms.

Federal Tax Withholding (http://irs.ustrea.gov)

Since January 1, 1990, agricultural employers have been required to withhold Federal income taxes on their employees. Agricultural labor has always been subject to FICA taxes and its withholding, with a few exceptions, but the withholding of income taxes had been optional. Agricultural employers must now withhold, deposit, report, and pay income taxes and Social Security taxes on their employees.

Who Is Subject?

The withholding of income taxes will affect agricultural employers who are paying wages subject to FICA (Social Security) taxes. Those include any employee receiving cash wages of $150 or more during the year or all employees if the employer paid wages of $2,500 or more during the year. Cash wages paid to a spouse are subject to FICA taxes. Children under the age of 18 at the start of the year in the employ of a parent, who is a sole proprietor, are not subject to FICA taxes. Farmers who expect to exceed either of the tests should withhold income and FICA taxes at the start of the year. Wages paid in commodities are not currently subject to withholding or FICA taxes but do count toward the $2,500 test. See "How Do Employment Taxes Apply to Farm Work" from IRS Circular A, 2003.

Changes In The Employment Tax Deposit Rules

The IRS updated regulations in 2001 covering how often deposits of federal employment taxes must be made.

General Rules

Under the rules, each agricultural employer will be classified as either a monthly or semi-weekly depositor of payroll taxes. Your deposit status will depend on the amount of employment taxes, including withheld federal income taxes, reported for a one-year "lookback" period. The "lookback" period for agricultural employers is the second calendar year preceding the current year. For example, the lookback period for calendar year 2003 is calendar year 2001.

If the employment taxes reported during the lookback period were more than $50,000, you will be classified as a semi-weekly depositor. If the employment taxes reported were $50,000 or less, you are a monthly depositor. The IRS will notify employers each November as to what your deposit status is for the coming year.

Exceptions

As an agricultural employer, if you accumulate less than $2,500 of employment taxes for the entire year, no deposits during the year are required. You can pay the employment taxes for the year with Form 943, Employer's Annual Tax Return for Agricultural Employees, by January 31st. An option is to make a deposit by December 31st to take the deduction during the current year for the employer's share of Social Security taxes.

If you are uncertain that your employment taxes will be less than $2,500 during the current year, make deposits under the appropriate rules (monthly deposits) to avoid the possibility of being penalized. That is, for any amount you pay employees, make a deposit of the employment taxes by the 15th of the following month. Doing so will avoid potential problems if your total payroll tax bill for the year turns out to be $2,500 or more. See Circular A (Publication 51), Agricultural Employers Tax Guide, Rev. January 2003.

State & School District Income Taxes (http://www.state.oh.us/taxfarm)

Farmers are not required to withhold Ohio income taxes or School District income taxes from their farm employees unless the employee requests it and the employer agrees.

If an employee's Ohio plus School District income taxes total more than $500, he/she must file an estimated tax declaration and make quarterly estimated tax payments unless the withholding will meet their obligation.

Ohio New Hire Reporting (http://newhirereporting.com/oh-newhire)

Under Ohio Revised Code (Sec. 5101.312), all employers including farm employers are required to report all new hires within 20 days of employment. The required report includes seasonal, part-time, and employees under 18 years of age and there is no exception for family members. Reporting can be by fax, mail, electronic, file transfer protocol, magnetic tape, or diskette.

Workers' Compensation (http://www.ohiobwc.com)

Workers' compensation coverage is required of all farm owners and operators with one or more employees. Employees covered include farm workers under the age of 18, part-time, full-time, and seasonal employees. Family members who are employees of the business must also be covered. There is optional coverage for the officers of a farm corporation.

Workers' compensation coverage does not extend to an independent contractor and his/her employees. Wages reported for premium determination must include any wages paid in commodities to farm employees.

Workers' compensation pays for all employees' medical care related to occupational injuries or diseases. Workers' compensation also provides compensation to the worker and/or dependents in the case of job related disabilities or death. The employer's own private health and accident insurance policy may not cover expenses that should have been covered by Worker's Compensation.

Federal Minimum Wage (http://www.dol.gov/esa/whd)

The minimum wage is currently $5.15 per hour. Agricultural employees who employ more than 500 man-days of labor in any calendar quarter of the preceding calendar year must pay at least the minimum wage. Agricultural employers using less than the 500 man-days of labor are exempt from the minimum wage provisions. A man-day is any day during which an employee does agricultural labor for at least one hour. Five hundred man-days is about equivalent to seven employees working fulltime in a calendar quarter.

The employer's immediate family who are employees are not included in the 500 man-day test unless the employer is a farm corporation.

Immigration Reform and Control Act (http://www.immigration.gov)

The Immigration Reform and Control Act affects all American employers. The law makes it illegal to hire unauthorized aliens. ALL employers must establish employment eligibility and the identity of new employees by completing Form I-9. Employers need to keep completed I-9's for three years or one year after an employee leaves. Form I-9 is available from the Immigration and Naturalization Service, Department of Justice.

Summary

There are other farm labor provisions such as Child Labor, O.S.H.A., E.P.A. and others that may affect farm labor. Here are some additional websites that provide farm labor management and regulation information:

Mid-American Agr & Hort Services, Inc., http://www.midamservices.org
Gempler's Alert, http://www.gemplers.com/alert.htm
Northwest Extension District, http://northwest.osu.edu
Department of Agricultural, Environmental & Development Economics,
The Ohio State University, http://aede.osu.edu/people
(go to Agribusiness/Farm Management and Bernie Erven publications)
Agr. Business Enhancement Center, http://www.ag.ohio-state.edu/~abe

Properly and legally managing labor will help dairy farms make progress toward their mission statement, goals, and objectives.