Archive for April, 2010

Stephenson named director of dairy policy analysis at UW-Madison

Mark Stephenson has been named as the new director of dairy policy analysis at the University of Wisconsin-Madison’s College of Agricultural and Life Sciences (CALS) and UW-Extension Cooperative Extension. In this role, Stephenson will play a leadership role in dairy policy, dairy market analysis, communication and education for UW-Extension and CALS. He is expected to start on July 1.

Mark Stephenson has been named as the new director of dairy policy analysis at the University of Wisconsin-Madison’s College of Agricultural and Life Sciences (CALS) and UW-Extension Cooperative Extension.

Stephenson brings 17 years of faculty experience from Cornell University where his time was divided between applied research, Extension and teaching in dairy markets and policy. Much of his work at Cornell focused on dairy policy and as a team member, included a ground-breaking analysis of spatial differences in milk prices and class I differentials. His research work also has been used in modifications to the product price formulas and again on looking at the class I differentials and the impacts of fuel costs on them.

“We are thrilled that someone of Mark’s caliber will be joining our staff,” said Irwin Goldman, interim dean of CALS. “Mark Stephenson’s arrival in Wisconsin will help assure our position at the leading edge of dairy policy analysis for years to come.”

John Shutske, associate dean and program director for Extension programs in agriculture added, “Dairy markets are dynamic, volatile, and dairy producers and processors need current and actionable information at their fingertips to make wise decisions on a daily basis. In Mark, we were able to get one of the most knowledgeable experts in the world in this area that’s so vital to Wisconsin’s economy.”

Stephenson has been a regular and reliable contributor to U.S. dairy policy discussion both with USDA and with Congress. Before his time spent at Cornell, Stephenson spent three years in the Department of Agricultural Economics at UW-River Falls where he also worked in dairy Extension.

In this role serving the dairy industry in Wisconsin, Stephenson brings considerable expertise in understanding of the complexity of international dairy markets. He recently spent time in New Zealand and Australia. Stephenson said, “For many years the United States dairy interests had the luxury of being able to focus almost exclusively on its domestic industry. Because imports and exports comprised such a small portion of product, we simply didn’t have to worry about the rest of the world. That situation is no longer the case and world trade in dairy products and the competitiveness of the U.S. dairy industry is a new and important consideration.”

In considering his new role with UW-Madison, Stephenson said “I applaud Wisconsin’s vision to create this position. It will bridge dairy-related disciplines and move us toward a common purpose as the dairy industry steps forward into a more complex and competitive environment.”


China threatens U.S. dairy import ban

In letters to U.S. Trade Representative Ron Kirk and USDA secretary Tom Vilsack, the International Dairy Foods Association (IDFA) urged swift action to continue uninterrupted imports of U.S. dairy products into China and to pursue a bilateral solution that will make sure that the Chinese market remains open for U.S. dairy products. On April 22, the Chinese government informed U.S. government officials that China would block imports of U.S. dairy products beginning May 1 due to alleged “deficient export certification.”

The United States and China have had a USDA Agricultural Marketing Service (AMS) Sanitary Certificate in place since 2007. China initially had required certain animal health declarations; however, USDA’s Animal and Plant Health Inspection Service (APHIS) said these mandates were unfounded, and the animal health statements were not included in the final negotiated certificate. Now China has retracted the terms of the 2007 agreement and advised the U.S. dairy industry that it will block all U.S. dairy exports within a week.

“This abrupt about-face will have a major economic impact on the U.S. dairy business at a time when it is just beginning to recover from the worldwide economic downturn,” IDFA president and CEO Connie Tipton said.

Tipton emphasized that any growth the dairy industry has enjoyed over the past few years will be swiftly reversed, impeding not only dairy exports but also the overall U.S. policy initiative to increase export growth broadly across all sectors.

“Dairy trade with China has increased exponentially over the past few years, with exports increasing from $61.6 million in 2005 to over $180 million in 2008,” said Tipton. “If U.S. dairy exports are shut out of China, other suppliers can quickly move in and displace U.S. market share, which would result in a loss of business and jobs for American dairy processors and suppliers.”

School is never out when it comes to cow cooling homework

Summer can be hard on a dairy herd, knocking the economic legs out from under an otherwise efficient operation. For higher management grades, complete your ‘assignments’ before it really gets hot.

By Ron Goble, editor, Western DairyBusiness


Whether grading milk production, reproduction or metabolic health, heat stress can send dairy herd performance standards plummeting. When economic times are tough, it’s even more important to make sure you are doing everything necessary to improve your dairy’s cow cooling systems.

Under extremely dry conditions – 10% to 20% humidity – cows may not show signs of heat stress until temperatures are in the mid to upper 80s. In very humid conditions, however – above 75% – heat stress can start with temperatures as low as 70 degrees.

Research from the University of Georgia found a delay of about two days between the onset of heat stress conditions and when cattle actually showed signs of heat stress. Indicators that cows are experiencing heat stress are:

• Feed intake is reduced

• Milk production declines

• Cows are less active and stand more

• Cows often crowd together, especially around water tanks

• Panting and open mouth breathing

• Rectal or milk temperature increases

Impacts bottom line

Heat stress negatively impacts all aspects of dairy cattle management – and the economic potential at your dairy.

“The annual economic impact of heat stress on animal agriculture in America has been estimated at $2 billion, with the dairy industry alone accounting for $900 million of this loss,” according to Todd Bilby, dairy specialist at Texas A&M. “Heat stress occurs over a wide combination of solar radiation levels, ambient temperatures, and relative humidity. This is further aggravated by metabolic heat production (generated by the cow herself).”

Herds with inadequate cooling systems can experience a milk production reduction of 20% or more when the temperature-humidity index begins to rise above 72. It may be time  to take inventory and possibly alter the cows’ environment.

It’s time for fresh look

It never hurts to take a fresh look at your cow comfort and cooling systems. It might be time to evaluate the cooling system in your holding pen. Does a roof provide shade? If not, add it.

If you don’t already have soakers and fans to cool cows while they wait to be milked there is still time to install them. Fans should be mounted at a 30-degree angle so air blows downward around the cow. Install parlor exit lane sprinklers to increase cooling beyond milking time.

Maintenance is also critical to assure that fans are working properly. Dust and debris accumulations on fan blades and grills can cause increased electrical load, diminished fan efficiency, reduced fan output and escalating electrical bills, according to Michael Tomaszewski, Texas A&M University.

It’s also important to have sprinklers or soakers at feed bunks to encourage cows to maintain their dry matter intake levels. Put the sprinklers and soakers on a timer so cows are soaked to the skin and then allowed time to air dry.

Test your system early, replacing defective sprinkler nozzles and repairing leaky water lines before a heatwave hits.

Not just for milking herd

Although shade and cooling for the milking herd might be your first priority, cooling is just as important for dry cows and heifers. At a minimum, provide dry cows, heifers and calves with shade.

Check water availability. Cows may double their water intake during the summer. If you’ve expanded your herd, verify the water supply system can keep up with the increased water demand. Provide baby calves with water, as well. Milk isn’t enough, especially when temperatures climb into triple digits.

Humidity and diet

Extension dairy specialist Donald E. Pritchard, at North Carolina State University, who works with dairies in both hot and humid conditions, suggests producers to ask their nutritionist to check rations for changes to help maintain intake and/or milk production.

One key to reducing summer production drops is to provide a palatable diet, Tomaszewski added. Consider altering your feeding schedule so cows have fresh feed in front of them more frequently. Feed during cooler parts of the day and at night to encourage cows to come to the feed area.

While the two main responses to heat stress are eating less and producing less milk, Pritchard said an elevation in the somatic cell count also can be problematic.

Check to be sure cows are receiving adequate levels of vitamins A and E, and selenium. These nutrients help promote a strong functioning immune system, necessary to combat udder invading bacteria and elevating SCC values, Pritchard said.

Researchers at the University of Minnesota say cows lose potassium through sweating and sodium is excreted in their urine in response to heat stress. Increasing potassium and sodium in their diet dry matter is recommended. Balancing for dietary cation-anion differences (DCAD) is one way of accounting for these two elements.

All that said, water is still the most important nutrient of all. Make sure they have plenty, and easy access to it.

Manage water troughs to ensure they are clean and adequately sized for your cow numbers. Install water troughs so cows have access to water before and after milking, but be careful not to impede cow flow, Tomaszewski said. In addition, test your water quality.

Healthy hooves matter

Hoof trimming can make a big difference in how a cow survives the effects of high temperatures. Cows usually stand more in the heat of summer in an effort to cool themselves. If their claws are properly trimmed and balanced, they’re better able to handle the increased standing time under sprinklers and soakers.

Heat stress also can significantly decrease pregnancy rates, with impacts lingering well into the fall months. Designing strategies to reduce negative effects of summer temperature on fertility; such as enhanced cooling, ration adjustments and reproductive protocol changes, will improve your dairy farm profitability, said Bilby.

Other summer reminders

Tomaszewski offers other summer management reminders.

• Plan for fly control. Flies contribute to mastitis and impact cow comfort. Cows may not eat as often if bothered by flies, resulting in a loss in milk production. Consider new foam insecticide applicators. Install applicators in appropriate locations before fly season starts. Evaluate including a larvacide in the ration. Look for fly breeding areas and eliminate them. A little detective work to identify and clean up these areas reaps big benefits from reduced fly loads. Investigate introduction of parasitic wasps. Some dairies have been successful in including these natural predators, along with good farmstead sanitation, as effective fly control procedures. Don’t forget about fly control on the heifers and dry cows.

If you have dry lots, provide adequate shades. Orient them north-south so the sun can help dry wet spots as the shade moves.

Check that milking standard operating procedures are being followed. Evaluate whether milkers adequately cover the teats pre- and post-milking with an appropriate teat sanitizer.

Don’t forget about milker’s comfort in the parlor. Provide a fan or some other way to make it more comfortable in the pit during milking. Hot parlors are not conducive to proper milking procedures.

FYI:

■ To contact Todd Bilby at Texas A&M, phone: 254-968-4144 or e-mail: trbilby@ag.tamu.edu

■ To contact Donald E. Pritchard at North Carolina State, phone: 919-515-8805, or e-mail: donald_pritchard@ncsu.edu.

To contact Michael Tomaszewski at Texas A&M, phone: 972-845-5709 or e-mail: m-tomaszewski@tamu.edu.

Sources & Resources: Heat stress and heifers

The Dairy Calf & Heifer Association offers a multi-part “Tip of the Week” addressing heat stress, by Roy Williams, 2010 DCHA Leadership Class member. Citing a study reviewed in the Journal of Dairy Science in 2003 (“Effects of Heat-Stress on Production of Dairy Cattle”, by J.W. West, vol. 86, pgs 2131-2144), Williams said heifers need not be severely heat stressed to suffer decreased growth rates.

Williams also reviewed on-line publications tackling some of the more complex components of heat stress.

http://www.uaex.edu/Other_Areas/publications/PDF/FSA-3040.pdf – Several suggestions for design/modification of confinement facilities that apply to both cows and heifers.

http://ag.arizona.edu/extension/dairy/conference/proceedings/2006/baumgard.pdf – This 10-page paper from a dairy conference goes into some detail about the relationship between heat stress and the components of the feed ration. If you formulate your feed rations for your heifers, this will probably be worth your time to read.

http://www.ansci.umn.edu/dairy/dairyupdates/du125.htm – This is another good, in-depth discussion of feeding strategies to reduce heat stress. This article discusses both feed ration issues and the timing of feeding.

http://animalsciences.missouri.edu/research/bec/Brody%20Lecture%20-%20Lucy.pdf – This article discusses the impact of heat stress on breeding, and offers some strategies for improving breeding success during periods of heat stress.

http://www.ars.usda.gov/Main/docs.htm?docid=15625 – This web page has photographs of cattle in various stages of heat stress. These may be useful in training your workers to recognize animals that are severely heat stressed.

http://www.dpi.nsw.gov.au/agriculture/livestock/dairy-cattle/feed/research/heat – For producers that raise heifers in a grazing system, this article discusses strategies for dealing with heat stress in grazing systems.

Visit www.calfandheifer.org; e-mail info@calfandheifer.org or phone 636-449-5077.

DAIReXNET resources

DAIReXNET offers publications and links to a wide variety of cow cooling and cow comfort information publications, including:

Evaluating and Selecting Cooling Systems for Different Climates. This report summarizes several studies documenting the negative effects of heat stress, concluding the combination of evaporative cooling, tunnel ventilation and feed line soaking were more effective in reducing respiration rates and vaginal temperature than tunnel ventilation and evaporative cooling alone. Even in high humidity environments created by the evaporative cooling systems, feed line soaking provided additional cooling for the cattle. The combination of evaporative cooling and feed line soaking is an effective heat stress abatement system.

Signs of Heat Stress. Some signs of heat stress in lactating cows are obvious, especially the reduced milk production and the lethargic behavior of the cows. If you have problems determining whether your cows are affected by heat stress, lock up 10 cows and take their rectal temperatures. If more than seven of the cows have temperatures above 103°F, the cows are probably exhibiting heat stress.

Visit www.extension.org/dairy cattle.

CREATION & EVOLUTION: Business models are living organisms

Editor’s Update

By Dave Natzke

The second year of “Survivor: The Dairy Edition” initially teased us with improved cheese prices and lower feed prices, only to return to volatile ways. Whether the remainder of 2010 brings any meaningful recovery or not, it’s a good time to take the advice of several politicians: Never overlook the opportunity of a crisis.

It may be an aberration that resolves itself when the economy improves, but current conditions call into question a prevalent  “model” of dairy production – buy lots of feed and produce lots of milk.

Economies of scale have usually benefited larger numbers, with income per unit multiplied by greater numbers of units leading to higher income. But, as we’ve seen in the past 18 months or so, the reverse is also true. Losses per unit multiplied by a larger number of units can lead to greater losses.

USDA’s monthly milk-feed price ratio is one indicator of milk income relative to feed costs. The index represents the pounds of 16% mixed dairy feed (purchase price) equal in value to 1 lb. of whole milk (sales price). In the past, a ratio of 3.0 or higher was considered “positive” for milk production, but some sources say an index of 2.5 can still provide positive returns. However, March 2010’s index is the 28th straight month below 3.0 and, in fact, it’s been 26 months since the index reached 2.5. From the records I can find, that’s the longest and lowest stretch in more than 20 years. It will continue.

At least at first, price reactions to the 2010 Planting Intentions and quarterly Grain Stocks reports helped push feed prices lower – and the milk-feed price ratio higher. Several crystals balls I’ve seen predict positive – but small – margins beginning in the latter half of 2010.

However, countering that are federal policies, with direct and indirect impacts. As I write this column, legislation under consideration in Congress extends the ethanol blenders’ tax credit and the tariff on imported ethanol for five more years. Not only would that  ensure a continued long-term focus on corn acreage for energy, but it may also mean an erosion in acreage of other crops.

The economics and inequities of Milk Income Loss Contract (MILC) and (Dairy Economic Loss Assistance Payment (DELAP) programs – with payments based on production caps – means government payments do not cover losses equally on a per-unit basis (see related story).

Then, there’s the federal budget and politics. Looking at the mounting federal deficit, any expectation the government will step in to raise dairy product price supports or other safety nets to any meaningful level for any duration may be just a nice bedtime story. Throw in the schizophrenic nature of the U.S. voting public and the likelihood political backlash will bring fiscal conservatives back to leadership in the next election or two, and the bedtime story becomes a bigger fairy tale.

Supply/growth management may address the price side, but evolving business models must continue to manage the cost side, and the middle. Dairy business models that rely on government and ignore the impact of other policies and trends are not sustainable.

Every business model may be different. Some may lessen the dependence on corn and soybeans as the primary feed currency. Some may manage margins with insurance. Others may seek more vertical integration to capture value in each segment of the industry.

However you create your evolving business model, “hope” is no longer a strategy.

* The GLASS …

… is half empty

USDA’s monthly World Ag Supply and Demand Estimates report raises anticipated 2010 U.S. milk marketings to 188.8 billion lbs., an increase of about 500 million lbs. from a month earlier. With April’s forecast, USDA increased its 2010 milk marketing projections by 1 billion lbs. since February.

• March dairy cow numbers in the 23 major dairy states were up for a third consecutive month.

• The March USDA Cold Storage report estimates a total U.S. cheese inventory of more than 1 billion lbs.

Fuel prices are higher. As of April 19, U.S retail gasoline prices averaged $2.86/gallon, 80¢ more than the same week a year earlier. U.S retail diesel prices averaged $3.07/gallon, 85¢ more than the same week a year earlier.

… is half full

February 2010 dairy exports were equivalent to 9.8% of U.S. milk solids production for the month, up from 8.7% in January. Imports as a percent of milk solids production were 2.9% in February, down from 3.1% in January. The value of dairy exports exceeded the value of imports in six of the past seven months.

USDA estimated 256,500 culled dairy cows were slaughtered under federal inspection in March 2010, up about 33,500 head from February 2010, and 18,300 more than March 2009.

A new United Nations’ Food and Agriculture Organization report, “Greenhouse gas emissions from the dairy sector,” estimates global milk production, processing and transportation contributes just 2.7% of greenhouse gas emissions.

* Depending on your point of view


Northeast Dairy Leadership Team assessing dairy policy reform proposals

Amid the ongoing dairy crisis, members of the Northeast Dairy Leadership Team are working to reduce price volatility and institute meaningful policy reforms that will ultimately bring about lasting improvements for individual producers and the industry at large.

According to Pennsylvania Agriculture Secretary Russell C. Redding, the current downturn exposed deficiencies in the existing system that must be addressed to avoid similar circumstances in the future. To do that, he said, consensus among stakeholders is critical and that’s where the leadership team has focused its efforts.

“As the economic recession unfolded and brought unprecedented challenges to the dairy industry, flaws in the existing dairy policy and marketing structure became magnified,” said Secretary Redding. “During the past few years of volatile milk prices, the leadership team has been aggressively working through the issues impacting this industry. We have intensified discussions around these areas and identified what we believe a revised system should address.”

Redding said the leadership team agreed that any program affecting dairy pricing and policy should:

  • Be market-oriented to allow for growth domestically and internationally;
  • Be responsive to quickly changing market conditions;
  • Include 100 percent financial participation by producers;
  • Be global in nature to consider the impact of imports and exports;
  • Be national in scope with the ability to implement regionally; and
  • Have minimal government involvement.

To meet those goals for producers in the Northeast, the leadership team has been reviewing proposals from industry groups throughout the United States and plans to fund an analysis of those proposals that will form the basis of recommendations to Congress containing agreement on several key points.

The analysis, which should be completed by the end of May, will analyze the Dairy Price Stabilization Program proposed by Dairy Farmers Working Together, Holstein Association USA and other organizations; the Dairy Growth Management Initiative proposed by Dairy Farmers of America; the Marginal Milk Pricing plan proposed by AgriMark; and the basic elements of the Dairy Producer Income Protection Plan.

Dr. Chuck Nicholson of Cal Poly San Luis Obispo and Dr. Mark Stephenson of Cornell University will conduct the analysis to evaluate impact on the industry and individual farm businesses.

“Members of the team agree that meaningful changes need to be made,” said Vermont Agriculture Secretary Roger Allbee. “However, we also believe that the changes need to be led by the industry as a whole, and as an industry, we must achieve consensus on proposal components. The analysis will play a key role in bringing about that consensus.”

Stephenson and Nicholson will evaluate the effectiveness of each proposal on limiting price variation and assess its impact on exports and revenues for farmers and processors.

“We plan to share recommendations from Nicholson and Stephenson’s analysis with Congressional leaders, so they can use the information in making decisions affecting the future of individual dairy farm businesses in the Northeast,” New York Agriculture Commissioner Patrick Hooker said. “All who participate in the Northeast Dairy Leadership Team agree that we need to lead change in our industry and we need to do so now.”

The leadership team is comprised of state agriculture leaders – including Redding, Allbee and Hooker – and regional industry representatives from the farm, sales and service, and processing segments. The group serves as a driving force for a vibrant, growing dairy industry in the Northeast through dynamic regional stakeholder collaboration.

The Center for Dairy Excellence in Harrisburg, Pa., helps facilitate Northeast Dairy Leadership Team activities. “Since January 2009, the team and the center have engaged in ongoing discussions with our Northeast Congressional delegation to help them understand the significance of the dairy farm crisis and the need to change dairy policy to positively benefit the dairy industry,” said John Frey, executive director of the Center for Dairy Excellence. “We believe the analysis will provide documentation to demonstrate the need for a comprehensive plan for dairy pricing and policy.”

For more information about the Center for Dairy Excellence, visit www.centerfordairyexcellence.org. To learn more about the efforts of the Northeast Dairy Leadership Team, click on the “NEDLT” icon at the bottom of the center website homepage. In New York, contact Mark Kenville at 315-453-3823; in Vermont, contact Coleen Leonard at 802-828-3835; and in Pennsylvania, contact John Frey at 717-346-0849.

How does your life insurance stack up?

May 2010 Western DairyBusiness

It’s your money

by Verlyn de Wit

Pop Quiz: Is the life insurance payout your family receives at the time of your death, tax-free?

As a student I believed that pop quizzes were the moral equivalent of a surprise attack in a not-yet-declared war.  As a former teacher I must confess that the pain of taking a pop quiz is in perfect inverse correlation to the sinister pleasure of giving one.

No easy answer

The answer to this quiz is two-fold and complex:

1) For income-tax purposes – the life insurance death benefit is almost always tax-free, but beware of the unusual exception described below.

2) For estate-tax purposes – the basic rule is that if you owned, or had limited control over your life insurance policy,  the death benefit is included in your taxable estate. Inclusion in your estate could mean that up to 45% of the death benefit will be lost to taxes!

You may want to talk to an attorney about “corrective surgery” if:

1) You own or have any control over your life insurance, or,

2) You and your spouse own policies on each other.

Income tax rule

Life insurance death benefits are generally income-tax-free. One primary exception exists, the “transfer for value” rule. This rule states that if an existing life insurance policy was sold to another, the buyer of the policy will pay income tax on his or her gain.

Example: Your neighbor needs cash very badly and offers to sell his $100,000 life insurance policy to you for $40,000.  Judging from his overall appearance, you determine that’s a pretty good deal and run for your checkbook. After paying the $40,000 purchase price, you make no further premium payments and collect a death benefit check of $100,000.  You have just incurred a taxable gain of $60,000.

Extate tax rules

We’ve already summarized the “incidents of ownership” rule in answer #2 above. But the problem reaches further than one might suspect. Let’s assume you own a $1 million policy on your life. Your estate is large enough that you expect it will be taxed, so you decide to give the policy to an irrevocable life insurance trust (ILIT). Death benefits are not estate taxed when received by a properly drafted ILIT.  But a new hurdle appears. IRC Section 2035, commonly called the “three-year rule,” states than any policy given to another entity will be taxed in the donor/insured’s estate if death occurs within three years of the date of the gift.

The easy solution

If you are in good health, your ILIT could purchase a new life insurance policy on your life. If properly drafted, your life insurance death benefit should be tax-free on both levels.

But what if you aren’t in good health?  What if the purchase of a new policy is cost-prohibitive or even impossible?

Put on your scrubs

It is time for corrective surgery on your existing policy. Don’t try this at home; you need a qualified attorney.

• Issue #1 – Avoiding the three-year rule: If you give the policy to your ILIT you come under the jurisdiction of Section 2035. So, let’s sell the policy to your ILIT. It should be sold to your ILIT for the appropriate value, but since the ILIT purchases the policy (probably with dollars you gave to the ILIT), estate taxation under the three-year rule can be avoided

• Issue #2, If the ILIT purchases the policy, won’t the death benefit be taxed under the “transfer for value” (TFV) rule? Normally, yes. But the TFV rule has a number of exceptions. If you fall under one of these exceptions, the death benefit is not income taxed.

One exception to the TFV is a transfer of the policy to the insured. Here comes the magic: your ILIT should be drafted so that it is a grantor trust for income tax purposes.

Steps can be taken

There are at least three “triggers” that can be written into the ILIT to make it so. On an income tax level your ILIT is now viewed as being the same entity as you!  Your attorney has successfully completed emergency corrective surgery; your existing insurance policy is in a tax-free ILIT, the death benefits will be income and estate-tax free, and you don’t have to live three years to make it so.

Yes, I know, this is a crazy business.

FYI

Verlyn De Wit helps successful dairy producers make smart decisions about their money.  He can be reached toll-free at 1-888-468-1728 by e-mail at vdewit@sammonsrep.com or snail-mail at 1270 Eastside Dr., Sioux Center, IA  51250. Securities offered through Sammons Securities Co., LLC. 4261 Park Road, Ann Arbor, MI  48103. Member FINRA and SIPC.

Neither Western DairyBusiness nor Verlyn De Wit is qualified to offer legal or tax advice. Consult your attorney and/or tax professional for a qualified opinion regarding your personal situation.


Cattle business is back

Suddenly, owning cattle looks like a stroke of genius, according to Chris Hurt, Purdue University Extension economist.  In a few short months, cattle prices have staged a seemingly miraculous comeback. In December, finished cattle were $80 per hundredweight, now they are $100. Calves were $1.05 a pound, now they are over $1.30. The reasons are clear: the world economy continues to recover, feed prices are lower, red meat supplies are down, exports are strong, and retail beef prices have been low. Now the question is can it last?

Beef production in the U.S. so far this year has been down 1%. A somewhat higher rate of slaughter has been more than offset by lower cattle weights.  However, there are even more important reasons to explain why cattle prices are so strong, Hurt said.  U.S. and international consumers are feeling more confident and they are competing for reduced meat supplies around the globe. Foreign consumers want more beef from the U.S. and from other exporting countries. In the first two months of 2010 for which data are available, U.S. beef exports were up 24 percent. At the same time U.S. beef imports from our competitors like Australia, New Zealand, and Brazil were down 23 percent.   The result of modestly smaller U.S. production with such strong exports and reduced imports is that beef supplies per person during the first quarter in the U.S were down about five percent. Similar data for pork reveal a 6 percent reduction.

Retailers have kept beef prices low in early 2010, and this has kept consumers fighting for reduced beef supplies and assisted in the cattle price surge, Hurt said. Retail beef prices in the first quarter averaged $4.23 per pound, which was down 10 cents a pound from a year earlier.  Lower beef prices help to stimulate consumers to buy more beef.  One of the reasons live cattle prices are so much stronger is because retailers had not yet moved their retail prices higher.   In the first quarter, as retail prices were down 10 cents, retail margins dropped by 20 cents per pound. This means that retailers primarily absorbed the higher wholesale beef prices at the expense of their own margins. In essence, this creates a period of seemingly strong demand because retail prices do not move up as quickly as wholesale prices.

The positive demand benefits of narrow retail margins and lower retail prices will not continue as retailers will be increasing beef prices this spring and summer, Hurt said. We can expect to see retail prices move back to record high levels, which were $4.46 per pound in the third quarter of 2008. In fact, it is likely that consumer prices will set new records this summer and fall. Given the weakly recovering economy, consumer demand may not appear so robust this summer with record high beef prices in grocery stores and restaurants.

Calf prices have increased about 25 percent since December as a result of much higher finished cattle prices and lower feed prices. Midwest cash corn prices were near $4 per bushel late last fall, but are now below $3.50. Soybean meal prices have been about $35 per ton cheaper this April compared to last December. Bright production prospects for the 2010 crops have also strengthened the desire to buy calves and feed cattle.

Most importantly is the question of whether these strong prices continue, Hurt noted.   The answer is yes, but not as strong as being experiencing this spring. Per capita beef production should be down about 2 to 3 percent for the rest of the year, but the smallest of those supplies is expected this spring.  The economic recovery continues to grow momentum in the U.S. and that is likely to continue, although unemployment rates will be slow to drop. On the negative side of the ledger, higher retail beef prices will cut into consumption by this summer and fall.

Finished cattle prices are expected to be at their yearly highs this spring. Summer prices are expected to be in the low-to-mid $90s, with fall prices moving back upward several dollars. For 2010, prices may average about $93, dramatically above the $83 of 2009. Prospects for 2011 should remain strong as well, perhaps moving close to $95 for the year.

More cattle will move into feedlots given the strong prospects for finished cattle prices and moderate feed prices. If the 2010 crops develop normally, calf prices should be 20 to 25 percent above last year’s levels. Steer calves averaged about $1.05 a pound in the eastern Corn Belt in the fall of 2009. This means they could average $1.25 to $1.35 this fall. While these are the strongest prices since the fall of 2005, they still may not be high enough to encourage cow-calf producers to expand given the much higher costs of production today.

Large animal veterinary medicine: A global view

May 2010 Western DairyBusiness

ON THE EDGE OF COMMON SENSE

By Baxter Black, DVM


Baxter Black is a cowboy poet and ex-veterinarian raised in New Mexico and now lives in Benson, Ariz.

Typically smaller, more rural communities have no veterinarian, or at least none that will take a calving call or a horse colic emergency.

Veterinary schools, veterinary associations, concerned farmers and isolated ranchers continue their search for new veterinarians interested in practicing Food Animal and Equine medicine. While we are searching in our front yard it is possible that the answer is sneaking up behind us.

If we look to our fellow professionals in human medicine, it is not uncommon to find yourself being examined and treated by a foreign-born physician. They may have graduated in their native country and/or received a degree in the U.S.

Of the 22,500 doctorates in the natural sciences and engineering awarded by the U.S. universities in 2007, more than half were foreign-born!  According to statistics, 60% remain in the U.S. to work. The majority come from Asian lineage.

Are they smarter than us?  Better spellers? Genetically more able to understand Physics, Calculus, Pathology or the Krebs Cycle? Probably not. I would just say they are more motivated.

To our own social credit, Americans have realized money isn’t everything. Family time, sharing, enjoying life, and dependence on government, corporations or unions as a security blanket, have now become our Nirvana. Unfortunately, even if we graduated twice as many veterinarians in the U.S. and Canada, it would still not reduce our spiraling inability to attract new homegrown DVMs to Large Animal practice.

As is oft repeated by veterinary students as to why large animal practice is to be avoided, “The work is too hard and the pay is not enough.” And, we cannot blame them for wanting to “have a life!” So we have to look elsewhere.

How about organizing a group of selected national universities to teach and graduate veterinarians licensed to practice Large Animal Only (equine and food animal). We actively recruit globally using the same strict scholastic prerequisites but with no out-of-state or out-of-country financial penalties or restrictions.  We would also legislate that no LADVM from this program would be allowed to pursue a further graduate degree within five years of graduation.

You may ask why I think foreign graduates would even be interested? Because they know that on a level playing field they have a 50% chance of being accepted…and they like competition and they WILL graduate.

Is it too soon to be considering such an “almost un-American” concept? The Irish and Chinese came and built our railroads. The Germans built our bomb.  The Mexicans are building our skyscrapers. The Japanese came here and made our cars better.

Dr. Sudesna Bose was grandpa Tommy’s Parkinson’s doctor. They did not think that the work was too hard and the pay too little.

I can’t say if it’s too soon, but the next time you’ve got a wounded horse or a C-section in the middle of the night, and the nearest capable Large Animal Veterinarian is two hours away, you might give it some thought.

FYI

Baxter Black is a cowboy poet and ex-veterinarian raised in New Mexico and now lives in Benson, Ariz. He has written 12 books and recorded more than a dozen audio and video tapes, and is a syndicated columnist and radio commentator. Books, videos, CDs and tapes by Baxter Black can be purchased through www.baxterblack. com.


Be prepared: Disaster drill helps dairy get ready for a crisis

Lee Mielke is the voice of DairyLine Radio. For more information, contact him via phone: 360-354-5596, ext. 101; e-mail: lmielke@dairybusiness.com; or visit www.dairyline.com.

By Lee Mielke

Two words remain in my thinking process from my short stint in the Boy Scouts: “Be prepared.” That bit of wisdom has served me well over the years.

I thought of that and was reminded of the old-fashion “fire drills” we used to have in grade school as I participated in a “dairy crisis drill” in Seattle, Wash., in late March. Hosted by Dairy Management Inc. (DMI) and International Dairy Foods Association (IDFA), I saw farmer and processor checkoff dollars at work.

There were about 90 participants from several states, made up of dairy processors, state and regional checkoff staff, state ag department representatives, a Food and Drug Administration official and three Federal Bureau of Investigation agents (one of which even handed me a Haggen daz bar, a topic for another day).

Participants were divided into small groups and assigned to fictitious dairy companies where various titles, job descriptions and roles were given. I was an “imbedded reporter.”

So far, so good, until a news bulletin reports a large outbreak of Staphylococcus Enterotoxin B (or SEB if you’re a TV or radio announcer). Dairy company board members are summoned to discuss the news accounts, which soon start pointing to dairy as a possible suspect. Those familiar with the story of Job know that bad news often comes in waves, and such was the case in our “drill.”

Board members must decide how their company will respond to calls from consumers and media regarding their company brand – and any implication it may have in this ongoing, escalating crisis. Blackberries and e-mails come fast and furious, and the public wants to know if it’s safe to eat dairy products. There’s no passing the buck in a crisis situation.

Several of these “officials” had to face media colleague Kate Sander, of Cheese Market News, and me in mock news conferences. We role-played as aggressive reporters trying to get the story for our readers and listeners.

I’ll restrain from further details to avoid giving too much information away for upcoming future drills, but I’m confident the training drove home the point that, while this was just an exercise, it was realistic and could really happen one day.

What would your dairy cooperative do in such a case? Does its leaders have a plan in place, ready to go?

These CEOs and board members will be the ones to defend your cooperative and its dairy farmer members in such a situation, and I couldn’t help but think that I’d sure want a competent, qualified, trained person to answer the tough questions – instead of the janitor or a milk truck driver.

The training was tough, intensive, and probably cost a few bucks to put on. But, in the spirit of “Boy Scout preparedness,” the investment is vital in the world we live in today.

Thankfully, the dairy industry has been proactive for some time in this area. A dairy communication management team – made up of DMI, IDFA, U.S. Dairy Export Council, National Milk Producers Federation and MilkPEP members – is in place to speak with one voice, respond only when dairy is called into question, and follow the government’s lead in such events.

The Tylenol Company laid the right response ground work in the nightmare it went through years ago, a nightmare the CEO and board members of Toyota have surely learned of late. Airlines have done these drills for years. Is your cooperative prepared?

DairyLine Radio’s Lee Mielke looks on during a briefing by Shannon Koski, account manager with U.S. Dairy Export Council.




Calf Connection: BMPs – Why don’t they work for me?

Recommendations for colostrum feeding and feeding milk or replacer in cold weather may not yield the same results on every dairy. Here’s why.

by Sam Leadley


It seems as though Best Management Practices (BMPs) don’t work equally well for all calf raisers. Why, when logic says BMPs should work for everyone?

Let’s take a look at two examples of BMPs which have not worked for some calf caretakers.

1) Colostrum quantity.

Until rather recently, the BMP recommendation for the quantity of colostrum has been to feed the newborn two quarts of quality colostrum. These days, the “new” BMP recommends feeding large breed newborn calves four quarts of colostrum, and three quarts to small breed newborns.

Unfortunately, when some calf care persons adopt the new quantity recommendation, their calves respond poorly. In fact, some calves scour so badly they die. Clearly, not good! That does not fit with a Best Management Practice. Feeding more colostrum really is supposed to improve calf health rather than make it worse. What’s causing the problem?

If the colostrum is not of high quality and/or is not fed quickly, feeding newborn calves a larger quantity of colostrum will not make up for those mistakes. But, let’s assume that high-quality colostrum is fed shortly after birth. Beyond these factors, what might be causing the problem?

The colostrum is contaminated with an excessively high number of bacteria. Feeding a calf “bacteria soup,” whether it’s fed right away or some time later gets the calf off to a bad start. The larger the quantity of contaminated colostrum fed to the newborn, the sicker the baby calf is likely to become. So, just feeding more is only one piece of a responsible and effective colostrum management program. Combining practices that provide clean colostrum with feeding the larger quantity of colostrum will most likely result in a good start for our calves.

2) Cold weather feeding rates.

BMPs for feeding milk or milk replacer to calves in colder weather basically recommend “feed more.” Past practice often has been to feed calves a limited amount year round. When calves use energy to keep warm, they need still more food in order to grow and to stay healthy. Thus, the recent emphasis has been on increasing feeding rates for calves reared outdoors or in cold barns starting in the fall and continuing until warmer spring weather.

Some calf raisers feed four quarts, twice daily. Their calves get more than 2.5 lbs. of milk replacer powder per day. Feeding milk replacer or milk like this during colder weather helps to promote growth and reduce sickness.

Unfortunately, after some calf care persons adopt the new milk feeding recommendations, their calves begin to have problems after weaning. Too many calves require treatment for pneumonia. Growth rates are poor. Clearly, not good! What might be causing the problem?

Higher milk or milk replacer feeding rates compared to the widely adopted practice of limiting milk to four quarts daily are best combined with carefully managed weaning programs. Why? Because we know high milk feeding levels are associated with delayed intake of calf starter grain. My calves on high milk rations usually waited until around three weeks of age before regularly eating calf starter grain, regardless of the fact that they had free choice water.

Waiting this long to start eating grain means rumen development is going to be later compared to calves eating grain two weeks earlier. This delay has to be accommodated when managing weaning if health and growth problems in transition calves are to be avoided.

The most common way to adjust an intensive milk feeding program to promote adequate rumen development is to use a gradual “step-down” weaning process. The need to do this is more urgent the earlier calves are weaned. For example, starting a step-down feeding program early is called for in calves weaned at 35 days compared to calves weaned at 56 days. A common weaning practice is to eliminate one feeding for calves being fed twice daily.

Why do the transition calves fed high rates of milk or milk replacer have problems after weaning on some farms, while on other farms they do much better? The rearing programs with these problems most often only adopt one-half of the package – feed more. The other half of the package – adopting a weaning program to promote adequate rumen development before weaning – is neglected.

The common thread

What is the common thread in these two examples even though each case involved a different BMP? The thread running through each is that, in order to get the desired response to BMPs, we must look at the whole picture when implementing any one of them. BMPs are intended to be profitable for the dairy. And they can be if viewed from – and implemented using – the larger perspective. p

FYI

Sam Leadley is a replacement consultant with Attica Veterinary Associates, Attica, N.Y. Contact him via e-mail: sleadley@rochester.rr.com; phone: 585-591-2660; or visit http://atticavet.entrexp.com.


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