Dairy

February 2000
Emphasize Feeding and Management when Times are Tough

Dr. Jim Tomlinson, Dairy Nutritionist
Mississippi State University

We are all keenly aware of the drastic downward trend milk prices have taken during the last several months. Additionally, there does not appear to be any relief prior to July, 2000. According to experts in the field of milk marketing, these facts mean we must "tighten our belts" in relation to costs associated with milk production without sacrificing milk yield, milk composition, body condition and/ or cow health. Since feed costs represent 50% or more of the total cost of milk production, attention to feeds and feeding management can lead to improved profitability. Several points which dairymen should evaluate to improve costs of milk production are:

Ryegrass grazing
This is the highest quality forage we grow for use in dairy rations. It is high in both protein and energy, therefore, the amount of supplemental grain mix fed and the ingredient composition of the mix should be altered. On most dairies, the amount of grain mix fed should be reduced and the level of protein should also be decreased. Maximize the use of this high quality forage during the peak-growing season this spring. If feeding a TMR in conjunction with ryegrass grazing, adjust the TMR feeding time so cows do not over-consume it, which would result in reduced dry matter intake from ryegrass grazing. Insure adequate intake of effective fiber to slow passage rate of the grazed grass thus increasing utilization of the nutrients consumed by the cow.

Dry matter intake
Rations should be balanced to maximize dry matter intake. High producing cows are the most profitable cows in the herd yielding higher income over feed costs. These cows are also the most efficient in converting feed to milk by producing two pounds or more milk from each pound of ration dry matter. Using a ration dry matter cost of 6 cents per pound and a milk price of $13.00/cwt, a cow will return 20 cents or more (26 cents additional milk minus 6 cents higher feed costs) per day. Insure that the ration is palatable and maintain the moisture level of the TMR in the 40-50 percent range.

Monitor feed costs
Feed ingredient prices are quite low compared to prices a couple of years ago, however, there are still "opportunity" ingredients available at times. Stay abreast of the ingredient market and purchase the ingredients which will yield the most economical ration. Corn, soybean meal (48% CP) and whole cottonseed are mainstays on many dairies. Monitor the price of other ingredients such as dried distillers grain, corn gluten feed, soybean hulls, citrus pulp, wheat middlings, bakery or potato/corn chip by-products, etc. to purchase as opportunity ingredients for ration cost reduction. NOTE: Be sure that any ingredient enhances nutrition provided by the ration ñ DO NOT purchase an ingredient solely on price per ton.

Feed additives
Too many dairymen want to omit value-added products from the ration to "Save Money". Perhaps sodium bicarbonate is the best known example to use. Research has shown that feeding sodium bicarbonate can increase milk production by two pounds or more. Omitting bicarb from the ration would save about 6-7 cents per cow per day but the two pounds of milk are worth 26 cents ($13.00/cwt milk price). Other examples are undegradable protein (bypass protein), rumen inert fat, Organic trace minerals, yeast culture and vitamin E. Omission of many of these products will likely have other adverse effects such as decreased body condition, reduced reproductive efficiency, increase in incidence of mastitis, increased foot problems, and reduced immune function. When considering the omission of a value-added product, do not simply think of short term effect but also critically evaluate any long term effects!!

In summary, make decisions, which will result in the most economical cost of milk production without sacrificing cow health, reproductive performance, udder health, etc. There are usually many areas which can be fine-tuned to save money. Just be sure the changes are beneficial both short term and long term.

Conerly Farm to Host Statewide Dairy Field Day
 Walthall County dairy producers, Jerry, Mac and Mark Conerly have graciously offered to host the 2000 Mississippi Statewide Dairy Field Day at their farm located South of Tylertown. The field day is scheduled for Thursday, May 18, 2000 beginning at 9:20 a.m.

For many years the annual Mississippi Statewide Dairy Field Day rotated between the MAFES dairy research stations at Mississippi State, Newton and Holly Springs. Our goal will be to provide dairy producers with information gained from research and Extension projects that are being conducted at these stations and across the state.

The keynote speaker will be Mr. Bill Chitwood from Sulfur, Oklahoma. Mr. Chitwood is a retired dairy farmer who speaks at conferences and meetings across the country and labels himself as a humorist. In addition, his familyës dairy herd continues to be one of the highest producing herds in Oklahoma.

The field day agenda is being finalized and will be listed in the next issue of this newsletter. The program will include timely topics in the areas of reproduction, herd health, feet trimming and care, and economics.

Please mark your calendars and make plans to attend the field day. The Conerly farm is located South of Tylertown and East of Highway 27. From Tylertown take Highway 27 South for approximately 8 miles and turn East (left) onto Simon Road (last road before crossing the MS/LA state line). Follow Simon Road 2.5 miles to the dairy on the right. Signs will be posted.

Protein Change Possible
National DHIA is currently considering a recommendation from the Council on Dairy Cattle Breeding to convert the milk protein analysis to "true protein". The current milk protein analysis estimates crude protein by measuring the total nitrogen content and multiplying by 6.38. Included in this figure is nitrogen from both protein and non-protein sources. Non-protein nitrogen in milk has little nutritional value and does not contribute to cheese yield.

The solution that has been suggested would be to lower milk protein by 0.19% to account for non-protein nitrogen in the current analysis. Non-protein nitrogen levels in milk vary by cows, breeds and herds, but the variation is random and small. If this recommendation is approved, DHI milk sampling laboratories would begin reporting true protein on May 1, 2000.


Upcoming Events

 

April 8

 

Mississippi Holstein Show, Lincoln Co. Livestock Complex, Brookhaven, MS Contact Wesley Farmer at 601-835 3460

 

April 14 & 15

 

Louisiana Holstein Sale & Show, Washington Parish Fairgrounds, Franklinton, LA Contact, Charlie Hutchison at 225-388-4141

April 15

Deep South Jersey Sale, Mississippi State Fairgrounds Jackson, MS
Contact JMS at 614-861-3636

May 18

Statewide Dairy Field Day, Conerly Dairy Farm
Tylertown, MS

June 2

Louisiana/Mississippi Dairy Heifer Sale, Pike County Fairgrounds
Contact Wesley Farmer at 601-835-3460

 

JANUARY 2000 HONOR ROLL HERDS*

COASTAL PLAIN EXP STA

NEWTON

151

81.2

2X

21086

754

669

01/11

RONALD H CLARK

LINCOLN

91

78.9

2X

20634

706

682

01/16

HERITAGE DAIRY

TATE

408

78.3

2X

23292

872

749

01/13

THOMPSON BROTHERS

MARSHALL

136

71.9

2X

20521

737

650

01/11

FREEMAN DAIRY

PIKE

122

69.6

2X

20153

673

694

01/18

NORTH MS BR EXP STA

MARSHALL

106

66.4

2X

19579

700

637

01/11

DIXIE DAIRY SALES

CARROLL

253

66.3

2X

19506

700

622

01/20

CAL MAINE FOODS DAIRY

HINDS

1685

65.7

3X

19247

699

628

01/16

DAVID ROBINSON & SONS

RANKIN

141

65.2

2X

21124

740

655

01/24

MS.STATE UNIVERSITY

OKTIBBEHA

200

64.7

2X

17194

665

579

12/29

LEON BARDWELL DAIRY

LINCOLN

48

62.4

2X

19311

649

604

01/22

SPEAKS & SON

WALTHALL

379

60.3

2X

17428

682

576

01/14

DANNY WALTER SISCO

LINCOLN

102

59.3

2X

18176

550

575

01/10

A L BOYD, JR

WALTHALL

79

57.8

2X

19868

660

644

01/16

PAUL W EDWARDS

NEWTON

155

57.6

2X

17834

660

588

01/24

J & L DAIRY

WALTHALL

216

56.2

2X

19923

580

639

01/10

TODD & JERRY BULLOCK

PIKE

115

55.8

2X

17106

615

553

01/20

JAY PAUL HOOVER

NOXUBEE

116

55.1

2X

18394

642

586

01/05

LOWERY BROS DAIRY INC

WALTHALL

91

54.5

2X

15045

515

482

01/26

LEN SMITH

AMITE

103

53.8

2X

0

0

0

01/20

FLOWERS DAIRY

JONES

88

52.4

2X

16266

567

556

12/27

WAYNE JACOBSEN

PIKE

111

51.4

2X

0

0

0

01/11

LOWERY BROS DAIRY INC

MARION

95

50.1

2X

14890

504

475

12/29

WALTER LAVIGNE

MARION

189

49.8

2X

15132

564

499

01/14

GRAHAM DAIRY

PONTOTOC

106

49.3

2X

17109

503

549

01/06
Top 25 herds enrolled on supervised DHIA testing programs by test day energy corrected milk for all cows.
** ECM = (.3246 x test day milk) + (12.86 x test day lbs. fat) + (7.04 x test day lbs. protein)

February 2000 BFP Price

Dr. C. W. "Bill" Herndon
Dairy Economist, MSU


Milk Pricing Moves into a New Era
The implementation of Federal Milk Marketing Order (FMMO) reform on January 1, 2000 resulted in the replacement of the Basic Formula Price (BFP) with a completely new system and procedure for establishing milk prices. This new process affects how dairy farmers are paid for the milk that is produced on their farms. Thus, each and every producer should devote some time and effort in trying to understand how their milk is valued and how these "new" milk prices will influence their monthly milk checks. The BFP has been replaced with a "revised" Class III price that represents the value of the various milk components used in manufacturing cheese products, only. Furthermore, this revised Class III price will NO longer be used as the "base" from which to establish the price for all other classes of milk. Recent issues of this newsletter attempted to describe this new system and, given dairy farmers have received their first milk checks under this scheme; many questions have been raised about how this new procedure works. Thus, several workshops have been planned to address this new pricing system. Ask your county agent for information about scheduling one of these milk price seminars in your county or area of the state.

Under the old pricing method, the BFP represented the Class III milk price which was the base price for generating Class I and Class II prices. The revised system utilizes USDA surveys to estimate the market prices for cheese, butter, nonfat dry milk and dry whey, which are then used to compute the milk component values for butterfat, protein, other solids and nonfat solids. These component values are placed in a series of formulas to calculate the price for four different classes of milk. These milk classes are: Class I denotes bottled milk products; Class II represents ice cream, yogurts and packaged cream; Class III portrays cheese and cream cheese; and, Class IV consists of butter and nonfat dry milk. Dairy farmers in the Southeast will have their milk price based on the values of skim milk and butterfat in each of the four classes of milk and there will be a different skim milk and butterfat price for each milk class. So, it has become critically important to know how many pounds of skim milk AND pounds of butterfat were produced on dairy farms. The Southeast order "blend" price and, thus, each farmerís milk check will be based on the price of skim milk and the price of butterfat multiplied by the number of pounds of skim milk and butterfat used in each of the four milk classes (referred to as the utilization rate).

One of the procedures employed by the USDA under Federal Order reform is the reporting of an "Advanced Class I" base milk price that will be announced for the next month on or before the 23rd of each month. For example, the March Advanced Class I base milk price (@ 3.5% butterfat) was announced on February 18 and will be used to estimate the value of milk used in beverage milk products. This newsletter will monitor this Advanced Class I price as a reference point to indicate the direction and magnitude of changes in monthly milk prices. Sharp increases in milk production continue to overwhelm the dairy market with cheese and nonfat dry milk prices at government support levels. Commercial inventories of cheese and butter products are ballooning while government purchases of nonfat dry milk continues to grow as these excess milk supplies are being processed into these Class III and IV products. Most dairy market analysts believe milk prices will remain at these current very low, depressed levels through the first seven or eight months of 2000. Milk prices are expected to peak during the fall months of October and November and follow the usual seasonal pattern. The March Advanced Class I price (for Atlanta and Starkville) was reported at $13.94 per cwt. representing a INCREASE of 13 cents per cwt. (+0.9%) ABOVE the corresponding February of $13.81. The March 2000 Class I price is a massive $5.70 per cwt. (or ñ29.5%) LOWER than the March 1999 Class I price of $19.35. Dairy producers should know that the March Class I price will be the most important price that will influence the revenues derived from the sale of their milk produced during March. Because 65 to 75 percent of Mississippi milk is utilized as Class I products, farmers will not realize any increase in revenues caused by this 13-cent increase in the March Class I price until they receive their "settlement" checks in mid-April as payment for milk sold in March 2000.

Milk Production.
Monthly milk production continues to skyrocket in the U.S. with January 2000 milk output increasing a gigantic 4.7%(645 million lbs.) compared to January 1999. This increase in national milk output was realized from milking 61,000 more cows that averaged producing 60 more pounds per cow, reversing a 30-year trend of annual decreases in the number of milk cows. Tremendous growth in milk production continues to be recorded in areas west of the Mississippi River, especially in Idaho, California, New Mexico and Arizona. Comparing January 1999 to January 2000, these states reported growth in milk output amounting to 14.5% in Idaho, 11.0% in California, 10.2% in New Mexico and 9.1% in Arizona. Of the 20 reporting states, milk production declined in only two states both of which were located in the Southeast (Florida, down 1.8% and Missouri, dropped 3.0%). However, these 20 states milked 69,000 more cows that produced 58 more pounds per cow during January 2000 versus the same month of 1999.

Annual milk production in the U.S. totaled 162.7 billion pounds during 1999 which was 3.4% (+5,363 million lbs.) more than the total output in 1998. Milk production grew from 147.7 million pounds in 1990 to 162.7 billion pounds, or more than 10%, during the past decade with the disparity between western and southeastern milk output growing more pronounced every year. Reviewing changes in annual output statistics for selected states revealed that huge increases were recorded in the western states of Idaho (+11.9%), California (+10.2%), Arizona (+9.4%), New Mexico (+8.5%), Nebraska (+8.5%), Utah (+6.6%), Kansas (+6.1%). Three states in the Southeast also reported increased output during 1999 and were Florida (+2.6%), Virginia (+2.1%) and Georgia (+0.8%). However, the nine other Southeastern states all continued to maintain the long-term trend of decreasing milk production ranging from the greatest decreases in Missouri (-6.2%), Tennessee (-5.6%), Louisiana (-5.3%), Mississippi (-4.7%) to the smallest declines reported in South Carolina (-1.3%) and North Carolina (-2.8%). Analyzing annual dairy statistics for Mississippi revealed the number of milk cows fell from 42,000 in 1998 to 38,000 in 1999 (or -9.5%) but these dairy cows increased their per cow output from 13,786 to 14,426 pounds (+640 lbs., or +4.6%) between these two years. The net effect of these changes was that annual milk production fell from 579 million pounds in 1998 to 552 million pounds in 1999. As milk prices languish and beef prices increase, many farmers expect to cull older, less productive cows from their herds which should begin to dampen these substantial increases in milk output. However, the biological factors which influence dairy production will prohibit any immediate response to reduce milk output by dairy farmers.

Dairy Product Prices.
Excess raw milk supplies continues to cause dairy product prices for cheddar cheese and nonfat milk powder to founder near the USDAís Commodity Credit Corporation (CCC) support price levels. However, butter prices have been surprisingly stable and remain at or above the 90 cents per pound level for Grade AA butter. Cheddar cheese prices have been virtually stuck at government support levels of $1.10 and $1.085 per pound for 40# block and barrel cheddar cheese, respectively. This has also been the case witnessed for nonfat dry milk (NDM) which has displayed essentially NO price movement since September 1999 and remains slightly above the government support level of $1.01. On the Chicago Mercantile Exchange (CME), 40# block prices were reported at $1.115 on January 20, exhibited very little fluctuation during the next four weeks, and were recorded at $1.11 on February 18-- a 0.50-cent (-0.5%) decrease over this period. Barrel prices also exhibited essentially no price movement when this dairy product price declined 0.25 cents (-0.2%) from $1.1025 on January 20 to $1.10 on February 18. On January 20, the Grade AA butter price was 94.50 cents compared to 91.00 on February 20 -- a decrease of 3.50 cents (-3.7%) per pound. For the past five months, Grade A nonfat dry milk (NDM) prices on the CME have remained absolutely flat near the government support price level of $1.0300 per pound. Ever growing amounts of excess and "distressed" milk supplies have caused the CCC to maintain its weekly procurements of non-fortified NDM to an amount ranging from 10 to 12 million pounds. Between October 1 and February 18, the CCC has purchased almost 105 million pounds of non-fortified NDM.

Near-term Market Outlook.
The outlook for 2000 does not hold many bright spots for dairy farmers, their cooperatives and processors. Milk prices are forecast to show very little upward inclination through July or August with Class I base milk prices in Mississippi remaining at or below $15.00 per cwt. As fall approaches, the usual seasonal price increases are anticipated with the peak expected near $16.00 to $17.00 during October or November. Dairy analysts are predicting 2000 farm-level milk prices will average about $1.50 less than in 1999. Adding to this dismal economic situation is the reality that the new milk pricing system implemented by USDA under its Federal Order reform has yet to be fully understood. These new pricing procedures will have an effect on farm revenues and milk checks. However, some analysts say that farm milk prices will increase while others indicate that farm revenues are destined to decrease under these new pricing mechanisms. The singular positive element in the dairy market is moderate feed costs that are expected to remain relatively low during 2000 and into 2001. The February Class III (which replaced the BFP) is expected to decrease and be reported just above the $9.50 level. The CME recorded on February 24 Class III futures contracts settlement prices were $9.56 for the February contract, $9.78 for March, $9.84 for April, and $10.03 for May. As expected, the deluge of "spring flush" milk is currently overwhelming the dairy market and there appears to be no relief in sight until the heat and humidity of the summer months starts to rein in bulging milk supplies. But, the past 10-12 years have clearly demonstrated just how volatile milk prices have been and how sensitive dairy prices are to changes in weather conditions.

Interpretation of Uniform or "Blend" Price
The implementation of the Federal Order reform by USDA has resulted in the consolidation of federal order areas and established 11 new Federal Order areas. Four of these 11 order areas were designated to employ a method to estimate the four classes of milk prices using the values for skim milk and butterfat. These four Federal Orders were the Southeast (which includes Mississippi), Florida, Appalachian and Las Vegas-Arizona areas. Using a series of pricing formulas and USDA weekly price surveys for cheese, butter, nonfat dry milk, and dry whey, the value of milk components are estimated for butterfat, protein, nonfat solids, and other milk solids. These milk component values are then used to calculate Class I, II, II, and IV milk prices by, again, employing a series of formulas. All this points out that the milk pricing system has gotten more extensive, if not more complex and difficult. As a result, dairy farmers (and many dairy economists) are perplexed about how to use this new pricing system to estimate the price of milk received by farmers.

The Market Administratorís published January 2000 uniform or "blend" price for the Southeast Federal Order at Atlanta (and Starkville) at $12.82 opened some eyes about the impact of this new system on farm level milk prices. One of the most revealing numbers in this publication was the Class I utilization rate which was reported at 62.64%, or the lowest level since the old New Orleans-Mississippi Federal Order was merged to create the Southeast order in 1995. Most analysts estimated that adding in Missouri, Arkansas and Kentucky to the Southeast order could reduce the Class I utilization somewhere from 2 to 7%, but no one expected a decline of 12 to 14%. Another revealing element of this "blend" price report was the VERY important effect that the pounds of butterfat used in each class of milk has on the "net" price for milk in each class category. For example, the "net" price for Class I milk during January was $12.64 as opposed to the Advanced Class I price announcement of $14.00 per cwt. @ 3.5% butterfat. The reason for the $1.34 difference was that the average percentage of butterfat used in Class I products was only 2.151%. However, the percent of butterfat used in Class II products was 7.251% which resulted in a "net" Class II price of $14.45 per cwt. during January while the "net" Class III price was $11.52 (@ 5.193% average BF) and $10.08 for Class IV milk (@ 7.039% BF). This alters the fundamental premise maintained in the South for many years that higher Class I utilization rates would always provide more revenues in farmerís milk checks. Now, this premise is NOT necessarily true!

Southeast "Blend" Price Falls to $12.82 in January
The Southeast Federal Order Milk Market Administrator reported the January 2000 "blend" or uniform price for milk delivered in Federal Order (FO) #7 at $12.82 per cwt. (for 3.5% Butterfat milk) in Zone 7, see the Mississippi map for zones (Zone 5 minus $0.20, Zone 6, 7 and 8 are the "base" zones, Zone 9 plus $0.20, Zone 10 plus $0.30, Zone 11 plus $0.40, and Zone 12 plus $0.50 per cwt.). The January "blend" price of $12.82 for the "base" zone of FO #7 represents an DECREASE of $0.78 per cwt. (-5.7%) compared to the December price of $13.60. The January 2000 blend price is $6.25 (or ñ32.9%) BELOW the January 1999 blend price of $19.02. This $0.78 per cwt. decline in the January 2000 blend price is difficult to discern because of the new federal order pricing system coupled with the substantial decrease in the Class I utilization rate. The January "blend" price was calculated using: (1) a "net" Class I price of $12.64 on 62.64% of the milk marketed; (2) the "net" price for Class II of $14.45 on 8.48% of the milk; (3) the "net" price of $11.52 on 16.22% of the milk used for Class III products; and, (4) a "net" Class IV price of $10.08 on 12.66% of the milk marketed. This newsletter will be publishing a "revised" map of Mississippi depicting the changes in the pricing zones which were the result of federal order reform, but this "new" map is not yet available at this time of publishing in this newsletter.

Congratulations!
At the recent annual meeting of the Mississippi Dairy Herd Improvement several awards were presented in addition to the 1999 Master Dairyman certificates. Three DHIA Supervisors were honored with the Myles Carpenter Supervisor Award.

First Place ñ Robert Hardin, Batesville, MS
Second Place ñ June Jumper, Etta, MS
Third Place ñ Bill King, Brooksville, MS
In addition, Mississippi DHIA also recognized Mr. Richard Hay, Amite County Agent with the Extension award for his efforts in promoting and maintaining the DHIA program in his county.

 

Uniform or "BLEND" Price ñ January 2000

North Mississippi:

$12.62

 

North Central Mississippi:

 

$12.82

 

South Central Mississippi:

 

$13.02

 

South Mississippi:

 

$13.12

 

Coastal Mississippi:

 

$13.22

 

Class I Price for March 2000 (Advanced Price)

 

North Mississippi:

 

$13.74

 

North Central Mississippi:

 

$13.94

 

South Central Mississippi:

 

$14.14

 

South Mississippi:

 

$14.24

 

Coastal Mississippi:

 

$14.34

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