Archive for March, 2010

Farmstead cheese industry: Cheese makers share experience during 2010 dairy seminars

By DairyBusiness Staff

TULARE, Calif. – Three farmstead and artisan cheese makers shared their challenges and rewards during a panel discussion at the 2010 Dairy Profit Seminars at World Ag Expo.

John Fiscalini of Fiscalini Farms in Modesto, Marisa Simoes of Three Sisters Farmstead Cheese in Lindsay, and Bill Boersma of Bravo Farms in Traver, provided an inside view of the ups and downs of the cheese-making business through what most dairy producers will call the toughest economic times they have ever experienced.

Following are some excerpts from their presentations and discussions. Moderator was Harold Petersen, director of Industry and Producer Relations, who coordinates all special events for California Milk Advisory Board.

PETERSEN: Please tell us about yourselves and your business.

BOERSMA: I’m owner of Bravo Farms with facilities in Traver, Calif. Started as a farmstead cheese producer in 1995 and have been making cheese for the last 15 years. No longer own a cow, but still enjoy producing cheese.

FISCALINI: I’m a dairy farmer in Modesto and we’ve been on the same property for 98 years. My grandfather started farming in there in 1912. I started making cheese in 2000 after attending a meeting where Bill Boersma was speaking about the cheese business. We’ve been making a number of different cheeses for the last nine years. We recently installed a methane digester on our dairy so I’m not sure where my fame comes from these days – as a cheese maker or going up against the Air Board and escaping with my hide.

SIMOES: I’m the daughter of a dairy farmer and we make cheese at our dairy just east of here in Lindsay. I’ve been making cheese for about 10 years. I started right out of high school when my Dad convinced me to attend a farmstead cheese making short course at Cal Poly in San Luis Obispo. I didn’t know what I wanted to do, but that was where I fell in love with the idea of  cheese making. At that time our family was actually renting Bill Boersma’s dairy and Bill was gracious and let us  use his facilities to experiment with cheese making and making cheese with him. From there we grew into a rented facility in Tulare and when our new dairy was ready do go we started making cheese on our own facility. That’s been about six years.

PETERSEN: Why Cheese? Why did you get into it and what were some of the really good things and what didn’t work so well?

BOERSMA: First of all, was at a WUD convention 1990 and Stanford Institute research study at the convention talked about how dairymen needed to get involved in their marketing…They had a good point and something we should be doing…I saw early on that the only way to survive was to grow like crazy and if you look back 20 years, that’s exactly what happened in the dairy industry. However, growth went the way of commodities which was great. I decided to go with a specialty. I didn’t realize how small the market was and a specialty was perceived to be anything but American made. European was the top of the line at that time. I dove into it without knowing what I was doing in the way of marketing. Happy to say that 20 years later, people are recognizing that cheeses that once were the mainstay of the European Style and that’s how I went into it.

Another major problem was the marketing factor. People were thinking we couldn’t produce enough. I just recently I had a company tell me that was more than they could handle. I’m proud to say that we busted down the doors pretty well.

FISCALINI: I actually went to a CMAB “So You Want To Become A Cheese Maker,” seminar 12 years ago or so. And the CMAB implied that the California cheese industry – at least the boutique/farmstead part – was where California wines had been 20 years earlier, and that we needed to follow the wine industry and be able to slide along on their coattails and bring the American consumer up to speed with cheese like they had been with their appreciation for California wines. Given that, and I always thought I would get rich quick, because we all know the middle man was an evil SOB that steals all the money between the dairy farm where the cheese is produced and the store where it gets sold. I’ve now become the middle man and I don’t think he’s evil and he sure as heck doesn’t get rich. My perception was I’m going to do the value added and cut out a couple steps where someone took a piece of the pie. I didn’t realize just how difficult it would be to get to that point and how much addition money I’d spend to in labeling issues and advertise and get my cheese into stores. I must be honest with you, I expected to make more money than I had made.

My family were cheese makers from 1705 to 1886 in Switzerland until my great grandfather moved over here and settled  at the dairy that is now the Cal Poly Dairy, where he made cheese for another 20 years. My grandfather moved to Modesto and stopped making cheese, so I kind of wanted to get back into that tradition. Lastly, I have three children, two daughters and a son. My daughters, I couldn’t see them truly taking over a part of the dairy. They like being girls…and don’t like wearing rubber boots and they don’t like getting their hands dirty. If I’m going to keep them in the family business maybe there is something else I could do like getting into the cheese-making business. Consequently, I have all three of my kids involved in the dairy farm and cheese plant.

SIMOES: That sounds like my story. I knew I wanted to do something in the dairy industry or general agriculture. But probably something within the family business. I probably felt a lot like John’s daughters. Milking, feeding and breeding didn’t interest me.   As far as the cow side of things that didn’t interest me either, but once cheese making was laid before me thought maybe this was a good alternative and something I could branch off from the dairy and could be my own under taking too, that was a big motivation for me.

PETERSEN: How did you choose your first cheese? Why, and are you still making it?

BOERSMA: My first cheese was kind of happenstance, I think…I wanted something really special. Also know that making cheddar especially with the non-standardized milk my cows at the time didn’t not understand the term standardization. Nor did I have a computer to make cheese with. Cheddar is not the easiest cheese in the world to produce if you do the actual hand cheddar milk curd kind of cheese. I thought, let me start with that and I’ll have some good practice and once I have that down I can go on to my real speciality cheese. As it turned out this was the first farmstead made cheddar east of the Alleghenies and I thought “hurrah,” I have a speciality. The other side of it is, cheddar is closely related to the commodity cheddar in name only. People would see my cheddar up against Land O’Lakes and Tillamook and see the price of mine and flinch, and then move on to the other cheddars. That was the problem of it, but that was the start of our specialty cheese.

Now comes the marketing part. Since that time in 1996, we came up with Chipotle. In those days no one knew how to pronounce it and nobody was making any cheese like that. So we did that and had no idea how popular it would be…when only 2 % of all specialty cheeses was flavored. It’s a little embarrassing that I’m not the greatest lover of jalapenos, but Chipotle is 50% of our total sales. We do the Al Capone thing and sell what people want.

FISCALINI: Our first cheese was San Joaquin Gold…the reason why I made it was because it is a mistake. I didn’t mean to make it, but it turned out to be an extraordinary cheese. Year-in and year-out it represents about 50 to 55% of all our sales. I made cheese with another cheese maker who had just come to work for me. The first day we made cheese, I wanted to make cheeses that I liked because if we couldn’t sell them, at least I could eat them. I didn’t like fresh cheeses, so I wanted to make cheddar and other hard cheeses.

We got a recipe for a Fontina cheese and the cheese maker said that this recipe is so simple even we can’t screw it up…needless to say, we screwed it up. A few months later, I was introduced to Mariano Gonzalez through the CMAB who became my head cheese maker.

He tasted our cheese and asked what kind it was. I said it was Fontina and he said, no it’s not Fontina. Anyone who knows Fontina knows this is not Fontina, but it’s too good to throw away. So he refined it and made it what it is today – the winner of two gold medals at the London World Cheese Awards.

SIMOES: We still only make two cheeses. One is Serena and the reason we decided to make it was what we could make with limited storage facility and with the equipment we had. Wanted to make a Romano-type cheese and had to age it at least 60 days. Serena is an aged Italian style cheese, fashioned after Parmigiano, but the cultures that we used turned it into something different – a real rich, nutty, earthy kind of cheese with a bandage wrapped with a natural rind, which cures naturally through the aging facility we have.

Our second cheese was a mistake too. When we were making cheese one day, our water heater went out and we couldn’t cook the curd like we normally do for Serena – a hard cheese that we have to cook to a pretty high temperature. We thought we could throw it away now, or keep making it and see what happens and throw it away later. So we made it like we would have made Serena, and ended up with a completely different cheese that was good in and of itself, but wasn’t Serena. We gave it a name of its own and a market and that’s how Serenita was born. To this day, these two cheeses are Three Sisters Farmstead Cheese specialties.

For the complete panel discussion via podcast, please visit www.DairyLine.com and click on “Dairy Profit Seminars” in the header. Then click on “WDB Seminar #7: Cheese Making.”

How do we clone Trent Loos?

Opinions & sacred cows

by Ron Goble

Dairy producers have a lot on their plate these days. It’s hardly fair to add anything else to their list of responsibilities. However, some things just cannot be ignored. Trent Loos was in Tulare, Calif., recently as one of our keynote luncheon speakers during Dairy Profit Seminars during World Ag Expo.

Those who know Trent, know he wasted little time cutting to the heart of the matter when talking about preserving animal agriculture in America. That is a battle he has been waging ever since he started his public speaking crusade about a decade ago. As he paced back and forth in front of an attentive audience, he rattled off story after story, fact after fact, in an effort to arm his listeners with “ammunition” they could use when afforded opportunities to speak to those in the non-ag community.

“How do we educate the public when they don’t understand the basics of the cycle of life?” he asks. “The biggest challenge we have in the food, fiber, pharmaceutical and fuel industries today is that no one outside of agriculture, understands that everything lives, everything dies, and death with a purpose gives full meaning to life.”

“We have dairy cows because they generate the essentials of life: calcium, vitamin D and fat. How do we address the disconnect with the public? We must change our communication skills. We say a lot of things that people outside of the farming community don’t understand. If we are to explain the business of agriculture and food production we must speak in a language people can understand.”

We need to have our “elevator speech” ready. Because the time it takes for the elevator to go from the first floor to the seventh, is often all the time we have to explain what agriculture is and how science and technology advancements in ag assists the nonfarm person and the consumer. We have to explain these things almost in bumper sticker fashion, says Loos.

We can’t continue to say “they” are the problem. We must explain what we do, and why, because consumers are losing access to domestically grown food. Soccer Moms want: (1) access to food; (2) safe and healthy food; and (3) assurance we treat our cows right. We have a good story to tell, but are often reluctant to tell it.

In 1947, Americans consumed 47 gallons of whole milk per capita. In 2009, it was down to 8 gallons. When 50% of Americans are calcium and vitamin D deficient, share the fact that whole milk is full of those two essentials. Since we know soft drinks erode calcium in the body, how much more important is it to explain why people should consume milk and dairy products?

You know we have an uphill battle when you discover three U.S. universities are studying whether plants feel pain. And believe it or not, some of those researchers say plants do feel pain, and actually communicate to each other. As Loos says, only a nation where things come so easily can we study such ridiculous things. It reflects the enormity of the challenge.

Loos asked, how many called NightLine a few weeks ago after they aired a negative story on the dairy industry? Only one person raised his hand. We all should have called to tell them they didn’t get it right, and what they should have included in their coverage. Seize every opportunity to stand up for the industry and tell your story.  We can’t clone Trent Loos, but we can exponentially multiply his message.

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


Middle East Dairy Business: An inward look needs an outward focus, too

National Perspectives

By Dave Natzke

While many U.S. dairy farmers and organizations seek ways to balance domestic milk supply/demand as a means to improve U.S. dairy’s dreadful economic picture, others are seeking to build international markets. For dairy’s future, the latter should not be overlooked.

I had the opportunity to participate in a U.S. dairy export information mission in Dubai, in the United Arab Emirates (UAE), Feb. 20-26. In addition to U.S. Dairy Export Council (USDEC) and USDA staff, dairy producer participants included Paula Meabon, Wattsburg, Pa.; Kenton Holle, Mandan, N.D., and Paul Rovey, Glendale, Ariz., all who serve on the Dairy Management Inc. board.

A simile for the trip might be Dubai’s Burj Khalifa, the tallest building in the world. The building’s elevator isn’t working, and probably won’t be until May 1. So, while there’s lots of potential to reach new heights, more groundwork must be done first. The same is true for U.S. dairy export potential.

The Middle East’s growing population and social changes make it an attractive market. Population in the Middle East/North Africa region is forecast to reach 692 million by 2050. And, we were witness to a growing “westernization” of Dubai, with supermarkets and smaller stores featuring dairy cases rivaling or surpassing any I’ve seen in the U.S. for product offerings. Fast-food and casual dining restaurants bear names of those commonly seen in every U.S. city. While some of the buyers we met primarily served an elite, commercial business/tourism class, crowded markets revealed an emerging and growing middle class.

The arid climate of the Middle East means many of its countries import a majority of their food. It is a milk-deficit region, yet dairy is a traditional part of the diet, with a long history of consuming white cheeses, yogurt, butterfat and milk powder.

The European Union (EU) is the Middle East’s leading dairy supplier, with a 30% market share. New Zealand supplies 20%-25%; Australia, about 10%; and the United States accounting for 5%-10% of overall imports (milk-equivalent basis), including about 4% of cheese and 30% of whey proteins.

U.S. dairy exports suffered in 2009, and business with the Middle East was no exception. Competitive forces and the global financial crisis hurt buyers’ demand and credit availability. Sales growth in 2007-08, when U.S. prices were  favorable relative to world prices, was lost in 2009, when that relationship reversed. U.S. sales to the region (by volume) were down by about 50% from the prior year. New Zealand implemented aggressive pricing, and temporary reinstatement of export subsidies enabled the EU to pick up market share.

The United States has not been a consistent supplier of dairy to the region, providing 3% of total cheese imports in 2007; boosting that to 8.8% in 2008; falling back to 3.2% in 2009. Sweet whey concentrates saw a similar fluctuation: 27% in 2007 and 2008; to just 11% in 2009.

Looking ahead, Middle East trade agreements with EU and Oceania – some in place, others in negotiations – could have a significant negative impact on U.S. price competitiveness. But while logistics and prices currently put many U.S. companies at an economic disadvantage, the potential market is too great to overlook. That message didn’t just come from USDEC staff. It came from Middle East dairy product and ingredient buyers hungry for what we produce.

A centerpiece of our information mission was Gulfood, the Middle East’s largest food exhibition for the foodservice and hospitality business. Even more informational, however, were five days of meetings with dairy product and ingredient buyers. They identified several challenges facing U.S. dairy industry’s attempts to export to the Middle East are:

• Distance and logistics, which add costs.

• Middle East companies would prefer to deal directly with U.S. companies, but lower sales volumes and inexperience in world markets mean U.S. companies frequently use brokers. In some cases, brokers representing both U.S. and EU companies find financial benefits by steering purchasers to the EU.

• Product mix. The U.S. dairy product price support program provides a safety net for yellow cheddar cheese, salted butter and nonfat dry milk, which directs our production into those products because we have a guaranteed buyer of last resort. Middle East customers prefer other cheeses, unsalted butter, whole milk powder and anhydrous milkfat.

• Other product specifications. Whey derived from U.S. yellow cheddar cheese production discolors end-user products; whey derived from white cheddar produced by other countries doesn’t. Other U.S. products may contain ingredients not permitted by all religions/cultures, including some starches to prevent shredded cheeses from clumping.

• Lack of U.S. customer support for marketing and product utilization, including labels in Arabic and other point-of-purchase support.

• Financial transactions. EU companies use a central bank to provide financing/credit to Middle East buyers. Most U.S. sales are cash, and the cash must arrive before the product is even shipped.

• U.S. products are often “commodity” focused, while “branding” is important to Middle East consumers.

Another elephant in the room is “fear,” and it raised its head several times in preparation for the trip. Friends, bombarded by the region’s cultural and religious disputes nightly in television news, asked me: “You’re going to the Middle East? Aren’t you afraid? They hate Americans, you know.”

What I found was a business community that separates foreign policy and business transactions. They’re hungry for American dairy products, and eager to do business. They are, by nature, a trading people, with routes of commerce evident even in Biblical times. Personal relations are important in their business relations.

Farid Habibi, assistant general manager of Hassani Group, has high hopes for increased U.S. dairy product availability, and was most vocal concerning U.S. potential in the region.

“When the U.S. decides to focus on something, it is second to none,” he said. “The trouble is, the U.S. domestic market is so large, and the export market comparatively small, so the U.S. doesn’t focus on it. The U.S. could replace Fonterra without effort, and the EU doesn’t know where it wants to be politically.”

The most immediate opportunity for U.S. dairy probably remains dairy ingredients, so local manufacturers can put together products with the right nutritional, cultural, ethnic, religious and economic attributes for their consumers. USDEC is focusing on business-to-business relationships to boost U.S. dairy sales. It  worked with just 13 U.S. dairy companies to export products to the Middle East in 1999; that jumped to 41 U.S. companies in 2009.

One other question surfaced several times on our trip: Why is the U.S. dairy industry using New Zealand-based Fonterra, a global market competitor, as a major marketing agent/advisor?

I’ll leave others to answer that one.

FYI

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

Calf, heifer ranches fight their own economic battles

By Ron Goble

Few businesses connected to the dairy industry were not adversely affected by the long stretch of low milk prices that hammered dairy producers nationwide. Calf and heifer ranches were no exception. They fought their own economic battles during the worst economic downturn ever seen in dairying.

Some calf ranches went out of business, while others were able to keep their heads above the financial flood waters.

Some producers feeling the economic squeeze, brought their calves home to the dairy in an effort to curtail expenses. Others saw the economics differently and – for the first time – made the decision to use the services of a calf ranch for the same reason.

Following are several personal stories told by those calf and heifer ranch operators caught in this economic tsunami.

Nicholas Calf Ranch

Rochelle and Peter Koch, owners of Nicholas Calf Ranch, Winton, Calif., started raising bull calves in Oregon in 1990. Three years later they moved their operation to Central California where they “didn’t have to fight the constant mud and the rain.”

They converted their bull calf operation to raising dairy heifers only – from day-old to 120 days.

Rochelle said they survived the 2009 downturn that has devastated many operators in the dairy industry.

“We had one dairy out of the dozens we serve, take their calves home to raise on their own,” said Rochelle. “Two other dairy clients went bankrupt and are no longer in business.

“Actually, we’ve filled those vacancies with dairies that had never used calf ranches before. When their bankers and financial consultants came to evaluate their operations they recommended using a calf ranch to raise their calves because when all is said and done, it was more economical to have us raise them.”

Rochelle indicated that when the hard times started, they sent a letter to their dairy clients asking if the producers wanted them to reduce the extent of their services to cut costs.

“I believe we can’t cut what we feed because it would only result in sick calves,” she said. “The lower quality ration would mean we would have a higher medicine cost and result in a poor quality heifer. We asked if they wanted us to stop pulling blood samples daily. Overwhelmingly, they wanted us to protect the health and well being of their animals. The calf is their future.”

So, Nicholas Calf Ranch continues to keep a veterinarian and nutritionist on staff, while maintaining the calf ration at a high quality level.

“Since we purchase all our feed from outside farms, we try to buy for next year. Although the futures market can be frustrating at times, whenever feed costs go down we can save our dairymen some money and drop our prices,” she said. “We had two price cuts in the past two years. Every little bit helps if we can make it more economical for our clients.”

Not all stories, however,  are as encouraging and positive as that of Rochelle and Peter Koch in California.

Amber Hills Ranch

Bart Hanson is owner/operator of Amber Hills Ranch in Rupert, Idaho. “We’ve raised dairy heifers for about 17 years. Currently we are raising only dairy beef calves. Before we cut back, our heifers were contract raised to six months and dairy beef to three months. All of our beef calves are age and source verified with electronic ID because of marketplace demand,” Hanson stated.

“Over the last few months, we’ve seen all our dairy heifer clients make the decision to take their animals home. From now on, the dairy producers will raise their own calves. Thus, we no longer raise any dairy heifer calves. That’s why we only raise dairy beef steers,” he explained.

“Right now the market is so bad and the margins so small, we are barely hanging on. It is hand-to-mouth. I’m concerned if we can’t make it until April. There is very little margin for profit in anything. Dairy is not the business to be in right now, until things change and demand improves considerably. I think come April, we will be finished as far as serving the dairy industry goes.

“I hope to pay off what debts I’ve accumulated,” he said.

Hanson is not without options. He has a university degree in clinical lab science/chemistry and worked in the medical field for nine years before going into the calf and heifer raising business.

“Health care is a big topic on everyone’s mind these days and I can possibly go back to working in that industry,” he said. “However, like 10% of the rest of America, I’ll be looking for a job soon.”

Hanson and his wife, Shelly have three sons and one daughter. “The family is concerned about our future, but hanging in there. We are hopeful,” he declared.

Cameiro Heifer Ranch

Cameiro Heifer Ranch in Brawly, Calif., raises heifers from 120 days to six to eight weeks prior to calving, explained general manager Diana Lujano-Gonzales.

She has had to make considerable adjustments in their operation as they struggle to survive the last year and a half of upside down dairy industry economics.

“We’ve gone from a ranch population of 18,000 heifers to around 10,000 heifers,” she said. “The economic downturn has required significant changes in our business. I’ve seen more bank appraisers and accountants in the last 18 months than in the last 15 years. These bankers and accountants are asking for more cost information than ever before, and dairymen are getting a lot of pressure from banks to take their calves and heifers home.”

Lujano-Gonzales said they have seen a combination of scenarios impacting a group of nine producers who were their customers. “Two of our producer customers went out on the CWT program. One was forced out of business because of the economic downturn, and six others of the group decided to raise their animals at home based on advice from their bankers.”

Lujano-Gonzales saw her workforce shrink from 45 employees at the peak of their operation to only 24 currently.

“About all I can say is that we are surviving. We are certainly not making money at this time,” she said.

Lujano-Gonzales estimated dairymen can raise their own heifers for between $1.25 and $1.50 per heifer per day, depending on the cost of what they feed and rent they may have to pay for additional land. Cameiro costs are $1.86 per heifer per day.

“Dairymen may not get the same quality bred heifer that we would deliver, but they aren’t looking for long-term solutions. They are looking for the immediate cost control and savings,” she said.

“When heifers leave our ranch after 17 or 18 months, the dairyman knows the animal was bred on time using the sires they wanted; vaccinated and boosters given to protect against disease; and precise records kept,” Lujano-Gonzales said. “In addition, all our heifers are well fed to develop good rumen capacity and they should mature into good milkers.”

Lujano-Gonzales said one of the biggest elements of the dairy industry downturn is the trickle down effect of those joining the ranks of the unemployed. Many small communities are adversely affected when a dairy or calf and heifer ranch must make serious cutbacks.

M & M Feedlots

Darin Mann of M & M Feedlots in Parma, Idaho is the third generation of his family in the operation. His grandfather started the business in the early 1940s. His father began raising dairy heifers in early 1970s.

They custom feed approximately 11,000 heifers on a margin for local dairy producers.

“As a whole, we’ve not seen a huge difference in our operation to this point. That could change in the near future, however. We lost one dairyman because the bank cut his line of credit and he went out of business. We replaced him with a new dairy customer.”

According to Mann, the most interesting development through these tough economic times has been his feeling less like a heifer grower and more like a commodity trader or feed buyer.

“In this economy, I must pay closer attention to feed markets. Our feed is so tied to energy that a decision by OPEC is going to trickle down and affect my hay price,” Mann stated. “If OPEC cuts back oil production, fuel prices go up. Ethanol becomes more valuable and more corn will go for fuel not feed.”

Distillers grain is cheaper because China has been buying soybeans from Brazil while backing off DDG purchases from the U.S. “If I still want to make 10 cents per cow per day, I have to watch my feed costs,” Mann said. M&M Feedlots get six-month-old heifers at about 400 pounds. They are raised and bred at 12 to 13 months weighing around 800 pounds and then we send them back to the dairyuman at about 225 days, carrying a calf and tipping the scale at around 1,300 pounds.”

Mann said they’ve maintained the same feed quality throughout this downturn. “Something you can’t start cutting is your ration,” he declared. “You might as well close shop if you start cutting there. You’d adversely affect the lifetime poroduction of those cows. That’s something we won’t compromise on.”

According to Mann, he has cut his margin through these rough times. “I have all my feed bought for the year, so I know what my costs are. So I lowered my price to pass on some savings to the dairymen,” he said. “If dairymen don’t survive, neither will I. By helping them out, we build trust and loyalty. We’re in this together and it all starts with the milk check.”

Mann said he thinks the dairy economy will get worse before it gets better. With all the heifers coming online, milk production still needs to be cut. Right now you can go buy a springer heifer cheaper than you can raise one.

“Im wondering how my business model will change in the future. Like dairymen, banks are just holding on,” he said.

FYI:

■  To contact Rochelle and Peter Koch at Nicholas Calf Ranch in Winton, Calif., call 209-725-8253 or e-mail them at, calfman1@aol.com

■  To contact Bart Hanson at Amber Hills Ranch in Rupert, Idaho, call 208-436-1690, or e-mail, ahrcows@pmt.org.

■  To contact Diana Lujano-Gonzales at Cameiro Heifer Ranch in Brawley, Calif., call 208-436-1690, or e-mail, fd2milk@gmail.com.

■  To contact Darin Mann at M&M Feedlots in Parma, Idaho, call 208-722-9039 or e-mail him at mmfeedlot@hotmail.com.

Tapping exports can reposition American dairy industry

American dairy producers are part of the global marketplace, whether or not they sell a single pound of product overseas. Their industry has yet to make long-term, strategic commitments to exporting products, doing so holds emerging opportunities.

Jay Waldvogel is the senior vice president of strategy and international development for Dairy Farmers of America, Kansas City. From his point of view with the largest milk marketing cooperative in America, he said the U.S. dairy industry needs to reposition itself. He made his comments during the annual business conference of the Professional Dairy Producers of Wisconsin held March 16-17 at the Alliant Energy Center, Madison, Wis.

“Your milk price is directly impacted by what happens out there,” he said, pointing to a world map on the screen.

Waldvogel said that American dairy producers have evolved in their understanding of overseas marketing. They initially relied on American consumers to purchase what was produced. Then the industry began exporting as a way to get rid of excess production onto the world market. As the industry evolved, it started to sell, but again mostly when it had excess product.

“Dairy cases around the world are much more interesting than they are in the U.S.,” he noted. To be part of those cases, U.S. processors need to deliver products and milk components that meet customer specifications. “Our perception of what is best is not what they think is best. What we want isn’t what they ncessarily want,” Waldvogel added.

The U.S. dairy industry has had some success in the export business, selling non-fat dry milk, whey (the nutrients remaining after milk is made into cheese) and some cheeses. However, jumping in and out makes U.S. sellers unreliable sources for many foreign customers, Waldvogel noted.

On the other hand, he said there are global opportunities for the U.S. dairy industry as more people around the world have more money in more places. He pointed directly at China and India as examples of where the U.S. dairy industry could be looking – if it produced the right products.

“When people have more money, they buy more calories, more nutrition,” he noted, adding that he believes foreign consumers are making enough money to afford U.S. dairy products at a price American farmers need.

A look at dairying in other countries doesn’t hold the potential that American producers could capture. Waldvogel noted that countries such as New Zealand, Australia and Europe have some contrains; and Argentina, Brazil and the Ukraine don’t have a dairying tradition or expertise to ratchet up production with short notice. That leaves American dairy farmers and their generations-old message of a wholesome, nutrition, safe product.

“Safety is an issue,” Waldvogel said, pointing to last year’s melamine contamination in Chinese products. “And if you don’t believe that the product you’re producing is the best, most nutritious product out there, then how do you expect consumers to believe it?”

The industry has to move from its previous positions “to be consistent marketers in global markets,” he said.

Repositioning the U.S. won’t be without its challenges, including investments in new processing and products, Waldvogel acknowledged. However, he said the industry has the next several years to make changes happen, if it’s willing to make the long-term commitment.

Ask your veterinarian about BVD Management

Bovine Viral Diarrhea (BVD) threatens herd health in a number of ways and can have a major negative impact a dairy’s bottom line. As producers and their advisors meet in the conference room (or kitchen) to discuss BVD, the good news is that combining management and a proper vaccination program with new testing methods can make a difference.

By Tom Shelton, D.V.M.

We didn’t know a lot about BVD when it acquired its name in 1946, and after decades of research and experience, we know today it is often associated with underlying a wide spectrum of diseases. These diseases include sub-clinical infections that are manifested in commonly recognized problems like pneumonia, scours, lameness, mastitis, repeat breeding problems, abortion, mummification of the fetus and congenital defects.

Dr. Tom Shelton is a dairy technical services veterinarian for Intervet/Schering-Plough Animal Health. He lives in Utah and can be contacted by phone: 208-867-3502 or e-mail: tom.shelton@sp.intervet.com.

1) When should I be suspicious that I have a BVD problem?

BVD could be the culprit if you notice unexplained animal health challenges or if you run into disease situations beyond the norm.

Ask your veterinarian about additional BVD red flags to look for on your operation and work with your veterinarian to determine if BVD is the underlying problem.

2) I vaccinate my herd regularly for BVD. Why would it still be a problem?

A number of recent studies have looked at the incidence of persistently infected (PI) animals that have been routinely vaccinated. In a number of cases, well-vaccinated herds have had either PI calves or PI lactating cows. While vaccination is critical to BVD protection, if it were 100% effective, we would not be finding this many infected animals.

3) If I can’t count on 100% protection, how can I maximize my vaccination program?

Unborn calves are at risk of developing a persistent infection from 40-120 days of pregnancy. To maximize protection in the dam at this critical time of gestation, an annual booster vaccination should be given 30-45 days post calving. Another common problem that manifests itself as “vaccine failure” may be adding infected animals (or unborn infected calves) to the herd as a result of poor biosecurity measures. For example, it’s common practice to add springer heifers that may be negative themselves for BVD, but are carrying an infected fetus.

To prevent this source of infection, ask your veterinarian about biosecurity measures you should take on your farm.

4) Is BVD a concern after 120 days of pregnancy?

Research has demonstrated that if a cow contracts an acute BVD infection after 120 days of pregnancy, the virus still can infect the unborn calf and have devastating effects. This is called congenital infection, or CI. In addition to a number of congenital abnormalities and abortion, some of these animals are born looking perfectly normal. However, these calves can get acutely sick more than twice as often as unaffected calves, and heifers can be delayed in getting pregnant.

5) What’s the risk of PI compared to CI?

Cows are at risk twice the number of days in gestation for CI compared to PI. For 80 days (from 40 to 120 days), unborn calves are at risk for developing a persistent infection. For 165 days (from 120 to 285 days) unborn calves are at risk for developing a congenital infection.

Talk to your veterinarian about ways to provide fetal protection for the entire pregnancy – for both PI and CI.

6) If we suspect BVD, what testing options do we have?

Testing for BVD within herds and individual animals has progressed greatly. There are now very affordable, accurate tests for bulk milk samples, pooled samples of individual animals and serological monitoring within herds. These new testing procedures have provided a great opportunity to refocus our attention to an insidious problem.

Ask your veterinarian to help you sort out the most cost-effective approach to BVD monitoring and diagnostics.

7) Why is minimizing the effects of BVD so important to the health of my animals?

The way BVD spreads among animals is complex and extensive. It will decrease the overall health of dairy animals and ultimately result in lost production and efficiency. In our quest to raise healthy animals, operate more efficiently and maximize our return on investment, we can’t lose sight of the often hidden scourge, BVD, and remain diligent in our vaccination practices. In addition, new testing methodologies, giving us effective and inexpensive results, have changed the equation for the fight against this costly disease.

FYI

Dr. Tom Shelton is a dairy technical services veterinarian for Intervet/Schering-Plough Animal Health. He lives in Utah and can be contacted by phone: 208-867-3502 or e-mail: tom.shelton@sp.intervet.com.


Ask your veterinarian about Heifer Management

Dairy producers are often not capturing maximum value from their heifers. As producers and their advisors meet in the conference room (or kitchen) to discuss heifer management, the first step to getting maximum profit potential from heifers is to establish a set of protocols to ensure heifers are on the appropriate nutrition, vaccination and management programs.

By Doug Scholz, DVM.

Replacement heifers have a tremendous influence on the genetics, profitability and sustainability of dairy herds. Healthy and well-developed heifers provide several economic advantages for producers – they reach breeding size sooner, get to the milking string earlier, have lower rearing costs and a significant financial impact on a dairy’s long-term prosperity.

Doug Scholz, DVM, is director of veterinary services, farm animal business for Novartis Animal Health. Contact him at douglas.scholz@novartis.com or visit www.healthyheifer.com.

1) Why aren’t heifers a higher priority for most producers?

Unfortunately, heifers usually take a backseat to other farm management areas that directly impact short-term cash flow. When milk prices are low and feed costs are high, it’s not surprising that most dairy producers’ day-to-day priorities focus on management areas directly impacting immediate revenue. But history suggests that even in times of high milk prices and economic prosperity, certain management areas are traditionally underserved, and potential profits are left on the table. Heifer management may be the most common example. As an industry, we haven’t been very progressive in establishing standards for managing heifers, and there is a lot of room for improvement in this area.

Talk to your veterinarian about your current heifer management program, identifying areas for change or improvement. Discuss immediate areas of focus to resolve any recurring problem areas.

2) Where could I be losing potential value from my heifers?

Lost value typically stems from a lack of consistency and formalized protocols surrounding heifer management, resulting in diminished growth and inefficient reproduction. Wide variances in heifer growth rates, calving age and health protocols are common, representing  thousands of dollars in lost income potential. These losses are cumulative over the cow’s lifetime and come from poor performance, reduced milk production and extra healthcare costs.

Ask your veterinarian about setting goals for heifer growth rates and body condition scores. Ask about record-keeping tools to help ensure protocols are followed consistently.  Discuss prevention strategies against diseases like Lepto hardjo-bovis that can lead to reproductive failure.

3) What are the most important management factors influencing heifer performance?

It really begins with prenatal care, making sure dams are on a solid health management plan prior to calving. Once the calf is on the ground, the most important management areas are colostrum, growth and development, nutrition, vaccination and/or disease prevention.

Ask your veterinarian about vaccination timing for pregnant cows to ensure protective antibodies are transferred in the colostrum. Talk to your veterinarian about transitioning calves to a postweaning diet designed for volumetric growth.

4) Why is proper vaccination so important for heifers?

One of the most critical elements in a successful heifer management program is an effective vaccination strategy. In fact, proper vaccination is just as important as nutrition in promoting heifer health. What producers might not realize is that calves born to first-calf heifers are significantly more vulnerable to diseases than calves born to older cows. For instance, research has shown that the odds of a calf dying from scours are six times greater when it’s born to a first-calf heifer, as compared to an adult cow. Adult cows that are vaccinated properly have higher antibody levels in the colostrum to pass on to the calf. Heifers, on the other hand, haven’t yet been exposed to antigen loads high enough to stimulate their immune systems, so the level of protective antibodies in a heifer’s colostrum isn’t nearly as high as an adult cow’s. In addition to scours, heifers need effective vaccination against reproductive and respiratory diseases.

Ask your veterinarian about vaccination timing for heifer calves. Protection from respiratory, reproductive and clostridial diseases is needed at two to four weeks of age. Booster doses may be needed at weaning.

5) What is the most critical time for heifer development?

The period from calving to three months of age is without question the most critical time for heifer growth and development. Heifers with a history of disease, insufficient nutrition or overcrowded housing conditions as young calves are likely to perform poorly in both reproduction and milk production. Getting heifers off to a fast start is the key to ensuring they reach breeding condition on time and in good health. Your veterinarian can help you install a heifer management plan to ensure your heifers start quickly and are well-prepared for a profitable role on the dairy.

Ask your veterinarian about grouping calves according to their nutritional and management needs.  Placing three to four animals in a group for one month postweaning allows calves to gradually adjust to group living. Ask about ways to improve calf environment to minimize exposure to viral and bacterial pathogens.

FYI

Doug Scholz, DVM, is director of veterinary services, farm animal business for Novartis Animal Health. Contact him at douglas.scholz@novartis.com or visit www.healthyheifer.com.


U.S. dollar and corn price: What’s the connection?

By Darrel Good
Agricultural Economist
University of Illinois


It has not been uncommon for daily fluctuations in corn prices to be attributed to fluctuations in the value of the U.S. dollar relative to other currencies. So, what is the connection?

From the side of the importer of U.S. corn, a lower valued dollar in relation to the currency of that country, all else equal, is in effect a reduction in the price of corn. A lower price to the importer might be expected to result in larger imports. That is, there would be a movement down the demand curve to a new, larger equilibrium of quantity supplied and quantity demanded. For the U.S. market, larger exports at the same nominal price of corn is in effect an increase in demand. That is, there is an upward shift in the demand curve for U.S. corn. In turn, the increase in demand results in a higher equilibrium price of corn. Theoretically, then, a lower valued U.S. dollar should result in larger exports and a higher nominal price in the U.S., assuming no change in other price factors.

The relationship between the value of the U.S. dollar and the volume of U.S. corn exports during the 12 month marketing year is difficult to identify. For the 10 marketing years from 1999-2000 through 2008-2009, for example, we find a very low correlation between the two variables. However, that is not the proper relationship to examine because it violates the assumption of all other things equal. A proper analysis should try to isolate the impact of the value of the dollar from the impact of other factors.

One of the things revealed in historic corn export data is that exports to the largest importer, Japan, are remarkably constant from year to year. For the period 1999-00 through 2008-09, Japan accounted for 26 to 36 percent of annual U.S. corn exports. Japan’s imports of U.S. corn were in a narrow range of 567 to 628 million bushels. It is generally well known that Japan buys U.S. corn based on the need to support the domestic livestock industry and that imports are not sensitive to price or exchange rates. The data over the 10 year period supports that observation.

Examining the relationship between exports of U.S. corn to destinations other than Japan and the value of the dollar reveals a negative correlation of about 0.4. The direction of the relationship is as expected and is relatively strong, but that simple relationship ignores the impact of other factors that might influence exports of U.S. corn. Those factors might include such things as the price of corn and the magnitude of grain production outside the U.S. Adding those factors to the analysis fails to yield a strong relationship between exports and the value of the U.S. dollar.

The analysis presented here of the relationship between corn exports and the value of the dollar is not comprehensive and covers a very short period of time. Still, the results suggest that exports of U.S. corn in any given year may not be especially sensitive to the value of the U.S. dollar. In fact, the magnitude of corn exports in a given year does not appear to be highly correlated to other factors such as foreign grain production. The inability to quantify these relationships makes it difficult to forecast corn exports.

A second point about the effect of the value of the dollar on corn prices is that the export market is now a relatively small portion of the U.S. corn market. Exports this year, for example, are expected to account for only 15 percent of the total consumption of U.S. corn. Exports to destinations other than Japan may account for only 10 to 11 percent of total consumption. Even if the influence of the dollar’s value on exports is stronger than suggested here, the impact on the price of corn is likely relatively small.

It appears that the impact of the value of the U.S. dollar on the value of corn may be less than implied by daily market commentary. The direct cause and effect relationship is relatively weak. There may be some recent economic relationship between the value of the U.S. dollar and crude oil prices which impacts the value of ethanol and therefore corn. The value of the U.S. dollar and commodity prices may also be correlated to some degree in the current economic environment as expectations about world economies influence both the value of the dollar and decisions about investment in commodities in general. In any case, it is unlikely that the corn market will completely ignore currency values in the price discovery process, even if the relationship is weak.


UW-Madison launches dairy decision support system

Madison, Wis. – Several decisions are made daily on a dairy farm – some involve cow and labor management, others address crop and business concerns, and there are a host of others in between. Unfortunately, dairy producers do not always have enough information to make the best decisions for current circumstances. One could argue time constraints significantly hamper the ability to make profitable decisions all the time noted Victor E. Cabrera, University of Wisconsin-Madison/Extension dairy systems management specialist.

“Oftentimes there are too many variables that simply cannot be controlled due to the nature of the business. A combination of highly volatile market prices and increasingly complex technology and management strategies do not leave much margin for error, either,” he added.

In response, a renewed shift toward advanced information management is currently taking place within our dairy industry. Previously foreign words such as “modeling” and “simulation” are becoming commonplace, thanks largely in part to advancements in computer technology.

Cabrera said, “With the help of computers and some advanced mathematics, we are not only able to manage the herd events happening today, but effectively forecast changes in herd structure as well.”

The Dairy Expansion Decision Support System – a decision support system designed to explore dairy farm production and expansion scenarios and simulate specific metrics of their performance – provides critical information dairy producers need to actively manage risk on their dairies.

The versatility of the program’s structure offers potential use in several other areas including providing a tool for risk management in times of great uncertainty, particularly during periods of dairy expansion; accounting for future herd growth when considering livestock housing needs; and matching the proper facility design with specific user-defined goals in mind. The Dairy Expansion Decision Support System program and supporting documentation can be accessed via the UW-Extension Dairy Management website at: http://dairymgt.uwex.edu/ .

UW-Madison dairy scientists began working on this project by drafting a few simple, yet very important goals: First, effectively simulate the natural biological progression of a real dairy herd and accurately forecast herd structure at a future point in time. Then, create a robust, yet user-friendly economic decision support computer program that could be widely adaptable to complex decision-making scenarios involving dairy production and expansion. With these ideas in mind, the latest application in what promises to be a powerful lineup of risk management tools was created.

What is herd structure? Take a closer look at the people working on a 1,000-cow dairy, for example. There are several different workers who each have a specific skill set tailored to their role in keeping the dairy operational from day-to-day and beyond. Milking personnel are in charge of properly milking the cows, feeding staff keep the cows fed, crop employees ensure high quality feedstuffs are grown for the dairy, and managers ensure the whole farm remains in business well into the future. There are several other team members who support the mission of a dairy; this shortened list will suffice for our illustration. Clearly, the people in each respective category depend on each other to keep the whole farm operating. Without crops, the feeding staff would not be able to keep the cows fed. This directly affects the milkers, who know cows will not produce much milk if their energy requirements are not met, and so on. A similar arrangement is present within a herd of dairy cattle; however, we categorize them differently to enhance our management capabilities.

Herd structure defines the number and age of both individuals and specific groups of cows within any collective cohort at a definite point in time. If one were to look at the animal inventory on a dairy, it is easy to see how this breakdown occurs: There are heifers up to twenty-four months of age, cows in their first lactation, second, third, and beyond. At the beginning of each lactating cycle, a calf is born. If it is female, she most likely will be raised on-farm and eventually enter the herd two years later. At any time during the lactation, a cow can be removed from the herd and her spot is (hopefully) taken by a more profitable replacement animal. When you have any number of cows with all of these events occurring at once, management of the whole herd becomes quite a challenge.

A decision support system can be described as an organization of information that allows a person to make otherwise complex decisions, and in this case, forecasts, with relative ease. Of course, the accuracy of these forecasts is highly dependent upon the quality of information entered by the user. In its current state, the program incorporates over 120 input variables from various aspects of the dairy. Each input variable is defined by the user, meaning the program can be adapted to nearly any farm. Some inputs relate to specific cow information, such as milk production; others describe related economic and financial data, including milk price.

Once these essential pieces of information are entered into the Dairy Expansion Decision Support System program, the model predicts heifer growth over time, cow movement, and monthly cash flows. Specific information related to milk production, feed intake, and labor requirements are also utilized to improve accuracy in generating monthly cash flow figures. In the end, a present value analysis adds meaning to the projected values and offers solid supporting evidence to make informed decisions regarding many “what-if” situations.

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Example of how the Dairy Expansion Support System tool works

Let’s follow an example with a 200-cow dairy. Suppose John wants to double his herd’s size within three years to accommodate his sister, Jane, and her family, as they want to move back to the farm and carry on the family tradition.

Currently, John and his family are milking 170 cows in a parlor/freestall setup that was updated 10 years ago. Although there are other concerns that need to be addressed (manure storage, land, feed, etc.), John and Jane want to finalize plans for their new freestall barn, which is scheduled to be finished six months from now. It will house the entire milking herd and include extra space for calving pens. The existing freestall barn will house heifers and dry cows. Their current facilities are already overcrowded, with only 150 stalls available for lactating cows. They have been saving up to purchase bred heifers, but are unsure of how many to buy once the new 400-cow freestall barn is built.

John and Jane are also concerned about the number of calvings per month, figuring out correct pen sizes, and ensuring they have enough labor available when the milking herd is moved to the new barn.

This is the exact point where the Dairy Expansion Decision Support System tool goes to work. After filling in the input values to describe the herd, a simulation was run on the computer within a matter of minutes. The results suggest a total of 114 heifers should be purchased in months 7, 8, and 9 (38 heifers per month) to achieve just over a 100% stocking density at the end of three years. At that time, there would be 402 total cows and an estimated 22 percent increase in income over variable costs per cow.

However, other potential scenarios could be explored. What would happen if John and Jane were to wait until months 34, 35, and 36 to purchase heifers instead? When comparing scenarios, it is useful to look at the total net present value and make a decision based upon which option generates a higher value. A comparison of the results indicates John and Jane could attain a 16.5 percent higher net present value over the 3-year period by purchasing heifers in months 7, 8, and 9 rather than in months 34, 35, and 36.

FAPRI: Projected economic turnaround fuels recovery in commodity trade and prices

WASHINGTON — Analysts with the Food and Agricultural Policy Research Institute briefed Congress this week on their 2010 agricultural economic baseline projections, known as the FAPRI Outlook. Despite the recent slowdown in the world economy and supply response to earlier dramatic price increases, which depresses commodity prices in the short run, FAPRI projects that an economic turnaround and bioenergy mandates will grow demand for food, feed, and fuel, stimulating trade and price recovery over the rest of the decade.

FAPRI is an economic research group with centers at Iowa State University and the University of Missouri-Columbia. The outlook projections incorporate recent macroeconomic forecasts and currently adopted agricultural policies.

According to the Outlook, the slowdown in the world economy in 2009 proved to be deeper and more widespread than originally anticipated, with a negative annual rate of real GDP growth of  1.9 percent. However, significant recovery is projected for 2010, with long-term real GDP growth of 3.3 percent reached by 2011. The Asian economies withstood the economic crisis, posting positive growth in 2009 (for example, China at 8.5 percent and India at 6.4 percent), and thus lead the world economic recovery.

The U.S. dollar made significant gains in 2009 but it resumes its real depreciation over the rest of the decade against the currencies of Australia, the European Union, New Zealand, Argentina, and China.

The economic recovery is accompanied by projected stronger energy prices. FAPRI expects that continuing recovery of crude oil prices and bioenergy mandates will grow demand and strengthen the world price of ethanol through 2019. Global net trade in ethanol is projected to increase by 3.12 billion gallons and reach 4.15 billion gallons by 2019. Biodiesel mandates in the Americas and Europe sustain the high price of biodiesel and vegetable oil, with growth in consumption mostly met by domestic production, as the traditional South American exporters also face domestic mandates.

Other highlights from FAPRI’s 2010 world agricultural outlook:

• Dairy prices declined significantly in 2008/09 as a result of the economic slowdown. In the long run, growth in population and income continues to put upward pressure on dairy prices. Australia, New Zealand, and the European Union remain the big exporters. While exports from the European Union stagnate, Argentina and Brazil expand their dairy exports. The Asian countries, Russia, and Algeria are the main importers in the world dairy markets.

• Bumper crop production in key wheat producing and importing countries, coupled with a slow economy, depresses the world wheat price over the next two years. An economic turnaround strengthens prices. The world corn price follows a similar pattern, decreasing in 2009/10 but strengthening thereafter. In the long run, grain prices are expected to remain strong because of growing demand for food, feed, and fuel purposes.

• A production shortfall in 2009/10, particularly in India, raises the world price of sugar by almost 60 percent. The price declines by 26 percent in the following year as countries recover. However, it continues to remain high, as more sugarcane is used for ethanol in Brazil, and sugar imports of countries like China and the EU remain strong.

• World prices of oilseeds remain relatively stable in 2009/10 as the supply rebound (especially for soybeans) is met with increased demand resulting from the economic recovery. Vegetable oils lead the oilseeds complex, as demand from both food and biodiesel uses expands firmly over the outlook period. Increasing demand for protein meal from the growing and intensifying livestock sector in Asia supports the price of meal despite large supplies due to strong oil-driven crush. Argentina, Brazil, Paraguay, and the United States continue to dominate world soybean production, while China continues to dominate world soybean imports. Palm oil remains the cheapest and most widely traded edible oil.

• Food safety concerns continue to affect the world meat market in the short run. However, sustained income and population growth raises per capita meat consumption and fuels expansion in world trade. Over the next decade, meat trade is projected to increase by 22.5 percent, and recovery in demand, coupled with higher grain prices, strengthens all meat prices. Brazil and the United States gain significant shares in the world meat market.

The multi-year FAPRI projections provide a starting point for evaluating and comparing scenarios involving macroeconomic, policy, weather, and technology variables in world agricultural trade. More information is available at the Iowa State (http://www.fapri.iastate.edu) and University of Missouri (http://www.fapri.missouri.edu) FAPRI Web sites.

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