Winter 2013
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%
ied
10 Beyond %
higher than third lactation & older cows
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%
Mastitis
First Lactation
Genetics for Life.
12
Culling Beyond Reason
%
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Feet & Legs
Chelios
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Dairy
Work through the questions, find solutions and take action.
njury
In August we introduced you to Genetics for Life. At Semex this is more than a campaign or a new slogan – it represents both where we’ve been and where we’re going. And, it is a reflection of what you’ve told us you’re looking for in your genetic solutions. Genetics for Life is about delivering the best possible product to Semex’s clients. Genomax™ sires are just that, being the best of the best with only one in seven bulls that enter a Semex stud qualifying for Genomax status. Semex’s rigorous selection process used to select our Genomax lineup has resulted in some of the most in-demand progeny proven bulls in the world. These bulls are proof positive that Genomax bulls are the best source to maximize genetic gain and profitability.
4 15 Low Production % 17Reproduction 10 14 6 %
Semexai24™
The New Year Started Right
Jersey Success
These young guns are following in the footsteps of other breed-influencing Genomax graduates including: 0200HO05929 GenI-Beq Brawler, 0200HO05588 Comestar Lauthority, 0200HO05575 Gillette Jordan, 0200HO02427 Ardross Sterling *RC, 0200HO02331 Mr Marvelous, 0200HO05630 Comestar Lavanguard and many, many more. We invite you to read more about one of our most recent Genomax graduates, 0200HO03648 Domicole Chelios (Baxter x Goldwyn), a Repromax and Calving Ease sire, and to find out more about our exciting Jersey Genomax program within this issue. We hope that you enjoy reading the Semex story and that like us, you believe in Genetics for Life.
Work through the questions, find solutions and –2– take action.
BEYOND BORDERS IS A MAGAZINE DESIGNED TO PROMOTE DAIRY GENETICS, TECHNOLOGY AND MANAGEMENT PUBLISHED BY SEMEX. Comments or submissions to the editor should be forwarded to Brenda Lee-Turner, Semex, 130 Stone Road West, Guelph, Ontario, Canada N1G 3Z2. tel: 519-821-5060, fax: 519-821-7225; email: bturner@semex.com Sexxed™, Genomax™, Genomax Plus™, Repromax™, ProMate™, ReproMix™, Premier™, HealthSmart™, ai24™, ShowTime™, .25Plus™, CVG™, Robot Ready™ and Calving Ease™ are registered trademarks of Semex.
Brawler Air Bigstone Jett Stanleycup Lauthority Mr Marvelous Lavanguard Jordan Sterling*RC TM
SUCCESSFUL GRADUATES LEADING GENETICS Genetics for Life is all about delivering the best possible product to our clients, and Genomax™ sires are just that. The rigorous selection process to select Semex’s Genomax
TM
TM
lineup has resulted in some of the TM
TM
0200HO06480
0200HO02792
VAL-BISSON DOORMAN 99%-I
SANDY-VALLEY SALOON
BOOKEM X SHOTTLE
IOTA X PLANET
GPA TPI
GPA TPI
+2439
+2358
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most in-demand progeny proven bulls in the world. And, they are proof positive that Genomax bulls should be used confidently to maximize genetic gain.
Jake Kempel, Semex Partner Development Manager
THEY ONLY WISH THEY HAD INSTALLED AI24 SOONER
A walk through Fertile Ridge Dairy makes a lot of dairymen jealous. The cows are comfortable and relaxed. They’re all wellconditioned, are a medium size and are lying in sand-bedded free stalls that are wellequipped with lots of fans and sprinklers, leaving no doubt that cow care is a priority for the fourth generation of Sutters at the heart of this family-owned operation. Located in the scenic hills west of Madison, Wisconsin near Mt. Horeb, Fertile Ridge Dairy has gone through a series of expansions since 1903, including the most recent in 2010 which brought them up to 600 head of Holsteins. This same year they also built a brand new calf barn, making calf care easier and allowing them to utilize pasteurized milk. Gary Sutter and his son Joel maintain a 90 lb/cow/day average with a 4.0% Fat, 3.0% protein and 150 SCC. Gary is the dairy’s overall manager and is in charge of their 1400 acres of alfalfa, corn, soybeans and wheat and the dairy’s manure management. Joel specializes in animal care, devoting the majority of his time to breeding, reproduction, health, herd management and overseeing the next generation of Fertile Ridge ladies. The challenges of visual heat detection and cow health grew with the herd.
“I was spending too much time every day trying to catch all the cows in heat and looking over the cows that I thought were not feeling 100%,” says Joel. “I was looking for a way to devote more of my time to just cows that needed my attention. I was also relying more on timed AI, and was trying to catch sick cows earlier in order to prevent drastic treatments and drops in milk production.”
–4–
Semex’s District Sales Representative Kurt McCullough and I listened closely to Joel and the Sutter family. “We thought they were prime candidates for ai24,” says McCullough. “We’d had other customers with similar concerns. Everyone wants to dedicate time to the cows that need it most and ai24 helps them do just that.” ai24’s unique rumination monitoring and its ability to identify early signs of illness was extremely appealing to the Sutters. Joel also liked the fact that milk weights will be incorporated into the system in the future, and that it interfaces with PC DART and can be monitored on his smart phone, making it a true ‘whole herd management’ system. Fertile Ridge installed the ai24 Data Flow 2 System in late April 2012. Joel caught on to the system very quickly and things were clicking for him by early June. He noticed very quickly that he was finding more cows in heat.
“I am catching more cows in heat and spending roughly two hours less per day to do it!” says Joel. “I was utilizing the pre-sych/ov-sych protocol with a cherry pick before. I am now cherry picking twice before enrolling cows into ov-sych to take advantage of the heat detection ai24 gives me. This allows me to get more cows bred sooner with fewer shots.” Sutter was quick to add that they have seen a two-third reduction in hormone costs while cutting the synchronization rate from 40% to 10%. The ai24 system was being fully utilized with the new protocol at the beginning of July with most of the following results from the summer months: • From July to October 2011: 46% Heat Detection Rate, 14 % Pregnancy Rate and 640 animals bred
• From July to October 2012: 56% Heat Detection Rate, 18 % Pregnancy Rate and 804 animals bred • September and October of 2011: Heat Detection Rate was 40-50% • September and October of 2012: Heat Detection Rate ranged from 60-70% Benefits from the rumination collar are mounting at Fertile Ridge. Joel gets collars on cows three weeks prior to calving so he can monitor them even prior to their critical calving times. He uses the system to quickly identify sick cows and fresh cows off to a sluggish start in their lactation. He is also able to monitor each pen and the whole herd rumination levels to monitor ration changes, pen changes, weather effects, sorting, slug feeding, and many other key influences to the dairy’s bottom line. “I no longer look at large groups of fresh cows,” says Joel. “ai24 identifies the problem cows for me and I can focus my time on these animals instead of those in the group that will take care of themselves. It is also letting me know if a cow has health issues pre or post calving and I can monitor the treatments I give to them to see if it worked or I need to re-treat. If the rumination is lower than normal, I know something is going on. If it’s consistent I don’t worry about her.”
“We keep getting better as we go. We’re now working with Semex to perfect the insemination timing on our dairy to maximize our conception rates on every breeding.”
L to R: Semex’s Kurt McCullough & Bryan Marcoot and Fertile Ridge’s Joel Sutter
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“The only thing I wish I would have done differently is I would have put the system in sooner,” says Joel. The Sutters have been extremely happy to see a quick payback on the ai24 system. “On a month-to-month basis, we’re paying for the technology with our drug cost savings,” Joel says. Factoring in all aspects of the system, Sutter feels ai24 will easily pay for itself in a year to year and a half. “I enjoy working with Kurt and Jake on bull selection and tweaking my reproduction program and protocols. We look at what’s going well, what needs to be improved and discuss options on how to improve. It’s a good system that I would recommend to anyone out there.”
Russell Gammon, Semex Jersey Program Manager
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DIVERSITY FUELING SUCCESSFUL JERSEY GENOMAX™ PROGRAM Semex’s Jersey program is Genetics for Life. Listening and talking to Jersey breeders worldwide, we understand their diversified needs. Genetics for Life is all about meeting these needs and helping to build a long-lasting and profitable Jersey cow. Our entire program and its offerings are built around this need and we’re proud to offer our Jersey product to dairymen worldwide.
Genomax™ Releases HEALTHSMART™ SIRE: SOPRANO In a breed hungrily searching for outcross genetics to the industry’s dominant female lines steps one of Semex’s newest Genomax bulls, 0200JE00521 Wilsonview Soprano. A HealthSmart sire, this early son of Danish health and fertility superstar DJ Zuma has the top numbers the modern dairyman is looking for with an ultra-low US EFI of 3.6, a leading DPR of 1.6, Cheese Merit dollars of $690 pushing the top of the charts, a PL rating of 5.4 and a highly desirable 2.83 for SCS. He’s from the famed Wilsonview herd in Oregon, bringing over 1000 pounds of milk and over 100 combined pounds of fat and protein! He also has a highly attractive JUI rating of 3.51 with a VG-86-2YR dam backed by generations of milky EX cows.
SHOW TIME™ SIRE: KOOP For those striving for show ring success, Semex’s 0200JE00507 Tower Vue Koop arrives at just the right time to make correct and appealing progeny. Again a high level outcross at 4.5 EFI with over 2.1 for type, naturally, this bull will sire super udders as foreseen by his current JUI of 5.62! By Tequila, Koop hails from the worldrenowned ‘K’ family at Avonlea Genetics, with three generations of EX Royal Winter Fair International Futurity Champions backing his 94% show-winning Connection dam. UPCOMING, APPEALING ALTERNATIVES Many Jersey breeders are searching for appealing alternatives to the highly popular and widespread Violet, Daffy and Iris genes. Semex’s 0200JE00514 DP Frontrunner, from a rising star cow family in Oregon, represents a succulent slice of Semex’s power-packed alternatives! A Premier son from DP Iatola Flower, an Iatola cow gaining fame, this bull excels in the following key areas: GJPI over +220, JUI over 5.7, overall type at 1.8 and CM$ at over 660 (USDA-G 12-12)!
Semex Polled™ Genetics Semex has become rightfully known as a leading source of polled Jersey genetics. Early 2013 additions to the super popular team of HealthSmart sires include 0200JE00212 Orthridge Da Bomb-P and 0200JE00499 Dutch Hollow Vintage-P, as well as the Violet family’s scion, 0200JE00205 All Lynns Vapour-P. This makes Semex home to three of the breed’s top five polled young sires for GJPI. Now that’s Genetics for Life!
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WITH POLLED GENETICS, OUR LEADING GENOMAX PROGRAM, APPEALING ALTERNATIVES AND OUR GLOBAL SELECTION PROGRAM, SEMEX JERSEYS REALLY DO OFFER OUR CUSTOMERS GENETICS FOR LIFE.
Brenda Lee-Turner, Semex Marketing Communications Specialist
GENOMAX™ GRADUATE SUCCESS:
0200HO03648 DOMICOLE CHELIOS
Genetics for Life is all about delivering the best possible product to our clients, and Genomax™ graduate Chelios is just that. As a Genomax™ sire, Chelios was extremely popular being an early Baxter son from one of the most popular Goldwyn daughters of her time, Domicole G W Shelive VG-87 5*. Now, with over 180 daughters in his proof, Chelios ranks as one of Semex’s top PTAT sires at +3.32 and +14 Conformation – making him one of the highest graduates in both LPI and TPI systems. Graduating as a Repromax™ and Calving Ease™ sire, Chelios ranks extremely high for fertility, and his daughters have fewer difficult births and fewer stillbirths, giving both the cow and the calf a better start.
THE PEDIGREE Dam: Domicole G W Shelive VG-87 5* 2nd Dam: Sunnylodge Allen Shelly VG-87 4* 1 Superior Lactation Award 3rd Dam: Sunnylodge Rudolph Scariet EX-92-3E 10* 2 Super 3 Awards 4 Superior Lactation Awards 4th Dam: Sunnylodge Jed Sheryl VG-89 10* 2 Superior Lactation Awards
IN THE FIELD In the field, dairymen are telling us that they like their Chelios daughters and that they’re excited to see more daughters calving in. And, it’s easy to see why they like them so much, they’re easykeeping and aggressive enough to thrive in many different environments from traditional tie-stall to free-stall set ups.
“They are very correct with tremendous, open dairy frames,” says Mooney. “They’ve got a deep and strong rib structure.” “They’re long with healthy, well-attached udders. They’ve got a strong bone in the leg that supports easy locomotion, and their rumps are long and flat,” says Mooney. “They’re very functional and are often some of the largest two-year-olds in their herds.”
“Dairymen especially like the way their lactations hold on in persistency.”
“The daughters are good milk producers,” says Barry Mooney, EastGen Progeny Anaylst.
“But, dairymen especially like the way their lactations hold on in persistency. They’re gaining dollars through high component percentages.” Not only are they contributing in the bulk tank, but these cows are structurally correct, which will keep them in their herds longer.
5th Dam: Sunnylodge Prelude Spottie VG-87 18* 2 Superior Lactation Awards 1998 Holstein Canada Cow of the Year Dam of Sunnylodge Linjet
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With the components and structure to be profitable, Mooney believes Chelios daughters will contribute for a long time.
“I really believe the added dollars achieved through their high component milk as well as their dairy frames, capacity, feet & legs and strong mammary systems will see Chelios daughters being very profitable dairy cows within many different management styles.”
GENOMAX™ GRADUATE
ENNVIEW CHELIOS SILLY GP-84-2YR-CAN (VICKI FLETCHER)
BRACKLEYFARM CHELIOS CHEERIO (CYBIL FISHER)
HOW TO USE HIM 0200HO03648
DOMICOLE CHELIOS BAXTER x GOLDWYN
Semex Sire Analyst Mike West has seen dozens of Chelios daughters and offers the following best use practices for this hot, new bull. “Because of his very uniform breeding pattern, Chelios is able to be effective on a variety of matings. When used on shallow-bodied cows that lack angularity he will be able to make his largest contribution,” says West. “He will also work well on those cows that need improvement in overall mammary systems, particularly in fore udder strength. He will mate well on cows lacking in components, boosting fat and protein levels. He should be used on cows that are wider through their back ends, particularly in their pin width. And he will work well on cows that are lower in their pin setting.”
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Dr. Claudio Aragon, Semex Brasil, Dairy Director
SEMEX BEYOND BORDERS: BRASIL According to the Food & Agriculture Organization (FAO) of the United Nations, the world will need to produce 65-70% more food by the year 2050 in order to be able to feed its population. At Semex, Genetics for Life is our commitment to the research & development, the long-lasting and profitable herds and the lifelong partnerships that will be a major factor in meeting this challenge.
Otton FIV da Palma – One of Semex’s star Gyr bulls
Typical Girolando (cross between Holstein and Milking Gyr) Cow
Brasil stands in a position to lead this supply due to the fact that is has enormous crop land expansion capacity, that it holds leading technology in crops like soybeans and that it is one of the world’s largest producers of meat and poultry. With cattle and crop production scattered all over the country, agriculture is responsible for a large part the country’s export market. Still, where milk production is concerned, Brasil struggles, averaging less than 4,400 lbs/cow/year from its nearly 10 million dairy cows. This situation is changing quickly however, with the introduction of new technologies, the more professional producers staying in the business and the widespread adaptation of the tropical dairy breed in various parts of the country.
REM Ricket is one of the main Nelore (Zebu) bulls in the industry
Also, higher internal demand for milk products over the past decade has pushed productivity up. That, along with a more stable economy and higher living standards have led to the increase in the country’s per capita dairy consumption.
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Brasil is a country with continental size. It is the fifth largest country in the world, with 8.5 million square kilometers of land, and it also has the world’s fifth largest population at over 193 million people. With its size and extension, Brasil enjoys a great variety of climates and soil qualities. Because of the distinct climatic differences between the southern, central and northern regions, there is also a distinct pattern in the type of dairy cattle raised in these varying parts of the country. Predominantly Holstein and Jersey farms are found in Brasil’s south, while the popular Girolando (Holstein x Zebu cross) is spread over the central and northern parts of the country. A large portion of Brasil’s 32 billion litres of milk produced (the fifth largest producer in the world) comes from these Girolando cattle.
160,00 150,00 140,00 130,00 120,00 110,00 100,00 2000
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Brasil Dairy Product Per Capita Consumption Source: MilkPoint 2010
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Tairana AI Stud – Open spaces for high quality Tropical breeds Brasil has over 200 million head of cattle, but still has a low artificial insemination rate of 12%. This is an enormous opportunity for growth, and Semex is a major player in this AI market expansion.
Over the last two decades, important genetic programs have been initiated and sire-proving programs are in place now that will help sort the best bulls within this population. This has tremendously enhanced With unequalled dairy bull power and state of the quality of the cattle, resulting in animals the art programs, Semex has been growing at that are more persistent in their lactations and produce more milk per hectare of land, rates of over 35% per year in Brasil. but still maintain the necessary traits that The country’s southern states, with mostly resist ticks and tolerate warmer climates. Holstein and Jersey herds, are highly The advancements this breed has made productive and employ modern technologies. genetically TM over the years is notorious, and This market demands high quality products, it is safe to say that Girolando is amongst the with programs and services making the best tropical breeds in the world. difference. Again, Semex is in great Semex has been investing heavily in the position to service this market. Programs breed over the past few years. Selecting like Repromax™ are largely praised, with TM quality Milking Gyr as the foundation, high exceptional results in these high-producing we are helping to produce some of the best commercial herds. Girolando in the country. Many of these The expansion of the dairy market towards Semex-sired cows even turn out to be bull the central and northern parts of Brasil mothers for the next generation. has made the Girolando breed extremely TM acquisition of the artificial With the recent popular. With compositions that vary from insemination stud Tairana, Semex is now half bloods (Holstein x Milking Gyr), 5/8 and in the position to provide these genetics 3/4 Holsteins, this breed is becoming more nationally, while also exporting these high and more important. These cows have the quality genetics to other tropical climates capacity to supply dairy products in areas around the world. The Tairana facility and TM that are dominated by warm and humid staff are second to none and produce semen climate, and a more pasture based farming complying with the Semex’s strict system. Gold Standard™.
Robot Ready Built for Automation
Show Time Elite Show Sires
Master Series Time Tested Sires
Repromix
High Fertility Pooled Semen
Calving Ease “Semex’s investments in a modern collection facility, its desire toPolled expand the bull power in the Tropical breeds and its search for top genetics is part of its commitmentRed to Genetics for Life.” & White Semex Tropical Genomax Plus TM
TM
TM
TM
TM
Genomax-Repromax-Calving Ease – 11 –
Tairana houses Zebu beef bulls and dairy Zebu bulls (Gyr, Girolando and Guzera). With a capacity to hold close to 200 bulls, Tairana is rapidly becoming one of the most modern facilities for semen technology. One of the star bulls in the stud is a Milking Gyr that is sired by the number one Gyr bull for production out of one of the most respected cows in the breed, Otton FIV da Palma. The Milking Gyr market is responsible for over 730,000 doses sold per year, while the Girolando bulls sell over 400,000 doses, representing a 40% growth per year in each of the last three years.
Robot Ready
TM
“The potential for the Zebu dairy breed to supply milk production in tropical climates is a reality,” says Claudio Aragon, Semex TM Brasil’s Dairy Director.
Show Time
“Brasil has top genetics in these breeds and is working hard to develop genetic programs that will truly express the superior portion of the population. Semex is a major player in this field and holds true to the promise of Genetics for Life by providing what the customer wants and needs.”
Master Series Considering the enormous beef market in Brasil and the fact that the Zebu market has been responsible for over 2.9 million doses of semen sold in 2011, Semex has been focusing TM on building one of the most respected beef Zebu lineups in the country. This top production Zebu lineup has captured the commercial beef market’s attention in Brasil and also worldwide. Those countries that require resistant, high performing, pasture based genetics are very interested in Brasil’s 40 year history in selecting for Zebu genetics.
TM
Repromix
Calving Ease Polled Red & White Semex Tropical Genomax Plus TM
TM
TM
TM
TM
Mark Carson, MSc., BSc. Agr., EastGen, Reproductive Strategy Manager
FOCUS ON THE FIRST LACTATION
Reproduction From a reproductive standpoint, first lactation cows must have better reproductive performance than the rest of their herd mates. This includes better overall pregnancy and conception rates, with pregnancy rates being 5% higher than their second, third and greater lactation contemporaries. Most of this advantage in pregnancy rate is due to better conception rates. You can expect conception rates in your first lactation cows to be about 10% higher than third lactation and older cows.
A Case For Measurement Sometimes overlooked, first lactation cows have different needs than the rest of the lactating herd. They are still growing and maturing, making their nutritional needs much different than their older herd mates. Also, they are often smaller cows and exist lower on the herd’s pecking order, making them more vulnerable to competition for both bunk and stall space. When their unique needs are not met, their performance declines, leading to lower milk production, lower conception rates and increased health issues. These reasons alone build a strong case for measuring their performance separate from the rest of the herd.
If their pregnancy and conception rates are the same, or even below the average of the older cows, you need to assess why these younger cows are underperforming.
Milk Yields Another way to measure your first lactation cows’ performance is by taking a look at 305 milk yields by age at first calving. This will show you any trends in performance, with your best average 305 milk yields coming from your targeted average age of first calving. For example, say your targeted calving age is 24 months. Then, your highest yielding group of first lactation cows should be animals calving in at about 24 months. If they’re not amongst the best performing first lactation cows, then a management or nutrition adjustment is needed. Let’s take a look at the example herd from the Northeast United States in Figure 1. In this particular herd, calving begins at approximately 21 months of age, with the bulk of the calving concluded by 24 months. Although the projected 305 milk yield is trending slightly downward with age of first calving, the overall performance of this group of cows is quite good, with no major declines in milk yield. Also, when you look at the average conception rates, this group looks like they are performing well. But, looking at averages can sometimes lead to missed opportunities to improve and become more profitable. When you look at the conception by age at first calving, you can see that it would be worth investigating why the 21 month old first calving heifers are not performing up to par. In this situation, we would recommend checking the criteria used to select when heifers start to be bred, as well as the body condition score of this group to see how they’re doing in the barn.
Figure 1: Projected 305 Milk Yields & Conception Rates By Age At First Calving At A Northeast United States Dairy
AGE AT FIRST CALVING
% OF CALVES
PROJECTED 305 DAY MILK YIELD
CONCEPTION (%)
21 22 23 24 Total
19 43 34 8 100
24,861 lb 24,497 lb 24,228 lb 23,842 lb 24,358 lb
31% 46% 44% 46% 42%
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You can expect conception rates in your first lactation cows to be about
10
%
Why Do They Retire?
higher than
Another important part of performance monitoring is analyzing third lactation & the reasons that some cows’ lactating careers end during first older cows lactation. Two important numbers need to be measured when looking at culling data: 1) Reason for cull; 2) Days in milk in which the cull took place.
7%
Take a look at some first lactation cull data from this same example herd in Figure 2. When you look at this data, some management priorities immediately jump out.
Mastitis
26
%
At the top of the list, is the percentage of culls related to feet & legs. This shows that the farm needs to assess hoof and genetic management of feet & legs. Environment and management factors such as time spent standing in the free stall barn, exposure to diseases and nutrition should all be considered.
22%
As well, looking at this report should lead to a good discussion on which sires should be selected as corrective matings in the future.
Feet & Legs
Died
Culling Reason
6%
Dairy
7
%
Injury
The other culling reason that sticks out for this herd is ‘died’. When looking at cows categorized as ‘died’, the biggest question that needs to be answered is when in the lactation did these cows die? If they are leaving early in lactation (before 90 days in milk), then you should take a deeper look at how your first lactation cows are doing through their transition periods. One item to look at in particular is calving ease. Monitoring the calving ease performance should be a critical part of your transition cow management program. Investigating milk yields, conception rates and health by calving ease can give you useful insight into calving management. If you’re having too many hard calvings, then sire and body condition scores need to be examined. If you notice that your unassisted calvings are doing poorer than calvings that were assisted, you need to examine the surveillance of your calving pen and timing of intervention.
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17
%
15%
Low Production
Reproduction Figure 2: Stated Reasons for First Lactation Cows Leaving The Herd For A Northeast United States Dairy
Mike North, Sr. Risk Management Advisor, First Capitol Ag
GET THE NEW YEAR STARTED RIGHT According to statistics, most peoples’ New Year resolutions have by now either been put to the side or are very near failure. That is not to say that the resolution process is completely worthless. Resolutions are made as a response to an area in our life where we feel we could use some improvement. For most dairymen that I talk to, one of the areas they commonly identify as their weak point is marketing/risk management. Given that this area of their business was historically irrelevant, it is easy to understand why they observe this as a shortcoming in these increasingly volatile times. In an effort to check where you are at and what you can do, let’s sort through a few questions aimed at your 2013 activities:
1. What efforts must I make to source feed?
For some, especially in the more northern parts of the country, forages and grain are more plentiful, albeit not excessive. For those outside that region, finding access to these needed inputs was and is a continued concern. Very likely, your ration has changed. As you work the wrinkles out of this issue, be sure to take into consideration seasonal price patterns, transportation cost, quality levels, etc. All of these things will play into your cost structure going forward. Most important, however, will be availability. It is tough to get milk from a cow without feed. Even the best price risk management strategy cannot feed your cows. Make sure you have available supply. This message rings true even for those who were blessed with rainfall and good local feed supplies. Proteins could pose a threat as we work into the new year. Even though soybean yields were not nearly as disappointing as corn, soybean balance sheets are now as tight as ever. Presently, the USDA is building their balance sheets around the expectation of a record large South American crop. But, what if they don’t get one? Very soon, we will have some answers as to what this will look like. In the meantime, February often offers a second chance to anyone who may have missed the seasonal lows for these products last Fall. With current pricing, I do understand the lack of excitement surrounding these purchases. However, when considering the fact that soybean meal spent most of the 2012 summer at levels near $550/ton, it is easy to make a case for much higher
protein prices if there are any hiccups in South American production… Or for that matter our own. Having physical supplies booked will go a long way to ensuring you aren’t stuck searching for protein this coming Spring and Summer. You can defend these purchases with put options if you fear booking at too high a level.
2. What risk exists for feed prices to rise?
A quick review of the charts shows the market’s potential to rebound to higher levels. It goes without saying that a market can at the very least repeat what it has already done (See Charts 1 & 2). With that in mind, corn can return to prices just shy of $8.50/bu ($303/ton) and soybean meal can return to levels north of $550/ton. While analysts use different technical indicators to suggest where prices will go, the fact remains that they are clueless as to whether they will go there. As you assess your own risk, recognize that prices can increase at least 15% (a measure of the move back to the highs of both corn and soybean meal). Both of these markets have a seasonal tendency to this time of year into the Spring and Summer. Given the tightness of the balance sheet, there is already enough fundamental support to maintain this seasonal behavior.
3. What risk do I face in milk price?
Over the years, producers have increasingly begun to address the extreme volatility common to the milk market. That volatility is present as a direct function of milk’s perishability. Slight supply changes cause abruptly large price changes. In 2012, aggressive culling that began in late Spring and early Summer as a response to lower profitability and was complimented by a historic drought. This fact alone will go a long way to supporting or moving milk prices higher. However, in the short term, risk still exists. While many have focused on the potential impact of drought, processors continue to produce products available for domestic and world buyers. Last year’s holiday
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CHART 1 - Corn
buying was able to rally US prices to strong levels (cheese north of $2.00/lb), while world markets sagged to levels not seen since summer and late spring (see Chart 3). As holiday purchases came to a close, cheese fell 30 cents in a week. Going forward, will the world buyer step up and become willing to pay more for product or will product prices (and then consequently milk prices) retract to meet the world buyer. What if both happen? Last winter, markets retracted from a Fall high of $2.00/lb to settle into a range that spanned from $1.45 to $1.65/lb for a period of seven months. The market cleared a lot of product and exports established new records of volume. If we were to settle into a similar price zone while other products manage to show similar price performance, we could expect to see Class III prices somewhere between $15 and $16/cwt. This is the risk we face in the milk price arena. Are you prepared? What strategy will you use to defend yourself from this scenario?
Work through the questions, CHART 2 - Soybean find solutions and take action.
4. What can I do to manage milk prices?
There are obviously many ways in which you can address this. As you have worked through these questions, hopefully your answers have both revealed what kind of margins you are dealing with, and whether you should become aggressive in your risk management pursuits or maintain a more passive approach. For those seeking to be more aggressive, selling milk is an approach you may choose to take.
For example, you could contract milk with the plant (you may substitute such a sale with a sale of futures to maintain a bit more flexibility, but you should prepare for the coinciding margin responsibilities) for the first half of 2013 and purchase calls to allow for any upside opportunity that may develop. The more passive individual may choose to purchase a simple put option for the period. While there are many approaches to managing the risk, you must find a strategy that fits your business model, emotional comfort, cash flow, etc. Prior to their implementation, please be sure to discuss any of these approaches with your market advisor. Then, more importantly, you must develop a plan that you will execute. While many resolutions are broken, this is one that is worth sticking with. Work through this exercise of acknowledging and defining your risk and then build a plan to address it. I was once told that a failure to plan is a plan to fail. Don’t let the business of the season or the volatility of the market scare you from doing what is necessary to make your business succeed. Work through the questions, find solutions and take action. If you have questions of your own regarding any of the items we have discussed, feel free to call or email. Have a blessed 2013!
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Work through the questions, find solutions and take action.
CHART 3
PUT TIME ON YOUR SIDE™
C: 0 M: 69 Y: 100 K: 4
C: 0 M: 79 Y: 100 K: 11
PMS: 173
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(877) 545-ai24 | www.semex.com – 16 –
C: 0 M: 46 Y: 73 K: 0