Buckeye Dairy News : Volume 5 Issue 6

  1. The MILC Program - Time to Act for the 2.4 Billion Pound Plus Producers

    Ms. Dianne Shoemaker, District Dairy Specialist, Ohio State University

    The beginning of the next Milk Income Loss Compensation (MILC) program fiscal year (October 1, 2003 through September 30, 2004) is fast approaching. For producers who ship less than the 2.4 million pounds of milk sold payment cap, no action is necessary. However, producers who will ship more than that must act quickly if their designated start month was October 2002.

    Over-the-cap producers have the option of deciding which month they will begin to receive payments for a program year. Many initially chose October of 2002 because prevailing milk prices led to a $1.59/cwt program payment. Payments continued monthly until the 2.4 million pound cap was met. Unless a producer changed the designated starting month (this must be done by the 15th of the preceding month), the program will begin payments again starting in October 2003 for the 2003/2004 program year.

    Program payments decline as milk prices increase. For instance, September's payment will be $0.00. It is anticipated that the October 2003 payment will be zero or near zero. It is important to note that pounds of milk produced are accrued, regardless of the amount of the program payment. In other words, if the monthly payment is zero, the producer will not receive a payment. However, the pounds of milk sold in that month will still be counted against the 2.4 million pound annual maximum.

    Producers shipping more than the 2.4 million pound production cap should check with their local Farm Services Agency Office before September 15th to see if their start month is where they want it to be.

  2. Futures Market Offers 'Premiums' to Cash: What you need to know?

    Dr. Cameron Thraen, Milk Marketing Specialist, Ohio State University,
    Additional milk marketing information by Dr. Thraen

    In this offering for the Buckeye Dairy News, I am going to take a departure from the traditional policy and price outlook to show you how you can 'read' the prices being set on the Chicago Mercantile Exchange (CME) Futures & Option market and do a little forecasting on your own.

    Ok, it has finally gone and happened. After an impressive run, which began back on July 31 of this year, the cash cheese market on the Chicago Mercantile Exchange has finally gone and taken the plunge! As I write this article the block cheese price has retreated $0.18/lb, from the high of $1.60/lb and the barrel cheese price $0.20/lb from its high of $1.57/lb. Of course, we all 'knew' that unless the whacky workings of the cheese market had gone completely off-kilter, these lofty prices just could not last. Good thing that it lasted long enough to set milk prices for August, September, and October, and Advanced prices for November! This shot in the arm moved the class III price steadily up from $9.75/cwt back in June to a welcomed $14.39/cwt for October. The Uniform Price in the Mideast Federal Order moved up from $10.63/cwt in June to $13.93/cwt for September and should be over $14.40/cwt when announced this week.

    Now with cheese prices making a typical seasonal retreat back to what will likely be the $1.25 to 1.35/lb level, and the butter price trading in the $1.14 to 1.19/lb range, it may appear to you that all of the good times and market pricing opportunities are over for the foreseeable future (the next 6 months anyway). The good news is that this is just not the case. If you are a proactive pricer, that is, one who proactively takes action to secure your price when the opportunity appears, rather than waiting to see what the market will give you, then this column is just for you. By watching the Chicago Mercantile Exchange Class III futures prices and knowing what to expect as 'average cash prices', there may be 'premiums' or 'discounts' to what we might expect to receive in the cash market. Let me elaborate.

    In Table 1, I show the average announced class III price, by month, for differing number of years used to compute the average. From these averages, I have computed the 'premium' or 'discount' that exists in the current CME futures class III prices. The premium is computed as the CME futures class III price (as of 11-05-2003) minus the average class III price using the following averages: (a) 3-year, (b) 5-year, (c) 7-year, (d) 10-year, and (e) 14 year periods.

    Table 1. "Premium / Discount" currently in the Chicago Mercantile Exchange (CME) Class III Futures Price for 2004.

     
    January
    February
    March
    April
    May
    June
    Class III Settle Price ($/cwt)
    11.50
    11.26
    11.29
    11.26
    11.26
    11.90
    3-year average
    0.95
    0.98
    1.11
    0.73
    0.05
    -0.12
    5-year average
    -0.09
    1.23
    1.03
    0.79
    0.50
    0.35
    7-year average
    -0.38
    0.48
    0.41
    0.50
    0.56
    0.13
    10-year average
    -0.46
    0.11
    0.00
    0.08
    0.20
    -0.12
    14-year average
    -0.38
    0.21
    0.17
    0.08
    0.05
    -0.22

     
    July
    August
    September
    October
    November
    December
    Class III Settle Price ($/cwt)
    12.40
    12.75
    13.30
    12.55
    12.00
    11.65
    3-year average
    -0.69
    -1.46
    -1.87
    -1.74
    0.93
    0.73
    5-year average
    -0.66
    -1.46
    -1.93
    -0.74
    1.62
    0.87
    7-year average
    -0.85
    -1.62
    -2.08
    -1.37
    -0.05
    -0.69
    10-year average
    -0.86
    -1.51
    -1.96
    -1.41
    -0.24
    -0.59
    14-year average
    -0.75
    -1.22
    -1.59
    -1.20
    -0.48
    -0.63

    Let's take January as an example. If you think that this coming January will be very much like the average of the last three, e.g., 2001 to 2003, you can see from the entry in the table coinciding with the 3-year average that the current futures price is $0.95/cwt over the 3 year average class III price for January. If you wish to include more January cash class III prices, then look at the 5-year average in the next row down. The 'premium' is now a minus $0.09/cwt. No premium at all, but a discount. As you work down the column and take in even more January prices, you can see that the discount grows. Now you have to make a decision. Are the current conditions, supply versus demand, more likely to be represented by the last three years, five years, or 14 years? If you are thinking 'surely the January price cannot be less than $11.55/cwt, recall that in 2001, the class III price slid from a September high of $15.90 to 11.87/cwt by January of 2003! When the cheese market retreats, it can have a major impact on the Class III price. I am not saying that this is the current situation today, just that it can and has played out this way in the past.

    Now look at the numbers in Table 1 for the February through April months. Up to the 7-year average, the current futures market Class III contract is offering a decent 'premium'. For example, February and March contain in excess, a dollar premium for the three and five year averages. At this time, buyers and sellers of Class III futures contracts do not see milk prices sinking toward the historical lows for these months.

    As we get to the summer and early fall months of July through October, we can see that the current CME futures prices are all 'discounts' to what we have received, on average, during these months. This is exactly what you should expect. Futures prices for commodities that are not storable, such as milk, reflect the futures market participants' forecasts of what they expect the market price to be in the � what else? � future. And as the weather (and its impact on production) is the big uncertainty during the summer and early fall months (witness 2001 and 2003), these same market participants are conservative in forecasting bad weather and therefore unwilling to pay any premium at this time.

    If you have access to a computer with an internet connection, you can find this 'Premium / Discount' table displayed on my website: http://aede.osu.edu/programs/ohiodairy. The table of premiums and discounts is updated after the close of trading each day. If you would like to become more knowledgeable about the milk and dairy markets, and would like to become a "ProActive Pricer", I will be offering my course Pricing Milk and Dairy Products in the United States through The Ohio State University - ATI, Wooster, Ohio, January 8 through March 13, 2004. This is a comprehensive course designed to broaden your knowledge of milk and dairy product pricing, Federal Milk Marketing Order pricing rules, and the factors that determine your milk check. The course provides practical hands-on experience with the dairy futures and options markets and pricing. The course meets each Thursday from 12:00 - 3:00 pm. If you would like more information on this course, contact Jan Elliott, Business Training & Education, The Ohio State University-ATI, (330) 287-7511, or email to elliott.3@osu.edu. The course Pricing Milk and Dairy Products in the United States will not be offered again until 2006, so do not miss this opportunity!

  3. Controlling Feed Cost: What to do when the protein market goes ballistic?

    Dr. Normand St-Pierre, Dairy Management Specialist, Ohio State University

    When it rains, it pours! Just when we thought that feed prices had reached their peaks in late summer, news of a short U. S. soybean crop reached trading markets, resulting in skyrocketing protein prices, especially high protein sources. With whole soybeans trading near $8.00/bu, it is unlikely that we will see much reduction in protein prices until the next soybean crop in the Southern hemisphere. Meanwhile, you can make tactical and strategic changes to your dairy rations and save some money. To do so, you first must understand how nutrients are currently being priced on the commodity market. The software Sesame is specifically geared to do this. Using 26 commodity prices (FOB, Central Ohio, TTL), we can extract the implicit prices of major nutrients in dairy diets. Results, as of early November 2003, are reported in Table 1.

    Unit cost of net energy lactation (NEL) ($0.067 per Mcal) is within the normal range experienced during the last decade. Thus, energy is currently not particularly expensive and your dairy diets should probably not aim at reducing this nutrient to its strict minimum. Rumen degradable protein (RDP), however, is very expensive ($0.12/lb), a net result of the high soybean meal price combined with most of the protein market moving up in sympathy. The normal ration of a high producing cow ration is generally balanced to supply 5 to 6 lb/cow/day of RDP. Thus, supplying adequate RDP currently costs an average of $0.60 to 0.72/cow/day and represents a significant increase in nutrient costs. On the other hand, the price of digestible, rumen undegradable protein (RUP) is normal ($0.20/lb), and so are the prices of non-effective (ne-NDF) ($-0.01/lb) and effective neutral detergent fiber (e-NDF) ($0.05/lb).

    Table 1. Estimates of nutrient unit costs.

    Nutrient name
    Estimates
     
    NEL - 3X (2001 NRC)
    $0.067
    **
    RDP
    $0.122
     
    Digestible RUP
    $0.202
    **
    Non-effective NDF (ne-NDF)
    $-0.012
    *
    e-NDF
    $0.052
    **

    - A blank means that the nutrient unit cost is likely equal to zero.
    - ~ means that the nutrient cost may be close to zero.
    - * means that the nutrient cost is unlikely to be equal to zero.
    - **means that the nutrient cost is most likely not equal to zero.

    A good look at the ingredients used on your farm may reveal cost saving opportunities. Currently, the following feed ingredients are priced well-below what they are worth (Tables 2 and 3): bakery byproduct meal, ground shelled corn, corn silage, distillers dried grains, gluten feed, hydrolyzed feather meal (with strong reservation due to the considerable range in quality), hominy, and wheat middlings. There are also some feedstuffs that are overpriced: beet pulp, canola meal, expeller-soybean meal, 44% and 48% soybean meal, roasted soybeans, blood meal, and fishmeal. Blood meal is actually priced correctly when the value of lysine (an important amino acid) is factored in our evaluation. Fishmeal, however, is still considerably overpriced ($100 to 150/ton) even when methionine and lysine are factored in the evaluation. Canola meal is a classical case of the lemming syndrome (when everybody seems to be following everybody else in the wrong direction). Canola is cheaper than soybean meal on a per ton basis, but its value is only approximately 70% that of 48% soybean meal. Strategically, it is time to minimize the supplementation of RDP from plant proteins and optimize the use of non-protein sources (urea) and of processed grain by-products (gluten feed and wheat middlings). These recommendations should serve as guidelines. It may be justified to use an ingredient from the overpriced list to fit the specific conditions of a herd. As always, a properly balanced ration, based on sound nutrition must be used. But, the individual components (feedstuffs) making the ration can be changed (increased, decreased, or substituted) without impacting animal performance.

    Table 2. Calibration set.

    Name
    Actual ($/ton)
    Predicted ($/ton)
    Lower limit ($/ton)
    Upper limit ($/ton)
    Alfalfa Hay, OH Buckeye D
    140
    148.44
    125.24
    171.63
    Bakery Byproduct Meal
    118
    139.24
    120.10
    158.38
    Beet Sugar Pulp, dried
    150
    112.73
    94.87
    130.59
    Brewers Grains, wet
    35
    39.70
    35.48
    43.92
    Canola Meal, mech. extracted
    253
    188.00
    172.46
    203.56
    Citrus Pulp, dried
    122
    111.08
    96.76
    125.40
    Corn Grain, ground dry
    102
    130.03
    109.78
    150.28
    Corn Silage, 32-38% DM
    40
    49.37
    41.43
    57.31
    Cottonseed, whole w lint
    192
    208.72
    179.67
    237.77
    Distillers Dried Grains, w sol
    145
    176.87
    162.26
    191.48
    Feathers Hydrolyzed Meal
    275
    341.29
    317.34
    365.23
    Gluten Feed, dry
    118
    158.80
    147.58
    170.03
    Gluten Meal, dry
    316
    317.11
    287.49
    346.72
    Hominy
    110
    127.91
    113.68
    142.13
    Meat Meal, rendered
    290
    277.78
    258.34
    297.22
    Molasses, sugarcane
    117
    90.85
    72.87
    108.84
    Soybean Hulls
    115
    101.22
    75.41
    127.04
    Soybean Meal, expellers
    321
    269.00
    248.75
    289.26
    Soybean Meal, solvent 44% CP
    271
    244.26
    224.59
    263.94
    Soybean Meal, solvent 48% CP
    281
    264.65
    247.64
    281.66
    Soybean Seeds, whole roasted
    302
    281.66
    263.23
    300.08
    Wheat Bran
    100
    117.93
    100.59
    135.29
    Wheat Middlings
    98
    128.29
    113.33
    143.26


    Table 3. Appraisal set.

    Name
    Actual [$/ton]
    Predicted [$/ton]
    Blood Meal, ring dried
    565.00
    390.29
    Fish Menhaden Meal, mechanized
    585.00
    330.22
    Tallow
    500.00
    273.71
    Urea
    370.00
    591.30


    The estimates were derived using the software SESAME Version 2.05 written at The Ohio State University. For additional information, please refer to Buckeye Dairy News Volume 5, Issue 2, March 2003.

    The estimates provided in Table 1 can easily be used to calculate the break-even price of a commodity for which a nutritional composition is available (at least approximately). To facilitate this calculation, we prepared a spreadsheet that can be used either electronically or as a template for manual calculations. In this example, we are assessing the break-even price of a dry (90% DM) food by-product containing 14% crude protein, estimated at 40% rumen undegradability, with 80% of the RUP being digestible post-ruminally, and 20% neutral detergent fiber (NDF) of which only 10% is effective (i.e., induces chewing and rumination). The nutritional composition is entered on a DM basis because this is the universal basis used by laboratories to report chemical composition of feeds. Costs of nutrients are entered on a per unit basis (per pound, except for energy with per Mcal) exactly as they appear in the Sesame printout. Although diets are balanced on a DM basis, commodities are sold on an "as is" basis. Thus, the nutritional content must be translated to reflect the "as is" amounts of each economically important nutrient per ton of feedstuffs. This is exactly what the section titled "Amounts per Ton" does. Thus, one ton of our by-product contains 1486.8 Mcal of NEL, 80.6 lb of digestible RUP, 151.2 lb of RDP, 36 lb of e-NDF, and 324 lb of ne-NDF. The last section (Value per Ton (as is basis)) calculates the value of each nutrient per ton of by-product. Although the feed contains a moderate concentration of protein (14%), more than 75% of its nutritional value (99.62/132.34) is actually derived from its energy content. The value of the fiber (NDF) in this feed is very close to zero ($1.87 minus $3.89) because so little of the NDF is rumen-effective. Historically, ne-NDF has been implicitly priced at zero (or even small negative values) on the Ohio market. Essentially, suppliers of ne-NDF (mainly grain by-product feeds) are paying users of ne-NDF to use this nutrient.

  4. Selenium Yeast for Dairy Cattle

    Dr. Bill Weiss, Dairy Nutrition Specialist, Ohio State University

    A few months ago, the Food and Drug Administration (FDA) approved the use of selenium (Se) yeast for dairy and beef animals. Prior to this approval, sodium selenite and sodium selenate were the only approved sources of supplemental Se. In Ohio, all diets fed to dairy animals (calves, heifers, and dry and lactating cows) should be supplemented with the maximum legal amount of Se (currently 0.3 ppm). The question is, "Should you use inorganic Se (selenite or selenate) or Se-yeast?" The inorganic sources are substantially less expensive per unit of Se than Se-yeast, and based on clinical responses, they appear to work adequately in most situations. Based on enzyme responses, the Se in Se-yeast under normal conditions is 10 to 20% more available than inorganic Se. Under conditions that reduce Se absorption, Se-yeast may be substantially more available than inorganic Se. The most common situation in which Se absorption is impaired is when cows consume large amounts of sulfate. Dietary sulfate is usually not a problem; however, in certain areas of Ohio, water can contain very high concentrations of sulfate. In an experiment conducted at OARDC, sulfate intake equivalent to drinking water with approximately 300 ppm sulfate-sulfur (900 ppm sulfate) reduced absorption of Se from selenate by 20% compared to cows fed no sulfate.

    Cows fed Se-yeast consistently have much higher concentrations of Se in milk, colostrum, and muscle than cows fed an equal amount of Se from inorganic sources. The increased Se concentration in milk and muscle may help improve human diets. Feeding Se-yeast to dairy cows during the dry period should improve the Se status of baby calves. The calf will be born with higher concentrations of Se in tissues, and colostrum from cows fed Se-yeast is very high in Se. Improved Se status of calves has been related to improved calf health.

    In conclusion, replacing inorganic Se with Se-yeast will increase feed costs probably by 2 to 4 cents per head per day. Under normal conditions, the improved availability (10 to 20%) of Se-yeast will not greatly change Se status of cows. Se-yeast should be considered in areas that have water with high concentrations of sulfate. The addition of Se-yeast to diets for dry and prefresh cows may improve calf health. The current regulation allows feeding both inorganic Se and Se-yeast as long as total supplemental Se does not exceed 0.3 ppm of the diet.

  5. The 2003 Tax Legislation - How much will it affect your dairy business and your family?

    Mr. David Miller, Farm Management Specialist, Ohio State University Extension 

    The Jobs and Growth Tax Relief Reconciliation Act of 2003 contains provisions for reducing capital gains rates, reducing the rates for taxation of dividends, widening the 10% tax bracket, increasing the standard deduction for married couples filing jointly, increasing the child tax credit, and reducing all tax rates by at least 2%. Business provisions include increasing the allowable limit for Section 179 expensing to $100,000 and a 50% first-year depreciation allowance. How will all these changes affect the 2003 tax bill for your dairy operation and your family?

    To estimate the potential impact of the new legislation for various family situations, a dairy operation with the following income and expense figures was used. The farm has projected income of $350,000 consisting of $285,000 milk sales, $6,250 calf sales, $12,000 cull cow sales, $28,150 Milk Income Loss Contract (MILC) payments, $7,000 other agricultural program payments, and $11,600 other farm income. Projected farm expenses are $318,500 including depreciation. Net farm income would be $31,500 consisting of $19,500 from Schedule F and $12,000 of capital gains from the sale of the raised dairy cows.

    For a married couple filing jointly (MFJ) with no other dependents, the "old" law tax bill would be $1,607 income tax plus $2,755 self-employment (SE) tax for a total bill of $4,362. Under the provisions of the new legislation, the total tax bill is $3,807, $1,052 for income taxes and $2,755 for SE tax. The new legislation saves $555 in Federal income taxes for this family situation. For a married couple filing jointly, but with two dependent children over the age of 17, the income tax reduces from $997 (old law) to $442 (new law) and the SE tax of $2,755 remains constant. Again the new law results in a savings of $555. A third scenario is the same married couple, but with two dependent children under the age of 17 who qualify for the child tax credit. Under these facts, the income taxes are reduced by $555, the same as before, but the child tax credit offsets all the income taxes and partially reduces the SE tax of $2,755 owed in both the old and new law scenarios.

    Since most farm families also have some off-farm income, $10,000 was added to the net farm income of $31,500 to see how the families above would fare. The results are similar. For the married couple with no other dependents, the income tax savings are $659 ($2,711 vs. $2,052); for the family with two dependents over the age of 17, the income tax savings are $555 ($1,997 vs. $1,442). For the family with the two children under the age of 17, the tax savings is $555, but the child tax credit reduces the income taxes to $797 and $0, respectively, resulting in an overall decrease of $797.

    A dairy farmer can further reduce taxable income and income taxes by using strategies such as pre-paying expenses or using Section 179 expensing. However, the objective of year-end tax management is to have at least enough taxable income to absorb the allowable exemptions and the standard deduction; $21,700 for MFJ with two other dependents and $15,600 for MFJ with no other dependents. In the scenarios where there is only farm income, an increase of $15,600 (MFJ and no other dependents) or $9,000 (MFJ and two other dependents) from Section 179 or pre-paying expenses would reduce taxable income to a level that just absorbs the allowable exemptions and the standard deduction in each case. With addition of the $10,000 off-farm income, the increased expense amounts of $25,600 or $19,000 are needed to reduce taxable income to zero. These increased amounts are well below the new $100,000 limit for Section 179, so this provision is of limited value to this dairy farm business. The same would be true of the new 50% first depreciation allowance.

    How well does this dairy farm family fare under the new 2003 tax legislation? There are tax savings but maybe not to the degree envisioned. Using the above examples, the tax savings come from the increased standard deduction for married filing jointly, widening of the 10% tax bracket, reducing the capital gains tax rates, and increasing child tax credit. If incomes were higher for this family, the tax savings would be greater and the business provisions of the increased Section 179 and the special first depreciation allowance would be of more value.

  6. On-Farm Assessment & Environmental Review (OFAER) Program

    Mr. David White, Ohio Livestock Coalition and Dr. Maurice Eastridge, Dairy Nutrition Specialist, Ohio State University

    The goals of the pro-active OFAER program are to promote environmental stewardship, minimize livestock impact on watersheds, improve the public's perception of livestock production, and move agriculture, particularly animal production agriculture, toward self-regulation.

    The OFAER provides a critical overview of beef, dairy, poultry, and pork farms in areas relating to overall site management, livestock housing and feeding systems, manure management, nutrient management, livestock mortality management, and non-regulatory assessment of the livestock production site. The resulting confidential verbal and written report identifies strengths, challenges, and recommendations for use in the livestock or poultry operation as the farmer chooses.

    The OFAER was developed in cooperation with the USDA- NRCS, Extension specialists, private agriculture consultants, livestock producers, and commodity organizations. On a national basis, the program is administered by America's Clean Water Foundation (ACWF), a national non-profit organization that received federal funding for the program. Environmental Management Solutions (EMS) of Des Moines, Iowa handles scheduling of the on-farm assessments and oversees the operation of the program. The Ohio Livestock Coalition (OLC) coordinates the program in Ohio and works in cooperation with ACWF and EMS to make sure farmers who wish to participate in the program properly complete the producer checklist prior to scheduling the on-farm assessment and review.

    The EMS has trained a variety of agricultural professionals as assessors, with many of them being Extension agents, NRCS or SWCD professionals, private ag or environmental consultants, or agricultural, mechanical, or civil engineers. During an on-farm assessment, a team of two assessors with different backgrounds evaluate environmental risks, such as surface-water pollution, groundwater contamination, odor, and pests.

    All sizes of farms are eligible to participate in the OFAER program, and it is open to beef, dairy, poultry, turkey, and pork operations. Data from the program indicates that environmental challenges are similar in type, no matter the size of the operation and that well-managed operations of any size can be environmentally successful. When risk areas are identified, producers find that by addressing such areas several valuable benefits occur - a reduction in potential liability exposure, an enhancement in community acceptance, and a savings in operating costs and expenses.

    Unlike a visit to the physician's office, the OFAER program is of no cost to the producer. Also, when risk areas are identified on farms, most of these risks can be addressed by developing and implementing best management practices (BMP). Specifically, more than 90% of the risks identified have been addressed by BMP. Structural changes were needed to address only 9% of the identified risks. And, cost-share funding for such practices and structures may be available from the USDA - NRCS or the local SWCD office.

    Ohio dairy producer, Jim Comp, has participated in OFAER and was featured in the September 2003 issue of Dairy Herd Management. To initiate an on-farm assessment, contact the OLC at dwhite@ofbf.org or (614) 246-8288.

  7. Robotic Milking: Are we there yet?

    Dr. Normand St-Pierre, Dairy Management Specialist, Ohio State University

    Imagine this: you get up in the morning and the cows are already milked. In fact, the cows milked themselves and they routinely do this three times a day. You no longer have to deal with kicking a lazy teenager out of bed or a hired hand who doesn't show up. This sounds good, doesn't it? In essence, this is what robotic milking was supposed to be. The reality has been somewhat different. A certain proportion of cows do not adapt well to robotic milking. There are still issues related to mammary health and increased somatic cell counts. The economics of robotic milking is largely dependent on numerous assumptions. In general, robotic milkers are not competitive with conventional systems in the US. Many of these issues will be resolved with time. Likewise, we expect to see a decline in the price of milking robots due to increased competition among manufacturers, larger production volumes, and more efficient manufacturing. During our last Ohio Dairy Management Conference in December 2002, Mr. Jack Rodenburg of the Ontario Ministry of Agriculture and Food presented an excellent summary of the Canadian experience with robotic milkers. For those who want to read more about it, you can either order your own copy of the proceedings ($15/copy) by contacting Mrs. Amanda Hargett (hargett.5@osu.edu) or by downloading the following document from our website (Robotic Milkers: What, Where, and How Much?).

    But, why don't we see more milking robots in the United States? It is simply because all Grade A milk produced in the US must meet the requirements stipulated by the Pasteurized Milk Ordinance (PMO). The PMO is written by the Food and Drug Administration (FDA) and it sets the minimum standards to be implemented by regulators in each individual state. Readers with an interest in the details of the PMO can consult the latest version of the document at: http://vm.cfsan.fda.gov/~ear/pmo01toc.html. Within the PMO is a list of guidelines regarding manufacturing equipment for the harvest and transport of raw milk. These are called the 3-A standards. These set the minimum standards to be met by all milking equipments, including of course, the milking function of robotic milkers. Currently, robotic milkers face five challenges from the PMO regulations:

    1. Inspection of fore-milk,
    2. Detection of abnormalities,
    3. Diversion of unacceptable milk,
    4. Proper and effective preparation of teats prior to attachment, and
    5. Separation of the milking area from the animal housing area.

    The first three items raise considerable technical and regulatory difficulties. On the technical side, the automatic screening of milk needs to be done very rapidly under a robotic system. More importantly, engineers must be provided with a clear physical definition of what is normal and what is abnormal milk. Definitions that were sufficient under a conventional milking system where decisions are made by a human being are no longer adequate under automation. It is expected that the FDA will issue a new statement regarding the definition of normal and abnormal milk in July 2004. This should clear the way for state regulators to apply the PMO to robotic milkers.

    Regarding the effective preparation of teats prior to attachment (item 4), the PMO requires that teats must be completely dry prior to the attachment of the milking unit. Of course, this is not actually met in the strictest sense of the word "dry" in most milking parlors, and it is not met at all by any of the current robotic systems. New interpretations of the word "dry" will have to be issued for robots to meet the PMO.

    Lastly, the PMO requires a physical separation between the free stall area and the milking center to prevent the introduction of unacceptable odors and air contaminants into the system. Many of the designs associated with robotic milkers are challenging the interpretation of the term physical barrier. There again, regulators are forced to re-think or clarify their definitions.

  8. 2003 Dairy Farm Price and Marketing Management Practices Survey - Your help is needed!

    Mrs. Dianne Shoemaker, Dairy Specialist and Mr. David Miller, Farm Management Specialist, Ohio State University Extension

    Please be on the lookout for this survey that will arrive in the mailboxes of most Ohio Grade A milk producers in late December. Many questions still surround the use of risk management practices and tools on Ohio's dairy farms. Are they being used? If not, why not? How effective are they? This survey will help us answer these and other related questions.

    Whether you use risk management tools or not, please take 15 minutes to complete the survey and return it in the postage-paid envelope included in the mailing. We appreciate your willingness to increase our ability to serve Ohio's dairy industry.