Archive for the ‘Columnists’ Category

The corn attack!

On the Edge of Common Sense

By Baxter Black, DVM

In the last few years, we have watched an increasing attack on corn. The skewed reasoning is: corn syrup is available, reasonably priced, and good for the average person, therefore; it must be bad! This is the kind of logic that has been applied to farmed salmon, Big Macs, lower taxes, capitalism and pasteurized milk.

I’m sure this same kind of reasoning was applied to earlier “civilizing” discoveries such as air conditioning, the steam engine and fire. In the book The Omnivore’s Dilemma, by Michael Pollan, © 2006 it was noted that “too much” corn syrup can make you fat, reduce the popularity of competing vegetables like beets and wheat straw, AND someone can make a profit on it!

In the book FIRE, © 5286 BC, the author noted that “too much” fire could cause global warming, reduce your ability to withstand the cold, and someone could likely invent matches and make a profit!

Too often, in the long-established profession of the Luddites, Nay-Sayers, and, otherwise unemployed columnists, their motives can be found by “following the money.” To sell a book or theory, wacko as it may be, you must first find a trend, discovery, or product that is well-known and well-liked. Then you make a persuasive observation casting doubt on the safety, ecological impact, availability and/or the morality of its use. The purpose is to create a problem where none exists;  i.e., wild horses, hormone implants, preservatives, oil drilling the tundra, pesticides, irradiation of food, hog confinement sheds, Alar in apples and antibiotics in cattle. Look at what a waste of common sense and money has resulted from the discovery of BSE…in one cow in the United States! It was a fear monger’s feast!

So while lettered experts, authorized “mullers”, activists, and writers are trying to portray corn syrup as some evil substance, others of their kind are searching for easy prey so they can be the “nay-sayer de jour”…Potential headlines:

“Burnt toast, a carcinogen suspect!”

“People who lean have a tendency to fall over!”

“Carrots used as weapons in Arctic battle!”

“Could bovine dewlap be related to snood shrinking in turkeys?”

“Should Holsteins sue the Dairy Improvement Association for the Chick-Fil-A ads?”

“Is Tractor Fantasy Dangerous?”

“Can Tolstoy save your Marriage?”

“Packers blame the tennis ball shortage in New Zealand for the drop in the beef market!”

The corn attack has stimulated discourse on why we eat so good, have so much cheap food, and can feed the world’s hungry if need be. The majority of this discussion has been among non-producers, non-scientist and journalists, wherein common sense, economic impact, scientific validity, and overwhelming acceptance are not on the table.

Michael Pollan in his book The Omnivore’s Dilemma caused a ripple. He put corn syrup on the stage for its fifteen minutes of fame. But, as Lincoln said when his dog swallowed an Indian head penny, “This too shall pass.”

FYI

Baxter Black is a cowboy poet and ex-veterinarian raised in New Mexico and now lives in Benson, Ariz. He has written 12 books and recorded more than a dozen audio and video tapes, and is a syndicated columnist and radio commentator.

Books, videos, CDs and tapes by Baxter Black can be purchased through www.baxterblack.com.


How Innovation Center helps your business

Your Dairy Checkoff At Work

By Tom Gallagher

As a dairy producer, you operate in a much broader and complex world than did your parents or grandparents. To be successful in your business today, dairy producers, through their investment in the dairy checkoff, must work with and through the dairy industry to grow sales by identifying common goals and building on producer investments.

This approach, working through the Innovation Center, benefits dairy producers because it provides the opportunity to influence the supply chain and the marketplace – by sharing knowledge and insights that affects how the industry processes, packages and promotes dairy products.

The Innovation Center is not a physical entity. Rather, it is an industrywide forum that allows a cross-section of the dairy industry – from farm to fridge – to work together to foster innovation and give consumers more of what they want, when and where they want it.

Already, the Innovation Center has engaged more than 180 companies and organizations, and more than 500 people, to address barriers and opportunities pre-competitively to protect and grow dairy sales.

Here are some examples to date of how the Innovation Center is helping the industry work together:

• Consumer Confidence: The Consumer Confidence Committee has completed quantitative research of consistent messages that reinforce consumer trust and confidence in dairy’s health and wellness, environmental stewardship, animal care, community, innovation and food safety. Results are being packaged for co-ops and processors to use in marketing and communications to promote more dairy sales. In 2011, we will start a proactive campaign to activate an army of ambassadors through the dairy marketing chain to promote dairy’s image with the public.

• Food Safety: This industry-led Food Safety Task Force, comprised of 24 senior executives and content experts from 11 processors and co-ops, assessed in-plant risks and vulnerabilities. It also built a plan to establish uniform pathogen control standards, auditing practices and industry and supplier education and training. Such efforts will reduce financial/business risk, maintain consumer confidence and create easily adoptable practices across all U.S. dairy and ingredient processors.

• Food Retailer Engagement: The Research and Insights Committee is working with eight grocery store chains on new strategies for improving dairy innovation and merchandising to drive increased sales. The retailers will do store testing of strategies that deal with “meal solutions” for shoppers.

• Comprehensive Business Case: The Research and Insights Committee has used comprehensive product, nutrition and consumer research to guide the industry to new growth opportunities related to: the Hispanic market, lactose intolerance, snacking, “dairy aisle reinvention” in grocery stores, and reduced sodium in cheese. This work has already helped industry leaders expand product lines and make company acquisitions that can lead to additional sales for the industry. New growth opportunities in 2011 include breakfast and sweeteners.

• Cheese and Sodium: The Health and Wellness Committee is working with more than 50 industry players on key “pre-competitive” barriers to reducing sodium in dairy products without sacrificing consumer satisfaction and product quality. The “action plan” for 2011 includes thought leader education on the role of sodium in cheese-making, a vendor solution for rapid-testing of sodium levels, and an industry-wide approach to assuring quality and safety in processing cheese with less sodium.

• Flavored Milk: In association with MilkPEP and IDFA, the Health and Wellness Committee has brought together dairy industry marketers, DMI and state and regional dairy promotion representatives, school foodservice directors and nutrition professionals to identify the challenges that drive schools to consider flavored milk bans, and action plans that can be used locally.

• Promoting the Positive: Based on thorough consumer research, new marketing strategies, messages and communications tools are being made available to dairy marketers. To date, more than a dozen dairy brands – including Kemp’s, Dean Foods, Kraft, Hood, Anderson Erickson, LALA, and Shamrock – are promoting dairy’s positive health benefits, such as multiple nutrients and protein, in their marketing efforts.

• Sustainability: The Innovation Center conducted the first national life cycle assessment (LCA) for fluid milk, advancing a science-based approach recognized as “best practice” around the world. This work has given the dairy industry the data it needs to help tell its story and set the record straight regarding dairy’s impact on greenhouse gas emissions. The study establishes a baseline for the U.S. dairy industry to use in demonstrating continued progress in reducing its carbon footprint. The Innovation Center is raising $1.6 million in outside funds to implement 10 greenhouse gas reduction projects throughout the value chain. Other studies are underway, including an LCA for cheese.

• Globalization: The landmark Bain study has served as a critical strategic guide for the U.S. industry to address the impacts of globalization on U.S. domestic and international trade and move U.S. dairy farther along the path of being a consistent global supplier. The study was aimed at addressing fundamental barriers to U.S. global competitiveness, as well as taking advantage of an anticipated shortfall of global supply. Efforts in this area include dairy pricing reform, volatility risk management, customer product specifications, net-export benefit trade treaties, and more competitive quality traceability systems.

• Communications: The Innovation Center has created a password-protected web site at usdairy.com to allow secure sharing of pre-competitive science, insights and information.

Through the combined efforts of cooperatives, processors, manufacturers and other businesses, the industry has contributed more than $7 million in donated time to the Innovation Center to help advance dairy producer priorities in the marketplace. That’s just one indicator of the increasing unity that is forming to keep the dairy industry strong and secure, assuring a continued home for the milk you work so hard to produce. I encourage you to let me know your thoughts as we continue to work together to grow the market.

FYI

Tom Gallagher is chief executive officer of Dairy Management Inc. (DMI), the domestic and international planning and management organization that works to increase sales of and demand for U.S.-produced dairy products and ingredients on behalf of America’s dairy producers. For more information on dairy checkoff programs, visit www.dairycheckoff.com.

Opinions & Sacred Cows : Held in the jaws of overregulation

By Western DairyBusiness Editor Ron Goble

It’s no secret we live in a world wrapped up in regulatory red tape. In fact, agriculture in general, and dairy specifically, can’t get things done in a timely manner anymore. Ask a dairy producer, who just jumped through a myriad of regulatory hoops over the past four or five years in his quest to build a new dairy, how stressful and expensive that venture can be.

Some states are more “welcoming” than others. California state regulatory agencies make it almost impossible to get the job done before a middle-aged dairyman reaches retirement age. Texas, on the other hand, makes the permitting and construction process about as painless as you can find. Not that they don’t have strict regulations to follow, but they have a way of moving the process forward in a productive and positive way – dairy industry friendly.

There is however, more outcry from the agriculture sector over the past two years of the Obama Administration because of proposed rules or final regulations. Agriculture has its guard up since President Obama issued an executive order in mid-January ordering each federal agency to submit a plan outlining how it will “periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded or repealed so as to make the agency’s regulatory program more effective or less burdensome in achieving the regulatory objectives.”

Although the new order stresses the rules must be based on “objective science,’ agriculture has its doubts. Going on government’s past performance, agriculture can expect more stringent regulations in the future, not less. I would be quite surprised – but happily so – if there were any moves to reduce, or do away with certain regulations because scientific evidence proves them to be overreaching. Ag groups are optimistically hoping overreaching rules will be reviewed and corrections made. I fear the latest executive order only opens a door of opportunity for more oversight and regulation.

The Environmental Protection Agency has a lot of backpedaling to do to ease up on the overregulatory pressures being applied to the dairy and livestock industries. Steve Foglesong, president of the National Cattlemen’s Beef Assn., told Feedstuffs recently, “If there were one word to describe the first two years of President Obama’s Administration, it would be ‘regulation.’” He characterized EPA’s recent actions as a “regulation rampage,” and examples of Administration actions would “kill industry as we know it.” He cited the Grain Inspection, Packers & Stockyards Administration (GIPSA) rule as “a perfect example of government overreach into the private marketplace.”

In today’s world, government regulations do more to hinder food production than help it. These bureaucratic hurdles hinder efforts to literally feed the world. If we expect U.S. farmers, ranchers and dairy operators to feed the 9-plus billion people who will populate the world in decades to come, things in the regulatory world must change.

We need to clear away the unnecessary regulations and the red tape they create. Because in the end, a hungry world won’t ask whether their beef was raised in a pasture or feedlot. They will only be concerned about having enough food to eat – and be able to afford it.

FYI

Have an opinion or response? E-mail Ron Goble, Associate publisher/editor, Western DairyBusiness at: rgoble@dairybusiness.com

Performance feedback: Correcting unacceptable performance

People Power

by Robert Milligan

We traditionally talk about two types of feedback – positive and negative – because there are two outcomes of every behavior or performance: 1) meeting or exceeding expectations; or 2) failing to meet expectations.

The appropriate response to “good performance” is positive feedback. It does not follow, however, that negative feedback is always the appropriate response to “unacceptable performance.”

When we experience unacceptable performance or behavior, a little voice subconsciously or consciously asks, “What punishment is appropriate?” The question is understandable, but the wrong question. We need to look at human behavior. Answer these two questions:

• When someone else makes a mistake, who or what do we tend to blame?

• When we ourselves make a mistake, who or what do we tend to blame?

The likely answer to the first question is “the other person.” The likely answer to the second is “not ourselves.”

These answers are at the core of human nature. In organizational behavior literature, this tendency is referred to as “The Fundamental Theorem of Attribution.”

When there is unacceptable behavior:

• the supervisor will likely attribute the performance as under the control of the employee and provide reprimand or punishment.

• the employee will likely believe/perceive/argue the unacceptable performance is out of his or her control, and a reprimand will be perceived as unfair.

In order to avoid this perception bias, we have to replace the “What punishment is appropriate?” question with “Why? What is the reason for the unacceptable performance?”

I often quote a highly respected dairy manager speaking at a “dairy days” program: “When I analyze the cause of my employee’s unacceptable performance, 90% of the time I determine the cause was something I did.” There are two key points in his quote:

• He was clearly asking: “Why? What is the reason for the unacceptable performance?”

• He was saying – and research, my experience and other managers agree – most unacceptable behavior is caused by factors not in the control of the employee.

Therefore, you may choose between two – not one – responses to “unacceptable behavior.”

Redirection feedback

Most managers know negative feedback is not appropriate in a situation where unacceptable performance is not due to the employee’s lack of motivation or focus. However, not knowing what else to use, they often do nothing, failing to be proactive and failing to change results.

The situation becomes an opportunity to redirect the employee toward good performance. We must pursue “What is the reason for the unacceptable performance?” to determine the cause. Possibilities include:

• insufficient training and coaching.

• expectations were not clear.

• the expectation was not attainable.

• unusual or unexpected circumstances prevented meeting the expectations.

As with any problem, understanding the root cause allows us to develop a plan to correct it – in this case unacceptable performance. You now have the opportunity to be proactive,  enable change in yourself and/or the employee,  increase employee performance and thus, farm business performance.

Redirecting is not easy, because the employee will likely expect – and easily perceive – you are delivering a reprimand.

To provide redirection feedback:

• begin with and include positive feedback on positive efforts and expectations met or exceeded. You are building on success.

• communicate that current performance is not acceptable. That’s often difficult. You must convey you want to help, not  reprimand.

• convey he or she is not at fault. Also often difficult to convey, this is the basis of and key to redirection feedback.

• use what you learned in determining the cause of the unacceptable performance to outline required changes – skills learned, knowledge gained, behaviors changed, actions taken, resources provided, expectations adjusted – to enable “successful” performance.

• keep focused on redirecting to succeed.

Negative feedback

If you determine the cause of the unacceptable performance is due to the employee’s lack of motivation, energy, focus or concentration – especially if you have already provided redirection feedback – negative feedback is warranted.

However, neither you nor the employee should view negative feedback as a punishment. It should be given as a choice:

• make the change necessary for good performance.

• incur the specified consequence.

Negative feedback is not easy to deliver. Following are some suggestions:

1) Begin with and include throughout positive feedback on positive efforts and expectations met or exceeded.

2) Communicate that performance is not acceptable, and change is expected.

3) Be clear the situation is not the cause of the unacceptable performance; the behavior is the problem.

4) Recognize the consequence – absence of positive feedback, reminder, reprimand, punishment – must produce sufficient discomfort to cause a change in behavior.

5) The purpose is still employee success.

Nearly all managers dread dealing with unacceptable performance. You must be proactive in determining the cause, then work to institute changes that will lead to employee success.

Based on your analysis of the reason for the failure to perform, you can redirect and/or provide a consequence for failure to change.

FYI

Robert Milligan, senior consultant with Dairy Strategies LLC, can be reached via phone: 651-647-0495; e-mail: rmilligan@trsmith.com, or website: www.dairystrategies.com. His column appears monthly in Eastern DairyBusiness magazine.

Marketing: Can rally hold through 2011?

The dramatic increase underlies bullish fundamentals, but have a strategy in place in case markets turn.

By Matt Mattke

Matt Mattke, Market360® dairy advisor at Stewart-Peterson

Q: Milk futures prices have rallied sharply since the end of December and the 2011 Class III average futures price is quickly approaching $17.00/cwt. Is a $17.00 average price sustainable for 2011?

A: It is possible milk futures prices for 2011 could hold at a $17.00 average for the year. In 2007, milk prices averaged $18.03/cwt., and in 2008 milk prices averaged $17.44/cwt. While those were the two highest calendar-average prices  the milk market has ever seen, one cannot rule out the possibility of 2011 milk prices matching or even exceeding either of those averages

So far in 2011 there have been several other livestock markets reaching some unthinkable and unprecedented levels.

• In January, the price of Live Cattle futures rallied to a new all-time high, with the February 2011 contract reaching $112.25/cwt.

• The Lean Hog futures market also reached new all-time highs in January, with the April and June 2011 Lean Hog futures contracts reaching $94.52/cwt. and $100.95/cwt., respectively.

The prior all-time high for Class III milk is $22.45/cwt., for July 2007. While milk prices still have a lot of work to do to get back to a $22.00/cwt. price level, one cannot rule out that possibility between now and the end of 2011.

The sharp rally in milk prices from Dec. 21, 2010 to Jan 31, 2011, was sharper and faster than any of the prior big market rallies seen in 2004, 2007 and 2008 (all of which led to at least one month of $20.00/cwt. milk).

• It took the March 2004 milk contract three months to rally from $11.30 to $14.40.

• It took the March 2007 milk contract almost 13 months to rally from $11.25 to $15.05.

• It took the March 2008 milk contract about nine months to rally from $14.75 to $18.60.

• It took the March 2011 milk contract just seven weeks to go from a low of $13.58 to a high of $18.57.

This dramatic rally suggests there are some very strong underlying bullish fundamentals brewing in the cash market that could linger for a large part of 2011.

This answer so far paints a seemingly rosy picture for milk prices, creating the impression there is little to worry about for 2011. Once Jan. 1, 2012 comes along, we’ll all be able to look back and see what kind of year 2011 turned out to be for milk prices.

On that day, the goal is not to look back on 2011 with regrets and “should haves,” seeing $17.00 milk prices turned into $12.00 prices and having taken no action. While the trend looks good for milk prices right now, we have seen how quickly things in the milk market can change.

Thus, it is imperative producers have a strategic action plan in place, in case 2011 milk prices do take a turn for the worst. Maybe that plan is to buy put options, systematically scale into milk sales, and/or follow the market with “stops.” Whatever the strategy turns out to be, it is important that there is a pre-determined action plan in place.

FYI

Matt Mattke, Market360® dairy advisor at Stewart-Peterson, can be reached via e-mail: mmattke@stewart-peterson.com, phone: 800-334-9779 or visit www.stewart-peterson.com. His column appears monthly in Eastern DairyBusiness magazine.

Dairy Financial Times: What can we expect from 2011?

By Paul Anema

After the disastrous year of 2009 and a less than spectacular 2010, most producers I talk to are looking to 2011 with anxiety and apprehension. So what can we expect from 2011? To answer that question I think we first need a reminder of perhaps the most important lessons of 2009.

Improbable does not mean impossible:  In his book “The Black Swan,” Nassim Nicholas Taleb describes this by looking at the life of a turkey. For a thousand days a turkey might get fed by the farmer’s hand. From that thousand days the turkey could determine that the good farmer would never hurt him – until that fateful 1,001st day.

The dairy industry has made similarly ill-fated assumptions that were proven false during the recent past:

1. “It’s not possible to lose $650 per cow in a nine month period.”

2. “It’s not possible for the value of cows and heifers to drop by 40% in less than six months.”

3. “It’s not possible to have record high feed costs and record low milk prices simultaneously.”

Because most dairymen had never seen anything like 2009 before, and because they still had very fresh memories of an outstanding 2007, the disasters that took place were not on anyone’s radar until it was too late to do much about it. So what does this mean for 2011?

The battles of 2011 will likely be different than the battles of 2009.

As feed prices are once again rising and milk prices have been swinging quite dramatically (I am writing this on January 25), I hear the refrain “here we go again” sounding from many dairymen. I don’t think we are in for a repeat of 2009 for two main reasons:

• First, the majority of clients that I am working with don’t have enough equity to absorb a loss of $650 per cow.

• Second, there is substantially less credit available now than in 2009.

This lack of credit is where most dairymen need to be focused. Perhaps the most critical and most dangerous assumption that could be proven wrong in 2011 is that “because I have been given credit in the past I will be given credit again.” While a tremendous amount of energy has been spent focusing on milk and feed prices, very little attention has been given to the diminishing credit markets.

The first and most obvious source of credit is from the banks. In recent months most banks have been decreasing the amount they will lend on cows to the point that they are not lending a whole lot more than what current beef prices will yield. Keep in mind that most feed and herd loans renew annually which allows the lenders to change the rules and/or call in loans as they deem necessary. It is also important to remember that the loan officer that you deal with does not set policy for the bank. There are persons higher up the ladder of that institution that ultimately determine the level of commitment they are willing to show to individual dairy farmers and/or the industry as a whole.

The second source of credit is from vendors. Many of these vendors were caught off guard by the losses of 2009 and many did not know how bad things were until it was too late. As such, they had no strategy for dealing with increased receivables from dairymen and by default many of them extended credit hoping things would eventually turn around. Now that many dairymen have gotten more caught up with these vendors I have my doubts about whether the vendors will be willing to go down that road again.

Because no credit relationship is 100% safe or guaranteed, the first line of defense is to be aware of this uncertainty and shore up your balance sheet in the event that you need to attract new suitors. While it is not a great environment to find new credit, a strong balance sheet certainly increases the chances that you won’t need to find a new source of credit. If you do find yourself in need of a new source of credit, a strong balance sheet is about the only way it will be possible. For those of you who have $200 per cow of working capital and debt to equity of less than 2:1 – congratulations. You are in a great position to survive and possibly thrive in the coming years. For those of you in a less enviable position the best way to improve the marketability of your balance sheet is to shore up working capital and decrease leverage.

This may be easier said than done, but here are a couple of ideas:

1. Use any profits to pay down short-term debt and payables. The trend in the past 10 years has been to use profits to fund growth. A dairy’s working capital is its first line of defense against periods of loss. Growth that contributes to erosion of working capital could very well be the fatal blow to dairy’s with a weak balance sheet.

2. Shed assets that are not essential to the survival of the farm. For dairies that have inadequate or negative working capital, it may be a good idea to sell quota and any growing stock that are not needed to maintain the current herd size. Some will argue that those assets could yield profits in the future and I would agree. But for many dairy farmers, selling these assets might be the only option that allows them to get to the future.

FYI

• Paul Anema, CPA, and partner in Modesto, Calif., with Genske, Mulder & Co., LLP, a certified public accounting firm representing clients who produce 12% of the nation’s milk in 29 states. Paul can be reached at 209-523-3573 or e-mail paul@genskemulderco.com

Editor’s Update: A Shadowy Start

It’ll be a long winter for dairy producer margins

By Dave Natzke

Milk market watchers predicted dairy producer economics would be scary in the first half of 2011. The shadow appeared early. Dig in, dairy groundhogs.

December 2010 federal and California order prices for manufacturing classes of milk were all down from November, and January 2011 Class I & 1 prices were also lower than the month before. Declining milk prices, combined with higher feed prices, pushed the December 2010 milk-feed price ratio to its lowest level since August 2009. At 1.97, the preliminary ratio is down from November’s revised estimate of 2.23, and compares to 2.42 in December 2009.

The monthly milk-feed price index, an indicator of milk income relative to feed costs, represents the pounds of 16% mixed dairy feed equal in value to 1 lb. of whole milk. December’s ratio was the 37th straight month below 3.0.

The 2010 average index was 2.26, the highest in three years. However, even though 2010 milk prices will end up 20%-25% higher than 2009, the end-of-year trends will carry into the start of 2011.

With that economic shadow as a backdrop, USDA’s Dairy Industry Advisory Committee (DIAC) was preparing to meet, Jan. 11-12, to finalize dairy policy recommendations to U.S. Ag Secretary Tom Vilsack.

Preliminary recommendations were voted on in December, and the stickiest issues did not draw a consensus. The committee voted on and accepted approximately 20 recommendations for policy changes. According to reports, they narrowly recommended all states be mandated to adopt California’s higher standards for milk solids, and approved a proposal to implement a mandated “growth management” program.

Among other proposals receiving greater approval, DIAC recommended stricter somatic cell count standards; federal order reform, including consideration of the elimination of end-product pricing; improved risk management products; adoption of farm savings accounts, modifications to the Milk Income Loss Contract program; and possible elimination of the Dairy Product Price Support Program.

Final recommendations will be posted at www.fsa.usda.gov/DIAC. Whether these recommendations add sunshine to the dairy plank of a 2012 Farm Bill rests in the political process.

A new year brought staff changes to DairyBusiness Communications.

Cliff Passino, national accounts manager, was named publisher of Western DairyBusiness and Eastern DairyBusiness magazines. In his new role, Passino will manage operations of the two magazines, as well as DairyLine Radio Network and DairyProfit Weekly newsletter, related web sites and electronic products.

He joined the company in 1998, working first at HolsteinWorld, before joining the DairyBusiness magazines’ marketing staff. He previously held marketing and field positions with Holstein Association USA, and worked on a large dairy in New Mexico. He’ll continue to work from a satellite office in Vermont.

Karen Knutsen was named publisher of HolsteinWorld magazine, adding to her current role as editor. She will manage operations of the monthly magazine and extensive Internet operations, which serve nearly 10,000 print subscribers and about 40,000 website visitors each month.

Knutsen joined the HolsteinWorld staff in 2002, becoming editor three years later. Raised on a Maryland Holstein farm, she earned a degree in animal science from the University of Delaware. She previously held a number of communications positions with leading AI firms. She is based in the East Syracuse, N.Y. office.

Finally, Susan Harlow, a member of DairyBusiness Communications staff since 1999, accepted a position as senior writer/editor at Antioch University New England, in New Hampshire, effective in early January 2011. Most recently, Susan served as associate editor for Eastern DairyBusiness and Dairy Profit Weekly.

Harlow departs on a high note. For the sixth time in her career, she recently received a Harold L. “Cap Creal” Journalism Award, presented by the New York State Agricultural Society and Cornell’s Alpha Gamma Rho fraternity. Her winning article, “Green for Green: Funding the Power of Digesters,” was published in the February 2010 issue of Eastern DairyBusiness. The award was created in 1978 to foster more coverage of the positive aspects of agriculture in New York state.

One final addition of note to the DairyBusiness Communications’ family. DairyLine Radio welcomed Dr. Mike Hutjens as a weekly contributor to its radio program. Hutjens is Extension specialist with the Dairy Department of Animal Sciences at the University of Illinois at Urbana-Champaign.

Well-known in the dairy industry, Hutjens has spoken at conferences in 46 states and 18 countries, sharing his knowledge and special TMR of humor. Hutjens’ “Feed Facts” segment will be broadcast every Friday on DairyLine Radio. Broadcast stations and times are available at www.dairyline.com.

FYI

• To offer your own opinion or response, e-mail Dave Natzke, national editorial director, DairyBusiness Communications, e-mail: dnatzke@dairybusiness.com.

People Power: Performance Feedback

People Do Respond to Positive Feedback

by Robert Milligan

Scientific and technological processes in dairy in the last 50 years have helped lead to outstanding production. But as we have repeatedly discussed, achieving superb dairy performance requires excellence in both technical and people processes.

One way to ensure technical processes lead to superb performance is through careful process monitoring. When it comes to workforce performance, however, careful monitoring is only a partial answer, because people are different from cows and crops:

1) They have emotions and make judgments based on motivation.

2) They can learn, think and make decisions.

3) They can talk and ask questions.

People not only use information from crop and animal monitoring to make decisions, but also emotions, thinking and speaking to enhance current and future performance.

To maximize their own performance, workers must: a) know the level of their current performance; and b) understand what they must do to improve performance. That requires accurate and precise performance feedback.

Providing feedback requires leaders and supervisors to be proactive – just as they are in monitoring crop and livestock performance – and involves two steps:

1) Just as with crops and livestock, they must observe and monitor workforce performance.

2) Using people attributes – emotions, thinking and speaking – they must communicate workforce assessments and work with each person to improve performance.

The challenge, of course, is to effectively communicate the assessment. This requires three types of performance feedback.

This month, we’ll discuss the effective use of positive feedback. Next month, we’ll discuss two other types of feedback when performance does not meet expectations.

To start, recall how many times you have provided positive feedback in the last 24 hours. When I ask this question in workshops, few respond to the “5 or more” choice. In fact, Gallup Foundation research found less than one in three employees receives positive feedback from their supervisor in a week.

Each of us understands the value of positive feedback. Why, then, do we provide so little? I believe there are two legitimate and solvable reasons:

•  Livestock and crops have little or no response to positive feedback, so most of you were trained to be outstanding livestock and  crop problem solvers. It is only natural to take a similar approach to workforce productivity.

• Most adults do not show their true emotional response when provided positive feedback. The apparent neutral or even negative immediate response discourages us from providing additional positive feedback.

I’ll address the second issue first. As I noted,  few workshop participants indicate they have provided positive feedback “5 or more” times in the last 24 hours. Of those who did, most said they provided the feedback to children.

Why? I believe it is because children have not yet “learned” to be ashamed or reticent about responding to positive feedback with true emotional response.

Research and my experience from coaching shows adults respond just as positively as children to positive feedback; they just do not show it. Managers making an effort to increase  positive feedback often tell me they are not certain their employees appreciated the positive feedback until they heard from the employees’ spouses.

With so little visible response, why then, should a manager provide positive feedback?

• Positive feedback is motivating. “Feelings of personal accomplishment” and “recognition for achievement” are two of Herzberg’s motivators.

• Positive feedback focuses the recipient on success. To be effective in improving performance, feedback must be specific, timely and accurate.

• Positive feedback builds confidence. Since many workforce members are young – and often insecure – this advantage is powerful.

• Excellent, specific positive feedback engages the employee in their performance.

Three-step process

The following three-step process provides a level of comfort to the manager providing the feedback, and reduces the reticence of the workforce member receiving the feedback:

Step 1: Observe good behavior.

Step 2: Compliment the employee on the positive behavior or performance you desire.

Step 3: State the specific current behavior or performance you are complimenting.

For example:

Step 1: You have been stressing the importance of attention to detail regarding udder health and milk quality. You observe an example of attention to detail by Jack.

Step 2: You thank Jack for following through on your emphasis on attention to detail.

Step 3: You cite the specific example – proper freestall maintenance – where Jack has emphasized that attention to detail.

These three steps provide specific feedback,  reinforces the behavior or performance you desire, and clearly identifies the action that is being rewarded.

I challenge you to provide high-quality,  positive feedback at least once a day for the next 21 days. Use the three step process to enhance the quality of the feedback.

Then, I’d like to hear from you on your positive feedback experiences. Contact me via phone: 651-647-0495; or e-mail: rmilligan@trsmith.com to share your story.

FYI

Robert Milligan, senior consultant with Dairy Strategies LLC, can be reached via phone: 651-647-0495; e-mail: rmilligan@trsmith.com, or website: www.dairystrategies.com.

Human Resources: Focus on feeders

Squeeze out more profit by boosting employee attention to IOFC

By Felix Soriano

With milk futures dropping in the first quarter of 2011, it’s especially critical to squeeze as much profits out of your cows as possible (without jeopardizing herd health). Don’t look at feed cost alone when evaluating opportunities to improve your feeding program. Instead, focus on profitability by monitoring income over feed cost (IOFC) on a monthly basis.

IOFC is measured in
$/cow/day and determines how much money is left to pay all other operating costs, plus a profit. This is the best parameter to evaluate a feeding program’s profitability, and is calculated using the following equation:

IOFC ($/cow/day) = Milk Price X (Milk Production / 100) – Feed Cost

While reducing feed cost is essential for a dairy operation’s success, focusing on maximizing IOFC is a better approach for short-term decisions. Here are 10 important actions you can take to improve IOFC:

1) Make more milk. This is the key driver of profitability under current market conditions. Work with your nutritionist to evaluate opportunities. There may be ingredients, additives or supplements to improve herd performance. However, don’t implement any technology or products that will not give you an immediate investment return.

2) Improve components. Take advantage of current component prices by feeding to promote higher milk protein and butterfat yields.

3) Reduce somatic cell counts. Your milk price will increase due to quality premiums, which will consequently increase IOFC. And, by reducing SCC, milk production per cow will also increase.

4) Promote higher dry matter intakes (DMI). A key driver of milk production, any practice that can improve DMI should be evaluated. Factors affecting intakes are cow comfort (including feedbunk space), water availability, feed quality, number of feedings per day, number of times feed is pushed up, etc.

5) Improve feed efficiency. Many factors affect feed efficiency. Milk production per cow is the main one. Also, by getting cows pregnant in time, feed efficiency can be significantly improved due to herd’s lower days in milk, because cows are more efficient converting feed to milk in early lactation. Feeding good quality forages and using feed additives, like yeast culture, will also improve feed efficiency.

6) Reduce shrink losses. By better controlling feed losses, cost can be reduced and IOFC improved. Although difficult to measure, shrink losses are dollars spent that will not generate any profits. Evaluate forage storage and feedout practices and implement new technologies and practices to reduce shrink losses. Focus on proper grain storage and handling techniques. For more information, read my article “Cutting feed cost begins at home” on my website under MEDIA link (www.apndairy.com).

7) Reduce variability during feeding. Day-to-day feeding consistency is a key driver of profitability. Many factors will impact feeding consistency, such as  the feeder’s performance, the use of proper equipment and feeding management software. Also, new technology, like the NIR feed analyzer installed in the payloader bucket, can help reduce variability in the diets between pens and batches of feed by adjusting amounts of forages and other ingredients fed based on dry matter and nutrient content.

8) Improve feed bunk management. Dairies with good feeding and feedbunk management can target lower feed refusals and reduce feed cost. Also, consistency and uniformity in the amount and quality of the feed dropped in the bunk will have an impact on performance.

9) Monitor feeder accuracy and consistency. It is crucial to define key performance indicators, such as loading and feeding accuracy, as well as feeding consistency and uniformity, to help your feeders stay in track. Monitor performance and communicate with your employees by giving good, productive feedback about their feeding performance at least weekly. This can be beneficial to reduce feed cost and improve profitability.

10) Spend time and money training feeders. Your feeders control more than 50% of the operating costs of your dairy. Work with your nutritionist and outside consultants who specialize in feeding management and can speak the native language of your employees. Well-trained and skilled feeders can significantly improve your profits.

Finally, act now. Evaluate if increasing milk production can have a positive impact in your IOFC and profitability. Work with your nutritionist and external consultants to benchmark and set goals on what your dairy’s IOFC should look like for the next year, based on future milk and grain prices.

FYI

Felix Soriano is a labor management and human resource consultant with APN Consulting LLC, Warrington, Pa. Contact him via phone: 215-738-9130, e-mail: felix@apndairy.com or visit www.apndairy.com.

Marketing: Unimaginable? Protect against climbing corn prices, and keep your options open if they fall

By Matt Mattke

Put yourself in position to benefit, no matter which direction the market moves.

The overwhelming herd mentality towards grains prices is bullish and, in some cases, euphorically bullish. The consensus is grain prices are going to continue moving higher. Many market analysts/traders have taken their prognostications one step further, saying grain prices are going to stay high for the next couple years, with supply unable to keep up with demand.

There are definitely many good reasons to be bullish: The trend is still up on the charts; inventories remain tight; ethanol demand is high and seems unaffected by higher corn prices; energy prices have been making new highs; and weather issues are emerging for Argentina’s corn crop. These factors, and others, suggest a very real risk of corn prices continuing to move higher.

The questions many dairy producers are  asking in response are:

• How high can the price of corn go?

• How long can these high prices last?

Both questions are difficult to answer, because emotions and irrational exuberance can take prices to levels well beyond what one would think the fundamentals justify. The old adage, “expect the unexpected,” is especially true with the current commodities markets.

Cotton futures prices in 2010 are a reminder anything is possible. In January 2010, cotton futures prices were at $69/100 lbs.; by December 2010, they hit an all-time high of almost $160/100 lbs. Nobody expected or imagined cotton prices that high.

The point is, dairy producers must prepare and protect themselves – both on the feed side as well as on the milk side – from those unexpected/unimaginable types of market scenarios. Those unimaginable market scenarios apply to both UP markets and DOWN markets. Going forward, you must be open to the possibilities of either $10.00/bushel corn or $2.00/bushel corn; be protected against the first scenario, but able to participate in the second scenario.

This does not require psychic powers or the ability to predict the future. It requires strategies that accommodate many market scenarios.

For example, right now the trend – and risk – is still for higher corn prices. On the other side of the coin, $5.00/bushel and higher corn prices have not lasted long in the past. There is the other old adage, “high prices cure high prices,” and $5.00 and higher corn prices have done a good job of fixing supply/demand imbalances in the past. Every rally over $5.00 has eventually been followed by a sell-off down to $3.00.

Buy corn, put options

Thus, there are dollars per bushel of risk and opportunity in both directions from the current market price of about $6.00. For a producer who still must buy corn for 2011, a strategy should be implemented that protects against the unimaginable upside risk, while still providing participation in the unimaginable downside opportunity. A strategy accommodating both is buying the physical corn and protecting the purchase with put options.

Buying the physical corn protects against higher prices. If a dairy producer has $6.00/bushel corn bought, and corn goes to $8.00/bushel, they are locked in at $6.00/bushel.

However, if corn goes to $2.00/bushel, they’re still locked in at $6.00/bushel. The latter scenario is where the put option coverage comes into play. If $5.50 put options are purchased at 30¢/bushel, and corn drops to $2.00/bushel, put options would provide $3.20/bushel of downside price protection. That would effectively reduce the purchase price on the physical corn from $6.00/bushel to $2.80/bushel.

Bottom line, complementing cash market purchases of corn feed or protein feed with put option protection can give a dairy producer a feed hedge position that protects them, no matter what unimaginable price development comes in 2011. If the corn price drops to $2.00/bushel, the producer is covered; if the price rallies to $10.00/bushel, the producer is covered. That is a more attractive position to be in.

FYI

Matt Mattke, Market360® dairy advisor at Stewart-Peterson, can be reached via e-mail: mmattke@stewart-peterson.com, phone: 800-334-9779 or visit www.stewart-peterson.com.

Get Started Marketing Well e-book available for dairy producers

Stewart-Peterson has released Get Started Marketing Well, a book for dairy producers available in electronic (e-book) form. The book walks producers through the process of positioning a dairy business for marketing success, describing key principles  and common pitfalls.

Visitors to www.stewart-peterson.com can read the complete table of contents and an excerpt from the book. Producers can request a free copy of the complete book at the firm’s website or by calling 800-334-9779.

For those who prefer a more interactive learning experience, Get Started Marketing Well webinars are also available at the firm’s website.

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