Archive for April, 2011

WUD secures $500,000 in water quality funding

Western United Dairymen has secured $500,000 for water quality projects on dairies in California’s Central Valley. The funding is provided through the Agricultural Water Enhancement Program (AWEP), part of the 2008 Farm Bill conservation title, and is administered by the USDA Natural Resources Conservation Service (NRCS).

Paul Martin, WUD’s Director of Environmental Services, says that despite the difficult economic climate, dairy producers in the Central Valley have worked hard to put in place all the required professional planning for manure management required by water quality regulations.  “With this new funding we will begin to implement those plans and actually lay the pipeline and build the infrastructure to handle water and manage manure in a very environmentally protective way,” said Martin.

“AWEP is a voluntary conservation initiative that provides financial and technical assistance to farmers and ranchers to improve water conditions and conserve valuable water resources on their agricultural land,” said Ed Burton, NRCS State Conservationist for California.

AWEP is a subpart of the NRCS Environmental Quality Incentives Program (EQIP).  AWEP differs from traditional EQIP in that proposals for funding are made directly to USDA by organizations on behalf of a group of agricultural producers. In this case Western United Dairymen applied for the funding and will help coordinate activities, although all the funding will go directly to the dairy producers.

NRCS California has 24 other AWEP projects from funds received in fiscal years 2009 and 2010. The projects are aimed at improving irrigation efficiency, nutrient management, groundwater quality and other conservation goals.  NRCS will announce sign-up information, for dairy producers located in the Central Valley from Redding to Bakersfield, in the coming weeks.  For a listing of NRCS offices statewide seehttp://offices.sc.egov.usda.gov/locator/app?state=CA

 

Keep dairy cows on full rations despite high corn prices

URBANA – Increasing corn prices and lowering milk prices are causing dairy producers to think twice about what they feed their cows this spring.

“Dairy farmers can’t afford to take cows off feed now because it takes too long to bring them back into full production,” said Mike Hutjens, University of Illinois professor of animal sciences emeritus. “The good news is that dairy cattle have an advantage because they can utilize forages and byproduct feeds. The bad news is that the price of corn increases the price of alternatives as well.”

Alternative feedstuffs such as distillers grains, corn gluten, fuzzy cottonseed, alfalfa and hay may not be corn, but they are all in the same market, Hutjens added. As nutrient prices go up in starch and energy, it drives the other prices up as well.

“Producers need to look at how much corn they should be feeding,” Hutjens said. “For a dairy cow, 24 to 26 percent starch is the typical level. Producers can get that from hominy, corn silage or shelled corn. So the question becomes what are the more economical sources available at the farm?”

As prices go up, sugar becomes an alternative that can feed rumen bacteria (target 4 to 6 percent in the total ration dry matter). Another source is soluble fiber, or fiber that the rumen microbes can break down in the rumen (target 10 to 12 percent in the total ration dry matter).

“The bottom line that our producers need to realize is that you can’t cheat the bacteria – they don’t read the farm magazines and know the price of corn went up to $7.60,” Hutjens said. “They just know they need certain carbon structures in the rumen to produce. We never want to slow them down. As a result, they produce 80 percent of the cow’s energy and 60 percent of her amino acids. Make sure rumen microbes are maxed out even if the price of corn appears to be high.”

Corn is still a good buy for producers today, Hutjens said. Sesame, a software program developed by The Ohio State University, evaluates 30 different feedstuffs in the Midwest. It compares energy, protein forms and fiber sources to come up with a commonality that says what the feedstuff is worth.

“Believe it or not, corn is underpriced,” he said. “We can afford to pay more than we are now when you look at all the other energy sources available. We can pay over $8 a bushel, and it’s still a better buy than looking at most alternative feedstuffs, with the exception of corn silage and distillers grains.”

Corn distillers grains need to be on the radar screen for dairy producers along with corn gluten feed, Hutjens said. Both of these feedstuffs are underpriced at this point. In fact, distillers grain is underpriced by nearly $100/ton.

“The big question producers want answered is how much distillers grain can they feed,” he said. “I typically advise five pounds of distillers grains dry matter per cow per day. It ends up being about 10 percent of the ration, and that prices out very economically.”

While the price of corn is projected to remain very high through the summer months, the price of milk is projected to fall through the end of the calendar year. Hutjens suggests using Sesame to find the breakeven price at full feed.

“High producing cows fed correctly will make money in 2011 with $7+ bushel corn,” he said.

 

Labor: Develop middle managers; train the trainers

By Ron Goble

Many dairymen struggle with developing good middle managers. So, the Western Dairy Management Conference brought a couple management and training experts together to share some of their techniques and successes with dairy producers from across the nation.

Mary Kraft, owner, chief financial officer, and human resources director at Quail Ridge/Badger Creek Dairy Farms in Fort Morgan, Colo., has done everything possible to make to make Quail Ridge Dairy as efficient as possible. It only figures that she and husband/partner Chris, also studied management techniques under the tutelage of veteran mentor Tom Fuhrman to cover all the bases.

She made it clear from the beginning of her presentation that the systems they’ve put in place at Quail Ridge are not all their own ideas, but the best they were able to find during extensive “R&D trips” to good dairy operations in their region. “That not research and development,” she said, “but rather, rob and duplicate.”

Often called the “Flow Dairy” in trade publications, Quail Ridge was designed and constructed by Chris and Mary with the flow of everything in mind. She shared their journey with hundreds of dairy producers and herdsmen attending the 10th annual Western Dairy Management Conference held earlier this year in Reno, Nev.

The Kraft’s 4,000 cow dairy in Northeast Colorado opened Jan. 2007, even though construction on the facility wasn’t complete until July. The ramp-up began with extensive training at Badger Creek Farm (the home dairy, milking 1,500 head with a double 22 parallel) to set up new managers before Quail Ridge opened.

Traffic patterns for moving cows, milk trucks, feed trucks, air, commodities and people make the five 800-cow freestall barns and double-50 parallel parlor highly efficient.

Mary Kraft began by asking herself about her goals, and her dedication to accomplish them. Some of the essential questions were: Are you a cow manager or a people manager? Can you live with someone else making a serious, perhaps a financial decision? Are you willing to relinquish the actual cow handling activities and let others be responsible? Do you feel you have to win every point, or can you get excited about the successes of your people? Are you interested in other people’s growth, and how much are you willing to put into their development?

“It’s important to start with the right ingredients,” she stressed. “And it’s important to start with the very best people, before you spend a lot of time and energy developing and training this person.”

She learned early not to settle for the first warm body that walked through the door, but choosing every new employee based on the following criteria:

• Are they motivated. “If they show up in a new pickup that they are going to have to make payments on – Motivated! Is their wife expecting? Motivated!”

• Did they take care of themselves – if they don’t take care of that, what do you think they will do with your things.

• Did they show up on time for the interview, and with the proper documents already in hand?

• Did they pay attention during the hiring process, and behave respectfully? “I walk them through every single step: what day is payday; what their responsibilities are; how much I’m paying them; how do we handle accidents; what things will get them terminated. If they are sitting up and attentive and not slouched in their seat, I know they are someone I can deal with.”

• Did they really understand what you said about their role in the job, and if they didn’t, did they ask respectful questions? “Most of them will begin in entry level position in he milking barn. I don’t expect them to have a huge amount of education or a certain skill set. But I am looking for somebody who seems to be grasping the things I’m telling them.”

• Do they have an attitude – a good one or a bad one? “If you have a person with a bad attitude, stop the interview right then and be done with it. You will save yourself so much time and energy it’s not even funny.”

Kraft found that it was important to put people in the right place. “One thing Tom Fuhrman helped us do was to design the hierarchy for our dairy,:” said Kraft. “Knowing where each person belongs in the chain of command and responsibility simplified the training and oversight process. No one manages more than six people directly. More than that and the system stalls. He taught us how to set people up for success.”

The next step is to begin your employees in the shaker box program, she said. “I’m particularly looking for the person who heard the information and practically applied it. And recognize too that most of those I’m dealing with probably have about a sixth grade education, but don’t confuse the lack of formal education with a lack of intelligence. We just need to give them the skill set to succeed.”

Many of their employees have had a mentor back home. Maybe a father who made them do the whole job, and made them understand the families economic consequence when the job wasn’t done well, Kraft explained. They have become people who take charge of their own destiny. We assign a mentor to our up and coming employees too, she said.

The Krafts have weekly meetings with all their department heads, who are expected to present about their area, issues, concerns and triumphs. It helps them keep the pulse on a large operation, but is also a means of teaching responsibility, preparation, communication and problem solving, according to Kraft.

 

Training the trainers

Dr. Noa Roman-Muniz, assistant professor, department of animal sciences, Colorado State University, was the other panel member speaking on labor issues. Her focus: training the trainers!

She received her DVM at the University of Wisconsin, and Master’s degree in clinical sciences with an emphasis in adult education at CSU. Noa grew up on a dairy farm in Puerto Rico, so she has understands the challenges dairy employees and dairy producers encounter.

“Being best at milking cows does not necessarily make you great at teaching new milkers how to do their job,” she said.

“Good trainers are passionate about what they teach. Good trainers are good storytellers, and stories are a good way to teach and learn, because stories help put facts into context, which makes them easier to remember.

“Good teachers will motivate people and make them believe that what I’m teaching them right now, is really cool to learn, and they have the ability to learn it. Good teachers should exhibit patience, respect and fairness to all.”

Once a potential trainer has been identified, that person should be trained properly. Training seminars and conferences offered by universities and private entities are great opportunities to provide trainers-to-be with background knowledge, Ramon-Muniz explained.

“One critical aspect of properly training the trainers is to explain to them the ‘why’ behind decisions made on the dairy,” she said. “For example, if we ask them to train others about forestripping, but neglect to explain why forestripping is important to cow health, milk quality and parlor efficiency, the trainer will lose the argument if confronted with the question, ‘why should I add one more step to the milking routine, if we already do so much in the parlor?’ A trainer should always be able to answer ‘why.’”

So, why is why important?

• Greater engagement on the learning process • Greater motivation • Understand the importance of their work (accountability) • Helps with problem solving (decision making) • Critical to know your audience and decide how much detail to share or leave out.

Ramon-Muniz said something as simple as impressing the importance of washing their hands and arms will save them many days or weeks of treating a sick, non-productive cow. Understanding the “why” allows workers to grasp the magnitude of what they do as part of their job.

After Ramon-Muniz’ first presentation the day before, she said a conference attendee told her they train their employees by “show, tell and do” protocols. “Show them what to do; tell them how to do it; and then let them do it,” she said. “I’m going to use that from now on in my own training of trainers. You can always be open to new ways to teach.”

She stressed it is important to ask the student if they understand what you’ve just explained. If they say “yes,” ask them to show you. “That’s the only way you will really know if they actually got what you were trying to teach them,” she said.

One advantage of having on-farm trainers is that following a training session they could provide feedback to the employees in their area. Immediate, constructive feedback is a critical and often neglected step in the training process, she said. Timely feedback is very important, if we desire to keep workers motivated and engaged. No feedback is worse than negative feedback. It gives the impression that doing a good job is just taken for granted and not important. They may be improving in their job, but not hearing any feedback from their manager that he sees the positive change.

Follow-up meetings should be held after training sessions to talk about worker progress and performance. The management team must choose parameters ahead of time, to measure worker and area performance.

“My father told me that if he ever wanted to take a vacation and not worry about the dairy, he had to teach his managers the ‘why’ of the job. He needs to know that they would make the same decision as he would, in his absence,” she said.

“Have your students demonstrate how they would do various tasks. Sometimes have them teach each other,” she said.

 

Dairy Financial Times: Fiscal fitness for your dairy

By Robert Burroughs

Three years ago, I was approaching 50 years of age, was horribly out of shape and overweight, and I knew that with my family’s history of heart problems, I could end up in a pine box in a very short period of time if I didn’t take some action to change my “situation.”

To make a long story short, in the last three years I have lost 55 pounds, made regular workouts a part of my lifestyle, changed my eating habits and as a result now am able to go backpacking in the Sierra Nevada, have climbed a 14,000 foot peak in Colorado, and have seen my blood tests reveal excellent heart health. For a 52 year old, I am fairly physically fit.

You’re probably thinking, “So what? What has that got to do with the dairy business in 2011?” Well, just like individuals need to assess their physical fitness, each dairy business needs to evaluate its own fiscal fitness, and then make a plan to get in better fiscal shape.

Getting in shape

So let’s take a look at the process of getting in shape. In my personal journey toward physical fitness, my first concern was cardio-vascular health, and in a business that equates to profitability.

Profits are very much like a healthy heart and lungs, because as long as the business is making money, it will be able to survive quite a long time, even if it has other problems. Keep in mind that because the dairy business is highly cyclical, we don’t look at only one year at a time, but at a three to five year period.

If your dairy has not shown fairly significant average profits over the last five years, then just like I started on a controlled diet and training on a stair-climber to lose weight and get my cardio-vascular system in shape, you need to make the changes necessary to become profitable.

Most dairymen have already “gone on a diet” so to speak, and have done all they can think of to cut their expenses and make their operation more efficient. While that doesn’t mean that there aren’t ways to do more with less, I am not going to spend a lot time in this article talking about how to cut costs. We are going to talk about the next phase of fiscal fitness.

Shaping up the balance sheet

As important as profitability is, we also need to understand how to shape up your balance sheet. You can have good profitability but if you don’t use it correctly, you can still end up with a bad balance sheet. Just like I started lifting weights and doing strength training workouts in order to increase muscle mass and re-shape my body, each dairy business has to think about the “shape” of their balance sheet. Does it have the right proportions, and is it in condition to handle whatever stresses may come?

We all know what a great body looks like, but what does it take to have a well proportioned balance sheet? The most important measurement may be overall debt to equity, which measures how many dollars of debt are serviced by each dollar of equity? But the measurement I want to address here is the current ratio and the related concept of working capital.

The current ratio is calculated by dividing current assets by current liabilities, and working capital is the difference between the two. Current assets consist of cash, receivables, feed inventories, investment in growing crops, and prepaid expenses. Current liabilities are made up of accounts payable for feed and other trade expenses, accrued interest and other accrued expenses, and feed loans or other loans due within one year.

You would like your current ratio to be at least 1.25 (although some lenders these days want it to be 1.5 or higher). A current ratio of 1.5 means you have $150 of current assets for every $100 of current liabilities. The higher the ratio, the more working capital you have, and the better you will be able to handle times when cash flow is negative.

The losses that everyone in the dairy business incurred in 2009 put a huge dent in everyone’s working capital, and although 2010 was much better, it did not go very far toward replacing that lost working capital. We are seeing many, many clients with negative working capital on their financial statements, and that can be very problematic for their lenders.

How do you improve a bad current ratio?    In the first half of 2011, dairymen should see positive cash flows, but if you use that cash to pay down long term loans, such as cow loans or real estate loans, or if you use the cash to build more freestall barns or buy more cows,  you will not improve your fiscal attractiveness. Those dairies with low working capital need to take advantage of the current high milk prices and the resulting cash flow and use it to pay down old payables or feed loans.  You also may be able to restructure your balance sheet, by paying off short term loans with long term borrowing.

If you have significant equity in cows or real estate, it may be possible to borrow against them to reduce your short term debt.  Also, if you have any long term assets, such as notes receivable or other investments, which are not generating significant returns, you might consider liquidating them and using the proceeds to pay off short term debt.  Be careful with this, as you may trigger tax liabilities in the process, so make sure you talk to your accountant before you make this kind of move.

Every dairyman needs to know

Fiscal fitness is imperative in these times of roller coaster milk prices and skyrocketing feed costs. Every dairyman needs to know what kind of shape his balance sheet is in, and how to make it better. The quickest way to shape up is to take advantage of these periods of positive cash flows to pay down payables and feed loans as rapidly as possible. Investments in long term assets should be carefully thought-out and financed appropriately, so the current ratio is not negatively impacted. At the risk of over simplification, a balance sheet looks best when it is heavy on current assets, light on current liabilities and heavy on long term debt and equity.

 

FYI

Robert Burroughs, CPA, and partner in Modesto, Calif., with Genske, Mulder & Co., LLP, a certified public accounting firm representing clients who produce 12% of the nation’s milk in 29 states. He can be reached at 209-523-3573 or robert@genskemulderco.com.

 

DairyProfit Wednesday, April 6, 2011

An (almost) daily recap of dairy information: April 6, 2011

Putting agricultural spending into perspective

Policy debates are currently dominated by the budget, and the heat has been put on ag spending – specifically farm programs – in many recent popular press articles. Nick Paulson and Gary Schnitkey, with the Department of Agricultural and Consumer Economics at the University of Illinois, provide perspectives on where ag spending fits in the overall budget discussion. Hint: The U.S. spends more in interest payments than it does for commodity and crop insurance programs.

Petition seeks CAFO ammonia regulation by EPA

Targeting livestock operations, more than 20 organizations filed a petition, April 6, with the U.S. Environmental Protection Agency (EPA), calling for an “endangerment finding” for ammonia gas and requesting EPA list ammonia as a Clean Air Act criteria pollutant. The criteria pollutant program requires EPA to establish air quality standards to protect public health and the environment.

The effort is led by the Environmental Integrity Project (EIP), and includes organizations that advocate for environmental protection, public health, animal welfare and rural economies and communities.  For the full text of the petition, go to http://environmentalintegrity.org/04_06_2011.php.

DAIRYLINE RADIO

Thursday: NMPF on New Jersey raw milk legislation

In Thursday’s DairyLine broadcast, National Milk Producers Federation’s Chris Galen reports on NMPF’s efforts, in conjunction with the International Dairy Foods Association, in opposition to legislation legalizing raw milk sales in New Jersey. To read the DairyLine broadcast comments, visit www.dairyline.com under “Today’s Dairy News.” Or, listen to the conversation with DairyLine’s Lee Mielke by clicking on “DairyLine Daily Broadcast.”

EASTERN DAIRYBUSINESS

CSI-Dairy: A cow-side investigation into two mysteries of butterfat depression

Numerous ‘culprits’ exist on dairy farms, robbing herd performance and injuring the dairy’s bottom line. Identifying and arresting the  offender isn’t always easy, and  often requires a full investigation, gathering and analyzing evidence on the farm and in the lab. In this mystery, two investigations into unexplained butterfat depression reveal a common offender.

WESTERN DAIRYBUSINESS

Recalculating: A new look at ‘THI’ and cost effective ways to manage heat stress in dairy herds

Cows and conditions have changed since the Temperature Humidity Index (THI) was created. Researchers are looking at earlier starting points for management intervention, and new cost-effective cow-cooling methods.

 

MARKETS: A ‘steady’ day

Closing on Wednesday, April 6:

Cheddar barrels: unchanged, at $1.5225/lb.

Cheddar blocks: unchanged, at $1.5775/lb.

Butter: up 0.25¢, to $1.9725/lb.

Extra Grade nonfat dry milk: unchanged, at $1.80/lb.

Grade A nonfat dry milk: unchanged, at $1.67/lb.

Class III milk futures: +4¢ to +20¢/cwt. through December 2011.

Corn futures: -3.6¢ to +1.6¢/bushel through September 2012.

Soybean futures: -3.4¢ to +2.4¢/bushel through September 2012.

Soybean meal futures: -$1.50 to+$2.00/ton through September 2012.

 

INDUSTRY NEWS:

Genex releases genomic MAP program

A new Genex Cooperative, Inc. program can determine the best mating option for a cow or heifer based on the animal’s genomic PTAs (GPTAs) rather than phenotypic scores, performance, parent averages or pedigree indexes. This genomic mating program, G-MAP, is the newest technology available in the genomic revolution.

Check for daily DPW news updates at www.dairybusiness.com.

For a sample copy of Dairy Profit Weekly, or subscription information, visit www.dairyprofit.com or phone: 800-334-1904, ext. 244.

Dave Natzke, Editor

 

Congress repeals ‘1099’ provisions of 2010 Health Care Reform Bill

By Gary Hoff
Department of Agricultural and Consumer Economics
University of Illinois

 

On April 5, Congress repealed two recent laws. One of the laws, enacted with the 2010 Health Care Bill, increased 1099 reporting to include property purchases as well as service purchases. It also required reporting payments to corporations as well as individuals. The new bill is a complete repeal of the provision in the Health Care bill. Although the additional 1099 reporting was not to begin until 2013, for payments made after Dec. 31, 2011, farmers and businesses were very concerned about the time and cost of complying with the law.

Assume you are a livestock producer and purchase feed each week at the local elevator. If the total purchases exceed $600 for the year, you would have been required to record the total purchases for the year, obtain the elevator’s federal identification number, and issue a Form 1099 at the end of the year. If you multiply this by the number of vendors that you pay over $600 each year, this would have been a tremendous burden.

Congress also repealed a second 1099 reporting requirement. The repealed 1099 filing would have required landlords that paid $600 or more to any service provider to file a 1099-MISC. For example, Sally owns farmland which she placed in the CRP program. She is now age 96, living in a nursing home, and suffering from Alzheimer’s. She must pay someone to keep the weeds under control in order to qualify for the CRP payment. If that person is paid over $600, she would have been required to file a Form 1099–MISC with the government. Landlords are now exempt from the 1099 reporting requirement unless they are in a trade or business. For example, a motel operator receives income from renting rooms on a daily basis. Because they furnish cleaning services for the guests, they are considered to be in a trade or business and must still file the 1099 forms.

With the changes, a review of the 1099 reporting requirements for the typical farmer is in order. A Form 1099–MISC must be given to any individual providing services aggregating $600 or more during the year. For example, Sam, the next door neighbor uses his spreader to apply lime to your fields. You pay him $400 plus the cost of the lime. Two months later, you hire Sam to use his backhoe to remove a large rock from your field. You pay him $250 for his work. The total you paid Sam for services in 2011 is $650. Consequently, you must give him a Form 1099-MISC as well as submit a copy to the IRS.

If you pay a landlord $600 or more for land rent, you must give them a Form 1099-MISC unless the landlord is a corporation.

If you have a 1099 filing requirement, be sure you comply with the law. Failure to do so will result in substantial penalties. In 2010, the IRS doubled the amount of these penalties. If you are audited by the IRS, the Revenue Agent will look at your records and then ask to see copies of the 1099s you filed.

Congress originally enacted the provisions that are now repealed to generate revenue to help pay the cost of the Health Care Bill. It was anticipated the provisions would produce $25 billion of revenue for the government over 10 years. We will have to wait and see how they will replace this revenue.

 

 

Petition seeks CAFO ammonia regulation by EPA

Targeting livestock operations, more than 20 organizations filed a petition, April 6, with the U.S. Environmental Protection Agency (EPA), calling for an “endangerment finding” for ammonia gas and requesting EPA list ammonia as a Clean Air Act criteria pollutant. The criteria pollutant program requires EPA to establish air quality standards to protect public health and the environment.

The petitioners contend concentrated animal feeding operations (CAFOs) are the nation’s leading source of ammonia pollution, which causes respiratory health problems even at very low levels.

The effort is led by the Environmental Integrity Project (EIP), and includes a diverse group of organizations that advocate for environmental protection, public health, animal welfare, and rural economies and communities.  They include the Bloomberg School of Public Health’s Johns Hopkins Center for a Livable Future, the Sierra Club, the Humane Society of the United States, the Waterkeeper Alliance, and rural community organizations in California, Illinois, Iowa, Michigan, New Mexico and Wisconsin.

The petition states: “Congress enacted the Clean Air Act (CAA) to protect public health from diverse sources of air pollution, and empowered the Environmental Protection Agency (EPA) to establish regulations for different pollutants as scientific knowledge evolves, and the dangers they pose to human health and welfare become apparent … [A]mbient ammonia pollution currently endangers human health and welfare, and EPA has an affirmative obligation to exercise its authority to regulate sources of ammonia emissions … Ammonia gas, an air pollutant emitted in vast quantities by Concentrated Animal Feeding Operations (CAFOs), meets the criteria for listing as a CAA criteria pollutant, because ammonia emissions from numerous CAFOs and other sources ‘cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare.’”

For the full text of the petition, go to http://environmentalintegrity.org/04_06_2011.php.

Putting agricultural spending into perspective

By Nick Paulson and Gary Schnitkey
Department of Agricultural and Consumer Economics
University of Illinois

Policy debates are currently dominated by the budget. While this is true regardless of whether or not the topic is agriculture related spending, the heat has been put on ag spending – specifically farm programs – in many recent popular press articles. It is not difficult to find criticisms of farm programs and claims of their partisan motivations, and attacks against proposals which seem light on farm program spending cuts. The relatively healthy ag economy and significant increase in farm income levels over the past few years are the most often argued points against the current design of farm programs, and have made it increasingly difficult to continue to justify the need to support and smooth farm incomes.

Over the next few weeks we will provide a series of posts which analyze some of the farm policy issues currently being debated and proposed changes to the design of the farm safety net (i.e. commodity programs, crop insurance, and disaster assistance). Today, we provide some context for these issues by taking a look at federal spending on farm commodity programs and crop insurance, and comparing those expenditures to spending on other USDA programs as well as budget items outside of the USDA and the farm bill.

060411_fig1.jpg

Table 1 reports actual spending as a percentage of total federal outlays across a number of programs for 2009. USDA spending on commodity and crop insurance programs represented less than 1% of total spending. Program spending on social security and defense is roughly 40 times that of these farm programs.

While total spending on USDA programs represents a larger percentage of total federal outlays, it has declined from approximately 6 percent of total federal spending from the late 70s through the mid 80s to between 3 and 4 percent of total spending over the past 15 years. Commodity programs and crop insurance represent a relatively small portion of this total USDA spending. A much greater portion of the USDA’s budget is devoted to food, nutrition, and consumer services, as illustrated in Table 2.

060411_fig2.jpg

Table 2 reports fiscal year (FY) spending on selected USDA programs. Since 2008, total commodity program spending has ranged from $6.7 billion to approximately $9 billion. Roughly $5 billion of this is for direct program payments. Crop insurance spending has increased over time and is now approaching the same level as that of commodity programs with spending ranging from about $4.5 billion to more than $7 billion per year since 2008. Standing disaster assistance (SURE), introduced in the 2008 farm bill, is estimated to generate about $1.7 billion in spending in FY 2010 and projected to have about $1.4 billion in spending for FY 2011. In contrast, USDA spending on food, nutrition, and consumer service programs (e.g. the Supplemental Nutrition Assistance program, more commonly known as food stamps) has increased from $60 billion in FY 2008 to more than $100 billion projected for FY 2011.

So what do these percentages and dollar amounts mean in terms of future cuts to farm program spending or modifications to existing programs? One could argue that these numbers show that 1) in relative terms, spending on USDA programs has already been declining over time, and 2) spending on actual farm programs, such as commodity programs and crop insurance, represent a small portion of USDA spending and a very small portion of total Federal spending. Therefore, the contribution that cuts to agricultural programs can make to meeting overall budget reduction goals is also relatively small. For example, completely eliminating the direct payment program – and its $4.9 to $5 billion per year price tag – would provide just a small portion of the total budget cuts being called for in FY 2011 and beyond.

However, the fact that farm incomes are at all time highs is an impossible fact to ignore. Furthermore, many of the programs which comprise the farm safety net provide overlapping coverage to producers suggesting that modifications could be made which would increase spending efficiency as measured by benefits to producers generated per dollar of taxpayer spending. Identifying these inefficiencies and making program modifications to eliminate or reduce them, rather than simply eliminating or making large cuts to existing programs, could potentially result in a collection of farm programs which provides an effective safety net at a reduced cost to taxpayers.

 

 

Essential oils can promote calf health, performance

With regulations restricting some antimicrobial use, dairy producers must look to alternatives for disease treatment and prevention in their calves.

By Emma Wall

Recently, the U.S. Food and Drug Administration approved new regulations limiting the use of neomycin/oxytetracycline (NT) in calf milk replacer. These guidelines no longer allow the use of NT at a 2:1 ratio of neomycin to oxytetracycline. In addition, the new approved 1:1 ratio can only be fed medicinally to treat scours for a 7- to 14-day treatment period. What does this mean to beef and dairy producers, and what are their options?

Emma Wall

First, producers need to decide whether or not it is still economically viable to purchase and feed milk replacer containing NT at the 1:1 ratio to treat scours. Although it is approved, and does appear to be an effective treatment option, the costs may outweigh the benefits.

As for preventative measures, producers are now forced to identify alternative approaches to optimizing calf health and preventing disease. Some of these options include improving dry cow vaccination protocols, ensuring newborn calves receive good quality colostrum within the first 12 hours of life, feeding a good quality milk replacer or pasteurized milk, and general improvements in animal handling and husbandry. In addition, a recent and exciting alternative is the use of essential oil additives in milk replacer.

Essential oils are compounds that give plants and spices their color and scent. Many essential oils have antifungal, antioxidant and antibacterial properties that are used to protect their plant of origin. The antibacterial properties of many essential oils present in chili peppers, cinnamon, oregano and other plants have been known for years.

 

Isolating essential oil activity

In addition, it is now possible to isolate the essential oils responsible for antimicrobial activity and produce them commercially. Essential oil products are quickly emerging as promising candidates for enhancing the productive performance of many agricultural animals, and calves are no exception. Adding certain essential oils to milk replacer has been shown to improve calf health and performance by:

• Increasing intake of starter grain

• Increasing average daily gain and body weight at weaning

• Increasing the population of lactobacillus in the gut

• Improving rumen development

In addition, several experiments comparing essential oils to medicated milk replacers have indicated that the essential oils work as well or better at promoting calf growth and health. With respect to scours, laboratory research has shown that one of the essential oils present in oregano (carvacrol) can inhibit the growth of E. coli.

An experiment was conducted to compare the efficacy of oregano to neomycin at treating calf scours, and the results showed they were equally effective. Unfortunately, the researchers did not include an untreated group of calves in their study, so it is difficult to determine exactly how well the treatments worked at reducing scours. Still, both treatments decreased the scour scores significantly, and to the same degree.

Essential oils impact on calf feed intakes

A number of essential oil products are emerging in the market, including CRINA (DSM), White Gold (Apex), and Xtract Instant (Pancosma). Research using essential oils (using a water soluble blend of carvacrol, cinnamaldehyde (from cinnamon), and capsicum oleoresin (from chili peppers)  has shown some nice improvements in calf performance (Figure 1).

Talk to your nutritionist and see if adding essential oils to your calf management program is

Essential oils impact on average daily gain, body weights

a good option. Remember, as with any calf management strategy, animal care and handling, and sanitization practices must be optimal if you expect to see results.

 

FYI

Emma Wall has a PhD in Animal Science and is currently a Post-Doctoral Associate at the University of Vermont. She is also a freelance writer and Scientific Consultant. Contact her at emma.wall@uvm.edu.

 

Figure 1.

Adding an essential oil water soluble blend of carvacrol, cinnamaldehyde (from cinnamon), and capsicum oleoresin (from chili peppers) to milk replacer and starter grain increases starter grain intake (left graph), average daily gain and body weight at weaning (right graph). Calves were fed milk replacer with or without essential oils added, and were offered free choice access to starter grain with or without essential oils added.

* = P < 0.05


 

 

Recalculating: A new look at ‘THI’ and cost effective ways to manage heat stress in dairy herds

Cows and conditions have changed since the Temperature Humidity Index (THI) was created. Researchers are looking at earlier starting points for management intervention, and new cost-effective cow-cooling methods.

By Ron Goble

One of the top cow comfort experts in the world, University of Arizona animal scientist Robert Collier points out the Temperature Humidity Index (THI) was originally developed for humans, not cows. The research,  conducted at the William J. Parker Research Complex at the University of Arizona in 1958, was extended to cattle using research conducted by I.L. Berry, at the University of Missouri, in the 1960s.

The data was placed into the familiar THI chart by the University of Arizona’s Frank Wiersma and Dennis Armstrong, in the 1980s, becoming a popular tool to estimate dairy cow cooling requirements and develop heat stress management strategies on dairies.

Since that early research, things have changed, according to Collier, speaking at the 2011 Western Dairy Management Conference, in Reno, Nev.

For example, the Missouri THI research was based on data from 56 cows with an average milk yield of about 34 lbs./day. Additionally, heat stress was applied for two weeks before milk yield was recorded, and the temperature was constant. During the original studies, there was also no wind speed or infrared heat load consideration.

Collier pointed out today’s typical milk production level is 70 lbs. or more/cow/day, impacting heat stress tolerance. Research in Israeli has demonstrated a milk yield of 99 lbs./day lowers the THI threshold  by 9° Fahrenheit  (5° C).

The time interval producers expect in today’s environment is next-day information. They want to know what impact today’s environmental heat load has on their cows’ production level tomorrow – not in two weeks. And, heat loads recorded from a metal roof during the summer are known to add approximately 6° F (3° C) to a cow’s heat load.

Finally, cows themselves have changed. “Since 1950, heat production per cow has increased an average of 28,000 Btu/day in the Holstein breed,” said Collier. “So the cow is more sensitive to heat stress, since she is producing more heat internally than cows from the 1960s. This requires re-evaluating the relationship between ambient temperature, milk yield and thermal stress level in cattle.”

 

Underestimated thresholds

Collier contends there’s still no better index to use for heat stress management. However, the current THI threshold is underestimated for today’s high-producing dairy cows.

The original THI chart had a stress threshold starting at 72, a point many used to trigger cooling management strategies. However, analyses conducted at the University of Arizona shows milk yield losses are detectable beginning at a THI of 68. Waiting until THI hits 72 is too late: Cooling methods on commercial dairies should be implemented earlier to prevent effects.

Collier stressed management strategies must focus on minimizing heat gain, while maximizing heat loss. University research showed the summer-to-winter milk production ratio in Arizona confirmed dairy cows are giving up 8.8 lbs of milk per cow/per day during summer compared to winter months.

 

By the numbers

“If we use an example employing 100 dairy cows cooled by a Korral Kool cooler, we should expect a milk yield gain of 4.8 lbs. of milk per day beginning cooling at 68 vs. 72,” he said. “For 100 dairy cows, that would equate to a milk yield gain of 4.84 hundredweights. Using a milk price of $17/cwt., and a feed price of $14/cwt. milk produced, the income above feed costs would be $14.52.”

Researchers used a variable cost of 14¢/cwt. of milk produced, and assuming each cooler would cool 10 cows, the total cooler variable cost would be $6.80, producing an income of $7.09/100 cows, or 7.1¢/cow/day. In a Western herd of 3,000 lactating dairy cows, the potential income would equate to $213/day, or $1,491/week. Collier pointed out that does not take into account any beneficial effects on reproductive performance in these cows.

 

Economic efficiency

With increasing focus on economic efficiency,  the objective of a 2009 research project, conducted at Caballero Dairy and Red River Dairy in Arizona, was to determine if lowering the threshold for cooling systems improved milk production and reproductive performance in lactating dairy cows under dairy farm conditions.

Collier concluded additional cooling – using oscillating fans or Korral Kool Coolers – did not improve lactation or reproductive performance when cooling was initiated at THI of 68 instead of 72, and was not considered cost effective.

Conventional cooling of dairy cows during the summer months consumes large amounts of electricity during the peak hours of the power demand and large quantities of water for various cow soaking and misting systems.

Energy costs on dairies continues to increase. Numbers supplied by Agriaire Industries shows a 9,500-cow dairy in Casa Grande, Ariz., spent $700,000 to cool their cows between April through October.

Collier shared a graph showing the historic increase in California’s electric rates from the years 1970 through 2006 for residential and commercial users. Rates climbed steadily, from 2¢ per kilowatt-hour to near 14¢ per kilowatt-hour during the period.

While electrical prices have been going up on an annual basis, prices can be much higher during summer months, too, Collier said.

Electricity futures prices on the Chicago Mercantile Exchange peak in July and August each year. A review of U.S. Energy Information Administration data on monthly electricity prices shows highest prices for end users peaks in June-September (www.eia.doe.gov/ftproot/electricity/epm/02261101.pdf).

Also, the average price of water increased last year by 3.8% worldwide, according to a survey conducted by NUS Consulting Group, and an official of the firm says the survey also provides evidence to indicate even higher water price increases in the future.

 

Seeking a more effective way

With rising electricity and water costs to cool cows conventionally – and if heat stress management intervention is to start at a THI of 68 vs. 72 – Collier raises the question: “Would alternative ‘passive’ forms of cooling provide a more cost-effective method to reduce milk yield losses?”

One method being researched is a thermal conductive cooling system, a heat exchanger “system” installed beneath the cows’ bedding area in dairy barns. This application utilizes flexible plastic-based heat exchangers.

In the warm southern climate, well water temperatures range from mid-60s°F to low 70s°F. There is approximately a 30-35° F differential between the cow’s internal temperature and the temperature of earth-cooled well water.

The colder temperature of the water cools the cows naturally via conduction, by transferring heat from a warm source (the cow) to a colder source (the heat exchanger with the colder water), explained Collier.

Recently, collaborative work by Agriaire Industries and the University of Arizona demonstrated heat exchangers could be buried 12 inches below the surface of a freestall bed and still provide significant conductive cooling to dairy cows.

“Geothermal cooling would represent significant cost reduction in reducing heat stress on dairy cows and offers the additional opportunity of using the same approach to warm cows during cold winter months in northern dairy locations. Field testing of this concept is currently underway,” he said.

If thermal conduction cooling is proven to effectively cool cows within “profitable physiological parameters” (101° F -103° F) and implemented on dairies, researchers said the potential exists to significantly shift/reduce peak loads of energy required to cool dairy cows, providing huge savings in summer energy costs for dairy producers.

 

‘Proof of concept’

Phase 1, the “proof of concept” testing, was conducted June 14-23, 2009 at the University of Arizona Agricultural Research Complex in Tucson, under the supervision of the University of Arizona Animal Science Department. This study supported continued development of the concept at a commercial scale.

A commercial scale test was then conducted at 3,600-cow Rancho Teresita Dairy, Tulare, Calif., from Sept. 1-30, 2009. For this test herd,  the 52-stall test section of the freestall barn had no fans and no soaker line system operating, only conduction cooling to cool the cows. Those cows were compared to traditional cooling methods (fans and soakers), which kicked in at 72° F.

With the water supply to the heat exchanger system averaging in the low 70s° F, the control test maintained an average bed temperature of 78.57° F. The test herd with the heat exchanger system averaged 76.31° F.

Rectal temperatures recorded during the 30-day trial showed temperatures at 101.96° F in control cows and 101.98° F in test cows. A 30-day average of skin surface temperatures were reported at 99.0° F in the control group  and 98.9° F in test cows.

Researchers reported 30-day average milk weights of 97.83 lbs/day for control cows and 93.6 lbs./day for test cows, a difference of 4.23 lbs/day.

During the week of Sept. 25 through Oct. 1, temperatures soared to peaks of 99° F, with sustained high humidity. Average loss for all 3,600 cows during this particular week was 5 lbs./cow/day. Supply water to the heat exchanger averaged in the mid-70°s F during this particular week.

Despite the milk output decline in the initial study, cost-effectiveness of the alternative cooling method convinced researchers the data generated from the “proof of concept” and field studies support further development of conductive cooling of dairy cows to reduce water and electrical use. The results supported use of refrigerated water, or implementing additional cooling above air temperatures of 90° F.

Additional studies are planned in 2011-12 at dairies in California, Texas and Arizona.

By modifying management, using conduction cooling alone to cool cows – and holding off turning on fans until temperatures reached 90° F – Collier estimated this same 3,600-cow dairy, using 180 fans at 1.2 kW/hr per fan and paying 9¢/kW/hr, would save close to $26,500 for the summer in energy costs to cool cows – a savings of more than 75% in electricity costs.

 

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