Western Dairy Grist - Spring 2024

Dairy Grist

WESTERN & PRAIRIE EDITION

SPRING 2024

Dear Milk Producing Friends,

Having experienced “the winter that wasn’t” in most parts of the country this year, and swiftly moving toward official Spring (March 19th), the national lack of snow are turning growers’ minds toward moisture levels and early growing conditions. As described in Graeme Crobies’ (FFC Senior Economist) article below, with the tumbling prices for corn and soy in the last quarter, purchased feed costs in 2024 will be materially lower than 2023, helping to expand milk producer margins. This coupled with forecasted demand, lower butter stocks, and the promise of lowering interest rates later in 2024, this year holds promise to be significantly more profitable than the previous two. Also on the farm economics front, Jayden Macpherson, in her article, outlines the farm inventory reduction, and improved cash flow associated with beef/Holstein cross breeding approaches that are quickly gaining popularity across the country. Tight dairy producer margins and high beef prices are certainly revolutionizing dairy herd breeding strategies!

2024 Dairy Outlook: Returning to a Sense of Normalcy

by: Graeme Crosbie, Senior Economist at FCC

*This article was originally published on February 7. Since then, the P5 has announced another incentive for March and six more for the late summer/early fall.

Higher processor demand and still-low butter stocks are setting the stage for more milk production from Canadian dairy farmers in 2024. This, combined with strong cull cow/calf prices and stabilizing – though still high – input costs provide context to our average gross margin estimates for 2024, which look better than they have in the last few years (Figure 1).

During the week of January 22nd, we were pleased to relaunch our biennial Ontario Dairy Symposium Series, hosting producers in Kemptville, Port Perry, Ingersoll and Drayton. It was wonderful to have the opportunity to gather and learn together as Nigel Cook (University of Wisconsin) and Christine Brown (OMAFRA) presented compelling information on the impact of cow comfort and heat stress abatement as well as the value of manure respectfully. Our own Jeff Keunen has provided a helpful summary of their talks in this edition of the Grist. If you are interested in receiving the full slide deck of these talks, as well as a presentation that I provided on the Sustainability of Canadian Livestock – the other side of the story, don’t hesitate to reach out to gvfmarketing@grandvalley.com or visit our website to download directly at grandvalley.com/dairy-grist-blog/

Wishing you a blessed Easter and a smooth and effective planting season!

Sincerely,

Ian Ross President & CEO, GVF group of companies

*Gross

**The

Sources: Statistics Canada, FCC Economics

In December 2023, the Western Milk Pool (WMP) announced that, effective February 1, 2024, quota increases would take effect. The increases are not distributed evenly across provinces (see Table 1) due to a ‘rebalancing’ effort to ensure all four provinces in the WMP are on an even playing field. No quota increases in eastern Canada (i.e., the P5) have been announced at this time.

Province Quota increase (%)

Manitoba + 1.50%

Saskatchewan + 2.00%

Alberta + 2.25%

British

Additionally, a farm gate milk price increase of 1.8% will go into effect on May 1, 2024. Between increased production and slightly higher farm gate prices, total farm cash receipts (FCR) for the dairy sector are forecast to increase 3.7% this year. Continued strong cull cow/bull calf prices in 2024 will provide an additional boost to profitability.

+ 3.00%

Trends to monitor in 2024

The top economic trends likely to impact dairy operations in 2024 include:

• Feed prices and availability

• Butter stocks

• Retail demand and inflation

Feed prices and availability

Feed availability and pricing will be the ultimate determinant of profitability in 2024. A record US corn crop in 2023 sent corn prices tumbling to a three-year low, easing the burden on producer feed costs, particularly in the east. With corn being the market-maker in other feed grain markets, this put downward pressure on feed wheat and feed barley prices even where drought limited wheat and barley production. A near record amount of US corn imports this year is also helping keep a lid on feed prices in the west, though prices remain elevated. FCC Economics is forecasting feed costs to be lower in 2024 but trend higher throughout the year.

Remember that feed costs are opportunity costs; for operations that grow some or all of their own feed, costs will likely be lower than the numbers reported in below.

P5 when butter stocks were at near-historical lows.

Retail demand and inflation

Demand for dairy products continues to shift but seems to be holding up relatively well in the face of tighter consumer budgets. One reason is that increases of dairy product prices in 2023 were lower than many other major food products (Figure 4).

Hay prices have been and will continue to be stickier in the west, more reflective of local market dynamics and the shortage of product. Producers will be crossing their fingers for good moisture in the spring and a strong first cut.

It’s recommended that each producer understand their own operation’s cost of production structure and identify some risk management strategies to minimize risk under different feed production or feed price scenarios.

Butter stocks

As was the case in our 2023 dairy outlook, butter stock levels are a trend to monitor this year. Butter stocks are higher than they were at this time last year but are still low relative to recent history (Figure 3).

Sources:

Canada’s Food Price Report 2024 forecasts that dairy product prices will increase 1 to 3 percent in 2024, tied with fruit for the lowest projected inflation rate among major food categories. If this forecast pans out, it will provide dairy products with a (relative) price advantage in the grocery aisle at a time when consumers are under extreme strain. Population growth is an additional driver of demand, helping provide a boost to sales when per capita consumption of food is declining.

Steady demand for dairy products is reflected in other data as well. On a monthly basis the Canadian Dairy Commission (CDC) estimates total requirements (TR) which is a measurement of how much butterfat is required by Canadian processors. The CDC estimates that TR grew by 2.4% in 2023, and the quota increase in the WMP was a result of anticipated increase in processor demand (i.e., TR) in 2024.

The Bottom Line

It has been a volatile few years for dairy producers, but 2024 is shaping up to be calmer – a return to a more normal environment, if you will. Anticipated interest rate cuts in the second half of the year will provide further relief to producers. How the growing season unfolds in the Prairies will be the ultimate determinant of profitability for western producers. Graeme Crosbie, Senior Economist. Republished with permission from FCC/Graeme Crosbie

GVF Dairy Symposium Recap 2024

by: Jeff Keunen, M.Sc., Ruminant Production & Robot Improvement Specialist

Grand Valley Fortifiers was pleased to once again be able to host our bi-annual Dairy Symposiums during the 3rd week of January. More than 400 guests joined us over the course of 4 days in Ontario to hear our guest speakers, who brought valuable insights, challenging ideas, and practical tips for dairy producers to take home and implement on their operations. We were privileged to have Dr. Nigel Cook from the University of Wisconsin and Christine Brown from the Ontario Ministry of Agriculture, Food and Rural Affairs join us for the 4 days. Below are some highlights from their talks.

Cow Comfort 2024: Maintaining Social Trust Through Housing that Optimizes Welfare – Nigel Cook

Social trust is one of the 3 pillars of sustainability that helps producers and the public establish an understanding that the food they consume is safe and the animals that produce the food are well cared for. With more than 90% of the North American consumers looking to consume more milk, meat, and eggs from our animals, it is paramount that we maintain their trust in our food supply, or they will start to consume less. When we do not meet consumer expectations, trust erodes, consumption decreases, and change is invoked. This change may be farmer organization driven (educated and process driven) or may end up being consumer and retailer driven (emotion based and outcome driven) to establish standards for producers to meet and ensure consumers are confident in the food choices they are making.

Low butter stocks leave little room for error should production not meet anticipated demand and will be a key reason why more incentive day announcements may be forthcoming for P5 producers. One incentive day has already been announced for February due to “a higher than usual market demand at the beginning of 2024.” Last year, there were six incentive days in the

As we look to the future in our dairy industry, we must recognize what shortcomings in animal welfare our facilities present and how we can work towards improving cattle welfare to not only increase the productive life of our animals, but also provide quality, nutritious food products that the consumer wants to enjoy. With the implementation of the updated Canadian Code of Practice and changes becoming required by 2027, we can look at our barns and facilities to keep cows healthy and injury free to maximize welfare.

The key components of cow comfort include providing cattle with shelter from climate extremes, access to feed and clean water, ability to walk and exercise, adequate sleep and optimized resting behaviour. Dr. Cook took a deeper dive into the topic of optimized resting behaviour, which can be described by the total lying time of cows, number of lying bouts and lying bout duration. When looking at the peer-reviewed scientific data, it is clear that deep loose bedding is best for cows. (Figure 1.) Deep bedded sand stalls increase lying time significantly over any other stall type, and results in lower incidences of lameness, hock, and knee lesions. Deep bedding provides cushion, traction, and support for the cow to facilitate rising and lying movements.

Bed

Combining a good stall base with a properly designed stall divider loop is needed to properly index cows, keep them clean and free from injury from neighbouring cows. A well-designed stall will provide the cow appropriate resting space but will prevent them from defecating in the stall as the neck rail will encourage the cow to back up when they get up in the stall. Dr. Cook mentions that seeing some perching in deep bedded stalls is fine as this forces manure into the scrape alley. On the other hand, if a producer is using mats or waterbeds, we do not want to see perching, but rather the cow standing with all four feet off the cement and in the stall.

Heat abatement and providing adequate cooling for cows during periods of heat stress is another area of cow comfort that has been extensively studied. It is well known that as air temperature and thermal heat index (THI = temperaturehumidity index) increase, cows lying time decreases by as much as 3 hours/ day (Figure 2). More recently, it has been shown that the negative effects of heat stress on a dry cow not only negatively affect the cow’s health and milk production, but also her daughters and granddaughters future milk potential! Keeping cows cool while they are lying in their stalls is the key to alleviating the negative effects of heat stress. Cows that are eating or standing have some cooling already happening, but a cow that is lying down is warming herself. Thus, keeping air speed over the cows at lying height (0.5 m above the stall base) is the key to cooling cows properly. With the various styles of barn types built for dairy cows (natural ventilation, tunnel ventilation, cross ventilation, or combinations of these) the need for fans to keep cows cool is paramount. Providing air speed over cows at 1-2 m/s (200-400 ft/min) at lying height increased lying time even as THI increased and maintained body temperature through the increasing heat stressed environment. Milk yield was also maintained for these cooled cows rather than the dramatic decrease we often see from heat stressed dairy animals. Producers can map out their stalls in barn for air speed to make decisions on fan placements, fan angles and number of fans needed in the barn to properly cool the cows. Research has shown that box fans or basket fans have a significant advantage over the high-volume low speed fans for getting the desired air speed at stall level throughout the entirety of the barn. The use of baffles in cross ventilated barns has become common to increase air speed in this style barn and provide adequate coverage to all stalls in the barn.

Heat Stress Consequences: Behavioral

An achievable target for average resting time based on healthy, non-lame cows, housed in deep-bedded comfortable freestalls, TMR fed, spending >21 hr/day in the pen at 100% stocking rate, with a favourable resting microenvironment, is 11.5-12.5 hr/day, with mean lying bouts of about 1.2 hours. Producers should be aiming for this level of lying time by improving housing environment and

supporting cow comfort.

Maximizing the value of the other commodity: Manure

– Christine Brown

Manure has been shown to have long term benefits on soil health and crop yields, with dairy and beef farms having the most resilient soils due to both manure and perennial forages being a significant portion of the rotation. Dairy manure brings with it valuable sources of Nitrogen (N), Phosphorus (P) and Potassium (K) along with many micronutrients and organic matter that can replace purchased inputs for crop production. Valuing the manure in relation to todays’ input costs, 1.13 million imperial gallons of liquid dairy manure is worth $52,000 of N-P-K for crops.

How can we maximize the value of this on farm resource that is continually produced?

01. Sample and test manure regularly. Sampling your manure will allow you to know the dry matter, total N, Ammonia N, total P & K, level of micronutrients (S, Ca, Mg, Mn, Zn, B), pH, Carbon: Nitrogen ratio, organic matter, and total salts. Knowing these nutrient levels combined with your soil samples can help you make informed decisions on applying manure to our fields.

02. Follow the 4 R’s of manure application: Right Source, Right Rate, Right Time, Right Place. All these rules are important, but the correct timing of application will have the greatest impact on yield and soil properties. When applying manure on forages fields producers should be applying as soon as possible after harvest to minimize crop damage and improve yields.

Total Nitrogen in manure is comprised of organic N + ammonium + nitrate. Organic N is more slowly available to the plant over time, while ammonium is available immediately to the plant but can be easily lost before being used. Trying to time application to maximize N available for crops when it will be most needed is key to getting the biggest return of N from your manure. In addition to manure N, some commercial N will need to be purchased to maximize crop production. In order to maximize commercial N efficiency, producers should apply recommended N rates for crops and utilize N credits, consider injection/ banding of N vs surface broadcasting (savings of 45% N at 25C; 7% at 15C), apply at correct time (side-dress vs ahead of planting) which can save 20% N, and use nitrogen inhibitors (up to 40% N savings depending on weather and Nitrogen type.

Manure adds complexity to fertilizer management and producers need to consider manure credits, nutrient availability and timing, and additional fertilizer needs for their crops. Testing manure will help you more precisely apply needed nutrients to your soils and crops and allow you to apply to fields that may have the highest need for nutrients and organic matter. 4 R management will provide you the highest value for your manure and will contribute to improving your soil health.

Scene & Herd

with: Brian Nelson, Dairy Specialist | Grand Valley Fortifiers

Think Before You Cut – The Impact of Forage Quality on Feed Costs

With first cut haylage only a couple months away, I wanted to look at how forage quality impacts overall ration costs. The goal is always to produce high quality forages to supply large amounts of energy and protein in addition to digestible fibre, to promote high milk production, healthy cows, and help lower feed costs. However, the summer of 2023 was challenging as the lack of sunshine, smoke from forest fires, and frequent rains prevented many of us from making our best haylage.

Overall, 2023 can be summarized as a year with lots of average or slightly below average haylage that needs to be fed. Fortunately, this has resulted in strong butter fat test across the province, due to higher amount of fibre in the rations and slower rate of fibre digestion. However, this does create some additional ration costs to maintain the targeted level of milk production. For interest, let’s consider 3 rations with different qualities of mixed haylage and the impact on overall ration costs. In this example all 3 rations use all the same ration ingredients, the only difference being haylage quality. These rations were balanced 50-50 with corn silage and haylage on a dry matter basis. For simplicity of comparison, all protein and minerals were assumed to be purchased and dry corn was considered a homegrown feed. The rations were all balanced for 35L of milk at 4.2% BF. The mature haylage (14%) was valued at $60/tonne, the average haylage (18%) at $77/tonne, and the excellent quality haylage (22%) at $90/tonne.

The table below shows a breakdown of the as fed amounts for the 3 rations along with the ingredient costs.

Figure 1: The impact of bed surfaces on total lying time (hours/day)

Figure 2: The Impact of air temperature on lying time

Ration Comparisons When Feeding

These costs have been broken down further into homegrown and purchased feed costs, and further broken down to costs per cow per day, and cost per liter of milk. There are a few differences to note between the rations. Surprisingly, there’s only a difference of $0.40 per cow per day in total ration costs between the three rations. However, when you look at the difference in the purchased feed costs, there is a difference of almost $1.00/cow/day. This is due to the increased protein content of the higher quality haylage, but also due to the increased digestibility and lower level of indigestible fibre in the haylage allowing for a higher forage ration.

The total percent forage of these rations ranged from 48% to 61%. This allows for 1kg less soymeal and 2kgs less dry corn in the excellent haylage ration and a healthier higher forage ration for the cow.

Costs

on Quality of Haylage Fed:

Of course, this example is over simplified. Many producers were able to blend haylages, feed more corn silage, or balance for less milk and milk more cows. The purpose of this exercise was to put a dollar value on haylage quality in a ration. At the end of the day, on a 100-cow herd, there’s a savings of $50$100 per day in purchased feed costs. Although we can’t control the variables of weather, striving for optimal haylage quality still has a huge impact on our ration costs, and allows cows to be fed higher forage diets while producing the same level of milk.

with: Jayden Macpherson, Ruminant Nutrition Consultant | Grand Valley Fortifiers

What’s the Beef? How can you turn Holstein x Beef Crosses into Cash Flow?

Crossbreeding dairy cows with beef has been a hot topic in the dairy industry recently for very good reasons. For years our industry has already been challenging traditional views on heifer raising and inventories, as sexed semen became more widely used and costs of production continued to rise. Canada also now finds itself facing record droughts, resulting in forage inventory constraints, on top of rising interest rates. Many producers are finding themselves with lower cash flow than ever before and are taking harder looks at their economical sustainability. What is tying up the most cash? Most producers will likely answer feeds costs, and there’s no doubt in today’s market that those are significant. However, if you dive into the numbers, you may find the answer is the inventory you are holding. That inventory is a broad spectrum of things, from feed to machinery to animals. Moving some of your animal numbers into beef x dairy crosses is a great way, in this current market, to turn your inventory into a cash flow opportunity. Across the Canadian prairies and U.S., the beef industry has taken the same big hits over the last couple of years caused by the drought and high feed prices, resulting in a record loss in the amount of beef animals being raised. This is now driving up beef prices, with the demand for beef remaining consistent and our

exports rising, now eyes are on the dairy industry to help bridge the gap. Today, many companies have now launched sexed Holstein x angus cross programs that focus on high quality, terminal crosses designed to maximize gains and feed efficiencies. These animals are now being reported to perform as well as conventional beef animals, and dairy producers can get paid similarly for dairy x beef crosses. Some semen companies now offer programs to facilitate the purchase of calves for $500-$700 or more, which is a very nice cash influx for only changing your breeding strategy to incorporate beef. So, how can dairy producers really take advantage of this? First, you need to understand what heifer inventory you need to maintain your herd and how much beef x dairy breeding you can afford to do.

There are two calculations for heifer inventories:

01. Replacements needed per year: (herd size) × (cull rate) × (age at first calving ÷ 24) × (1 + noncompletion rate for heifers).

02. Heifers produced per year: (herd size) × (12 ÷ calving interval) x (percent female calves) × (1 – calf mortality rate) × (24 ÷ age at first calving).

*Calf mortality counts deaths in the first 48 hours after birth.

*Non-completion rate is the proportion of heifers born alive that leave the herd before first calving

In this example, we are going to work around the first calculation for a 130cow dairy (milking and dry), with a cull rate of 20%, and a non-complete rate of 4%. This farm needs to have 163 calving’s per year or an average of 14 calves per month (130 x (1 + 0.2) x (1 + 0.04) = 162.24/12 months = 13.5 calves) to ensure they can sustain their milking herd. They target a rate of 30% two-yearolds in the milking herd so they need to have at least 4 of those 14 calves to be heifer calves (13.5 calves/month x 0.3 = 4.1 heifers/month). Therefore, if they have a calving interval of 24 months, they will need to have at least 97 heifers (4.1 heifers/month x 24 months) in their youngstock inventory. In case there are any issues with any heifers this farm carries an extra 5% in their youngstock inventory, so they aim for around 114 heifers (13.5 calves/month x 0.35 = 4.7 calves/month / 12 months = 113.6 calves/year). To ensure they have 114 heifers in their inventory they use 70% sexed semen in their herd. For the remaining 30% they use a sexed angus semen. They raise the beef x dairy calves through their calf program to around 350+ lbs at 4 months and then they sell them at market prices. This farm uses milk replacer that costs $95/bag and they feed the crossed calves 6 L/day. They buy in their commodities and make their own calf mash on farm using the Grand Valley Fortifiers calf premix, so their total grain cost is around $500/mt. The calves pick up in grain intake between 4-8 weeks of age, so they average around 1.5 kg/day and are weaned at 60 days. Between the milk placer ($256.50) and calf mash ($22.50) the total preweaning feed costs are around $279/calf. The calves then stay on their calf mash for another two months until they are sold at market which costs another $90/calf (average 3kg intake x 60 days x $0.5/kg). The total feed costs to raise a beef x dairy cross calf is $369. Market prices will always fluctuate, but as of the beginning of February, you could average $4.40/lb for a 350 lb calf, making the gross profit $1,540/calf and a net profit after feed costs $1,193/calf. If this farm fed whole milk at a cost of production price of $0.30/L their net profit would be $1,319/calf. With 30% of their calving’s (49) being angus crosses this brings in $58,481/year on milk replacer or $64,655 on whole milk. If they had chosen to sell day old calves for $700, they would only have added $36,400 to their cash flow.

Since they aren’t raising as many dairy heifers and have the space in their calf facilities available, raising beef x dairy through their calf program to 350+ lbs has been a great way to improve the farms economical sustainability. Raising crosses past 350 lbs could still yield great returns if the facilities, feed inventory, and man-hours are available to maximize their feed efficiency. Previously, this farm bred the remaining 30% to conventional semen and raised around 139 replacement youngstock. In addition to the cash flow from beef sales they now save around $81,250 in feed costs by not raising another 25 heifers at an average total feed cost of $3,250/heifer. In total, cash flow has improved to $139,732 on milk replacer or $145,906 on whole milk. If breeding to beef isn’t already a part of your breeding strategy, you may want to run your own numbers and give it a try!

Thought of the Day!

“God does not give us everything we want, but He does fulfill His promises, leading us along the best and straightest paths to Himself.”

– Dietrich Bonhoeffer