Milk Prices

Everyone has heard about the tumbling Basic Formula Price (BFP). Two questions are whether the BFP is based on a dependable pricing mechanism, and whether Florida dairymen selling into essentially a Class I market should experience the wild price rides currently being caused by cheese and butter prices monitored by the BFP.

USDA reports that "recovering milk production, slowing sales, and a premature end to seasonal stock declines caused prices of milk and cheese to start falling from record summer levels. However, the size of the price drops soon exceeded what could be easily explained by the small, gradual causes."

To put this in perspective, the October drop of $1.24 and the November drop of $2.52 means the BFP has dropped $3.76 in two months. The November drop is the largest single month decline ever for the BFP or the M-W price series (what the BFP replaced). The November BFP is $1.26 lower than it was in November 1995, and this is the first time since August 1995 the BFP has been lower than the same month the previous year.

Since the production and market realities don't seem to justify these wild movements, many feel the BFP as a pricing mechanism over reacts. It is based on the National Cheese Exchange which is a thin market, and the result is that it reflects the method of pricing rather than supply and demand.

The effect on the Class I Federal Order minimum prices is shown in the accompanying table. For reasons discussed in the previous newsletter, the effect is being felt this month (December) and will be much worse next month. The BFP is expected to drop another $.30-$.50 for December.

Last month we mentioned that the impact of all this on the Florida mailbox milk price will depend on the premium, or the amount above the Class I price dairymen receive for their Class I sales. The reason I have included Atlanta in the table is that Florida Coops can't increase the premium without increases in other Southeast locations. Florida would simply price its milk out of the market compared to alternative nearby sources.

We see Florida (table below, using Miami as an example) increased the premium $.43 in December when the Class I price fell $1.24. The premium did not increase in the Atlanta market that month. For January, the premium in Atlanta increased $.89 (the effect being as if the BFP only fell to $12.50 rather than $11.61) and in Miami it increased $.73.

Although these increases don't remove the effect of the declining BFP, they buffer it a little. The ability to hold milk prices in Florida when the BFP falls depends on others holding the price north of us. An association of cooperatives in the Southeast (Dairy Cooperative Marketing Association or DCMA) is trying to coordinate efforts as a unified group to support prices throughout the Southeast.
- Michael DeLorenzo

Mycoplasma Mastitis Update

In the last several months we have had several mycoplasma outbreaks, more than 50 cows cultured for mycoplasma. In one herd an old, large cooling pond was cultured positive for mycoplasma. This herd also had many pulsators not functioning properly. The pulsators were repaired quickly and cows left the pond because of cool weather. This outbreak seems to be over.

Another herd changed its calving area to a covered sand lot and incorporated it with the pot herd. It seems that every cow that was positive for mycoplasma was a fresh cow or had been in the pot herd.

Now that cooler weather is here, if you are having mastitis problems I would sample my ponds for mycoplasma, if not drain or pump out the ponds. Let the sun work on them and add some lime to make yourself feel good. Folks who dig new ponds every year probably don't have to worry. I would not quit using ponds, just keep them cleaner.

We have cultured mycoplasma out of a cow wash pond, so keep them cleaned out. If nasty, power wash them.

Since mycoplasma lives in the ground, calving areas should be grass and clean. Change the sand often in pot herd lots if small. Separate lots for fresh cows and mastitis cows would be a good practice in herds that can do so.

Cull all cows with more than one quarter with clinical mastitis that will not clean. If you have many of these, you better get a bulk tank culture. However, one half of all mycoplasma cows will produce normally in the next lactation. Cull by clinical signs - mastitis that will not clean up. But depopulation of the herd without finding the reason for the outbreak isn't a solution. If you think you need help, give one of us a call, we're in the book.
- David Bray

Idaho

Idaho and Florida had similar situations in 1989, each state had about 180,000 cows. Today, Idaho has about 220,000 cows to Florida's 165,000 cows. Idaho has the fastest growing dairy industry in the U.S. While on vacation, my son, Jay and I visited southern Idaho in October to determine the reasons that the two states have shown such differences in recent growth trends.

We visited 4 dairies in the Magic Valley area around Jerome and 3 dairies in the Idaho Falls region. The regions differed significantly due to climate and closeness to their markets. Cheese plants are located near Jerome and competition results in over-order prices and quality or protein bonuses. The herds we saw ranged from 180 to 2,500 cows and generally averaged above 20,000 lbs. One herd had 250 registered cows that averaged more than 24,000.

The Magic Valley is the area of great growth. Some dairies in that arid region have only parlors for facilities, not needing barns since rain or snow is an unusual event. Large bales of straw are available at $35 per ton or less. They are used as wind breaks until opened to make beds for cows when low temperatures are expected. In the Idaho Falls area, herds are smaller, averaging about 100 cows, have more facilities to house and protect cows (from the colder and wetter climate) and have higher hauling rates, up to $.80 per cwt.

Alfalfa makes up about 35-40% of the typical Idaho ration. It is fed free choice several times per day. High producing groups get prime alfalfa, low groups receive the first cutting. Alfalfa is supplemented with barley and soybean meal. Whole cottonseed has only recently been fed and is increasingly used since rail car back hauls from the southeast have lowered hauling costs $10 per ton. Feed costs were typically about $4 per cow per day and total cash costs were about $11.50 per cwt. The milk price was $16 at that time. The difference between Class I and Class II prices was only $.60 per cwt.

Alfalfa

Alfalfa is grown under irrigation on about 1.1 million Idaho acres. Yields average about 5 tons per acre per year (3 cuttings). Nutrient testing is done routinely. Relative feed values are used to determine the grade and price (along with color, smell, etc.).

Prices have averaged about $85 since 1993 but are about $93 per ton in 1996. In fall 1996, there is a shortage of alfalfa in southeast Idaho since spring rains delayed harvest of the first crop which reduced the yield of later crops. The limited amount of available prime alfalfa was fetching nearly $100 per ton in October.

The demand for alfalfa is growing in Florida. It is estimated that $100 million is spent annually, primarily by Floridian horse and dairy producers. A major factor is freight, with rail charges at about $80 per ton if cars hold 100 tons. There is a range of 75 to 115 tons per car depending on car size, bale size and bale density. Three plants now shred and compact alfalfa for transport.
- Russ Giesy

Buying Modems With Hardware Error Detection and Correction

The current recommendation from DRPC Raleigh is to buy a modem with the fastest data transfer rate available, error detection/correction and data compression installed in modem firmware, and buy from a list provided by DRPC. Although the modems connected to the DART computer at DRPC support up to 19,200 bits per second (bps), there are modems available that have a faster transfer rate. Faster modems may be useful for accessing other bulletin board services (BBS) or the Internet. In fact, the modems connected to the PCDART BBS transfer data at speeds up to 38,400 bps. The modems connected to the DART computer are restricted to 19,200 bps by the current mainframe hardware.

Recently, the DRPC Computer Support Group has helped several users who have bought modems which some computer salesman assured them included "error detection/correction and data compression." However, the implementation of error detection/ correction and data compression schemes by some modems is in the software, not in the modem firmware. This will not work with PCDART.

Avoid modems that describe their features with phrases such as "WinRPI for data compression and correction," "works with any Windows software," or "works with DOS communications software that is RPI compatible." Both you and our Computer Support Group have better things to do than test modems.

Please notice that in order to take advantage of all of the error detection/correction and compression routines included with your modem, you must turn on these features. Since all modems are different, you should read in your modem manual to find out how to do this. Look for references to "V.32bis," "V.42bis," "LAPM" or "MNP" to determine how to do it. If the method to turn on these features is with software, add the appropriate commands after the "AT" in the "Dial Command and Phone Number Sequence" in application A, item S.

Also, the PCDART software checking option is automatically turned on unless you put in the appropriate "Modem Error-Chk Message" in application A, item S. This message varies but some of the messages are LAPM, REL or MNP. If the message returned by your modem to the PCDART communication program matches the message in "Modem Error-Chk Message," the software checking normally done by the PCDART communication will be turned off. Your download speed will be significantly improved.
- Ron McCuddy

Politics of Seasonal Plans

Five southern market orders will lose their seasonal base plans on December 31, 1996 because congressional authority for the plans will expire. These orders range from Louisiana to Georgia to southern New Jersey to southern Indiana. Congressman Steve Gunderson (Wisconsin) took credit for killing the authority as reported by Bill Thomas, Extension Economist at the University of Georgia, in the recent issue of Southeast Milk Producer. It is interesting that those in these orders fought hard to maintain the plans while Florida dairymen voted down a seasonal plan earlier this year that they had implemented a few years ago.

Besides the fact that some producers had already made adjustments to their operations under the existing seasonal base plans, without a base plan there will be increased incentive for out of order milk to be pooled in the southern orders during the Spring flush. This will reduce Class I utilization rates and, therefore, reduce the blend and milk price to producers in these orders. The loss can also threaten the needed over order premium according to Thomas. The Class I utilization rate in the Southeast order was 75.6% in March 1996, while is was 38.2% in Texas for the same month. It would not be difficult for a plant or cooperative to get its milk pooled in the higher utilization order. Current seasonal base plans "provide an economic incentive to produce more milk in the Fall to receive a high base price in the Spring", which will be lost without the seasonal plans.

Loss of the seasonal base plans is expected to increase seasonality of production. This means increased balancing costs to producers caused by high give-up charges and freight when obtaining supplemental milk, and reduced opportunities to dispose of excess milk in the Southeast. Who benefits? Those outside the southeast. They want a part of the market. The opposition to the base plans came from parties outside the orders with the plans, according to Southeast Milk Producer. Regional politics continue.
- Michael DeLorenzo

Feed Prices

With grain prices easing and the November mailbox milk price higher than October, the Florida milk:feed price ratio moved higher again in November. This will change rapidly in the next few months because commodity prices are not expected to soften significantly while milk prices fall. The USDA milk:feed price ratio peaked in October indicating a difference from the Florida dairy situation.

- Michael DeLorenzo