Archive for August, 2008

Milk Market Bigger Than Any One Fundamental

August and September have historically provided some good longer-term milk contracting opportunities. While this has not been the case the last couple years as milk prices have trended higher, this year may be different.

Stepping back to assess the milk market’s bigger picture, there are a number of developments over the last six months that have not garnered much attention, because feed costs have dominated the headlines:

1. the duration of the current bull cycle. Since Class III futures began trading in 1997, the average bull cycle has lasted about 19.5 months. The longest bull cycle was 25 months, starting in August of 1997 and lasting until September of 1999. The current bull cycle, which began in August of 2006, is on its 24th month. If you end this current bull market cycle at May 2008’s high, then the cycle lasted 22 months. While no market cycle is ever exactly the same in terms of its duration, it is important to recognize the current bull cycle in milk could be at or near its maturity.

2. dairy cow numbers have grown at a tremendous rate. Year- Milk market biger than any one fundamental to-date, the number of dairy cows on U.S. farms grew by 60,000 head. This is the second fastest rate in the last 11 years. Dairy cow slaughter is running only about 1.9% higher than last year at this time, despite record-high feed costs.

3. total natural cheese stocks and total milk production have both grown year-to-date at an average rate of more than 3%. This is the highest average cheese stock growth rate since 1999, and the highest average rate of milk production growth since 2006.

4. large speculators in the milk market have reduced their net bullish futures position by almost 3,000 contracts over the last month, according to the Commitment of Traders report released by the Commodity Futures Trading Commission. These guys are some of the big players and market makers in Class III, and they do not usually reduce their bullish position by that magnitude in a strongly higher trending market.

5. the domestic and global economy is slowing. Job layoffs and unemployment figures have been rising. Consumers are feeling the pinch of rising energy costs 28 Midwest DairyBusiness August 2008 and overall rising costs of living. Consumer confidence in the United States and around the world has fallen to levels not seen in more than a decade or longer. Subprime woes and bank failures have not abated. A strong consumer is extremely important to the milk market, and the consumer’s strength and depth of pocketbook has to be brought into question.

Producers have cited higher feed costs and higher costs of production as reasons why they have not or will not develop a marketing strategy. The factors listed above are reminders that the milk market is bigger than any one fundamental. While feed costs are an important factor within the milk price cycle, there are dozens of other fundamentals which influence milk prices. If every other fundamental points towards lower milk prices, then high feed costs may not be enough to support the whole market. If a reduction in supply is needed, the milk market will be driven down to unprofitable levels.

Indeed, the next couple months could provide some rallies and some upside pricing opportunities for milk producers. Take advantage of this potential seasonal strength and develop a marketing strategy that protects your downside price risk through the end of 2009.

Optimize milking equipment

Optimizing and maintaining your milking equipment is important for milking efficiency and udder health. Focusing on five areas can help you reach peak efficiency and monitor performance.

1. Vacuum. Milking system vacuum should be based on average peak milk flow claw vacuum, which will vary depending on average milk flow rate. Average flow rate is reliant on multiple factors, including milking frequency, udder prep lag times, milk production and take-off settings.

Monitor

• Check the vacuum gauge during every milking shift.

• Maintain vacuum pump and filters regularly to ensure proper function.

• Check for plugged air holes in milking unit.

2. Pulsation rate & ratio. Pulsation is broken into four phases: A) opening, B) open (milk phase), C) closing and D) closed (massage phase). To optimize pulsation rate and ratios, look at the time (milliseconds) spent in each phase so the system can be set to provide optimal milk and rest phases for safe, fast and comfortable milk out and healthy teats.

Monitor

• Have pulsators graphed regularly by a qualified technician. Graphing frequency should increase with usage and if problems are identified.

• If debris enters the air hoses, coach milkers to communicate these issues with management so action can be taken.

3. Liners. Liners should fit the average teat size in the herd, and vacuum should be set properly for that specific liner. Change liners according to the manufacturer’s recommendation to maintain efficiency, minimize liner slips and maximize performance.

Monitor

• Change liners, air tubes and milk hoses on a regular schedule. Check for holes in the air tubes during each milking.

• Align arrows on liners for proper function.

• If you notice fluctuations in milk out and average flow rate when you change liners, replace them more often.

4. Automatic take-offs (ATOs). ATOs provide consistency in milking unit detach times, but must be properly set to prevent overmilking. Proper udder prep procedures, unit attachment and alignment are vital to proper ATO function. ATOs should be adjusted to account for changes in production and milking frequency.

Monitor

• Strip yields measure residual milk after milking, an excellent indicator of milking performance and ATO setting. Immediately after milking, hand strip each quarter for a maximum of 15 seconds, measuring the milk amount from each teat. If strip yields are less than 250 mL (0.5 lb.)/cow, the cow should be considered milked out. If yields exceed 500 mL (1 lb.)/cow, milk out problems may exist. Your goal should be 40 to 100 mL/quarter. If individual quarters have high strip yields, proper unit attachment and alignment should be checked.

5. Wash system Monitor

• Chemical levels should be balanced for system size, hours of operation and type of equipment.

• Ensure your wash system is draining quickly and completely, and that the air injector is set to create a proper slug.

• Monitor quality counts and temperature, and visually inspect equipment regularly.

Other key parlor monitors

Parlor shift reports. Customize a report to monitor progress toward your goals. Average milk flow rate, average unit on time, milk/stall/hour and time to milk are excellent monitors.

Teat end scoring. Scoring can identify incidence of hyperkeratosis and other teat health problems.

Scheduled maintenance. Have a complete list of scheduled maintenance, indicating who will be responsible for each task and how often it must be performed. Enlist the help of your equipment dealer to ensure proper equipment maintenance. Perform a system check at least once a year using NMC guidelines.

As changes in your herd, management, procedures, equipment or goals occur, changes in equipment settings may be needed. Monitoring and regular maintenance will keep your milking system working at peak performance and keep you informed of changes that should be made.

AFACT: Ag industry must unify to protect technologies

The American Farmers for the Advancement and Conservation of Technology (AFACT) said they remain committed to unifying the industry for the protection and preservation of modern agricultural technologies in the production of safe, nutritious and affordable food. AFACT co-leaders and dairy farmers Liz Doornink, Baldwin, Wis. and Carrol Campbell, Winfield, Kan., issued the statement following the announcement that Monsanto is seeking to sell the business functions associated with its recombinant bovine somatotropin product (rbST), POSILAC®.

The 1,400-member AFACT organized a year ago out of concerns related to rbST use restrictions placed on dairy producers by milk processors and retailers, even though the technology is approved by the federal Food and Drug Administration. The organization also raised concerns over  “absence labels” on milk and other dairy products that create confusion among consumers and raise questions over the safety of milk that is not labeled “rbST-free”, “hormone-free“, ”pesticide-free“ and “antibiotic-free”.

AFACT has since attempted to unify the agricultural industry against activist attacks on other technologies. In July, the organization held a “Power of Producer Advocacy Summit” in Chicago, attracting representatives from nearly 40 companies and organizations representing a cross section of agriculture and supporting services.

“Monsanto’s announcement creates further need for organizations like AFACT and a unified industry,” said Doornink. “Summit participants encouraged AFACT leadership to diversify its membership and sponsorship, as technology providers will continue to feel the pressure from activist organizations and those who wish to employ tactics like niche marketing with absence labels. Unfortunately, those who created the challenges for rbST may be further motivated by Monsanto’s announcement.”

“AFACT is committed to be a voice for producers who want the freedom to choose safe, effective and proven technologies for the stewardship of our livestock and natural resources,” said Campbell. “We will continue our efforts to support rbST and all the other agricultural practices that provide consumers with safe, nutritious and affordable foods. Our efforts to grow our producer membership and industry support will be critical, as we have many important messages to share with the people and organizations that process, retail and consume our products.”

”The leadership of AFACT received very favorable feedback from Summit participants on the opportunities and value of producer advocacy,” Doornink said. “Participants were astounded with AFACT’s grassroots leadership, passion, commitment and knowledge on the societal benefits of the technologies and practices we employ to produce safe, affordable and nutritious food products in a sustainable manner. Many of these organizations are considering ways to collaborate with AFACT, as the threats to our industry are significant while global demands for food production grow.”

To learn more about AFACT and become a member go to their website at www.itisafact.org.

AFACT Vision
To provide the consumer safe, wholesome and nutritious food at a good value as well as factual and truthful information regarding the advances in modern agriculture.

AFACT Mission
1. Provide consumers safe, valuable and wholesome food products.
2. Safeguard the image of modern agriculture products in the market place.
3. Support advancements in modern agriculture that would benefit food production both domestically and internationally.
4. Educate all in the food chain that “sustainable” agriculture utilizes advancements in modern agriculture to produce safe, nutritious and affordable foods that meet social, environmental and economical responsibilities.

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