Eastern Pulse: December 2010

Northeast: The $3.17/cwt. advantage

By Susan Harlow

Some Pennsylvania dairy producers turned a profit over the last five years or so. But not many. Those who did paid attention to managing some key areas of their operations, according to Pennsylvania Farm Bureau’s MSC (MSC) Business Services.

MSC’s newly released study of 85 dairies showed the 24 farms that were profitable between 2006 and 2009 had an average net profit margin of $3.17/cwt. more than the other “average” farms. How? Don’t look for the easy answer.

“It flat-out doesn’t fly that there’s a silver bullet,” said MSC’s Mike Evanish. “In order for a producer to be in this elite group, it has to be a total management package.”

MSC Business Service first looked at data for 650 Pennsylvania dairy farms and found 19% were profitable in 2009. Then they looked at those profitable dairies between 2006 and 2009, finding 24 were profitable during that period.

Those 24 “study” farmers did stand out in several key areas, especially good-quality forage and high internal herd growth (IHG). The study does not say much for the rest of the industry. “Pennsylvania farmers are just not doing a good enough job at raising heifers and raising crops,” said Wayne Brubaker, of MSC.

Making more income was not the answer to profitability, although the study farms had $500/cow more to spend after expenses on things like debt service and capital replacement.

“The big difference in revenue was livestock income,” said Brubaker. “The quality and quantity of cows sold was better, and they had higher IHG,” leaving those farms with 34¢/cwt. more in livestock income.

Expenses had more impact than income, MSC said. The study group adjusted to changes in marketing more quickly and never let costs get out of control. “That’s why that group is profitable; they can keep production costs lower than average by $2.12/cwt.,” Evanish said

Interest expense was 49¢/cwt. lower for the study group. That’s an important advantage, but only 3% of sales, and so not a major factor, Brubaker said. The study group’s interest expense declined every year, while it went up for the average group in 2007. Evanish speculated those producers bought equipment to avoid taxes in a good year. “I would like to see interest expense at less than $1/cwt., and the average Pennsylvania farmer is approaching that, so they’re getting into a critical situation.”

The study group had 8% higher production, to which lower SCC contributed 1%. But they also did a better job of getting work out of their employees, averaging 236,600 lbs. of milk more per worker.

MSC concluded that those Pennsylvania producers who did make profits were able to make more milk per cow at less cost because they:

Had better animal husbandry, conception through slaughter, leading to a internal herd growth that was 5% higher. ”The average farmers were buying cows from study group farmers to keep their cow numbers up,” Brubaker said.

Understood the market they operate in and reacted quickly. “They read. It’s absolutely essential to know what’s going on in your industry,” Evanish said.

Produced high-quality crops. “Too often we ask the nutritionist to make a miracle out of junk,” Evanish said. “I see too many farms where the first expense they cut is fertilizer and pesticides.”

As a result, the study group used fewer acres per cow, had a $165/acre advantage in forage value, and averaged $3.36/cwt. for feed and crop expense.

Miner Institute Dairy Day

Miner Institute, Chazy, N.Y., will host its annual Dairy Day, Dec. 14. Exhibits open at 10 a.m.; the program at 11 a.m. The agenda includes:

• 11 a.m. – Updates from Miner Institute, by Dr. Rick Grant, Miner Institute president

• 11:15 a.m. – Early life nutrition and management: Preparing them to be better cows, by Dr. Mike Van Amburgh, Cornell University

Noon – Lunch (available for $5)

1 p.m. – Utilizing knowledge of behavior to improve the nutritional management of dairy heifers, by Dr. Trevor Devries, University of Guelph

• 1:45 p.m. – How to optimize return on investment of heifers: Pregnancy and other targets for optimum milk yield, by Van Amburgh.

For more information, contact Wanda Emerich, e-mail: emerich@whminer.com, phone: 518-846-7121, ext. 11 or visit www.whminer.org.

Northeast Dairy Challenge

More than 110 students from 12 northeast colleges and two Canadian universities participated in the eighth annual Northeast Regional Dairy Challenge in Batavia, N.Y., held Oct. 28-30, 2010. Host coordinator, Dorothea Fitzsimmons, and colleagues from the Alfred State College welcomed students from Cornell, Delaware Valley College, Morrisville State College, Penn State, Ohio State-ATI, SUNY Cobleskill, University of Maine, University of Massachusetts, University of New Hampshire, University of Vermont, Vermont Technical College, University of Guelph and McGill University.

Working in mixed-university teams, contestants assessed all aspects of a working dairy farm, including facilities, nutrition, financials, reproduction, animal health and more. Students collaborated on a 20-minute team presentation, detailing their observations and suggestions to a panel of judges and participating farm families. For a list of results, visit www.dairychallenge.org/ne_event.php.

Southeast

• Kentucky

In an effort to increase Kentucky milk production and quality, changes are coming to the Kentucky Dairy Development Council MILK Program. Starting Jan. 1, 2011, the SCC qualification will be changed to ≤ 300,000 average for all pick-ups for each month. The PI count will remain at ≤20,000 for each month.

Payment for a milk production increase will be calculated at two levels, based on the average production for each month for the 2009 and 2010 production years: The average production for the months of January 2009 and January 2010 will set the base production for January 2011. Each successive month will be calculated in the same manner.

With the 2011 program, a new dairy producer will be able to use their first three months production to establish their base. Their permanent base will be set when their first 12 months of production is completed.

The new payment scale will be 50¢/cwt. for a 5% increase over the respective month’s base production, and 75¢/cwt. for a 10% increase over the respective month’s base production. The payment cap has been increased to $15,000/farm/year.

The producer must be on a DHIA approved program with a minimum of six tests in a rolling 12-month period and one test in each quarter.

New producers not previously on DHIA must have two tests in their sign-up quarter before they are eligible to receive a payment. The producer must also comply with a record-keeping requirements.

For more information, visit http://kydairy.org/MILKProgram.aspx.

Midwest

• Illinois

Two University of Illinois online dairy classes begin in January 2011:

• Milk Secretion, Mastitis, and Quality (ANSC 435) will begin on Jan. 17, coordinated by Dick Wallace. All phases of lactation physiology, mastitis, immunity and nutrition, and health will be covered.

• Advanced Dairy Nutrition (ANSC 423) will begin on Jan. 24. Coordinated by Mike Hutjens, the class covers nutrient classes, phase feeding, dry cow feeding and health, and forages.

Lectures are recorded on CD (class on demand) with an Internet live class held during the 10 weeks of class on Monday nights from 6-7 p.m. (feeding) or 8-9 p.m. (milk quality) CST.  Enrollees can participate for credit (U of I tuition rate), continuing education credit, or non-credit with reduced tuition.  To review the class schedule, topics, and enrollment details, go to: http://online.ansci.illinois.edu/

Three regional Illinois Dairy Summit Seminars – sponsored by Illinois Milk Producers Association – are also scheduled in January 2011.

The sessions will be held: Jan. 25 – Centralia;  Jan. 26 – Bloomington; and Jan. 27 – Freeport.

Program topics include precision feeding, TMR audits, calf management, balancing feed and milk prices, as well as a producer/nutritionist panel. For details and registration, go to www.illinoismilk.org.

• Michigan

An article in the October 2010 Michigan Dairy Review (www.msu.edu/~mdr/vol15no4/vol15no4.pdf), by Kathy Lee, Extension dairy educator for Northwest Lower Michigan, provides information about Michigan DHI herds based on two management characteristics: production and herd size. Several general trends were observed:

• The highest production group has the lowest average days open and the highest pregnancy rate. This group also has the lowest days to first service and the highest percentage of heats observed. However, the highest average for percentage of successful first services was in the lower production group.

• The highest production group has the lowest average somatic cell counts.

• Larger herd size average is associated with the highest production group.

These trends should not be considered a cause-and-effect relationship between milk production and the other key indicators. More likely, management factors that influence milk production also have an impact on other aspects of herd performance.

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