USDA back in the dairy business

After several years of inactivity, the USDA is back in the dairy business by virtue of the price support program. Actually, it is a USDA agency, the Commodity Credit Corporation, that makes the purchases to reduce the amount of dairy products in the marketplace.

While the price support level now is $9.90 per hundredweight of milk, that price level is achieved by the CCC purchasing dairy products at a price that supports the $9.90 figure. Under current law, the specific purchase prices are 80 cents a pound for nonfat dry milk, $1.05 for butter, and $1.13 for block cheese.

Because dairy product manufacturers have some extra costs involved with selling to the CCC (such as packaging specifications and certain grading standards) they usually are not willing to sell until the market price is below support levels. That's why the cash cheese price can drop below suppor level, as it did this winter.

Once in government storage, the products are sold by the CCC to other government agencies or foreign countries, donated to relief agencies, or sold back to the open market. The products cannot be sold back to the open market at less than 110 percent of the support price. However, the government attempted to use brokers to sells CCC holdings at less than 10 percent over support price a couple of months ago. The National Milk Producers Federation objected to that strategy, and the practice was stopped.

Unfortunately, having dairy products in CCC inventory acts as a ceiling on wholesale dairy product prices which set the price of milk. For example, any time the market price of nonfat dry milk gets above 88 cents a pound, the government can sell product and, essentially, keep the price from rising as high as fast as it might otherwise.

In 1983, the CCC purchased 18.8 billion pounds of milk in the form of nonfat dry milk, cheese, and butter. That was 14 percent of all milk produced by farms. Since October 1, the CCC has purchased 175 million pounds of nonfat dry milk and 4.5 million pounds of butter.

Fewer dairies quit milking last year

Relatively strong milk pricing in late 2007 and throughout the ensuing year encouraged many dairy producers to remain in business, so much so that only 3.4 percent or 2,003 dairy farms idled milk pumps last year. That represents the smallest percentage decline in dairy farm numbers and the lowest ever actual drop since milk permit tracking began in 1992. The 2,470 farms leaving the industry in 2005 was the second lowest actual drop in numbers and ties 2005 with the smallest percentage drop ever at 3.4.

Since 1992, the drop in licensed or so-called commercial dairy farms has been 74,382, from 131,509 to 57,127. That’s a drop of 57 percent during that time. The farms counted in this survey are those that have a permit to sell milk. This number differs from another USDA estimate . . . operations with milk cows. That total now is 67,000 and has declined 103,500 or 60.7 percent since 1992.

Among states with over 1,000 dairy operations in 2007, the largest percentage decline took place in Illinois (-9.4). That state lost 100 farms and now is under 1,000 permitted farms, leaving 12 states above that threshold. Kentucky (-5.4), Iowa (-5.2), Pennsylvania (-4.2), and Minnesota (-4.0) rounded out the largest decliners. Among 1,000-plus operation states, two states had small gains in farm numbers: Missouri 2.3 and Indiana 0.6 percent.

Cow numbers highest in over a decade

Cow numbers are way up. Since 2004, there are 305,000 additional cows on U.S. dairy farms putting total cow numbers at 9.315 million. The growth has been gradual, ranging from 2005’s 0.3 percent and topping out with this year’s 1.4 percent. To put the current cow population in perspective, the last time we had over 9.315 million cows was 1996.

Overall, total milk production was up to 190 billion pounds which is a 2.3 percent increase from the previous year. That 2.3 percent increase is right in the middle of the 2.1, 2.8, and 3.5 percent gains in national milk production during the prior three years.

Growth in milk per cow slowed for the fourth consecutive year, dropping to 1.4 percent compared to 1.6 to 3.2 percent in the previous three years. The order of the top 10 states changed slightly: Texas (+14 percent rose from eighth to seventh; New Mexico (+7.9 percent) rose one spot to eighth, while Michigan (+1.8 percent) fell from seventh to ninth.

For a full report on 2008 milk production, check out our March 10 issue.

Happy national FFA week

This week over half a million (507,764 to be exact) FFA members are celebrating national FFA week, February 21 to 28. In between stops today, we had the chance to speak with Regina Holliday, Southern Region vice president for the national FFA organization. “National FFA week is a chance for us to celebrate the success, history, and student success of our organization,” Holliday says. FFA’s theme for this week and this year is to step up and stand out. “We are encouraging members to step up and get out of their comfort zone and do the best you can,” she adds.
Although she calls Georgia home, Holliday is spending her national FFA week in New York, while other national officers are spending time in other states including, Colorado and Illinois. Today kicked off Regina’s tour of New York when she met FFA members from the Vernon-Verona-Sherrill (VVS) Chapter. The VVS Chapter treated the national officer to a tour of their very own maple tree farm where members harvest, bottle, and sell their own maple syrup as a fundraiser. “Members learn and do everything, including marketing,” Holliday says, describing her unique tour. Looking at her schedule the rest of the week, there are stops planned at many schools and even plans to meet the New York Commissioner of Agriculture.
Maybe you have already noticed your local chapter gearing up for the week, we noticed our local chapter served a pancake breakfast last week to the community. “Take the initiative to be a helping hand,” Holliday says when describing ways any community member can help out their local FFA chapter year-round.

Dairy farm numbers drop 4 percent

The number of operations with at least one dairy cow stands at 67,000, a decline of 4 percent from 2007. This number was just released as part of USDA NASS' annual summary: Farms, Land in Farms, and Livestock Operations.
The number of farms with milk cows is different than the number of licensed or "commercial" dairy farms which we will report in our March 10, 2009, issue.

The recent USDA report estimates that there were 21,705 operations with between 1 and 29 cows; 12,270 with between 30 and 49 cows; 19,330 with between 50 and 99 cows; 9,011 with between 100 and 199 cows; 4,359 with between 200 and 499 cows; and 3,320 operations with more than 500 cows.
More than half of the cows in the U.S. –51.9 percent– are in herds with 500 cows or more. Those cows produce 57 percent of the U.S. milk supply.

The USDA estimates there are 2.2 million farms in the U.S. In addition to 67,000 with dairy cows, 757,000 have beef cows (more than 90 percent quite small), and 73,150 have some swine.

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Hoard’s Dairyman joins Facebook; become a “fan”

Just yesterday we started the Hoard’s Dairyman “fan page” on Facebook. In less than 12 hours and next to no promotion, it has already grown quickly. We haven’t been the only ones to see the quick popularity from the social networking site. This afternoon we visited with Mark Jewell, founder of AgJobNetwork.com, an agricultural job resource site with a social networking twist. We know you’ve likely heard of Facebook, Twitter and the career-oriented LinkedIn. Yet, unlike those sites, this one is strictly agricultural, an industry that Mark says “has not even begun to harness the power of new media.” Jewell started a Facebook group less than a year ago to build a network of qualified freelancers for another website he had started. “After 30 days, we had 1,500 members.” It was then that Jewell realized the power of what the website calls “the word-of-mouth engine” and started the job site.

If you’re on Facebook, join us. Just search for Hoard’s Dairyman! You can watch for what’s new on our blog through the RSS feed, view videos about Hoard’s Dairyman, and network with fellow readers. Utilize the discussion board, and tell us what you think.

World Dairy Expo names judges

Official judges for World Dairy Expo 2009 have been appointed, according to World Dairy Expo media specialist, Lisa Behnke. The individuals responsible for placing over 2,500 head of dairy cattle during the five-day show are:

Central National Ayrshire Show – Steve McDonald, Princeton, Illinois

Central National Brown Swiss Show – Dave Sprengler, Plato, Minnesota

National Guernsey Show - Madison – Fowler Branstetter, Edmonton, Kentucky

International Holstein Show – Mark Rueth, Oxford, Wisconsin

International Junior Holstein Show – Brian Garrison, Tiffin, Ohio

Central National Jersey Show – Michael Heath, Westminster, Maryland

International Milking Shorthorn Show – Rick Allyn, Caanan, Connecticut

Grand International Red & White Show – Chris Hill, Thurmont, Maryland

Associate judges will be named at a later date, says Behnke.

Snapshots World Ag Expo

Each second week in February, Tulare, Calif., welcomes agriculture enthusiasts from around the world for World Ag Expo which is claimed to be the world's largest farm show. In its 42nd year, the 2009 event was no exception to its reputation of grand scale and home to every type of equipment and machinery, and let's not forget the popular tri-tip sandwiches. Don't think it was just about corn and cows either. World Ag Expo also features equipment serving some of the lesser-known agricultural industries such as tomatoes, grapes, and cotton. You can find a slide show below for some snapshots of the week. It was clear that, despite a gloomy economy, enthusiasts enjoyed learning what the newest innovations were and how they could impact a farmer's bottom line. Did you attend World Ag Expo? What did you think of this year’s show?

More cheese please

Cheese is the flavor highway for pizza," said Dave Brandon Domino's chief executive officer when discussing the launch of the "American Legends" product-line which features six pizzas with 40 percent more cheese on them. "This is a permanent menu platform. We hope to build on it," says Brandon. Dominos anticipates using 10 million pounds of cheese annually with the American Legends product line. This premium product will use American, Cheddar, feta, mozzarella, Parmesan, and provolone.

U.S. dairy farmers, through the producer-funded check-off program, partnered with Dominos to help make the launch possible. "This is just another step in the evolution we started five years ago when we began partnering with companies to promote dairy products," noted Tom Gallagher the chief executive officer for Dairy Management, Inc. "The first partnership started with McDonald's and the single-serve milk offering," Gallagher said. Gallagher reports the current partnerships with Dominos got rolling with a $12 million commitment with DMI. Dominos is expected to match four to five times that level.

When asked if DMI's $12 million made the project possible, Domino’s Brandon said, "It was the stimulus to make it happen," playing off the current economic headlines. Brandon went on to say, he was not willing to say it would never have happened, but, without the partnership, it would have taken much longer to get done.

No doubt, pizza is an important product for the dairy industry . . . 25 percent of all U.S. cheese goes on pizza. "If we were able to add one ounce of cheese to all pizza sold in the U.S., that would equal 250 million pounds of cheese," said Paul Rovey chairman of DMI. (Milk equivalent would be 2.5 billion pounds or 1.4 percent of U.S. milk production.) And anything that can be done to return pizza sales to the level of just a few years ago is a must. In fact, DMI will be holding an emergency pizza task force meeting by bringing together major pizza chains in the next few weeks.

This announcement is no small rollout. Dominos has 9,000 stores in 61 countries across the globe with over 1 million transactions per day. The American Legends product offering is focused on the domestic chains of which Dominos has 5,000 stores. "We (Dominos and DMI) have shared goals, to sell more pizza, and more cheese," says Brandon.

12 things to not do during tough times

Amid the frustration of yet another boom-and-bust dairy cycle, one thing milk producers can be certain of is that because they're in the downturn now, recovery will be the next thing that happens.

When it will occur is anyone's guess, and short of a unanimous decision to enthusiastically cull cows and cut production there is little that dairies can do to make it arrive any faster. So what should they be doing in the meantime?

According to a dozen industry experts we talked to in the last few days, perhaps the best strategy is what they should not do. That way when the inevitable turnaround does begin their herds will be ready and able to capitalize on it. From a list that could have easily been several times longer, here are 12 recommendations of what dairies should not do during tough economic times:

1. Don't think you're all alone in this situation.
2. Don't stop focusing on high production per cow.
3. Don't keep grossly unprofitable cows.
4. Don't ruin your ration.
5. Don't stop talking to your lenders.
6. Don't let milk quality premiums get away.
7. Don't skip equipment cleaning and maintenance.
8. Don't stop vaccinating.
9. Don't back off on heat detection.
10. Don't stop using A.I.
11. Don't cut corners with fresh cows.
12. Don't ignore calves.

CWT members support two-year committment

With production costs far exceeding the price dairy farmers are receiving for their milk, the members of Cooperatives Working Together voted Tuesday to fund the self-help program for two full years, from Jan. 2009 through Dec. 2010, to help bring the dairy supply into balance with shrinking demand. “America’s dairy farmers are looking to CWT to help them overcome the dire financial circumstances they are facing,” said Jerry Kozak, President and CEO of NMPF, which manages CWT.

The decision to fund CWT for another two years is predicated on achieving the participation of a 67% supermajority of the nation’s milk supply at the current 10 cent per hundredweight membership assessment, Kozak said.

CWT’s members also approved two changes in program policy. First, all members whose bids are accepted in future herd retirement programs will agree and warrant to cease dairy production for one year. This warranty will apply to both the producer and his/her dairy facility.

The second change is that farmers who were successful participants in past CWT herd retirement rounds will be permitted to bid in the next herd retirement round that CWT conducts.

Kozak also noted that CWT has not solicited government financial assistance. He indicated that a prominent agricultural lender will provide CWT a line of credit tied to the level of funding that CWT members are committing to invest in the organization over the next two years.

Feed prices taking their toll

As milk prices remain in the cellar, the high cost of feed is placing further strain on producers nationwide. For farms west of the Mississippi the strain may be the greatest in California. In a just-released report from Moore, Stephens, Wurth, Frazier, and Torbet — a California-based accounting firm, net incomes for herds throughout the state were ranging from negative $138 per cow in Southern California to $188 in the heart of cow country, California's San Joaquin Valley. On a per-hundredweight basis that's a range from negative 90 cents to $1.13. Farm profits were higher for farms in Arizona, Idaho, and the Texas Panhandle. The only region in the accounting firm's report with lower profits was for farms in New Mexico.

While those numbers may seem livable, keep in mind that was during a time when California mailbox prices were near $16.25 for the state. Now, mailbox prices may drop by $4 to $5 or more, bringing severe financial hardship to farmers.

Feed prices remain robust. In January, 14,444 tons of Supreme alfalfa hay was sold with prices ranging from $170 to $268 per ton. Rolled corn was selling for $187.50 to $196.60 per ton; soybean meal at $359 to $361; and whole cottonseed at $317.25 to $319.25.

Resurgent dollar played a role in milk price collapse

No one thing ever triggers a farm milk price collapse all by itself, although the simple explanation usually boils down to too much supply and not enough demand. That's the case this time, as well, but what dairy producers may not appreciate is that currency exchange rates play a role in today's imbalance.

Not only has recession in the U.S. spread like an infection around the world to sicken other economies, it has also pushed the value of the dollar higher in relation to other currencies. Thus, when it comes to buying U.S. dairy products today, foreign buyers not only are more fiscally cautious but they also have less buying power.

Take Mexico for example. The No. 1 buyer of U.S. dairy products has seen the value of the peso drop from about 9.8 cents in mid-2008 to barely 7 cents today, almost a 29 percent decline. Canada, our No. 2 buyer, has seen its currency drop from $1.03 in late 2007 to just 80 cents today, a decline of 22 percent.

But that's just part of the problem. Partly because the dollar was so weak for so long, the percentage of total U.S. milk production that was exported soared in recent years. According to the U.S. Dairy Export Council, 3.6 percent of all U.S. production was sold abroad in 1996. In 2008, it is expected to be between 10 and 11 percent. U.S. dairy producers boosted production to meet that growing demand.

The effect of even a modest slowdown in foreign purchases of U.S. dairy products is drastically more sudden and painful today than ever before. That's one reason why the pipeline of dairy product sales plugged up virtually overnight, why domestic sales alone are hopelessly unable to keep up with production, why producer milk prices imploded, and why this situation in unlikely to turn around soon.

Wind power could blow your energy bills away

I think we all can agree controlling the increases in our energy bill is appealing. That was the idea behind one session at the 2009 Midwest Value-Added Agriculture Conference held in Rochester, Minn., in late January. Howard McElroy of Winkleman’s Environmentally Responsible Construction in Brainerd, Minn., outlined options for implementing a small-scale wind turbine on farms. Farms can generate electricity for their own use and sell the excess to their local power utility depending on the turbine's size. Wind turbines won’t control odor or the gas everyone’s been talking about like a methane digester will. But, wind turbines are a lot more cost appealing for a small farmer looking at adding a renewable source of energy to his or her farm. Grants and tax credits are available, too. The typical payback period for a farm’s small wind turbine is between 6 to 12 years, considering tax incentives. “We’ve always tried to be kind to the environment,” said Clare Palmquist of Marshik Dairy in Pierz, Minn., and a one-year owner of a wind turbine. Clare along with her husband Dean Marshik operate the dairy and milk 80 cows. Besides feeling good about using a renewable source of energy, the farm is pleased with what it has done to its energy bill. “It has cut down our energy bill by about a third or a fourth,” Clare said. “Dairy farms use a lot of energy; if we were just a residential home, we would be selling a lot of energy” she added.

To learn more about how energy is created from wind, view this video
To learn if there is wind energy potential in your area, click here

Mystery grass headed for seed production

In 1990, Charles Opitz of Mineral Point, Wis., discovered an unknown, highly palatable grass growing in a remnant of the ancient oak savanna on his farm. He realized the grass was different from others on his farm and contacted University of Wisconsin-Madison researchers and those from USDA-ARS. After some investigation, they concluded the mystery grass was meadow fescue. Additional research identified hundreds of stands of meadow fescue on other farms in southwestern Wisconsin, northwestern Illinois, northeastern Iowa, and southeastern Minnesota.

Meadow fescue originates from northern Europe and mountainous regions of southern Europe. It was introduced to the U.S. and Canada in the early 1800s but fell out of favor by the mid 1940s. From that point forward, surviving meadow fescues evolved with the surviving stands acclimating to local climate conditions.

Meadow fescue is cold- and drought-tolerant. It has excellent forage quality and palatability. Like most fescues, it has a naturally occurring fungus or endophyte that grows on it. Unlike tall fescue, which has an endophyte that causes disease in livestock, this recently discovered meadow fescue has an endophyte that causes no harm to livestock. In fact, its endophyte protects the plant from drought, heat, and predation by insects.

From those early samples from the Opitz farm, researchers have developed a variety of meadow fescue known as "Hidden Valley." That variety is in the seed-production phase and should be available to graziers in two to three years, reports Michael Casler with the USDA Forage Research Center.

To download a copy of the entire publication details meadow fescue go to: fescuefinalweb.pdf