Archive for July, 2009

Maintain herd health while you weather the storm

By I. Noa Roman-Muniz, DVM, MS

Extension Dairy Specialist

Colorado State University

 

FORT COLLINS, Colo. – In difficult economic times, we all switch to survival mode. On a dairy farm, survival mode means maintaining milk production while reducing costs as much as possible. 

While all areas of the operation should be assessed for the opportunity to reduce costs, today I would like to offer some suggestions about options for making herd health programs more cost efficient. 

 

Early identification of sick cows 

When discussing health issues on any dairy farm, early identification of sick cows is one of my main discussion points. Everyone on the dairy should be instructed on how to identify signs of early disease. 

When ill animals are identified promptly, the appropriate treatment can be administered earlier in the course of disease and the animal has a better chance of recovering. This does not only improve our chances of retaining that cow in the herd as a productive animal, but reduces the costs of lost milk production, extended therapies, and more invasive procedures in the case of certain diseases. 

This principle applies to both adult animals and calves being raised on the farm. For example, if a calf with mild dehydration is identified today, you might be able to treat her with oral electrolytes and keep her hydrated at a relative low cost. 

If instead of identifying the problem and starting the treatment today, you waited until tomorrow, you might need to administer fluids intravenously and you might even need the intervention of the herd veterinarian to rehydrate the calf and keep her hydrated during the course of the disease.  

 

Treatment vs. culling vs. euthanasia

Besides following established protocols for the treatment of commonly occurring diseases, it is also vital to establish a decision-making process to ensure that all animals are properly evaluated before medications are administered. 

When an illness is identified, we must consider the costs of treatment, and the probability of that cow improving as a result of treatment. In some instances, we should consider selling or culling the cow. 

The dairy management team should be able to make good culling decisions and know the ideal time to cull those animals at risk of developing more serious diseases. It is critical to understand that only cows that are healthy and strong enough can be transported to the sale barn or slaughter plant. 

Selling cows that fail to get pregnant due to reproductive issues is critical. We must also consider euthanasia as a humane option to end the suffering of ill and non-ambulatory cattle. This is both an economical and an animal well-being issue. 

Workers and management should have the needed tools to assess a cow’s condition and decide if the cow should be treated or euthanized. 

Your herd veterinarian should be an integral part of the process of constructing protocols for the identification and management of sick cows.

 

Work with your veterinarian

Besides helping with the design of protocols for disease identification, treatment and other management decisions specific to ill animals, your herd veterinarian is a great resource when it comes to strategies for preventive health on the dairy.

Work with your veterinarian to revise vaccination protocols for calves and adult cattle.  When considering a vaccination program, one must assess the risk of disease in the herd, the cost of the disease, and the cost and effectiveness of the vaccine. 

While some herds may not be adequately protected against common or devastating diseases, some other herds may be over vaccinated and redundant vaccines are adding costs to the health program without any additional benefits to the herd health.

You may also want to discuss with your herd veterinarian options for prioritizing health services. What veterinary services should continue as scheduled because of their importance to maintaining herd health?  Which ones could be pushed back because they are not as critical?

 

Drug inventory 

 In these difficult economic times, we should ask ourselves how differences in inventory could affect cash flow. Keeping a short-term inventory for antimicrobials, hormones, vaccines and other commonly used drugs on the dairy farm might provide cash flow advantages. 

Also, pay attention to the storage room and make sure that all drugs are protected against extreme temperatures. Pay attention to expiration dates and make sure that everyone involved in herd health programs is aware of proper drug handling and administration protocols. 

Using the right syringe and needle and administering the drug correctly is as important as using good quality drugs. If people administering drugs are not aware of the consequences of using the wrong needle or syringe, or giving the wrong drug at the wrong time, we are not only jeopardizing animal health, but are wasting drugs and increasing the costs of vaccinations, sick cow treatments and reproductive management programs.

The above are just examples of strategies for reducing herd health costs on dairy operations during these harsh economic times. By no means is this list complete, and I ask you to take into account the specifics of your operation and choose your strategies accordingly. Consider the following:

•You might need to consider how you can modify the feed ration without compromising animal health. 

•You might need to consider how labor activities can be modified to be more efficient without compromising worker safety and animal health. 

•You might need to evaluate with the reproductive consultants the costs and benefits associated with natural service and synchronization and artificial insemination programs.  

When it comes to animal health, I believe that prevention strategies will pay off as long as they are based on the specific needs of your dairy operation. Prevention can take place everywhere on the dairy. 

Colostrum management, biosecurity, vaccination programs, daily observation of cows, proper management of the feeding and reproductive programs, personnel training on calving and milking procedures are all part of a prevention program that will ensure the health and well-being of dairy animals and reduce illness-related costs.  

And I believe healthy cows will help us weather the storm.   

 

FYI

  To contact I. Noa Roman-Muniz, DVM,  e-mail noa-roman-muniz@coloradostate.edu or call her at 970-491-6022.

  To contact William Wailes, head, Animal Sciences, Colorado State University, e-mail  W.Wailes@colostate.edu or call him at 970-491-5390.

California dairy farmer: Dairy producers need relief

California Farmers Union President Joaquin Contente testified on behalf of National Farmers Union before the House Agriculture Subcommittee on Livestock, Dairy and Poultry today on the financial crisis gripping dairy farmers. 

 

“In my lifelong history as a dairy farmer, I have never seen prices remain this far below our costs for this long and I have never seen so many dairy producers so desperate for relief,” Contente said. “In my county alone 25 dairies have either filed or are in the process of filing for bankruptcy and many more are closer to bankruptcy each day.”

 

“In order to end this crisis, it is vital that dairy producers come together to agree upon policy changes that will lift the industry out of this deepening crisis,” Contente said. 

 

The California Dairy Campaign and California Farmers Union have put forward a resolution that calls on the president, Congress and the United States Department of Agriculture to acknowledge the importance of the dairy industry nationwide as well as the unique aspects of the dairy industry region-by-region through the following four steps:

  • Updating the federal dairy product price support program to reflect today’s cost of production;
  • Implementing fair tariffs on unregulated imported dairy solids;
  • Mandating greater market transparency.
  • Establishing a milk inventory management program.

“There are family dairy farms that have weathered many economic storms, but the crisis they confront today is unparalleled in our history,” Contente said. “The outlook for dairy producers in California and across the country is grim unless Congress acts quickly to reform federal dairy policies.”

Senators express concern over livestock disaster assistance rules

A coalition of Senators is questioning if several new rules of the Livestock Indemnity Program will actually help farmers and ranchers if their herds incur losses from harsh weather.

 

            The Senators wrote to Secretary of Agriculture Tom Vilsack about the critical assistance that the Livestock Indemnity Program can provide to support the livestock industry during a difficult time.  They specifically wrote about the need to come up with a more precise methodology to calculate death losses for non-adult beef animals and the necessity to set a payment rate utilizing monthly or quarterly price points to more accurately determine fair market value payment rates for the lost animals.

 

            The letter was sent by Senators Chuck Grassley, Tom Harkin, Mike Johanns, Ben Nelson, Pat Roberts, Sam Brownback, Tim Johnson and John Thune.  A copy of the text of the letter is below.

 

 

 

 

 

 

July 28, 2009

 

The Honorable Tom Vilsack, Secretary

United States Department of Agriculture

1400 Independence Ave, SW

Washington, DC 20250

 

Dear Secretary Vilsack,

 

We write today to thank you for the U.S. Department of Agriculture’s (USDA) recent publication of the Livestock Indemnity Program (LIP) rules effective July 13, 2009.  Livestock producers faced losses from harsh weather in 2008 and continue to face disasters in 2009.  This assistance is critical to helping support the livestock industry during a very difficult economic time.

 

Section 15101 (and Section 12033) of the Food Conservation and Energy Act of 2008 (2008 Farm Bill) directed USDA to set payment rates under this program at “75 percent of the market value of the applicable livestock on the day before the date of death of the livestock, as determined by the Secretary.”  In addition, the Federal Register notice 7 CFR Part 760 repeats this formula.  However, Farm Service Agency (FSA) Handbook 1-LDAP, page 2-46 dictates the set payment rates for Kind, Type, and Weight Range of livestock.

 

Non adult beef animals are separated into weight ranges of “less than 400 pounds” and “400 pounds and more.”  Many of the death losses this year have occurred from extreme heat which has killed heavy steers and heifers in feedlots.  These cattle can weigh upwards of 1000-1300 pounds.  However, the weight class of “400 pounds and more” would not come close to covering a 75 percent market value payment for livestock in these higher ranges which are close to market weight.  We suggest that the USDA strive to come up with a methodology calculating more specific payments for each animal as was intended by Congress. We urge you to work with groups representing affected livestock producers to come up with this more precise methodology.

 

In addition, the rule sets out that the payment rate is calculated using “nationwide prices for the previous calendar year unless some other price is approved by the Deputy Administrator.” During years of price volatility, producers may not be satisfactorily compensated based on market conditions.  Rather than the approach included in the rule, we suggest the USDA instead utilize monthly or quarterly price points to more precisely determine fair market value payment rates for the lost animals.  This revised approach should be used to calculate the indemnity rates for all livestock species, not just cattle.

 

We appreciate your assistance in making the LIP more equitable for our nation’s livestock producers.

 

Sincerely,

Chuck Grassley

Tom Harkin

Mike Johanns

Ben Nelson

Pat Roberts

Sam Brownback

Tim Johnson

John Thune

 

 


Marketplace holds answer to dairy’s dilemma

By Bill Bruins 
President, Wisconsin Farm Bureau Federation

Every dairy farmer understands that when the milk price goes up it eventually will go down.  If history repeats itself (and it usually does), today’s low prices will likely rebound next year. 

In the meantime, most of us spend considerable time ‘crying in our milk’ as our farms lose equity.  Many of us automatically turn to the federal government for help.  Some go as far as publicly saying that depression-era prices and skyrocketing input costs will result in all dairy cows disappearing in a matter of weeks unless the government gives all of us a profitable price!  While Agriculture Secretary Tom Vilsack recently pledged a billion dollars of federal support, he acknowledges that it will not move the dial much on prices. 

The thing to remember throughout dairy’s current dilemma is what gave us 20 dollar milk in 2008 is the same thing giving us 10 dollar milk in 2009 — the marketplace.

Yes, the government does have a role in regulating the industry, and it does set the basic price for our milk.  However, that price is largely determined by the marketplace’s forces of supply and demand. 

Some argue that the support price should be raised.  The last time that was tried under the Carter Administration, government warehouses soon overflowed with dairy.  The nation’s dairy herd needed to be reduced, so the government established the whole herd buy-out program at considerable cost to taxpayers.  Beef producers have never forgot what it did to their industry. 

Every time our prices dip, some farmers talk about a supply management program.  However, a government-controlled reduction in the supply of milk is doomed to fail when other dairy-producing nations will race to replace it. 

The fact is that we import more milk products than we export.  Even with our low prices, domestic processors (including our major cooperatives) can buy foreign products cheaper than U.S. raw milk.  Global trade is a fact of life for most ag products, including milk.  Last year the U.S. exported nearly 11 percent of its dairy production.  When the world economy tanked, demand shrunk and prices collapsed.  Soon our domestic prices were at support levels, causing dairy to flow into government warehouses instead of world markets.  The demand for milk protein remains strong, but we just can’t provide it for the right price.

Becoming a reliable supplier to the world market is vital to the long-term growth of the U.S. dairy industry.  Our domestic marketing policy served us well in the past, but the world as we now know it has changed.  Opportunities await; but only if we are willing to change. 

That change will hopefully come from revamping the way we market milk.  There are hopeful signs this will happen.  Secretary Vilsack says he supports reform to the milk marketing system and the American Farm Bureau Federation’s delegates have agreed to study what ails the dairy industry before making new policy resolutions. 

The Wisconsin Farm Bureau’s Dairy Committee, made up of 20 dairy producer members, will meet in August to set our organization’s dairy directives.  Farm Bureau’s members remain committed to not only find ways to ease the pain dairy farmers are experiencing this year, but to working on the long-term solutions that will bring positive and lasting change.  

Iowa dairy farmer testifies sector in a ‘price-cost squeeze’

America’s dairy producers find themselves in a “price-cost squeeze” between plummeting milk prices and feed costs that have remained high. Several public and private assistance initiatives are in place, but relief is not yet being fully felt at the farm gate, an Iowa dairy farmer today told a House Agriculture subcommittee.

Iowa Farm Bureau President Craig Lang, partner in a dairy with his father, brother and sons, testified on behalf of the American Farm Bureau Federation before the subcommittee on livestock, dairy and poultry during a hearing on the economic challenges facing the dairy sector.

Lang said that due to historically low milk prices, his family and a number of other dairy producers have depleted cash that was put aside during positive economic years, and they are “now using a bank line of credit to help pay for daily operations.”

Coming off positive economic returns in 2007 and most of 2008, farmers responded to market signals to produce more milk. Lang explained that last fall, factors such as the global economic recession and a stronger dollar effectively shut down the international market for U.S. dairy goods.

Lang said “the demand shock from the evaporation of the international marketplace, excess supply being thrust upon the domestic marketplace, and shrinking margins of income over feed costs” are putting dairy farmers at financial risk.

Lang testified that lower prices have resulted in supportive action by the federal government. At Farm Bureau’s urging the Agriculture Department has purchased dairy products for nutrition programs. Low prices also have triggered support payments under the Milk Income Loss Contract for the first time in two years, and USDA has allocated the maximum volume of dairy products eligible for incentives to boost exports consistent with world trade rules.

Lang said Farm Bureau would support several options to assist dairy producers in the short-term, including a program called Cooperatives Working Together. CWT is a voluntary, producer-funded program that supports milk prices through herd retirement and other means.

“We applaud the efforts undertaken by CWT so far,” Lang said. “The latest removal of 100,000 cows, unfortunately, only represents about 1 percent of the U.S. herd. Our economists believe another 3 percent reduction in cow herd numbers for an extended period of time will be required before dairy prices are likely to significantly rebound.”

Lang said that program may not have funds necessary to reduce the U.S. herd enough to boost milk prices back to a profitable level. This may mean the only option is for more farmers to sell their herds on the open market.

“Eventually, that culling of the U.S. herd will reduce milk supply and boost prices,” Lang said. “Cull cow markets have already softened considerably and are making this a difficult decision for farmers.”

While fewer dairy cows would be useful in increasing dairy prices to farmers, Lang said Farm Bureau is “adamantly opposed” to a federal dairy herd buyout program similar to those used in the past. In the past such programs have had negative impacts on the beef industry and Farm Bureau does not support programs to benefit one sector to the detriment of another.

In the meantime, Lang said USDA expects a brighter economic picture around the corner. USDA is forecasting the all-milk price to average $11.60 per hundredweight in the third quarter and $13.10 per hundredweight in the fourth quarter. For all of 2010, USDA is projecting an all-milk price of $15.30 per hundredweight.

“We are working our way out of this severe crisis and must let the dairy sector return to a supply/demand balance as soon as possible,” Lang said.

USDEC’s Suber: government can help dairy exporters maintain markets

As the U.S. dairy industry grapples with depressed global markets and reduced export sales, government can play a key role in improving the competitiveness of U.S. suppliers, Tom Suber, president of the U.S. Dairy Export Council (USDEC), told a hearing convened by the U.S. House Agriculture Committee’s Subcommittee on Livestock, Dairy and Poultry.

“Congress and the Administration could pursue a number of measures that USDEC believes would help us maintain and improve our global competitiveness and permit us to more rapidly regain export markets as economies improve,” Suber said at this morning’s hearing to review economic conditions facing the dairy industry.

In the first five months of the year, the value of U.S. dairy exports was down 52 percent from last year’s record pace, according to the latest U.S. Department of Agriculture/Foreign Agricultural Service data. A severe reduction in demand in key overseas markets, coupled with rising production last year, has led to a steady inventory build-up in 2009. As a result, commodity prices are about half what they were at this time a year ago.

“Entering the second half of 2009, recovery in global dairy demand remains elusive, leaving expectations for soft commodity markets for the balance of the year and into 2010,” Suber told the subcommittee. “But whatever the declines in global markets, it is clear that processors and producers have come to rely on exports as very important to the health and growth of the industry. Exports have already been shown to dramatically benefit farmer income; we cannot afford to ignore this part of the equation so critical to overall supply/demand balance of the U.S. dairy market.”

Ultimately, the return of consumer demand will come with the restoration of economic growth, he said. And virtually all forecasts foresee a medium- to long-term return to dairy demand expansion that exceeds the supply capabilities of the traditional exporters, leaving opportunities for U.S. suppliers to fill the gap.

In the meantime, however, a number of government actions can help exporters weather the difficult conditions, he said.

Among the measures that can have an immediate impact, Suber called for maximum use of the Dairy Export Incentive Program (DEIP) to help U.S. suppliers compete with subsidized exports from the European Union and aggressive pricing from New Zealand. Though allowable DEIP volumes are just a fourth of the annual commercial sales achieved over the last five years, “full use of DEIP can help our exporters keep a foothold in key markets and maintain relationships cultivated over a number of years.”

He also asked that Congress maintain funding for the Market Access Program (MAP) and the Foreign Market Development (FMD) program at their full Farm Bill authorization levels of $200 million and $35 million, respectively.

“MAP and FMD are excellent examples of successful industry-government partnerships that can directly benefit producer incomes,” Suber said. “USDEC has participated in these programs for several years and has used the funding to help raise awareness and grow demand for U.S. dairy products abroad.”

Another critical part of the export-support equation is the expertise of the U.S. Department of Agriculture’s Foreign Agricultural Service (FAS), both in Washington and throughout the world, he added. Ensuring adequate funding for this agency will enable government officials to work with industry to resolve sanitary/phytosanitary (SPS) issues and technical barriers to trade (TBT), as well as vital, time-sensitive challenges when product is detained in port.

However, as FAS and other agency staff work to make sure trading partners adhere to their commitments, it is equally important that the United States live up to its trade obligations, Suber warned. To this point, he referenced the U.S. violation of its cross-border trucking obligations with Mexico under the North American Free Trade Agreement (NAFTA). After the United States refused to allow Mexican trucks to deliver into the U.S. market, Mexico implemented new retaliatory tariffs, a move that puts U.S. dairy exports at risk.

In addition to the near-term benefits provided by these measures, Suber offered recommendations that will provide medium- to long-term growth for U.S. dairy exports.

“We should swiftly move towards approving pending Free Trade Agreements with Panama and Colombia and, especially, South Korea,” he testified. “These agreements would remove barriers to our products and would provide us with an edge over our competitors or at least allow us to remain on more even footing.

“At the same time that we pursue genuinely beneficial bilateral agreements, we must not take our eyes off the bigger prize – a successful multilateral deal,” he continued. “We urge the administration to continue to aggressively pursue an ambitious Doha Round agenda, which would prevent backsliding on export subsidies and market access, particularly in developed countries, which has become such a serious concern this year.”

Finally, Suber asked the subcommittee to be prepared to assist the industry in accommodating the impact of increasing globalization on both the domestic and export markets.

This spring, the Innovation Center on U.S. Dairy – a high-level forum where top leaders from all sectors of the business come together to review structural constraints to industry growth and prosperity – retained a management consulting firm to profile the present and future state of global dairy trade and the competitive position of the U.S. industry. An Innovation Center task force is developing strategic recommendations for a path forward in the face of a more integrated and global dairy industry, which it is prepared to share with the subcommittee, he said. If structural reforms are pursued, the government will play a crucial role, he concluded.

Four cooperatives form the Western Milk Cooperatives Agency

 

Four California milk marketing cooperatives signed a
Marketing Agency In Common agreement, July 16, for the purpose of working together to
find methods to more efficiently and cost effectively market the milk produced
by their members and to more closely align the supply and demand for milk
and dairy products in California.
The formation of the Western Milk Cooperatives Agency also will allow for the
acquisition, exchange and dissemination of production, market and statistical
information for the mutual benefit of the members of the four cooperatives –
California Dairies Inc., Dairy Farmers of America, Inc. (Western Council), Land
O’Lakes, Inc., and Security Milk Producers Association. The cooperatives will
begin immediately to identify synergies and operational efficiencies, particularly
in the area of milk transportation, to address the short-term dire financial
crisis now facing California dairymen.

Four California milk marketing cooperatives signed a Marketing Agency In Common agreement, July 16, for the purpose of working together to find methods to more efficiently and cost effectively market the milk produced by their members and to more closely align the supply and demand for milk and dairy products in California.

The formation of the Western Milk Cooperatives Agency also will allow for the acquisition, exchange and dissemination of production, market and statistical information for the mutual benefit of the members of the four cooperatives – California Dairies Inc., Dairy Farmers of America, Inc. (Western Council), Land O’Lakes, Inc., and Security Milk Producers Association. The cooperatives will begin immediately to identify synergies and operational efficiencies, particularly in the area of milk transportation, to address the short-term dire financial crisis now facing California dairymen.

Seated (L to R) Fred Douma, signing for Security Milk Producers Association; Tony Mendes signing for California Dairies, Inc.; George Mertens, signing for Dairy Farmers of America; and Cornell Kasbergen, signing for Land O'Lakes, Inc. Standing (L to R): Hank Perkins (SMPA), Tom Mendes (CDI), John Bidart (CDI), Ron Pietersma (DFA), Glenn Wallace (DFA), Bill Vander Poel (SMPA), John Zonneveld (LOL), Eric Erba (CDI), Pete Garbani (LOL), Perry Tjaarda (DFA), Donald Vander Poel (SMPA), Ben Curti (LOL).

Seated (L to R) Fred Douma, signing for Security Milk Producers Association; Tony Mendes signing for California Dairies, Inc.; George Mertens, signing for Dairy Farmers of America; and Cornell Kasbergen, signing for Land O'Lakes, Inc. Standing (L to R): Hank Perkins (SMPA), Tom Mendes (CDI), John Bidart (CDI), Ron Pietersma (DFA), Glenn Wallace (DFA), Bill Vander Poel (SMPA), John Zonneveld (LOL), Eric Erba (CDI), Pete Garbani (LOL), Perry Tjaarda (DFA), Donald Vander Poel (SMPA), Ben Curti (LOL).

August 2009: Pro-Dairy

The Manager: Feed Decision Making

 

The Manager, a special section prepared by PRO-DAIRY specialists, appears in Eastern DairyBusiness 12 times a year. In keeping with the PRO-DAIRY mission, The Manager helps strengthen the management skills of dairy producers and increase the profitability of the dairy industry. PRO-DAIRY, an educational program begun in 1988, is a joint venture of the New York State Department of Agriculture and Markets, Cornell University’s College of Agriculture and Life Sciences, and Northeast agriservice organizations. For reprints of PRO-DAIRY’s The Manager, contact Heather Howland, 272 Morrison Hall, Cornell University, Ithaca, NY 14853. Phone: (607) 255-4478 Email: hh96@cornell.edu

 

 

August 2009 features include:

 

Welcome to the wild world of sourcing feed 

How dairy producers tackle decisions on whether to buy or grow
commodity feeds has changed a lot in the last decade

By Tom Overton and Larry Chase

http://dairywebmall.com/dbcpress/?p=3663

 

To contract or not to contract

There’s no crystal ball to help make foolproof decisions on contracting
feed. But there are tools that help improve decision making

By Tom Overton and Larry Chase

http://dairywebmall.com/dbcpress/?p=3665

 

How do I price forages?

Pricing forages? That perennial question asked by dairy producers can
be answered using any of these methods

By Tom Overton and Larry Chase

http://dairywebmall.com/dbcpress/?p=3667

 

Dairy consultant Q & A

Drawing on a wealth of experience, Corwin Holtz offers ideas on
making sound feed-buying decisions

By Eleanor Jacobs

http://dairywebmall.com/dbcpress/?p=3670


The Manager: Dairy consultant Q & A

Drawing on a wealth of experience, Corwin Holtz offers ideas on making sound feed-buying decisions

 

By Eleanor Jacobs

 

Dairy producers aren’t the only people who have changed their approach to sourcing feed inputs. Dairy consultants and nutritionists are also taking a different tack in helping their clients make decisions on whether to contract ingredients and, if so, what might be the best options on the market.

For insight on this, PRO-DAIRY talked with Corwin Holtz of Holtz-Nelson Dairy Consultants LLC. Based in Dryden, N.Y., Holtz works with herds across the country. 

 

PRO-DAIRY: How has your approach to making strategic decisions on feed inputs changed in the past five to eight years?

 

Holtz: As consultants, we spend more time on phone calls to stay on top of the feed markets, especially during certain times when forward contracting. I have 20-plus contacts between brokers and feed companies, but typically make three to five calls. 

Half of our clients track feed prices; half ask us to do that. We gather the information, but it’s up to the clients to pull the trigger and make the decision on whether to contract feed at a certain price. 

We can’t guarantee the price won’t come down. We try to help clients determine what are the best buys and the best sources of nutrients from feed ingredients that are available.

 

PD: What information do dairies need to make informed decisions on feed purchases?

 

Holtz: It’s critical that dairy producers know their cost of production. If they do, then we know what is a reasonable price for the dairy to pay for a feed ingredient. 

They need to compute their projected feed needs for a year – how many cows are they going to be milking and how many heifers will they be feeding? This tells them how much tonnage of particular ingredients they need to contract.

If dairies are going to contract feed, they also need to look at the income side and consider contracting some of their milk. By doing this they have the ability to lock in a potential margin. 

One of the biggest hazards in contracting feeds is looking back and second-guessing your decisions.

 

PD: How do you work with your clients to help them determine the best use of their cropland?

 

Holtz: I see many more people growing soybeans and additional corn acres. They are also more dairies contracting with neighbors for high-moisture corn.

If you got down to the last penny, the cost of growing high-moisture corn or soybeans may not be a money-maker for dairies. But from a cash-flow standpoint, it makes sense for many dairies. They don’t have to write that check for a feed ingredient.

 

PD: What tools can farmers – or you – use to make informed decisions on feed purchases?

 

Holtz: We ought to use programs such as Sesame or FeedVal more than we do. But it’s a time issue. Any program that helps us look at different diet scenarios so we can compare certain ingredients at particular prices is valuable.

The unknown is forage quality. We have to deal with forage quality variability and have to adjust our feed program to compensate for that. The biggest thing we as consultants can do is pound on our clients to continually improve forage quality so we can be in position to purchase less feed.

 

FYI

Cowrin Holtz is a consultant with Holtz-Nelson Dairy Consultants LLC. Reach him at 607.351.0677.


The Manager: How do I price forages?

Pricing forages? That perennial question asked by dairy producers can be answered using any of these methods

 

By Larry Chase and Tom Overton

 

In these times of low milk prices and high input costs, dairies may be all the more eager to feed as much forage as possible. To do so may mean looking to neighbors as a source for forages. And with that comes the proverbial question: How do I determine the price of forages? 

There are many approaches you can use to compute how much to pay when buying or selling forages. The methods range from very simple to relatively complex in terms of the information needed to determine a price for forage. 

Here are the common approaches:

1. Use current prices in the area. This quick  method doesn’t account for such factors as differences in nutrient or dry matter (DM) content of silages. 

A variation of this approach is to use prices from auctions where forages are sold. This works better for hay than silage. At a recent Pennsylvania auction, the price for a ton of mixed hay ranged from $65 to $185. What was different about these hays to cause such a large price swing?

2. Use published prices as a reference point. One source is a monthly list of feed and forage prices available from the Department of Dairy and Animal Science at Penn State University. Find the list at: www.das.psu.edu/dairy/pdf/feedprices.pdf.

Virginia Ishler in the department compiles the Penn State list monthly using prices from a number of sources. The June 2009 list had a price of $37.40 per ton for average corn silage at 33% DM. The price for average legume hay was $162 per ton. These price lists don’t account for factors such as variations in nutrient content and DM.

Similar lists may be available from other sources such as regional agricultural publications. 

3. Use information from crop enterprise budgets. There are a number of computer programs or factsheets that can be used to determine the actual costs of producing various crops:

www.aede.osu.edu/programs/FarmManagement/budgets   

http://agguide.agronomy.psu.edu/cm/sec12/sec121.cfm

  www.uwex.edu/ces/crops/uwforage/Pricingstandhay-FOF.pdf

http://cdp.wisc.edu/crop%20enterprise.htm

These sites take into account such factors as the costs for seed, fertilizer, machinery and labor, plus yields. Some programs allow for inclusion of storage costs and losses. 

The crop enterprise budget tools require that you supply a lot of detailed information. But it’s worth the effort since you can do such things as adjust forage price based on factors like yield per acre. 

In 2009, a sample budget from Penn State showed a total cost of $698 per acre to produce conventional-tillage corn silage. The break-even price of the corn silage ranged from $29 per ton with a yield of 24 tons per acre to $38.78 at an 18-ton per acre yield. 

Corn silage yield per acre is a major factor in determing corn silage price when using crop budgets. As you look ahead to future crop years, consider using some of the crop enterprise budget tools. 

4. Use computer spreadsheets. There are a number of these computer-based programs, ranging in ease of use and the quantity of input data required. These programs value forages based on nutrient content rather than from an enterprise cost of production estimate.  

Here’s a short list of computer spreadsheets to check out:

Pricer: www.uwex.edu/ces/dairynutrition/spreadsheets.cfm

Designed specifically for pricing forages, Pricer requires prices for corn, soybean meal and base forage. Also, it requires information on cow body weight, milk production and milk price. 

Forages.xls: www.das.psu.edu/xls/forages.xls  

Inputs for this program are prices for corn grain, soybean meal and average quality legume hay.

FeedVal: www.uwex.edu/ces/dairynutrition/spreadsheets.cfm

There are different FeedVal programs that vary in the inputs required. The original FeedVal program uses neutral detergent fiber (NDF) as one of the nutrient inputs. FeedVal 3 and 4 don’t consider NDF and are less applicable for pricing forages. 

FeedVal requires prices of corn, soybean meal, lime stone and dicalcium phosphate.

SESAME: www.sesamesoft.com

This program calculates the cost of forages using energy, protein and fiber fractions in the feed. 

All of the computer programs allow you to modify basic forage analysis parameters, such as DM, crude protein (CP) and NDF, so you can get an estimated price based on the quality of forages you either grow or want to buy.
    Most of the programs are fast and relatively easy to use. The simpler programs (forages.xls, FeedVal) require less input information but still provide useful feed price estimates that can be used as a starting point for sale or purchase information. 

The Sesame program, for which you must pay a fee, encompasses more nutrient considerations in estimating feed prices and should give a more precise estimate.

 

Table 1. Predicted forage value, $/ton

Program                Alfalfa hay Corn silage 

                                  20% CP,              35% DM

                                  44% NDF

Forages.xls 164                       51%

FeedVal 169                      48

Pricer                             172                      58

Sesame                        160                     63

 

Table 1 contains an examples of forage prices obtained using four of these programs. Corn grain was priced at $152 per ton; soybean meal at $347 per ton. Predicted forage prices differ between the programs due, in part, to differences in trying to get the same base information into the programs. 

These forage pricing methods can help you determine more closely the value of forages, whether you’re buying or selling them. Make using them part of your decision-making process; it’s important in the current dairy economy and the tight margins.

 

FYI

Larry Chase is an animal scientist at Cornell. Reach him at 607.255-2169. Email: lec7@cornell.edu

Tom Overton is an animal scientist at Cornell University and associate director of PRO-DAIRY. Reach him at 607.255.2878. Email: tro2@cornell.edu.


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