Buckeye Dairy News : Volume 7 Issue 3

  1. Mideast Federal Order Hearing Held on March 7, Wooster, Ohio

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

    If you are a regular to my Ohio Dairy Website (http://aede.osu.edu/programs/ohiodairy/), you will be familiar with a chart that I post on the opening page each day. This chart appears under the heading 'Mideast Price Watch @ a Click.' On the chart, I show the current Class III futures price for the next 12 months and the average Class III prices where the averages are calculated over a 3, 5, 7, 10 and 14 year period. What is the point of posting this chart daily? What information do I wish to convey to you - the dairy farmer?

    Despite all of the sophisticated, complicated, and oftentimes intractable quantitative models which will tell you precisely how much of your upcoming milk production you should hedge or protect with a price floor using the Chicago Mercantile Exchange (CME), only you can make that decision. The information on the website chart shows you the current opportunities relative the past average prices and puts this in the form of premiums or discounts. Premiums if the current Class III futures prices are above the past averages and discounts if below. If a chart is not to your liking with the click of your mouse button, you can also retrieve the information as a table. The table below is an example from May 19, 2005. The first 4 months provide information for 2006 (as 2005 is already history) and the remaining data show the premiums and discounts for May through December 2005. Entries in RED are discounts and show you that the current Class III futures prices are below that particular average. On this same web page, you can access a print version of this table that you can hang daily in your milk house office.

     

     

    Currently, the futures market has turned from very robust to rather weak. There are still premiums available in this market but they are nothing like those available only a few months ago. Just back on March 1st premiums for May through August where all well over two dollars with most above $2.50/cwt! Hopefully, you took advantage of these premiums and priced at least some of your May through September milk with a direct hedge or an option contract. With rational expectation that milk production across the United States would come roaring back, spurred by record high prices the last half of 2003 and all of 2004, these price premiums where too good to pass-up. Or did you? Now, the reality of high milk prices curing high milk prices has taken hold in the markets and the premiums must be weighed carefully against their cost. The reality is that we will have plenty of milk and this is evident in the eroding premiums as we move further out into 2005 and then 2006.

    Are there any opportunities still in the market for this year or have they all vanished? Take a close look at the pricing opportunities for November and December. Current Class III futures prices are above the long-term median price for these months. They may not remain there for long. I suspect that one more U.S. milk production report (June 16th) showing robust cow numbers and yields will all but end the good times for prices for at least the next 12 months.

    Well, it is time to drag my horse back into the barn. If you like to stay up-to-date as to the opportunities (or lack thereof) for getting better than average prices for your milk, be sure to bookmark my Ohio Dairy Website (http://aede.osu.edu/programs/ohiodairy/) and visit daily. My current milk price outlook can be viewed on the web. I update this outlook each month. Check it out at http://aede.osu.edu/programs/ohiodairy/ProActivePricing/priceforecast.htm.

    For a complete update on current market conditions, futures, and options markets, and policy issues of importance to Ohio and Federal Order 33 producers go to my web site, Ohio Dairy Web 2004, and click on Cam's Price Outlook.
     

  2. When is the Best Time to Market Cull Cows?

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

    Here are a few things that we know. The price of milk is dropping. It rains as soon as you start the first cut of hay. Feed prices keep changing. All of these events create headaches and opportunities. In this column, we concentrate on the opportunities offered from changes in commodity markets.

    Springtime generally brings substantial changes in the relative price of feedstuffs. This year is no exception. There have been significant changes in the relative prices of many commodities lately. Now is a good time to re-evaluate your purchasing strategy. To help you with the process, we evaluated current commodity markets in Central Ohio using the software SESAME (available at www.sesamesoft.com). The appraisal would be slightly different for other Ohio regions, but not markedly so.

    Compared to January 2005, prices of nutrients (Table 1) show:

    1) An increase of 1.3¢ per Mcal of net energy lactation,
    2) A drop of 4.1¢ per pound of degradable protein,
    3) An increase of 4.1¢ per pound of undegradable protein,
    4) A drop of 3.4¢ per pound of non-effective NDF, and
    5) A drop of 0.6¢ per pound of effective NDF.

    Therefore, as a general rule, it is currently wise to reduce the safety margins of dairy rations for net energy and undegradable protein. Meanwhile, the markets are willing to pay you for increasing your usage of rumen degradable protein and non-effective NDF. In practical terms, this means that there are some high fiber by-products that are currently real bargains. These are identified in Table 2.

    In Tables 2 and 3, we report the results for 27 feed commodities traded or available in Central Ohio. Table 2 conveniently groups commodities into three groups: bargains, at breakeven, and overpriced. If all the ingredients in your rations are from the overpriced column, it is time to visit with your nutritionist. Details of commodity pricing is shown in Table 3. In this table, the column labeled "actual" is the price for tractor trailer loads (TTL) FOB Central Ohio. The "predicted" column is the calculated breakeven price per ton; lastly, the "lower limit" and "upper limit" are the 75% confidence range for the breakeven price.

    Nutrient prices can be used to calculate a benchmark for feed costs. All these years of research have resulted in relatively precise nutrient requirements for milk production. Results of the calculations using the National Research Council (2001) requirements are presented in Table 4. The cost of feeding for a milk yield of 75 lb/day has gone up by 9¢/cow/day since January but is considerably less ($1.05/cow/day) than it was a year ago. Milk prices, although still decent from a historical perspective, are not as strong as they were a year ago, or even what they were last January. Consequently, income-over-feed costs (IOFC) has dropped $2.09/cow/day from last year, and $1.26/cow/day from January 2005. Historically, however, this benchmark averages $5.50 to 6.00/cow/day. Thus, IOFC is still strong relatively speaking and good profits should still be the norm for Ohio dairy operations.

    Table 1. Prices of nutrients, central Ohio.

    Nutrient name
    May 2005
    January 2005
    May 2004
    Net energy lactation ($/Mcal)
    0.095
    0.082
    0.095
    Rumen degradable protein ($/lb)
    -0.113
    -0.072
    0.081
    Digestible-rumen undegradable protein ($/lb)
    0.252
    0.211
    0.286
    Non-effective NDF ($/lb)
    -0.077
    -0.043
    -0.064
    Effective-NDF ($/lb)
    0.043
    0.049
    0.021


    Table 2. Groupings of commodities, Central Ohio, May 2005.

    Bargains
    At Breakeven
    Overpriced

    Bakery byproducts
    Corn grain
    Corn silage
    Cottonseed meal
    Distillers dried grains
    Feather meal
    Gluten feed
    Hominy
    Wheat middlings

    Whole cottonseed
    Gluten meal
    Meat meal
    Expeller soybean meal
    Roasted soybeans
    Tallow
    Wheat bran

    Alfalfa hay - 44% NDF, 20% CP
    Beet pulp
    Blood meal
    Brewers grains, wet
    Canola meal
    Citrus pulp
    Molasses
    Soybean hulls
    44% Soybean meal
    48% Soybean meal
    Fish meal


    Table 3. Commodity assessment, Central Ohio, May 2005.

    Name
    Actual ($/ton)
    Predicted ($/ton)
    Lower limit ($/ton)
    Upper limit ($/ton)
    Alfalfa Hay, 44% NDF, 20% CP
    121
    99.21
    77.35
    121.06
    Bakery Byproduct Meal
    107
    136.45
    125.76
    147.14
    Beet Sugar Pulp, dried
    145
    104.10
    87.27
    120.92
    Blood Meal, ring dried
    440
    406.88
    378.99
    434.77
    Brewers Grains, wet
    25
    21.15
    17.55
    24.75
    Canola Meal, mech. extracted
    129
    106.63
    93.14
    120.13
    Citrus Pulp, dried
    146
    112.42
    103.32
    121.52
    Corn Grain, ground dry
    99
    147.73
    137.53
    157.94
    Corn Silage, 32 to 38% DM
    35
    45.75
    38.12
    53.37
    Cotton Seed Meal, 41% CP
    133
    157.15
    145.75
    168.56
    Cottonseed, whole w lint
    153
    172.46
    144.31
    200.62
    Distillers Dried Grains, w solubles
    99
    127.86
    113.92
    141.80
    Feathers Hydrolyzed Meal
    235
    289.90
    271.15
    308.65
    Gluten Feed, dry
    72
    105.79
    95.45
    116.13
    Gluten Meal, dry
    327
    333.20
    312.60
    353.79
    Hominy
    88
    117.11
    107.90
    126.31
    Meat Meal, rendered
    235
    217.82
    199.18
    236.46
    Molasses, sugarcane
    143
    105.00
    96.37
    113.62
    Soybean Hulls
    72
    36.09
    12.14
    60.05
    Soybean Meal, expeller
    257
    269.61
    255.03
    284.19
    Soybean Meal, solvent 44% CP
    213
    157.25
    138.85
    175.64
    Soybean Meal, solvent 48% CP
    222
    195.46
    179.26
    211.66
    Soybean Seeds, whole roasted
    237
    243.43
    227.12
    259.74
    Tallow
    405
    389.79
    355.46
    424.12
    Wheat Bran
    50
    51.34
    35.32
    67.45
    Wheat Middlings
    33
    69.16
    55.14
    83.18
    Name
    Actual ($/ton)
    Predicted ($/ton)
    Corrected ($/ton)
    Alfalfa Hay, 38% NDF, 22% CP
    --
    99.41
    121.32
    Alfalfa Hay, 48% NDF, 17% CP
    --
    100.47
    85.73
    Menhaden Fish Meal, mech.
    645
    323.33
    --

    Table 4. Nutrient costs and income over nutrient costs, Central Ohio.1

    Nutrient
    May 2005
    January 2004
    May 2004
     
    ------------------------------ $/cow/day --------------------------------
    Nutrient costs2      

    NEL

    3.30
    2.85
    3.31

    RDP

    (0.60)
    (0.38)
    0.43

    Digestible-RUP

    0.57
    0.48
    0.77

    ne-NDF

    (0.36)
    (0.20)
    (0.30)

    e-NDF

    0.47
    0.54
    0.23

    Vitamins and minerals

    0.20
    0.20
    0.20

    TOTAL

    3.58
    3.49
    4.63
    Milk gross income
     
     
     

    Fat

    4.58
    5.50
    6.75

    Protein

    6.29
    6.62
    7.56

    Other solids

    0.45
    0.38
    0.16

    TOTAL

    11.32
    12.50
    14.47
     
     
     
     
    Income over nutrient costs
    7.75
    9.01
    9.84

    1Costs and income for a 1400 LB cow producing 75 LB/day of milk, with 3.6% fat, 3.1% protein, and 5.9% other solids. Component prices are for Federal Order 33, April 2005.
    2NEL = Net energy for lactation, RDP = rumen degradable protein, RUP = rumen undegradable protein, ne-NDF = noneffective neutral detergent fiber, and e-NDF = effective neutral effective fiber.

  3. Ammonia Emissions from Dairy Farms - The Basics

    Dr. Maurice Eastridge, Extension Dairy Specialist, The Ohio State University

    Similar to other sectors of agricultural production, the dairy industry is undergoing constant change. There is less than 2% of the human population today involved in agricultural production, yet the growth in population is demanding an increasing supply of food. Therefore, food production enterprises have increased their number of productive units (acres or animals) and made advances in improving productive efficiency per unit.

    Ohio's dairy industry has been following the national trends: decrease in number of farms, increase in number of cows per farm, and an increase milk yield per cow. The number of dairy farms has decreased by about 70% since 1970, but during this time period, the number of cows per farm has more than doubled from about 25 cows/farm to 58 cows/farm. This change in herd size in conjunction with the increase in milk yield per cow (about 2% per year), has resulted in a somewhat stable milk supply for the State, allowing the State to maintain its rank of 11th in the nation for total milk production. With this milk supply, plus milk from other states, the milk processing industry in Ohio has remained strong despite the decrease in total number of manufacturing plants (Ohio's ranks 5th for number of manufacturing plants). This processing capacity has helped the State to maintain a strong dairy industry and for the State to maintain its rank of being 1st in Swiss cheese production.

    The dairy industry in Ohio is a major contributor to Ohio's economy. The value alone of the milk produced in 2003 was $588 billion, and for each dollar generated on a dairy farm, in excess of $2 is generated elsewhere in the economy. For every employee on a dairy farm, about 2.25 jobs are generated elsewhere in the State for processing dairy products and providing goods and services to the dairy industry. The economic development impacts of the dairy industry are significant.

    There have been increased environmental and social concerns with the increasing size of dairy operations. This has occurred with the increased number of nonfarm people moving to live in rural residences and with more animals per unit of land base in given areas. Actually for Ohio, the number of agricultural acres per animal unit (based somewhat on animal size) has increased from about 5.7 to 7.6 acres (data exclude horses and poultry). The increase in number of animals within a given community and the extensive use of liquid manure systems have contributed to these concerns. Even though some large dairy farms are on a relatively small amount of acreage, the farmers contract with local crop farmers for feed production and for land application of manure to provide nutrients for the cropping system. Nutrient balance and manure storage and handling systems will continue to be major points of focus for dairy farms. Environmental stewardship and social responsibility are of focus by today's dairy farmers. However, new regulations for reducing the risks for water and air contamination are going to have cost implications to the dairy farmer without notable increases in the price they receive for their food product.

    Within Ohio, the regional distribution of the dairy industry has begun to shift. Traditionally, the northeast and west central areas have been the most concentrated areas for dairy farms. In northeast Ohio, the number of herds is decreasing midst an increase in tourism and the increase in lot size for residences within a densely populated area of the State. The northwest area of Ohio in increasing in number of herds and they are of large size. This has been an attractive area because of the land base for feed production and the lower population density. With the new herds moving into Ohio and expansion of herds already in Ohio, the number of cows in the State increased between 2003 and 2004. There have been dramatic decreases in number of farms with less than 29 cows and 50 to 99 cows, but the number of farms with 29 to 50 cows has remained somewhat stable because of small increases in herd size by farms that sale manufacturing grade milk and with the possibly of only one family member needing to work off of the farm. The number of farms with 100 to 199 cows has also remained somewhat stable, but farms with 200 cows or more have been increasing in number; at the end of 2004, Ohio had 35 herds with 500 or more cows.

    Ohio has the feed resources and dairy industry infrastructure to sustain a vibrant industry. The increase in number of large farms and increase in herd size of most farms will result in stable to upswings in number of cows and total amount of milk produced in the State. Although there has been consolidation in the processing industry and loss of some small processors, Ohio will continue to have more capacity to process milk than supplied from within the State. Increasing input costs, including changes in feed costs based on weather and other market forces, and volatility of milk prices require that dairy producers operate their enterprise in an economic manner. In addition, responsibilities for sustaining the environment and being attentive to social issues will have cost implications. Yet, the pride in providing a high-quality food source midst a desirable way-of life and the desire to work with animals will continue to be motivating forces for Ohioans to remain in the business of producing food.

    Year

    Total Milk

    (million lb)

    Milk/cow

    (lb/yr)

    Cows

    (x 1000)

    Herds

    % Milk from Herds

    with > 200 cows

    Manufacturing

    Dairy Plants

    1970
    4,420
    9,705
    454
    --
    --
    167
    1975
    4,259
    10,635
    400
    14,800
    --
    124
    1980
    4,310
    11,493
    375
    12,600
    --
    107
    1985
    4,870
    12,552
    388
    11,000
    --
    84
    1990
    4,667
    13,143
    342
    9,000
    --
    80
    1995
    4,600
    15,917
    289
    6,800
    12.0
    74
    2000
    4,461
    17,027
    262
    5,500
    19.5
    56
    2001
    4,295
    16,519
    260
    5,200
    23.0
    56
    2002
    4,475
    17,080
    262
    5,000
    27.0
    54
    2003
    4,490
    17,269
    260
    4,700
    32.0
    51
    2004
    4,560
    17,338
    263
    4,500
    34.0
    46

     

  4. Prevention and Treatment of Hairy Heel Warts

    Gene McCluer, Extension Educator, Hardin County, The Ohio State University 

    Generally speaking, sanitation around the barn remains the backbone of fly control. Removal of potential breeding sites will slow the build-up of fly populations. Pyrethrins can be used in misters or foggers for quick knockdown of active fly problems, but they don't offer residual control. These include, but are not limited to, Pyrethrins+Piperonyl butoxide, Ectiban, and Vapona. These products can often be purchased in concentrates or in aerosol cans for use in milk rooms (or the pickup truck). Always read the label before using in livestock facilities.

    Residual fly sprays can be used on walls, ceilings, posts, and other fly resting places. This type of product can have from 1 to 7 weeks of control. It may be necessary to remove the cows for 4 hours or until the spray dries. Usually, the manufacturer cautions that you not contaminate feed or water. See specific labels for application recommendations. Products for this use include, but are not limited to: Countdown 2 or Countdown 25% WP, Grenade 10% WP, Atroban 11%, Ecitban 5.7%, Permectrin II 10%, Spinosyn, and Elector. The same materials may be used on fly resting sites outdoors.

    For pastured cattle and control of stable flies, face flies, and horn flies, ear tags, dust bags and back or face rubbers may have a place. Make sure the products are labeled for lactating cows, dry cows, or whatever type of animals that are being treated. Baits also can have a place in the fly control program. For more details, see University of Kentucky fact sheet ENT-42 at: http://www.uky.edu/Agriculture/PAT/recs/livestk/recbeef/beeffly.htm.

    Other resources that are helpful include several lists of insecticide products at Kansas State University. The products are listed according to insecticides and common chemical names at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciiiiccn.pdf. They are also listed in alphabetical order at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciitrade.pdf, and by method of application at: http://www.oznet.ksu.edu/entomology/extension/InsectInfo/ciiiform.pdf.

  5. Update on Ohio's Program for Controlling Johne's Disease

    Dee Jepsen, Ag Safety and Health Specialist, The Ohio State University

    The State Safety Office has received questions about farmers being solicited by a poster service, and the mandatory poster requirements for farm operations.

    We have reviewed the federal and state regulations and found this IS a labor regulation, and that farmers NEED TO BE IN COMPLIANCE. An informational flyer has been put together to help answer these questions and was sent to county Extension offices (click here for a copy of the flyer).

    Here's a summary of the regulations:

    • The poster requirements apply to ALL EMPLOYERS in the state of Ohio. So this is not an agricultural regulation, but one that affects businesses that hire employees. More specifically, it is regulated under the Ohio Department of Commerce, Division of Labor and Worker Safety.
    • There are no exemptions for agricultural operations, and the requirements apply if at any time during the year an employee is hired (even for one hour).
    • Three posters are mandatory:
      State of Ohio Minimum Wage (614-644-2239)
      Unemployment Compensation Coverage (877-644-6562)
      Ohio Fair Employment Practices Law (614-466-2785)
    • If the farm hires minors, then the Ohio Minor Labor Law poster is also required. If the farm hires large labor forces (more than 500 man hours in a year) or migrant workers, and/or contracts with the federal government, there are several other poster requirements.

    A useful website for farmers to know about is: http://www.dol.gov/elaws/posters.htm. This service walks farm employers through a series of questions to determine their exact poster requirement for federal compliance.

    The solicitation many Ohio farmers received was from a service, of which a fee was imposed on the farmers to help get them into compliance for the type of poster they needed. While these service providers are legitimate and will certainly provide the posters meeting the regulations, they may not be tailored to the farm operation. In other words, the farmer will still have to decide which posters to have displayed.

    We have also found these posters are FREE from the respective regulatory agency (see telephone numbers listed above). It will require a call to order the 3 required posters, but this is cheaper than the $60 charge from the poster service company.

  6. Information on the Environmental Protection Agency Air Quality Program

    Barry Ward, Extension Leader, Production Business Management, The Ohio State University

    Whether you're a custom farmer or someone in the market for custom farm work, rising fuel prices may have something to say about the price charged for your next custom farming job. Custom farming rates have changed very little in the last several years as tradition seems to govern many long-term custom rate arrangements. Well, we've charged Johnny Farmer $21/acre to harvest his corn for the last 3 years, so that's what it'll be this year. Times may be changing. Diesel fuel price increases during the last several months have caused many to rethink their custom farming rates.

    Diesel fuel prices have increased significantly over the last 24 months at the farm gate. Survey work has shown that diesel prices in the spring of 2003 averaged around $1.10/gallon, while today's diesel prices for farm usage are about $1.85/gallon.

    If we look only at fuel price increases as they relate to in-field operation of the farm equipment, we see a significant increase in the cost of many farm operations. This assumes we ignore the effects of fuel price increases to the manufacturing and cost of the implements, cost of oil and lube, and cost of driving or transporting the equipment to the field. The following list highlights the fuel requirements of farm equipment operations and increase in fuel cost from April 2003 to April 2005.
     

    Implement
    Gallon/Acre Diesel1
    Fuel Cost/Acre 20032
    Fuel Cost/Acre 20053
    Increase 2003 to 2005
    Combine Corn - 6 row
    1.93
    $2.12
    $3.57
    $1.45
    Combine Soybeans - 25 ft hd
    2.02
    $2.22
    $3.74
    $1.52
    Chisel Plow - 23 ft
    0.64
    $0.70
    $1.18
    $0.48
    Disk/V-Ripper - 17.5 ft
    1.69
    $1.86
    $3.13
    $1.27
    Planting Corn - 12 row
    0.34
    $0.37
    $0.63
    $0.26
    Round Bale - 1000 lb
    0.77
    $0.85
    $1.42
    $0.57

    1Gallons per acre diesel fuel values are estimates borrowed from the "Farm Machinery Cost Estimates for 2005" publication. See the full publication and estimates for diesel fuel use per acre for other implements at: http://www.extension.umn.edu/distribution/businessmanagement/DF6696.pdf
    2Diesel Fuel Price used for 2003 is assumed to be $1.10/gallon.
    3Diesel Fuel Price used for 2005 is assumed to be $1.85/gallon.

    So what now? You may decide that changing custom rates will change other relationships with your customer that you may not want to forfeit. So you swallow the price increase and continue to spread your fixed costs over more acres. Or, you may decide that it's time to rachet your custom rates up a little to avoid a lower return to your time and management.

    If you are having second thoughts about raising those rates, you might want to consider adding a "fuel surcharge" to your existing custom rate to offset the rise in fuel prices. This method may make it more palatable for your customer. Fuel surcharges have been used in the trucking industry and may be an option for custom farm operators. A base custom rate and a base fuel price are parts of this equation. As fuel prices increase from the base price, clients pay the difference between the base fuel price and the spot fuel price. This is a simple example that doesn't take into account higher machinery, fuel, lube, or transport costs.

    Whatever you decide, understand that these cost increases are real and will impact the custom farming business, whichever side of the transaction you are on.

    1Reprinted from: Ohio Ag Manager Newsletter, May 2005 issue; http://ohioagmanager.osu.edu.