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July 2014 Archive for Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

Why Can’t the Midwest Keep Up Its Dairy Share?

Jul 28, 2014

The results of a new study confirm what most farmers and processors know – along with a few surprises.

Editor’s note: Dairy Today is conducting our own expansion survey. We’d like to know your attitudes toward expansion, whether you plan to grow or not. And if you don’t, the reasons why. Take the 10 minute survey by clicking here

Anyone and everyone who has traveled the back roads of the western Corn Belt know instinctively that this is a great place to milk cows. Productive land, open space, cow-friendly climate and agricultural infrastructure not only dominate the landscape, it is its very fabric.

And yet, milk production in Iowa, Minnesota, Nebraska and North and South Dakota as a share of national production is just half of what it was 40 years. This five-state area is producing just 8% of the nation’s milk, down from 16% in 1970. Though production has rebounded somewhat in the last decade, the region is still a shadow of the dairy powerhouse it once was.

There are signs of life and rejuvenation along Interstate 29, which runs down the eastern edge of the Dakotas and the western border of Iowa. Both cows and processing have migrated to this "I-29" corridor, proving that commercial dairy production and manufacturing can survive and thrive in the region. But why hasn’t dairy taken off in other areas of the region?

The Midwest Dairy Association (MDA), the regional checkoff program for these western Corn Belt states plus Arkansas, Illinois, Kansas, Missouri and eastern Oklahoma, decided to find out. MDA commissioned Blimling and Associates and to conduct a comprehensive, competitive market analysis.

The idea stemmed from now-famous Bain Study, which showed that the United States is best positioned to fill growing world demand for dairy products, says Mike Kruger, MDA’s CEO. "So we asked the questions: What is the Midwest’s share of that growth, and what’s the dairy checkoff’s role in that market opportunity?"

The result is a 217-page report, "A Path Forward," that looks at both dairy farm and processing competitiveness compared to other growing dairy regions. The results confirm what most farmers and processors know. But it also has a few surprises, and some sobering spreadsheets on what an investment in a dairy operation requires.

For example, we know that the western Corn Belt enjoys strong milk price premiums, often beating comparable manufacturing areas by 50¢ to $1/cwt. But that’s a double edge sword—making dairy products manufactured here less competitive in national and global markets.

We also know that the western Corn Belt enjoys cheaper feed, last year’s massive winter-kill of alfalfa notwithstanding. South Dakota’s five-year ration cost average (2008-2012) was a hair over $6.50/cwt. of milk produced. That’s 25¢ better than Wisconsin and $1.25 better than Idaho.

The real shock came in dairy facility building and land costs, which have doubled in the last decade. A 3,000-cow, cross-ventilated facility with 100 acres for the site and 500 acres of cropland in South Dakota now costs upwards of $25 million. A comparable facility in Wisconsin or Michigan is $22 million. The difference is more expensive land farther west: $12,000/acre in South Dakota versus $6,000 in Wisconsin and Michigan.

In all these areas, only a select few dairy producers have the financial leverage to build facilities of this scale. So it’s going to be up to everyone else to decide if they’re willing to grow incrementally, from 80 cows to 150, from 150 to 300, and so on.

MDA’s "Path Forward" is just the first step. Western Corn Belt states must decide if dairy is their future. Dairy farmers are at the core of this decision, because only they can make the financial investments on the ground to make it happen.

Western Corn Belt farmers have faced this question for the past four decades. Often, they have said "no." But the time is fast approaching for a collective "yes." In another decade, it will be too late.

Is a German Monk Impacting Your Dairy’s Bottom Line?

Jul 14, 2014

Environmental effects may be behind the wide difference in the performance of your first-calf heifers, but don’t discount genetics.

If you’ve ever taken the time to chart the performance of your first-calf heifers, you’ll see a wide difference in performance. Even in the best managed herds with 30,000 lb. herd averages, one heifer will produce 36,000 lb. of mature equivalent milk while a heifer lying in the next freestall is producing 20,000.

Roughly 70% of the variance is due to environmental effects: A health event early in the calf’s life—pneumonia, scours, whatever—can affect how she performs in the parlor later in life.

But don’t discount genetics, says Pat Hoffman. Hoffman was a heifer specialist with the University of Wisconsin for years, and is now a Dairy Technical Specialist with Vita Plus Corporation.

Hoffman explains the other sources of performance variation are both genetic: parent average and Mendelian sampling effect. (Each contributes about half of the genetic variance.) Parent average is the average genetic value of the sire and cow. The better the parents, the better the average.

The Mendelian sampling effect is where that German priest comes in. Father Gregor Mendel, through experiments with pea plants in the mid-1800s, discovered how genes sort themselves at fertilization. When a sperm fertilizes an egg, the genes of each are recombined. On average, that recombination will be the average of the parents’ genetics. But any one individual can get any combination. Over a population, the recombination occurs on a bell curve with most getting the average and just a few on each tail of the curve getting the best or poorest combinations of genes. (Note: A.I. bull studs rely on Mendelian sampling to find the best next generation of sires. And that’s how and why they only bring back one in 10 bulls to active, proven line-ups.)

In practical terms, roughly 20% of calves get the best combination of genes and another 20% get the poorer combination of genes. It might seem counterintuitive, but as herd averages rise, the Mendelian effect takes on greater value, says Hoffman.

When herd averages were just 10,000 lb./cow, a 20% variance was +/- 2,000 of milk. At a 20,000 lb./cow average, the variance is 4,000 lb. And at a 30,000 lb./cow average, the variance is 6,000 lb. So the 24,000 lb./cow versus 36,000 lb./cow difference is actually to be expected, says Hoffman.

"There are numerous genetic research papers on the Mendelian effects on milk production and estimates are different within each research paper. But random genetic effects account for more than 5,000 lb. of milk in first lactation," he says. "At $20 milk, this variance is of high economic value."

"In fact, this Mendelian sampling effect has more value than ever before. And it may be growing [as we improve a herd’s genetic level] and not shrinking."

What you do about this is another matter:

Scenario 1. If you need every heifer as a replacement, your only decision is what you breed your heifers to. Low genetic value heifers merit cheap semen or beef semen (to produce dairy beef).

Scenario 2. If you don’t need all the heifers for replacement, the decision gets trickier because it now costs $2,000 (give or take) to raise a heifer to freshening.

The key is knowing which are the genetically poor heifers. If you have good records, parent average is probably good enough for Scenario 1. If you’re actually going to cull animals, parent average may or may not be.

Hoffman points out that parent average is dependent on the accuracy of records—knowing who the sire and dam are. Plus the reliability of Parent Average for production traits in a commercial herd is roughly 20 to 25%, says geneticists. Hoffman prefers genomic testing because it has higher reliability (65 to 70%) and will correctly identify parents.

But geneticists point out that a tripling of reliability does not equate to a tripling in accuracy. To get to the issue of accuracy, you have to take the square root of the reliability. So the accuracy of Parent Average for production is about .5. The accuracy of genomics is .84. Consequently, genomics is more accurate, but not 3X more accurate.

And then there’s the issue of cost. Genomic 6K or 9K chips cost in the range of $50. But to find the bottom 20% without using parent average, you have to test everybody. So the $50 test becomes $250. Perhaps that makes sense in Scenario 2 if you’re trying to save $2,000/head in rearing costs. It probably doesn’t in Scenario 1—unless you’re a registered breeder also trying to find the very top-end heifers for flushing and sexed semen treatment.

You can read Hoffman’s entire presentation on heifer performance variation here.

For more on genomic testing:

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