Buckeye Dairy News : Volume 7 Issue 6

  1. Milk and Dairy Product Production Climbs - What's Down the Road for Milk Prices?

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

    As we enter the fall of the 2005 calendar year, it is time to take stock of where we are with milk prices and where we are likely to go in the next 15 months. In this column, I will review the trends observed in the cash markets for dairy commodities; take a look at the relationship of butter and cheese inventories to high and low milk prices; and finally stick my neck out and provide a forecast for the remainder of 2005 and for 2006. Let's get to it!

    Cheese Market

    After peaking at $1.73/lb in the last week of January 2005, the Chicago Mercantile Exchange (CME) average cheese price has followed a general downward trend through mid-August. Over the last 10 weeks, the CME cash cheese market has traded in a narrow band between $1.45 and $1.55/lb. The last week of October and the first week of November witnessed a fundamental adjustment in the cheese market. The CME cash cheese price fell into the mid $1.30's/lb - levels not seen since February of 2004. The last time CME cash price for cheese #40 blocks traded below this level was back on June 27, 2003 with a close of $1.275/lb. The Dairy Market News reports that cheese markets are weak and may remain so over the next couple of months. Look for the cheese price to remain low for sometime to come. My crystal ball has the National Agricultural Statistics Service cheese price dipping into the $1.28 to $1.30/lb range by March 2006. Higher cheese production costs as a result of soaring energy costs have severely squeezed cheese to milk margins and made life difficult for the cheese industry. For an in-depth look at the relationship between Federal Order formula pricing and cheese processing margins, check out the "Federal Order Product Price Formulas and Cheesemaker Margins" by Jesse and Gould at http://aae.wisc.edu/future/ under 'publications'.

    Butter Market

    The CME butter market has followed a different path, peaking only recently at $1.72/lb during the third week of September. However, in the last three weeks, the CME butter market has also lost steam and has slid down to $1.48/lb on the CME cash market. The new cash-settled butter futures trading on the CME suggests butter prices in the $1.45 to $1.50/lb range through May 2006. My forecast suggests that butter prices will rebound and trade in the $1.59/lb range, sliding toward $1.52/lb by the end of 2006. If not, be prepared for a substantial drop in milk prices this spring!

    Skim Powder and Whey Markets

    The powder markets have been on an upward trend through all of 2005. Nonfat dry milk, benefiting greatly from a very tight world market for skim powder, has increased steadily from a low of $0.88/lb to the current price of $0.97/lb. The whey market has moved in lockstep with the skim powder market, rising from a low of $0.24/lb to the current high of $0.30/lb. This matches the high reached during May 2004!

    So, what we have here is a reversal of the roles typically played for these key dairy commodities. The butter and cheese markets are showing signs of weakness, while the powder derivative markets are showing signs of strength. This signals a growing imbalance in the all important domestic market for milk and dairy products, with available supply out-pacing commercial demand and an imbalance in the derivative protein market with commercial demand out-stripping available supplies.

    Implications for the Class I Mover

    With the cheese price showing the greatest sign of trading lower and butter and powder prices remaining strong, it is possible that we could see a return of the Class IV price as the Class I mover sometime around mid-January of 2006! The last time the advanced Class IV skim price functioned as the Advanced Class I mover was back in February 2002. This is not good news. The Advanced Class IV skim becomes the mover whenever the cheese market is weak, and this generally is associated with lower butter prices and low farm milk prices. Recall the milk prices at the farm level received during 2002 through July of 2003. The Class III price averaged only $10.33/cwt during this period. Let's hope that we are not headed too far in that direction!

    Dairy Product Inventories Can Flatten Milk Prices

    I have included three charts: one for Butter, one for Cheese, and a dairy commodity price forecast chart at the end of this article. The Butter and Cheese charts show the relationship between product inventories, production, and high or low milk prices. In each chart, I have plotted the ratio of dairy product stocks to dairy product production by month, averaged for the three high price years (1999, 2001, and 2004), the three low price years (2000, 2002, and 2003). The price forecast chart is shown directly below these two charts.

    The first chart on the left shows the Butter stocks to production ratio (BSPR) and where we are sitting at the present time. The seasonal pattern is obvious. Stocks tend to rise during the first half of the year as cream is flush and butter production is in full throttle. In the second half of the year, when cream is less available, stocks are drawn down relative to butter production. What is also apparent and very important for our outlook on the butter price is the relative position of each of the charted lines. High milk price years need high butter prices. High butter prices have been associated with a moderate to low BSPR. Now look at where we are sitting in 2005. The BSPR is 1.64 to 1. This is higher than we have observed this time of the year for the 'high-price' years but much lower than that observed during the 'low-price' years. This suggests that we will not see wholesale butter price move below $1.40/lb in the coming months unless something happens to limit commercial demand or further advance milk production.

    The second chart on the right shows the Cheese stocks to production ratio (CSPR) and where we are sitting at the present time. As with butter, the seasonal pattern is there but not as obvious. Stocks relative to production tend to rise during November through February, and then again during the March to July period. In the second half of the year, when farm level protein tests fall, the cheese industry pulls from stocks to satisfy demand, and stocks are drawn down relative to cheese production. Higher average cheese prices require a moderate to low CSPR. Now look at where we are sitting in 2005. At a ratio of 1.06 to 1, the CSPR is running below what we would normally expect this time of the year and indeed what we have experienced during high price years. With continuing strong commercial demand, we can anticipate that the wholesale cheese price will not decline much below $1.30/lb. While this seems low when viewed in the light of the past 18 months, remember that the last time we experienced a strong surge in milk production, cheese price retreated to support levels of $1.10 to $1.15/lb and stayed there for many months. The third chart directly below the Butter and Cheese charts shows what can happen to the class III milk price IF demand weakens and production stays strong going into the spring of 2006. Relative to the last couple of years, this is a very pessimistic outcome. The class III milk price declines over the next six months into the upper $11/cwt range. I remind you that spring-time, Class III prices in the $11.75 to $12.20/cwt range were much more typical of the long-run averages than are the $14.00 to $20.00/cwt prices that we have seen in the past two years.

    Let's Take a Look at What is Ahead for Milk Prices

    With milk cow numbers increasing, dairy slaughter low, and the specter of energy prices siphoning disposable income from the consumer pocketbook, we can anticipate a drop in milk prices over the next 15 months. However, if we can keep a balance between commodity stocks and production, the decline will be gradual and not wrenching. My long-term forecast for the last quarter of 2005 and for all of 2006 is based on this assumption and shown in Table 1 and Table 2. These forecast prices translate into a Class III milk price of $14.07/cwt for 2005 and $13.71/cwt for 2006. For those producers who participate in the Federal Order 33 pricing program, you can add an additional $0.30 to $.40/cwt to this price to arrive at an estimate of their mailbox price. For 2005, this gives us a price of $14.37 to $14.47/cwt and for 2006 a range of $14.01 to $14.10/cwt. It remains to be seen what impact the Cooperative Working Together (CWT) program will have on these forecasts. Recall that the program is set to remove 65,644 cows over the next couple of months. According to National Milk Producers Federation, this represents a production capacity of 1.2 billion pounds of milk annual rate. Perhaps, more important at this point is the export subsidy program. The trigger price for cheese and butter is $1.40 and $1.30/lb, respectively. Let's hope that these measures are not needed in the coming months. I strongly suspect they will be put into action as we move into 2006.

    Table 1. Forecast component and Class III price, 2005.

    Forecast for Planning Year

    Milk Fat

    ($/lb)

    Protein

    ($/lb)

    Other Solids

    ($/lb)

    Nonfat Solids

    ($/lb)

    Class III Price

    ($/cwt)

    2004 Annual Average
    2.055
    2.601
    0.079
    0.694
    15.41
    2005 Quarter I
    1.7454
    2.5644
    0.0922
    0.7517
    14.3052
    2005 Quarter II
    1.6124
    2.6254
    0.1067
    0.7756
    14.1048
    2005 Quarter III
    1.8375
    2.3062
    0.1323
    0.8083
    14.0833
    2005 Quarter IV forecast

    1.7754

    2.2671
    0.1446
    0.8253
    13.8194
    2005 Annual Average Forecast
    1.7427
    2.4408
    0.1190
    0.7902
    14.08

     

    Table 2. Forecast component and Class III price, 2006.

    Forecast for Planning Year

    Milk Fat

    ($/lb)

    Protein

    ($/lb)

    Other Solids

    ($/lb)

    Nonfat Solids

    ($/lb)

    Class III Price

    ($/cwt)

    2006 Quarter I
    1.8375
    2.3062
    0.1323
    0.8083
    14.0833
    2006 Quarter II
    1.7754
    2.2671
    0.1446
    0.8253
    13.8194
    2006 Quarter III
    1.7005
    2.1864
    0.1294
    0.8117
    13.2289
    2006 Quarter IV forecast

    1.6821

    2.0122
    0.1240
    0.8283
    12.6129
    2006 Annual Average Forecast
    1.7712
    2.2532
    0.1354
    0.8151
    13.71

    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.

    Charts 1, 2, and 3. Total U.S. butter and cheese stocks production ratios and dairy commodity price forecast, November through April 2006.

  2. Feed and Nutrient Pricing

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

    Feed and dairy markets have been relatively stable this fall, with little change expected in the near future. On the feed side, there were concerns for the cottonseed and its by-products from damages caused by Katrina. So far, there has been no measurable effect.

    Milk prices still are amazingly resilient to substantial increases in supply, a consequence of greater average productivity, as well as an increase in the national herd.

    Prices of nutrients, as calculated by SESAME using early November prices, are in Table 1. Feed commodity prices and their calculated break-even prices are reported in Table 2.

    Calculated income over nutrient costs went up by $0.56/cow/day between September and November 2005 (Table 3). Historically, we are experiencing strong returns in milk production. This should make for a nice Christmas among our family of dairy producers.


    Table 1. Prices of nutrients, central Ohio.

    Nutrient name
    Estimate
     
    Net energy lactation - 3X ($/Mcal)
    0.083407
    **
    Rumen degradable protein ($/lb)
    -0.148448
    *
    Digestible-rumen undegradable protein ($/lb)
    0.332989
    **
    Non-effective NDF ($/lb)
    -0.045611
    ~
    Effective-NDF ($/lb)
    0.066382
    ~

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

    Table 2. Commodity assessment, Central Ohio, November 2005.

    Name
    Actual ($/ton)
    Predicted ($/ton)
    Lower limit ($/ton)
    Upper limit ($/ton)
    Alfalfa Hay, 44% NDF, 20% CP
    120
    100.23
    74.18
    126.28
    Bakery Byproduct Meal
    102
    122.15
    109.41
    134.89
    Beet Sugar Pulp, dried
    145
    120.99
    100.95
    141.05
    Blood Meal, ring dried
    515
    457.22
    423.98
    490.46
    Brewers Grains, wet
    26
    23.58
    19.29
    27.87
    Canola Meal, mech. extracted
    161.50
    105.11

    89.03

    121.19
    Citrus Pulp, dried
    187
    108.17
    97.32
    119.01
    Corn Grain, ground dry
    90
    137.03
    124.86
    149.20
    Corn Silage, 32 to 38% DM
    35
    48.23
    39.21
    57.39
    Cotton Seed Meal, 41% CP
    182
    170.67
    157.08
    184.26
    Cottonseed, whole w lint
    139
    169.68
    136.13
    203.24
    Distillers Dried Grains, w solubles
    108
    139.32
    122.70
    155.93
    Feathers Hydrolyzed Meal
    245
    306.62
    284.27
    328.96
    Gluten Feed, dry
    73
    105.83
    93.51
    118.15
    Gluten Meal, dry
    367
    369.13
    344.56
    393.68
    Hominy
    90
    110.82
    99.85
    121.78
    Meat Meal, rendered
    210
    208.65
    186.43
    230.86
    Molasses, sugarcane
    144
    90.60
    80.32
    100.88
    Soybean Hulls
    82
    58.14
    29.59
    86.69
    Soybean Meal, expeller
    231.40
    292.62
    275.24
    309.99
    Soybean Meal, solvent 44% CP
    186.40
    147.59
    125.67
    169.51
    Soybean Meal, solvent 48% CP
    196.40
    191.06
    171.76
    210.37
    Soybean Seeds, whole roasted
    237
    231
    211.56
    250.44
    Tallow
    350
    342.34
    301.43
    383.25
    Wheat Bran
    48
    55.37
    36.23
    74.52
    Wheat Middlings
    41
    70.86
    54.15
    87.58

    Table 3. Nutrient costs and income over nutrient costs, Central Ohio.1

    Nutrient
    November 2005
    September 2005
     
    ------------------------------ $/cow/day --------------------------------
    Nutrient costs2
     
     

    NEL

    2.89
    2.61

    RDP

    (0.79)
    (0.39)

    Digestible-RUP

    0.75
    0.68

    ne-NDF

    (0.21)
    (0.25)

    e-NDF

    0.72
    0.70

    Vitamins and minerals

    0.20
    0.20

    TOTAL

    3.57
    3.55
    Milk gross income
     
     

    Fat

    4.93
    4.93

    Protein

    5.53
    5.03

    Other solids

    0.66
    0.58

    TOTAL

    11.12
    10.54
     
     
     
    Income over nutrient costs
    7.55
    6.99

    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, August 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. Forage Planting Decisions: Corn Silage or Alfalfa?

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

    There is no 'best' forage for lactating dairy cattle. All forages provide the three nutrients needed in the greatest quantities by cows; energy (NEL), protein, and fiber (NDF). The nutrient provided by forages that is must difficult to replace is effective fiber. Energy and protein provided by forages can be readily obtained from other feeds (for example, corn grain and soybean meal), but fiber provided by forages must be replaced by other forages or to a lesser extent by whole cottonseed. The amount of forage grown on a farm should be a function of the fiber requirements of that farm. An important assumption made for this article is that both the corn silage and alfalfa silage were harvested at the correct maturity for dairy cows. Corn silage harvested too wet or too dry and alfalfa harvested too mature will reduce milk production and alter the conclusions. In addition, all the following calculations were made assuming a conventional corn hybrid is used. Hybrids with high in vitro NDF digestibility can increase milk production and alter the results (for details on comparing different hybrids see https://dairy.osu.edu/resource/feed/cornsilforweb.pdf).

    When making planting decisions, you will not know the actual nutrient composition of the forage and you will not know the actual yield. Therefore, decisions should be based on expected or probable results. If you have previously grown alfalfa and corn silage, you can classify your farm as having below average, average, or above average yield potential for corn and alfalfa. For this discussion, calculations were based on the yields in Table 1. Estimated costs (OSU Enterprise Budgets) are in Table 2. Estimated storage costs were $22/ton of dry matter (DM) for corn silage and $11/ton of DM for alfalfa (assumed two fillings per year for alfalfa).

    For this article, I assumed that all the forage fiber required by the cows on a farm would be grown on that farm (e.g., no purchased hay). A Holstein cow with an average milk yield of 70 lb/day will require approximately 3300 lb of forage NDF for a 305-day lactation. Assuming corn silage and alfalfa silage average 44% NDF and using the yield data in Table 1 and assuming shrink was 5% for corn silage and 8% for alfalfa silage, the acres of each forage that would be needed to provide 3300 lb of forage NDF are in Table 3. If available land is quite limited, less land is needed to meet the fiber needs of the herd when corn silage is planted, even at a very low yield. Based on the forage cost in Table 3, at all yield potentials, alfalfa is a more expensive source of fiber than corn silage. However, protein supplementation costs are lower for alfalfa-based diets than corn silage-based diets. Using nutrient composition from NRC and average prices for corn grain, soybean meal, and expellers soybean meal, the concentrate needed for cows fed corn silage as the sole forage will cost about $67 (for 305 days) more than the concentrate needed when alfalfa silage is the sole forage. When the increased cost of the concentrate is added to the cost of the forage, on average, cows fed diets based on corn silage will be cheaper than those fed alfalfa silage. However, the average difference between forages is only 3% (probably within the error of all the assumptions used). Yield had a much greater influence than forage species. The cost difference between low and high yields for corn silage was 13% and for alfalfa it was 28%.

    Because of increased risk and because of increased variability in diet composition, diets with a single forage are generally less profitable than diets with two sources of forage. Research data show that milk production is equal when cows are fed diets with various corn silage:alfalfa ratios when diets are balanced correctly. Therefore, gross income should be similar and the decision as to which forage should predominate in a diet is a function of cost. Based on the total cost data in Table 3, the ratio of corn silage to alfalfa varies based on yield potential (Table 4). When land is poorly suited for alfalfa (low yield potential), the predominant forage should be corn silage, independent of the yield potential for corn silage. When land is well-suited for alfalfa (high yield potential), then alfalfa should be the major or predominant forage in the diet.

    Table 1. Dry matter yields (tons/acre) used for calculations.

    Yield Potential
    Corn silage
    Alfalfa silage
    Below average (25% less than average)
    4.9
    3.4
    Average
    6.5
    4.5
    Above average (25% more than average)
    8.1
    5.6


    Table 2. Estimated total production, harvesting, and storage costs ($/acre).

    Yield Potential
    Corn silage
    Alfalfa silage
    Below average (25% less than average)
    405
    360
    Average
    490
    415
    Above average (25% more than average)
    575
    470


    Table 3. Acres needed to provide enough forage NDF to meet the requirements of one lactating cow (average production = 70 lb/day) for 305 days and costs based on yields in Table 1.

     
    Corn Silage
    Alfalfa Silage
     
    Low
    Average
    High
    Low
    Average
    High
    Acres needed/cow
    0.81
    0.61
    0.49
    1.20
    0.91
    0.72
    Forage cost, $/cow
    328
    299
    282
    432
    378
    338
    Concentrate cost1, $/cow
    67
    67
    67
    0
    0
    0
    Total cost, $/cow
    395
    366
    349
    432
    378
    338

    1Increased cost of concentrate needed to meet the metabolizable protein requirements for cows fed a diet with corn silage as the sole forage compared with a diet with alfalfa silage as the sole forage.


    Table 4. Forage source that should result in lowest feed costs based on expected yield potential for corn silage and alfalfa silage1.

     
    Corn Silage Yield Potential
    Alfalfa Yield Potential
    Low
    Average
    High
    Low
    ++ Corn
    ++ Corn
    ++ Corn
    Average
    + Alfalfa
    + Corn
    + Corn
    High
    ++ Alfalfa
    + Alfalfa
    + Alfalfa

    1++ Corn = forage should be predominantly corn silage; ++ Alfalfa = forage should be predominantly alfalfa silage; + Corn = forage should be slightly more corn silage than alfalfa; and + Alfalfa = forage should be slightly more alfalfa silage than corn silage.

  4. Protecting Teat Skin During Winter

    Dr. Joe Hogan, Mammary Health Specialist, The Ohio State University 

    Cold, winter weather usually has harsh effects on unprotected teat skin. A couple of common sense practices can be helpful in preventing teat skin damage and subsequent mastitis. Dr. Leo Timms at Iowa state University has published a number of papers available through the National Mastitis Council (www.nmconline.org) outlining practical management tools to prevent teat skin chapping and cracking. A couple of his main points are listed below:

    Temperature. Wind chill temperatures of less than -25 oF put teats at extreme risk to freezing and frost bite. Less extreme chapping and cracking is likely at wind chill temperatures less than 0 oF. Appearance of skin problems is usually obvious within 2 to 3 days after exposure. Climate control for cows is usually not practical, but preventing cows from exposure to wind while teats are wet will help prevent cracking and lesions.

    Windbreaks. Provide windbreaks for cows as they leave milking parlors. Feed and house cows inside if possible during times of wind chill temperatures below 0 oF. Avoid drafts in barns that create wind tunnels that allow rapid movement of cold air. Wet teats are more likely to be damaged by cold, so use bedding in stalls that is as dry as possible.

    Milking Hygiene. Avoid using excessive water for preparing teats for milking in cold weather. Washing removes natural oils and the drying action associated with using large quantities of water can be abrasive to skin. Water not dried can freeze and harm the teat skin. Sanitize teats with a germicidal predip containing skin conditioner. Blot teats dry instead of rubbing.

    Post-Milking Teat Dips. Use a germicidal teat dip that does not harm the teat skin. Various products claim enhanced skin health due to addition of skin conditioning components. These may be beneficial in cold weather to help reduce drying and chapping of teat skin. The current recommendations are to dip and blot excess dip from the teat end before releasing the cow from the parlor. In extreme cold, quitting dipping for one or two milkings may be a realistic route to reduce the risk of cold weather damage. However, because omitting post dip application will increase the risk of spreading contagious mastitis pathogens, stopping teat dipping is not a practical long term solution.

    Barrier teat dips should not be used during times of extreme cold because these dips may take over twenty minutes to dry. Dips with over 50% emollients have also been slow to dry and also leave teats sticky and wet. Powder dips have shown minimal activity against contagious pathogens, but they do dry teats. Use of powder products has been suggested as an alternative to not dipping for a day or two. Finally, avoid salves. Most salves have diminished antimicrobial activity and can attract dirt, bedding, and other contaminates to teat skin.

  5. Dairy Enterprise Economics from Ohio Producers

    Mr. Don Breece, Farm Management Specialist, OSU Extension Center at Lima 

    For 12 years dairy farm financial information and enterprise data have been collected from Ohio farms participating in Extension and Farm Business Planning and Analysis programs. These farms use the FINPACK computer program for analysis. There data are also included on a national data base located at the Center of Farm Financial Management, University of Minnesota. The data base is called FINBIN and is found at: www.cffm.umn.edu. Here is a summary of Ohio data (from 10 to 16 farms per year) for the past 5 years. More complete details may be found in the Ohio Farm Business Summary 2004 - a copy is located at local Extension offices.

    Table 1. Net returns for Ohio dairy farms.1

     
    Averages
     
    High Profit Third
    Year
    Feed ($/cwt milk)
    Return ($/cow)
    Year
    Feed ($/cwt milk)
    Return ($/cow)
    2000
    6.95
    235
    2000
    6.47
    539
    2001
    7.52
    630
    2001
    5.92
    1037
    2002
    6.94
    261
    2002
    6.07
    665
    2003
    7.24
    33
    2003
    7.78
    609
    2004
    7.81
    547
    2004
    7.47
    1065
     
     
     
     
     
     
    5 yr average
     
    341
    5 yr average
     
    783

    1Includes replacement costs and opportunity costs for home grown feeds (N = 10 to 16/yr for Ohio); MN 5 year averages (FINBIN Data; N = 1923); feed cost average = $6.72/cwt milk, and average net returns = $485/cow.

  6. A New Income Tax Deduction

    Mr. Don Breece, Farm Management Specialist, OSU Extension Center at Lima

    The American Jobs Creation Act of 2004 created a new domestic deduction based on income attributable to domestic production. Qualifying property includes receipts derived from what is grown or produced. This new deduction begins for the 2005 income tax year and is limited to the lesser of:

    1. 3% of qualified production activities (QPAI),
    2. 3% of taxable income of an entity or adjusted gross income for an individual taxpayer, or
    3. 50% of W-2 wages paid during the year by the taxpayer.

    Qualified production property for cash-basis farmers includes receipts for sales of livestock, produce, milk, grains, and other products raised by the farmer. Proceeds from the sale of raised breeding stock, reported on Farm 4797, also qualify. However, sales of purchased breeding or dairy animals will not qualify unless these were purchased as young stock and a substantial part of the animals value resulted from the farmers expense in raising the animal to maturity. Sales of land, machinery, and equipment are also excluded from domestic production gross receipts. Furthermore, custom hire is also excluded.

    The 50% of W-2 wages limitation may become the most limiting factor for many farmers wishing to qualify for this deduction or wanting to take the maximum advantage of it.
    One way to increase W-2 wages is to pay wages for unpaid family labor; however, the increase of FICA taxes and decrease in self-employment wages for the operator would need to be factored in as a result of this change. Also, note that the following wages are not included for the calculation of qualified wages:

    1. Wages paid in commodities,
    2. Wages paid to a child (under age 18) of the farmer, and
    3. Compensation paid in non-taxable fringe benefits.

    Although the domestic production activities deduction is limited to 3% of QPAI for tax years 2005 and 2006, it will be 6% for 2007 to 2009, and 9% for years after 2009. The tax form for this new deduction is Form 8903. See your income tax practitioner or the IRS web site at www.irs.gov for further information.

  7. Commercial Activity Tax Update

    Mr. Don Breece, Farm Management Specialist, OSU Extension Center at Lima

    Farmers with gross sales of over $150,000 join other commercial businesses subject to a new Ohio tax (and no, it is not a tax on your barn cats!). As result of this years Ohio Budget Bill, the Commercial Activity Tax (CAT) came into being. In a question to the Ohio Department of Taxation, whether farms were included, the reply was as follows: "The CAT was intended as a broad based, low rate privilege tax. As such, it applies to farmers and other agricultural enterprises, once these entities reach $150,000 in taxable gross receipts." A second question was asked about milk and other livestock sales from Ohio farms to out-of-state markets. Would these sales be a part of the gross income figure and subject to the tax? The answer was that "the gross receipt has to be sitused to Ohio. If the dairy farm milk is sold outside Ohio, the farm is not subject to CAT. See the Ohio Revised Code 5751.033 for situsing provision."

    For businesses with gross receipts below $150,000, no CAT is due. For businesses with gross receipts between $150,000 and 1 million dollars, a flat $150 tax will be paid. A tax rate schedule will kick in for businesses with gross receipts over 1 million dollars. All businesses with receipts of over $150,000 per year must pay a one time registration fee; $20 will cover most farms ($200 maximum fee). On line registration is encouraged (a reduced $15 is charged for web registration), and after November 30, a fee will not be charged. For the fees already paid, they will be deducted from the tax due. A web link is available to explain more about the CAT and other new Ohio tax information at: http://tax.ohio.gov/.

  8. Tom Noyes, Wayne County Extension Dairy Educator, Has Retired After More Than 30 Years

    Mrs. Dianne Shoemaker, Extension Dairy Specialist, OSU Extension Center at Wooster

    After more than 31 years as the Extension Dairy Agent in Wayne County, Tom Noyes has retired from Ohio State University Extension. Arriving in Ohio, the Rhode Island native brought a love of the dairy industry and a Master's Degree from the University of Rhode Island. His specialization and interest in dairy nutrition remained a passion throughout his career.

    In addition to dairy cattle nutrition, Tom's contributions in the areas of dairy management and intensive grazing management were many. Tom was a founding member of the Dairy Excel Team and taught many of the more than 500 graduates of the Managing for Success workshops. He organized and led many of the study tours and workshops that followed Managing for Success.

    Designing and implementing management intensive grazing systems for dairy farms, grazing tours, pasture walks, and financial analyses of farms practicing management intensive grazing are just a few of the contributions that Tom has made in the area of managed grazing. Research trials involving forage varieties were also conducted at OARDC.

    In Wayne and neighboring counties, Tom planned and conducted hundreds of dairy programs and tours for local producers. On-farm consultations helped answer nutrition, management, and financial concerns of those requesting assistance.

    Tom will be missed for his many contributions and willingness to assist others both within and outside of Wayne County.

    We wish Tom the best as he joins his wife, Rosalie, in retirement frequently spent at their family's dairy farm milking Jersey cows and the occasional Ayrshire. Also anticipating his retirement are numerous grandchildren in Wayne and Geauga counties.

    Congratulations, Tom and remember, we're always looking for a few good volunteers

  9. New OSU Dairy Resources Brochure Available

    Mrs. Dianne Shoemaker, Extension Dairy Specialist, OSU Extension Center at Wooster

    We're not just "Dairy Science" anymore

    What resources does Ohio State University Extension offer today's dairy industry? Animal health and well-being, dairy cattle nutrition, farm business management, housing and facilities, environment, social issues, and youth development are the main categories that begin to describe the wide-ranging expertise available through OSU faculty and staff located on the Columbus and Wooster campuses and throughout Ohio in County Extension Offices.

    The dairy industry does not stand alone. Expertise from two colleges and seven departments support our dynamic industry. A new brochure, "Resources for Ohio's Dairy Industry" provides links to available expertise. "Resources" is available on-line at https://dairy.osu.edu or request a hard copy by contacting Laurie Winkelman at 614-688-3143, winkelman.6@osu.edu.

  10. Changes in Appointment for Tim Demland

    Mr. Tim Demland, Executive Director of Ohio Dairy Producers 

    On October 13th, the Board of Directors of the Ohio Dairy Producers (ODP) decided to enter into an administrative and operations agreement with the American Dairy Association and Dairy Council (ADADC) Mid East to become effective November 1, 2005 to share staff and facilities. The decision was reached by both the boards of the ODP and the ADADC Mid East after many months of discussion between the dairy producer leaders of the two groups.

    For the past five years ODP has been working jointly with The Ohio State University Extension for staff services, primarily through the Extension Associate Dairy position that I held, and we are extremely grateful. But one of the foundational goals of ODP was to become completely supported and run by dairy producers. This agreement fulfills those goals.

    The new partnership creates the opportunity for two dairy farmer owned organizations to work together on behalf of Ohio's dairy production industry. Viewed as a win-win arrangement, the contract provides ODP with the resources and expertise necessary to represent dairy farmers in legislative and regulatory areas - areas that the check-off program is prohibited from working. Dairy farmers will now have the organizational structure, the separation of duties, and an enhanced membership organization to address these vital non-check-off functions.

    Under the agreement, I will continue to serve as the executive director of ODP but will transfer employment from OSU to ADADC Mid East. In addition to my duties to ODP and the Ohio Dairy Industry Forum, I will also serve as an industry relations manager for ADA and assist with producer communications.

    The Board and I are extremely excited about the wide range of opportunities that have now been opened for all dairy producers. We also continue to covet your continued support and input in identifying those issues that will most effectively enhance the productivity and profitability of Ohio's dairy production industry.

  11. Collegiate Dairy Judging Team Results for 2005

    Mr. Bernie Heisner, Coach and Executive Director of COBA/Select Sires 

    The Ohio State University Dairy Cattle Judging Team of Brian Baird, Kingsville, OH; Dan Sanders, Waynesfield, OH; Stacey Shipley, Newark, OH; and Zach Stammen, New Weston, OH; coached by Bernie Heisner earned many honors in regional and national contests this fall.

    At the National Contest held at the World Dairy Expo in Madison, WI, the team was 5th high out of 23 teams. The OSU team was 1st in Holstein, 3rd in Jersey, and 3rd in Linear. Three OSU students received "All-American" recognition for placing in the top 25 in this national contest: Zach Stammen was 12th high, Brian Baird was 15th, and Dan Sanders was 22nd. The OSU students receiving top 10 honors in the individual breeds included: Dan Sanders - 5th Brown Swiss; Zach Stammen - 3rd Guernsey; Zach Stammen - 2nd Holstein, Brian Baird - 10th Holstein; Zach Stammen - 8th Milking Shorthorn; Brian Baird - 9th Red and White; Zach Stammen - 4th Linear; and Zach Stammen - 9th Reasons.

    Earlier in the fall, this OSU team was 2nd Overall at the Eastern States Exposition contest held in West Springfield, MA. Stacey Shipley led the team at this contest, earning the 3rd high individual overall and she was 1st in Ayrshire. The OSU team was 1st in Ayrshire. Dan Sanders claimed the 5th high individual award, and Zach Stammen was 10th high. The team also competed at the All-American Dairy Show, Harrisburg, PA and placed 7th as a team and Dan Sanders was 10th high individual.

    Many younger OSU students gained experience by competing in the Mid-South Fair Contest, Memphis, TN. The OSU graduate, Kelly Epperly, Anna, OH, served as assistant coach for the two OSU teams consisting of Whitney Beck, Wauseon, OH; Greg Hartschuh, Lykens, OH; Dan Lahmers, Malta, OH; Neil Moff, Columbiana, OH; Sheryn Schlairet, Mt. Vernon, OH; Cade Stockberger, Utica, OH; and Dan Ziegler, Belleville, WI.

    Dan Ziegler was high individual in Holstein in the Mid-South contest. Cade Stockberger was 16th high individual overall, and Whitney Beck was 17th. The two teams ranked 7th and 12th at Mid-South contest.

    The top four OSU individuals from Memphis - Cade Stockberger, Whitney Beck, Neil Moff, and Dan Ziegler earned the opportunity to compete in the North American International Livestock Exposition contest at Louisville, KY. The team finished 10th of 18 teams, and Cade Stockberger was 15th high individual and Neil Moff was 28th.

    The Ohio State University is proud of the efforts and the accomplishments of the 6 teams involving 11 students which competed in 5 collegiate dairy cattle judging contests in the Fall of 2005.

    The 2005 OSU University Dairy Cattle Judging team at World Dairy Expo
    included: (from left to right) Bernie Heisner, Coach, Brian Baird, Stacey Shipley,
    Dan Sanders and Zach Stammen.

  12. Ohio 4-H Dairy Judging Team Results

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


    Youth in Ohio competed in two contests in 2005. Allison Stammen (Darke County), Jodi Reutter (Holmes County), Esther Rupp (Wayne County), and Erin Bardall (Harrison County) competed at the World Dairy Expo on October 3 in Madison, WI. The team placed 7th overall out of 30 teams and placed 9th in reasons, 3rd in Brown Swiss, and 6th in Jersey. At the North American International Livestock Exposition held in Louisville, KY during November, the Ohio 4-H team consisted of Joel Bourne ( Darke County), Laura Gordon (Wayne County), Kaleb Kohler (Fairfield County), and Matt Weeman (Wayne County). The team placed 11th overall out of 23 teams and placed 2nd in Ayrshire, 3rd in Brown Swiss, and 5th in Holstein. Matt Weeman was 5th in Brown Swiss and 9th in Holstein. The team was coached by Mr. John Lemmermen with the OSU Department of Animal Sciences.

    The 2005 Ohio 4-H Dairy Judging team at the North American International
    Livestock Exposition included: (from left to right) John Lemmermen, Coach,
    Laura Gordon, Matt Weeman, Kaleb Kohler, and Joel Bourne.

  13. National and Regional 4-H Dairy Quiz Bowl Contest Results

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

    Ohio was represented at the Dairy Quiz Bowl Contest held during World Dairy Expo in Madison, WI. The team was from Wayne County and consisted of Sherri Gress, Hayden Gress, Laura Gordon, and Kerby Hershey. The team placed 4th out of 7 teams and was coached by Lisa Gress.
    The 26th National 4-H Dairy Quiz Bowl competition was held at the North American International Livestock Exposition November 4-5 in Louisville, KY. Ohio did not have a team in the competition this year, but Drs. Maurice Eastridge and Peter Spike served as judges in the Contest. Nineteen state 4-H teams competed in this year's event. The top four teams were, respectively: New York, Maryland, Iowa, and Minnesota, with Georgia and Illinois receiving honorable mentions. Your help in encouraging youth to participate in this wonderful learning program would be appreciated.