Archive for January, 2009

Is it more than just the blues?

Independent dairy producers tend to think they can ‘power through’ a stressful period. Be aware of signals if conditions are going beyond normal stress on you, your family members or employees.

By Dave Natzke

Milk prices are low and margins are in the red. Got stress?

We all feel anxious or under stress at times, and mild stress can keep us alert and focused. However, severe stress over a lengthy period can disrupt lives and lead to physical and mental health problems. 

Becky Wittig, business and community outreach coordinator with Mental Health America, Milwaukee, Wis., warns dairy producers to be aware of signals if conditions are going beyond normal stress. 

Wittig said it’s important to identify signs of stress and specific stressors, and learn methods for a balanced life.

“Stress is an adaptive response in which a person’s body and mind prepares or adjusts to a threatening situation,” Wittig said. 

Stress may result as a reaction to relationships, responsibilities, losses, expectations, change, lack of recognition or unexpected interruptions. 

There are both good and bad kinds of stress, but the body can’t tell which is which, so it reacts in the same way. Physical reactions include release of stress hormones, increased alertness, eyes dilate, heart rates increase and digestion decreases. Blood flow decreases to the stomach, but increases to the legs and arms to prepare for the “flight or fight” reaction.

“A natural part of life, stress is also in the eyes of the beholder,” Wittig said.

Stress-hardy individuals view stressors as challenges and opportunities, feel in control of there circumstances and perceive they have resources to make choices and influence events. They generally have a good social support system and have an exercise routine, regular sleep patterns and a healthy diet.

But what about those less stress hardy?

“Bad” stress, or distress, can be acute (short duration) or chronic (long duration). Symptoms may include fatigue, irritability, headaches, muscle loss and lack of focus or function. People under stress are more prone to accidents and injury.

The hazards of chronic stress may include a weakening of the immune system resulting in a number of health issues, from allergies and ulcers to headaches, asthma and high blood pressure. When not handled properly, stress can trigger or compound issues related to mental illness, including depression or anxiety disorders.


Depression

“Depression is more than the blues,” Wittig said. “When the ‘down’ mood lasts for more than a couple weeks, the condition may be clinical depression, a serious and common illness that affects how you think and feel mentally and physically.”


Signs of depression include:

• nervousness or “empty” feeling

• feelings of guilt or worthlessness

• feeling tired or run down

• feeling restless or irritable

• don’t enjoy the things you used to

• feel like nobody loves you

• feel like life is not worth living

• sleep or eat more/less than usual

• have persistent aches and pains

If you, a family member or employee are affected by five or more of these for periods of two weeks or more, it’s time to seek medical help, Wittig advised.


Stress or anxiety disorders

Wittig said anxiety disorders – overwhelming fears that are chronic, unrelenting and progressive – grow worse in stressful conditions, interfering with occupational or social functioning. It’s the most common mental illness in the United States, affecting more than 40 million people. Causes may include: physical/genetic preconditions; highly stressful life expectations; unhealthy lifestyle choices; acute or chronic physical health problems; or underdeveloped stress management skills.

Mental health disorders – depression, anxiety disorders, eating disorders and/or substance abuse or dependence – may and do occur at the same time.

Mental illness changes the person’s thinking, feeling or behavior (or all three) and that causes the person distress and difficulty to function, interfering with carrying out daily activities.

“There are lots of misconceptions and misinformation regarding mental illness,” Wittig said. Admitting to being affected by mental illness carries a public stigma.

Mental illness is real, common and treatable, Wittig explained. It actually has a better ratio of treatment success than heart disease, she said. However, because most people – especially independent business managers – believe they can “tough their way through it,” two-thirds of those affected do not seek treatment.

What can you do if an employee or family member exhibits signs of depression or anxiety disorders? 

Be aware of the signs, and educate yourself and others about the illness, symptoms and treatments, said Wittig. Help the person get appropriate diagnosis and treatment. Offer support, reassurance and hope, and have realistic expectations.


Managing stress

Mental health – and mental illness – ebb and flow throughout the day, depending on the introduction or relief of stressors. To manage stress, Wittig suggested the following:

• plan ahead. Eliminate activities that are unnecessary.

• set limits. Learn to say “no.”

• list tasks and prioritize them. Do one thing at a time.

• deal with the “basics.”

• develop a list of things that fulfill you, and another list of things that “drain” you. Focus on the first list, and be aware of the second.

• refrain from negative thinking.

• take time for yourself.

• share your feelings

• maintain a circle of support

To manage work stress, take quiet time for reflection and preparation; take occasional breaks; emphasize communication; focus on what you are eating and what you are listening to. Take time to wind down or slow down.

Finally, Wittig said, focus on the things you can control.

“Most of the troubles we bring on ourselves are things we worry about that we can’t control. Worry about the things you can control.”

 

 

SMART FARMING: Integrated, automated system holds a key

Management, production and consumer demands place a heavy weight on producers’ shoulders. Automation may help relieve some of the burden.

By Dave Natzke

Economics and lifestyle issues for dairy producers, as well as consumer-driven demands regarding food quality, safety and traceability, will continue to push dairying toward increased automation, according to leaders of one of the largest dairy technology companies in the world.

DeLaval, manufacturers of milking equipment – including robotic milkers – hosted journalists from throughout the world at a “Smart Farming” seminar at its headquarters near Stockholm, Sweden, in early December.

With dairy’s economic future defined by scale and efficiency, “dairy farming, as a lifestyle, is fading away,” said Stefan Bergstrand, dairy training manager. “There’s a new generation of dairy farmers, worldwide, who are investing in larger farms. To manage those larger farms, labor and feed costs are important issues. Dairy management is about managing costs.”

“Larger farms and higher yields are increasing demands on professional management and labor,” said DeLaval’s European regional president Jan Ove Nilsson. “There are also increasing demands placed on animal health and welfare, milk quality and food safety, and traceability. That will require more reliable herd monitoring to enable proactive decision-making and action.”

On the farm, several factors drive automation advances: 1) a desire to make jobs easier and improve lifestyle; and 2) labor issues, including availability and cost.

According to Benoit Passard, DeLaval’s vice president of marketing and communication, three keys to automation are:

1) capturing information

2) processing information, leading to aided decision-making tools

3) robotization or mechanization of the process (either in part or completely).

 

Robotic carousels

DeLaval officials said they were testing a prototype robotic milker for carousel milking parlors, but would not estimate a possible introduction date. The system may be more suitable for managers of larger U.S. herds, who  have been slow to embrace “box” robotic milkers able to handle a maximum of 60-70 cows per unit.

Andrew Turner, DeLaval vice president of milking systems, said carousel applications would address both group and voluntary traffic patterns, with no labor limitations on cow traffic, allowing 24-hour/7-day use of milking equipment, and increasing milk harvested per hour. Dairy managers could focus on cow management, instead of milking management, he said.

Challenges include complete and perfect teat preparation, without compromising parlor throughput. The system will require “intelligent rotary platform movement.” 

 

Beyond robots

However, the company’s officials stressed automation advancements will go beyond milking robots, to feeding, herd health and reproduction management – both at the herd and individual cow level.

“Because feed costs make up such a large portion of overall costs, improving the efficiency of feeding by 10% can improve profits by 50%,” said Bergstrand. But, he continued, there’s frequently a disconnect between feed efficiency and cow nutrition formulated on paper and the feed that actually makes it to the front of the cow. Variation is one of the challenges to efficient feeding.

“Cows require consistency, accuracy and frequent feeding,” he said. “Sometimes that’s inconvenient with labor schedules.”

Bergstrand predicted automation will help producers by allowing more frequent feeding, as well as on-the-go feed analysis for dry matter, nutrient content and palatability. Sensors will help monitor fermentation and storage stability. It will allow producers to continuously adjust feed mixtures based on changing nutrient needs, pH levels or heat stress, for example.

Improved and integrated cow sensors will lead to more wireless, user-friendly integrated systems, allowing massive data collection and real-time, remote analysis by management team members, according to DeLaval’s Fenando Mazeris. That information will help manage herd health, reproduction and milk quality – identifying risk factors and setting off alarms before clinical signs appear.

In the milking parlor, on-farm milk analysis will include detection of antibiotics and other foreign materials, and count and identify bacteria, before they get into the food chain.

Rest assured, dairy producers will still be needed. Collecting data still requires analysis and interpretation, then making herd and business decisions based on that information.   

“Data is dead, unless you give it life and depth,” said Turner. “Our vision is an on-farm integrated system where we can apply even further automation. We know that the farmer needs to boost profit, milk yield and quality, and reduce feed and labor costs. Our goal is to contribute to the peace of mind for future generations of dairy farmers.”

Milk price update: tumbling prices, a sharp correction

By Mark Stephenson, Ph.D. 

Cornell Program on Dairy Markets and Policy 

Back in November, when I was preparing for our annual Agribusiness Outlook, I forecast that 2009 was going to be a bad year for milk prices.  At that time, my forecast called for a more than $3.00 drop from the 2008 levels.  I have now revised my price outlook significantly downward from that already gloomy forecast. 
Only a couple of months ago, we were beginning to understand that our economy was headed into a substantial downturn but we hadnthe economy yet.  The decline in domestic demand for dairy products would have been bad enough, but the recession we are facing is a global one. The tremendous farm milk prices of 2007-08 were primarily due to large increases in export demand for dairy products.  The United States had always been a bit-player in world markets, exporting between 3-4 percent of our milk production.  Growth in world economies like China and oil exporting nations stimulated a growth in demand for dairy products world wide.  This also came at a time when traditional suppliers, like the European Union and Oceania were experiencing changes in foreign policy and natural disaster (drought) respectively, seriously reducing their ability to supply as much product to world markets as they historically had.  Lastly, the U.S. dollar had become very “weak”, making U.S. prices look appealing to people paying in other currencies.  The three factors created a “perfect storm” of opportunity to export dairy products and in 2007-08, we exported between 10-12 percent of our milk supply.  This was more than double the average of the previous 10 years. 
    Both the supply of milk and the demand for dairy products are “inelastic”.  This means that relatively small changes in quantities will give us fairly large swings in milk prices.  Historically, if we experienced a 1-2 percent variation in milk supply we would see very large swings in milk prices. 
    All three factors of the “perfect storm” are reversed today.  The dollar has strengthened, worldwide demand is weak, and production in Europe and Oceania is improved.  Dairy product exports will not go to zero from the U.S. in the current environment, but they will be greatly diminished.  Letpast two years—about 5 percent of our milk supply.  If nothing else changed, that would mean that we had an additional 5-7 percent of milk staying on our domestic market.  That alone would send tremendous shock waves through our dairy markets.  Now, couple that with a domestic economy in recession and a more than 1 percent growth in production to boot and I think that you can imagine that we will be seeing milk prices at support levels this year.       We haven’t sold significant amounts of dairy products to the CCC since the early 1990s. This year, we will sell perhaps as much as 400 million tons of nonfat dry milk, substantial quantities of butter and probably cheese to the government.  Of course the implications of sales to the CCC are support level prices for milk—somewhere around $10.00 per hundredweight for class III and class IV. Although feed prices have declined from the $6 level for corn, they remain high by recent historic standards.  I recently heard a large dairy producer from the Southwest (where producers buy most of their feed) say that for the first time in his 25 years of dairying, milk prices will not be enough to cover variable costs of production.  Recall that in tough economic times a firm may choose to produce at a loss as long as their variable costs of production are covered.  Relatively fixed costs—like equipment purchases or a new roof on the barn—may have to be delayed while capital is consumed.  But, an economist would say that producing when variable costs are not covered is irrational. 
This dairy producer was further indicating that they would have to look at substantially culling the herd to the point where the most efficient animals would at least produce enough milk to cover their feed costs.  Dramatic culling is the only way that we can reduce the milk supply by enough to pull milk prices back above support levels any time soon. 

My updated milk price forecast is given in the table below.  This equals an average farm milk price decline of something like $4.70 per hundredweight from 2008 levels. 

 

Milk price forecast

Milk price forecast

 

 

 

    This is going to be a most difficult year for dairy producers.  From what I understand, agricultural credit is available but loans will be scrutinized carefully for credit worthiness.  Interest rates may be low and appealing but eligibility requirements will probably be very high.  It is also likely that other traditional sources of credit, including feed, equipment and fertilizer dealers, may be more restrictive with open accounts.  Farms will need to be on top of anticipated cash flow shortfalls and work with their lenders sooner rather than later.  
  This financial outlook may place many producers under tremendous emotional stress during the year.  Please know that there are resources to help deal with these problems too—from informal sources like a local house of worship, to more formal such as counselors, Cornell emotional support if they are in need. 
     This collapse of milk prices won’t last forever. On the contrary I think the U.S. has officially entered the realm of world exporter of dairy products and that several emerging economies will demand increased consumption of dairy products in their diet.  However, the global recession will have to show signs of a turn-around before that will impact our milk prices once again and that is likely to be a couple of years away.  If producers cull the national herd heavily enough—and I expect they will—we could see some strengthening in milk prices by the second half of this year.

MODERNIZATION: Building for a dairy future

 

A 2008 survey of Wisconsin dairy producers found modernization projects provided personal, financial and cow benefits. 

By Dave Natzke

Dairying in the eastern United States is still comprised primarily of small farms owned and managed by family members. For example, based on 2007 USDA dairy statistics, the average herd size was 89 cows in the Northeast; 94 cows in the Midwest; and 155 cows in the Southeast. A majority of those commercial dairies still milk cows in traditional stall barns. However, things are changing, as producers invest in new and more efficient facilities and equipment. 

Mark Mayer, associate professor, University of Wisconsin-Extension dairy agent, and David Kammel, professor, biological systems engineering, UW-Madison, working in conjunction with the University of Wisconsin Center for Dairy Profitability, compiled survey results from 99 Wisconsin producers who modernized their dairy facilities in the past decade. They recorded producers’ observations regarding benefits to themselves and their cows. They were asked to identify planning and financial resources, as well as modernization challenges.

Most producers involved in the survey switched from a stall barn to some type of parlor system. Of those who moved to a parlor system, 62% built a retrofit parlor in an existing facility; 38% built a parlor in a new building. Parabone and parallel parlors were the most popular choices. Parlors averaged 13.7 units.

 

Modernization time frame

The average time for a modernization project – from conception to actual use of the facility – was 23 months. However, there was a wide range: from as short as 3 months to as long as 120 months.

The average construction time – from the start of construction to the first milking in the parlor – was 17 weeks. Again, there was a wide range: 4 weeks to 26 months.

Only 36% said they developed a written business plan for their modernization project.

Producers said they provided an average of 37% of the labor, with 63% provided by professional contractors. Producers provided more of their own labor on retrofit parlor projects than on new construction projects.

 

Modernization costs

Converted to 2008 dollars, average parlor construction costs ranged from a low of $3,360/unit for a retrofit flat barn parlor to a high of $22,361/unit for a new construction parallel parlor (see Table 1).

Total investment for the 99 dairies was $65.3 million (2008 dollars). The average investment was $659,671 per dairy, or $3,250 per cow. Total investments included expenditures for modernizing calf, heifer, milk cow and dry cow housing, milking parlors, manure and feed storage and handling systems. Parlor and milk cow housing costs averaged 73% of total expenditures.

 

Before and after

Pre- and post-modernization characteristics of the dairies were analyzed. Among the findings (see Table 2):

1) Herd size: In most cases, modernization included herd expansion. The average herd size was 82 cows before a modernization project; 203 cows after it. 

2) Labor efficiency: While average herd size increased 148% after modernization, full-time equivalent (FTE) dairy labor increased just 85%. Cows per FTE increased from 35 to 50.

Of the dairies that switched to a parlor system, cows milked per hour per person increased from 22.7 pre-modernization to 44.1 after the project was completed. 

3) Land: Total acreage owned or rented increased, but acreage per cow declined by 45%.

 

Cow benefits

Asked to identify the cow benefits they observed as a result of modernization projects, producers cited the following most frequently:

1) Improved overall cow health

2) Less feet and leg problems

3) Lower somatic cell counts

4) Increased production

5) Lower culling rates

6) Increased conception rates

 

People benefits

Producers most frequently cited the reduction in labor per cow as a benefit to a modernization project. Labor savings averaged 25.8 hours per cow per year, with about half coming at milking. At an average hourly wage of $12/hour, annual savings averaged $310/cow/year after a modernization project.

Other benefits cited were: improved working conditions; improved worker health/safety; allowed the business to continue; increased profitability; provided entry for the next generation; and increased family time. About 43% said they would no longer be in business without the modernization project.

 

Income impact

Based on increased milk production resulting from modernization, the report’s authors calculated average gross milk income per cow in 2008 ($17/cwt. milk X +1,439 lbs. milk) increased $245/cow. Per herd (+121 cows), gross income increased $466,099.

 

Resources

Producers most frequently cited visits and tours of other farms as a resource to design their own modernization project. They also ranked visits and tours of other farms as the most important resource in their decision-making. 

Other resources included Extension meetings/seminars and/or publications; farm visits by county agents and/or state specialists; magazines and newspapers; and farm shows.

When getting advice from others, fellow dairy producers ranked highest. Other advisors (by rank) included: builders/contractors; ag lenders; Extension agents/specialists; nutritionists; milking equipment dealers; financial consultants; veterinarians; and professional design consultants.

 

Challenges

Among major challenges to modernization projects, producers most often cited working with contractors and serving as their own general contractors. Other major challenges were:

• deciding on type of system/number of cows

• budgeting and financing

• milking in existing facilities during construction

• designing milking and housing facilities

• cost overruns

• finding good and knowledgeable contractors

 

Can I have a ‘do-over’?

If they were allowed to start the modernization project over, what would producers change?

The No. 1 response: They wish they would have started sooner.

Other responses included:

• increased parlor size/number of freestalls

• start expansion at another site to allow for future expansions

• spend more time planning and get more help with design

• start with new building and equipment right away

• start building earlier in the year (not fall)

 

 

FYI

■ To view the complete report, “Wisconsin Dairy Modernization Survey, 2008,” visit the Center for Dairy Profitability web site at http://cdp.wisc.edu and Click on “What’s New” Or, phone: 608-263-5665 or e-mail: dairyprofit@calshp.cals.wisc.edu.

■ For information on dairy modernization design and strategies, visit www.uwex.edu/ces/dairymod/index.cfm.

 

Mark Mayer, associate professor, University of Wisconsin-Extension dairy agent, and David Kammel, professor, biological systems engineering, UW-Madison, working in conjunction with the University of Wisconsin Center for Dairy Profitability, compiled survey results from 99 Wisconsin producers who modernized their dairy facilities in the past decade. They recorded producers’ observations regarding benefits to themselves and their cows. They were asked to identify planning and financial resources, as well as modernization challenges.

Mark Mayer, associate professor, University of Wisconsin-Extension dairy agent, and David Kammel, professor, biological systems engineering, UW-Madison, working in conjunction with the University of Wisconsin Center for Dairy Profitability, compiled survey results from 99 Wisconsin producers who modernized their dairy facilities in the past decade. They recorded producers’ observations regarding benefits to themselves and their cows. They were asked to identify planning and financial resources, as well as modernization challenges.

 

2/09 PROMOTION: Combined industry forces make safety messages, prevention measures stronger

By Paul Kent

As dairy producers we take food safety very seriously. But how well do consumers understand that?

Paul Kent

Paul Kent

Thanks to a cross-species public relations team, they’re hearing about it more frequently. And even more important, should a crisis regarding foot and mouth disease (FMD) ever surface, animal agriculture will be prepared with a consistent, reassuring message for consumers.

The Cross-Species FMD Communication Team is a group that represents the beef, dairy and pork industries, in combination with the U.S. Department of Agriculture/APHIS. It works to prepare the industry against this highly contagious and economically devastating disease, which last occurred in the United States in 1929.

It’s a serious issue. Though not found in this country, it is in more than 100 countries in Africa, South America, Asia and parts of Europe. In 2001, the United Kingdom experienced a devastating FMD outbreak that affected about 10,000 farms and resulted in $15 billion in losses. As our economies and industries become more global, the possible introduction of foreign animal diseases like FMD becomes a bigger concern.

FMD, of course, has no relationship to human health, and measures to eliminate the disease are intended only to protect the U.S. animal population from harm. Still, any publicity about the disease impacts demand for meat and dairy products. That’s because many consumers don’t have any notion of what FMD is. In fact, recent research shows that nearly 40 percent of consumers believe FMD is also called BSE, or “Mad Cow Disease.”

A broad-based team

In response to any potential for an outbreak and an ensuing consumer outcry, the Cross-Species FMD Communications Team is developing a unified crisis response plan that will strengthen industry and government preparedness and lessen consumer confusion. It allows the industries to speak with one voice, take advantage of joint communications resources (eliminating duplication in the process), and provide coordinated and consistent information to consumers if FMD were to enter our borders.

The Beef Checkoff Program is helping fund this team, as are Dairy Management Inc., the National Milk Producers Federation and the National Pork Board. The group also is working with APHIS public affairs in its efforts to drive FMD planning and prevention in this country.

In 2008 the Cross-Species Team worked to inform trade media of the challenges associated with an FMD outbreak and to equip them with materials and information, as they will be a critical part of any FMD emergency response effort. The team shared its goals and efforts and conducted “table-top” exercises during both a May meeting with livestock industry reporters in D.C. and the National Association of Farm Broadcasters meeting in November. Media participants were able to get hands-on experience with FMD response and provide feedback to the team on what tools would help them better perform their jobs in the case of an FMD outbreak.

Now the team is working to strengthen its relationships with others on the “front lines” – those who will likely be involved in any response effort. These include veterinarian groups, the Department of Homeland Security, the Centers for Disease Control and Prevention and others.

The team also is creating important media resources for reassuring consumers and streamlining communication in the event of an outbreak. These include videos and other online materials that will be quickly and easily accessible on the redesigned www.FMDInfo.org Web site, which is scheduled to launch as a single and consistent source of FMD information later this year.

In addition to these cross-species efforts, the Beef Checkoff Program also is funding programs that support state beef council crisis planning and preparedness. For instance, an electronic FMD State Workbook was launched last January. Twenty-six state beef councils were represented in the workbook’s launch, and a follow-up Webinar offered states the chance to learn from the produce industry’s 2007 response to E. coli in spinach. At the Cattle Industry Summer Conference additional tools and tips were provided to states.

All of this for a disease that our country doesn’t even have? No, all of this for a disease that our country hopes to never get. But if FMD – or even just publicity about the issue – does surface in the United States, we’ll be prepared, thanks in part to the Beef Checkoff Program, the dairy checkoff and the actions of forward thinking producers. 

Minnesota DBQA

The Minnesota Dairy Beef Quality Assurance (DBQA) program includes educational outreach through producer training, brochures, pamphlets and posters distribution at farm shows and dairy conventions as well as through articles published in dairy and farm publications. The benefits of the DBQA program are also publicized through numerous radio interviews.

            The Midwest Dairy Beef Quality Assurance Center has been established at the Minnesota Beef Council as a vehicle to reach dairy producers not only in Minnesota but also throughout the Upper Midwest.

            All Minnesota BQA and DBQA certification workshops are held in cooperation with local veterinarians, extension educators and others. A valid veterinary client patient relationship (VCPR) is required for certification. By working closely with the University of Minnesota Center for Animal Health and Food Safety, the Minnesota Beef Council has developed an expanded relationship with bovine practitioners throughout Minnesota. Initially the BQA/DBQA training program focused on proper injection site placement, but the curriculum has evolved to meet changing needs and market conditions. Recently, the animal care and handling and responsible use of antibiotics sections of the certification workshop have been expanded.

            A special feature of the Minnesota DBQA program is the availability of bilingual training sessions as well as the distribution of Spanish language posters and brochures. Spanish language brochures and posters explaining guidelines for responsible antibiotic use and BQA Best Management Practices are available through the Minnesota Beef Council. For more information on Minnesota’s Dairy Beef Quality Assurance program contact Ron Eustice or Conrad Kvamme at (952) 854-6980 or ron@mnbeef.org.

 

 

FYI:

Cattlemen’s Beef Board member Paul Kent operates a 480-acre dairy, where he milks 60 cows and raises corn, oats and alfalfa. He markets his milk as a member of Land O’Lakes and is a member of Federated Co-op for his agricultural inputs. He currently represents Land O’Lakes on the steering committee of the Minnesota Dairy Leaders Roundtable and National Dairy Board. He also serves as chair of the Dairy Committee for the Minnesota Association of Cooperatives and co-chair of Wisconsin Federation of Cooperatives/Minnesota Association of Cooperatives (WFC/MAC) Two-State Dairy Committee. 

2/09 MARKETING: $9 milk — risks and opportunties

By Matt Mattke

Q:  At $9.00/cwt. milk, what are the potential price risks and opportunities for the next twelve months?

 A:  The one remaining risk for 2009 is the possibility that all contract months could expire at an equal or lesser price level than where the January contract expired.  This would mean that prices in the second half of 2009 could slowly creep lower, thus removing the almost $3.00 premium that exists between the January contract price and the latter half contract prices.  Such a price event has not occurred since 2000, but it has occurred before, so it could occur again.  Currently the January contract is at $10.65, so coming down to this price level is the major risk for June to December contract months (February to May prices are already at that level).  The major catalyst for this to occur would be for the cheese market to trade sideways for a prolonged period at the current $1.05 to $1.10 price range.

 

While the milk market is at least 12 to 14 months away from the next bull market, some pricing opportunities could arise in the meantime.  For March through June contract months, a bounce of $1.00 to $2.00/cwt is realistic, which could propel prices to retest the $11.50 to $12.50 price level in these months.  For July through December contract months, a bounce to $15.00 to $16.00 is a realistic possibility.  The $16.00 price level is the absolute most bullish possibility we could see for July to December prices at this time.  If grain prices remain at historically high levels, a drastic pickup in slaughter numbers in the first half of 2009 could be one catalyst that helps to bring the most bullish price scenario to fruition.

 

Be sure to stay defensive on any bounces.  Another bull market like 2007 and 2008 is years away, and in the meantime if any price bounces do occur, there will be pressure to return prices to their previous low levels.  

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

2/09 People Power: Five anchors for turbulent times

By Robert Milligan

Turbulence2 = turbulence in dairy X turbulence in the general economy. There are five key focus areas to help you survive and thrive in Turbulence2:

1. Be a CEO. Chief executives of American financial institutions and auto makers had to beg for bailout money from Congress because they (and their predecessors) failed to recognize and strategically respond to external forces. Don’t make the same mistake. Turbulent times require you to give your CEO responsibilities your highest priority.

Even though you may be scared to death and would rather be doing dairy tasks, make the time to understand all you can about what is happening in the dairy industry and the general economy, them develop and implement appropriate strategies.

2. Be fair. Interpersonal relationships with family, friends, partners, advisors and employees are based on trust. Developing trusting interpersonal relationships is complex. A key component is being fair. Recognize that “fair” is not just about being “nice.” Fairness is about responses and feedback you provide – appropriate to the performance level and effort. Not responding to poor performance is also unfair. 

3. Financial success is about the margin. We focus on input and output prices going up or down, but our main focus must be on the margin between income and expenses.

For example, assuming a business is profitable, what is the result of a doubling both income and expenses? Even though increasing expenses could result in trauma, the result is a doubling of the margin. Don’t ignore input and output prices; they all contribute to the margin. In assessing where the farm has been, is now and will be financially, the focus must be on the margin. 

4. Don’t forget life balance. In my short presentation I call “How to Farm and Have a Life,” I ask, “Do you farm to live or live to farm?” Almost all answer the question “farm to live,” but their actions are often “live to farm.”

Life balance is not unlike CEO responsibilities. We intend to give both priority – they are both important. Unfortunately, they both are often ignored in favor of tasks and actions that are both urgent and important. Time management is about priorities. Make plans and follow them to ensure a priority is on the “important but not urgent” – life balance – over the “not so important but urgent.” Enjoy every minute you can with family and friends.

5. Pennies count. It looks to be a very difficult financial year in the dairy industry. The old adage of “a penny saved is a penny earned” has imbedded in it a lot of wisdom. A very small increase in income or a small reduction in expenses may not seem like much relative to total receipts or total expenses. Small changes add up, and often are more significant when measuring the bottom line – profit.

Another component of small changes is focusing on making all of your processes “no defects” – executing  processes exactly correct every single time. Quality assurance, consistency or reducing variation underlies the success of almost every successful business or organization. Commit to reducing the variation – eliminating mistakes – in every process.

Review these five focus areas and select one – and only one – to work on in the next month. Make plans. Implement the plans. Keep going. 2009 will be challenging, but remember. “when the going gets tough, the tough get going.” 

FYI

• Robert Milligan is senior consultant, Dairy Strategies LLC, and professor emeritus, Cornell University. He can be reached at 888-249-3244, ext. 255, e-mail: rmilligan@trsmith.com.

• Milligan conducts LearningEdge webinars on business leadership and management topics. For information, including a list of complimentary webinars, visit www.dairystrategies.com.

How will EPA’s new CAFO rule affect you?

     The U.S. Environmental Protection Agency’s concentrated animal feeding operations (CAFO) rule, released last October, is set to go into effect this month. But “this situation is a moving target…so expect changes and new interpetations as this evolves,” says Karl Czymmek of Cornell University’s PRO-DAIRY program.
     Czymmek has these highlights of the new rule, which EPA was forced to write after the 2005 Waterkeeper vs. EPA court decision:
• Farms that “discharge” to waters of the United States are expected to apply for Clean Water Act Permits.
• Farms that are not
designed, constructed and maintained to prevent process wastewater from reaching waters of the United States are deemed to “propose to discharge,” and need a Clean Water Act (CWA) Permit, according to EPA.   In effect, even though they do not discharge regularly, these farms are not designed or managed to prevent a discharge should the conditions occur.
• As far as EPA is concerned, farms can decide for themselves if they need a permit, but all farms of Large CAFO size are expected to have a nutrient management plan for land application of manure regardless of whether they have a permit or not.
• Farms that do not seek a permit may voluntarily certify to EPA that they do not discharge. It is likely that not many farms will voluntarily certify “no discharge” to EPA, Czymmek says. 
• EPA’s Clean Water Act permit requirements are very restrictive from a farming standpoint. They:
-Permit agency review of the farm plan, including manure rates for each field, for the next five years.
- Require public notice and access to plan details before the permit can be issued.
- Make public hearings possible in some circumstances.
- The CWA Permit term is five years unless the farm adds any
new land for manure spreading, adds a new crop or increases nutrient or manure rates on any fields.   Such changes trigger a new review and public notice process. “Needless to say, many farms would find this process unworkable for a variety of reasons,” Czymmek says.
CAFO laws in several states will also change, and may supersede EPA’s CAFO law. In New York:

o      In August of 2008, the Department of Environmental Conservation released a  draft CAFO Permit for New York.

o      This draft had a number of challenging provisions and many organizations, including Northeast Dairy Producers Association (NEDPA) and NY Farm Bureau (NYFB) provided comments to DEC in September, 2008. 

o      In December 2008, with NYFB leadership, NEDPA and NYFB representatives, met with DEC officials in Albany to voice concerns about the direction of the August draft of the proposed NY permit and the development process. 

o      NEDPA lead an effort to develop a joint statement from the dairy industry voicing a number of concerns about the August permit draft.

o      Due to changes to the federal CAFO rule and undoubtedly helped along by an organized industry expressing concerns, DEC reconsidered its earlier approach and released two draft permits for public comment.  Here’s how things look now:

§       There are two permits for New York.  DEC hopes to have them issued by July 1, 2009. If not, the current permit is expected to continue until replaced).

§       According to DEC, all NYS farms more than 200 cows or 300 heifers (or meeting other medium CAFO animal numbers) are going to be required to get one of these permits.  For the most part, each farm will be allowed to decide which permit to get, but they must have one or the other.

§       DEC is offering a Clean Water Act permit that closely mirrors the federal permit described above.  This is for farms that “discharge or propose to discharge.”

§       The other permit is a New York state permit for farms that do not “discharge or propose to discharge.” 

§       DEC indicates a farm that “discharges or proposes to discharge” is one not constructed, designed and maintained according to NRCS standards.   Conversely, a farm that does not discharge or propose to discharge is designed, constructed and maintained in accordance with NRCS standards.  

§       Large (and medium) CAFOs with a fully implemented CNMP meet the no-discharge definition and will be eligible for the state permit.

§       Large CAFO’s that are not fully implemented within six months after the new permits are issued will not be eligible for the state permit and will need to get the CWA permit.  While there may be other reasons why a large CAFO may want to get the CWA permit, large CAFO’s that are not yet fully implemented should strongly consider getting fully implemented in order to preserve the option to be covered under the state permit.

§       Medium CAFO’s that want to get the state permit need to at least have a nutrient management plan and other “non-structural practices” implemented to be eligible for the state permit.  All medium CAFO’s, whether permitted or not, would be wise to get this taken care of in the coming months so that they will not need to get the CWA permit.

§       Under the state permit, all information submitted to DEC will be made available to the public upon filing a Freedom of Information request.  Large CAFO’s will be required to submit more detailed information than mediums in the form of an Annual Nutrient Management Plan.  In this document, large CAFOs will have the option of submitting either a written description of the farmstead OR farmstead maps.

 

Agri-Mark says no more rBST

By Susan Harlow, editor
Eastern DairyBusiness

  Agri-Mark Inc. dairy cooperative, New England’s largest dairy cooperative, will not take milk from cows treated with r-BST into its New England plants after Aug. 1. The cooperative has been pressured for rBST-free milk by its wholesale customers for bulk cheese, butter and nonfat milk powder.
     Agri-Mark’s board of directors voted Jan. 15 for the ban. Spokesman Doug DiMento said the decision was difficult for the board. “This will be one of worst years on record for milk prices, yet here’s an approved technology that makes farmers money and we’re asking them not to use it,” DiMento said.

    Agri-Mark made the decision in order to keep its customers. “We have to meet the needs of the marketplace, protect our markets and grow future markets, and we have to take action now,” DiMento said.
    “It’s affected all of our plants in New England and because of that, it will also affect milk from outside handlers,” he said. Agri-Mark’s West Springfield, Mass., plant, which makes butter and powder, is the only balancing plant in the region.
    Less than 10% of Agri-Mark’s producers are using rBST, DiMento estimated. Producers who want to keep using the growth hormone will have to pay to have their milk hauled to Agri-Mark’s plant in Chateaugay, N.Y.     For any producers outside that area, hauling costs will be very burdensome, especially given today’s milk price climate, DiMento said.
    The cooperative will try to maintain the 20-cent-per-cwt. premium it now pays for rBST-free milk. “Others pay higher premiums but we pay our premium to all rBST-free producers, even if they ship to a BST plant,” DiMento said.
   It’s not clear yet if Agri-Mark will realize any cost savings from no longer having to segregate milk, DiMento said.

Crop production’s carbon footprint measured, improving

A new report creates a framework for measuring agriculture sustainability. Developed to inform long-term continuous improvements in agriculture production, the initial findings indicate crop production is already making progress toward reducing its environmental footprint. The Environmental Resource Indicators report was released at the American Farm Bureau Federation annual meeting by Field to Market, the Keystone Alliance for Sustainable Agriculture.

Field to Market is a diverse alliance representing the many links in the food chain, including grower organizations, agribusinesses, food companies and conservation organizations. As demand continues to rise and pressures on natural resources increase, the Alliance views the report as the first step in a long-term effort to quantify and improve the environmental, socio-economic and health impacts of agriculture production. The report evaluated national-scale metrics over the past two decades for land use, water use, energy use, soil loss, and climate impact in corn, soy, cotton and wheat production. In 2007, these crops comprised nearly 70% of the 305 million acres of U.S. cropland.

“Several trends are emerging. Importantly, production agriculture has become increasingly efficient, relying on fewer inputs to produce more. However, we recognize there are significant challenges ahead in meeting increased global demand in a sustainable manner,” says Michael Reuter, director of conservation programs for the Central US Region of The Nature Conservancy. “These metrics will be expanded to define other attributes of sustainable agricultural production and lay the foundation for studies that will analyze additional environmental, socio-economic, and health factors.”

Progress has been made. The initial index shows that soil-loss efficiency trends have improved substantially by 30% to nearly 70% for the four crops evaluated. Energy use per unit of output is down in corn, soybean, and cotton production by nearly 40% to more than 60%. Irrigated water use per unit of output has also decreased 20% to nearly 50% while carbon emissions per unit of output have dropped by about a third for these three crops. The results are intended to provide meaningful and credible information to shape knowledge-based decisions and allow tracking of trends over time. A next-generation report will assess water quality and biodiversity indicators.

These improvements are especially important when put into the context of global needs for food and fiber. Experts predict demand for agricultural goods will double by 2050 as global population increases by an additional 3 billion people. Agriculture is already the predominant user of all habitable land and 70 percent of fresh water. By 2030 grain-producing land per capita will drop to just a third of what it was in 1950, while the World Water Council predicts in just a decade we will need 17% more water than is available to feed the world. The industry is working diligently on collaborative solutions to meet these challenges.

 “Increased productivity and improved natural resource management will be vitally important as we seek to feed, fuel and clothe our growing world population on the same amount or even less land in the decades ahead,” says Kevin Rogers, cotton grower from Arizona. “The best opportunity to achieve this goal is for all groups in the chain to work collaboratively. Participation from farmers and the conservation organizations is vitally important to success.”

In addition to the findings, the report is significant for its direction toward creating a comprehensive methodology that can become the standard for measuring agriculture sustainability. Field to Market conducted a broad-based peer-review process that included 17 experts from universities, government and other institutions to help enhance the methodology..

“The peer-review process allowed us to add many different and fresh perspectives to the body of work, allowing for a very objective product,” says Marty Matlock, area director of the Center for Agricultural and Rural Sustainability at the University of Arkansas, who incorporated peer-review comments. “The most valuable aspect of the group’s work has been bringing together very diverse interests and creating mutual understanding and acceptance of one another’s concerns.”

Most notably, Field to Market seeks to work with farmers to identify and create best practices that can drive future improvements. The Alliance is beginning an industry-wide dialogue that will lead to programs for continued improvement of economically and environmentally friendly food and fiber production. The group is also creating an online calculator to help individual growers assess the efficiency of their operations, along with cataloging advice from experts and other growers that will help advance future sustainability efforts.

“Increasingly we’re hearing from our consumers who want to make sustainable food and fiber choices,” says John Wolf, vice president of ingredients, commodities and risk management at Kellogg Company. “It’s important consumers understand the progress already being made while recognizing that bringing the entire supply chain together is critical to continue making advances from the farm fields to the supermarket shelves.”

            Field to Market is just beginning its efforts to develop and improve sustainability metrics and create practices to promote continuous improvement throughout the agriculture food chain. The group is currently finalizing water quality and biodiversity indicators and expects to issue a next-generation report that assesses these in mid-2009. Future reports will consider additional environmental impacts as well as socio-economic and health factors.

            An executive summary and full report can be accessed at http://keystone.org/spp/env-sustain_ag.html.

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