December 2005

January 1 Cattle Inventory Up 2 Percent reports the National Agricultural Statistics Service (NASS). All cattle and calves in the United States as of January 1, 2006, totaled 97.1 million head, 2 percent above the 95.4 million on January 1, 2005. All cows and heifers that have calved, at 42.3 million, were up 1 percent from the 41.9 million on January 1, 2005.  Beef cows, at 33.3 million, were up 1 percent from January 1, 2005.  Milk cows, at 9.06 million, were up 1 percent from January 1, 2005. The report was released on January 27, 2006.  National and state data are available at http://www.usda.gov/nass/PUBS/TODAYRPT/catl0106.pdf.

Global growth shifts discussed is the “Business” feature in Feedstuffs (Dec. 12, ’05). “Expect a shift in global growth away from the U.S. and toward Japan and the Eurozone, U.S. interest rates to creep up a bit and the U.S. stock market to remain flat in 2006, the global head of financial research for Rabobank International (Bernard Walschots) told a National Grain & Feed Assn. meeting. . . . Although U. S. growth will weaken, inflation is expected to ease some, and unemployment will stabilize. . . . Walschots said growth in the U.S. will slow as the housing market eases. That will spill over into business investment and consumer spending. Short term, inflation is a problem because of high oil prices, but a medium-term outlook is better, he said.”

Fonterra acquires Chinese dairy interest (Feedstuffs, Dec. 12, ’05). “Fonterra Cooperative Group has acquired 43% of the Shijiazhuang Sanlu Group, a Chinese milk producer and processor. . . . Fonterra, headquartered in New Zealand, is the largest dairy exporter to China, but the acquisition gives the cooperative its first on-the-ground presence in the Chinese dairy industry. . . . Fonterra chief executive Andrew Ferrier said the acquisition reflects the company’s confidence in the future of the Chinese dairy industry. Sanlu chair Tian Wenhua said the partnership represents ‘a first crucial step toward an objective to aim at world-class levels and develop Sanlu into a global leader in the dairy industry.’”

Global dairy markets still strong is the “Dairy Industry Insider” feature by Penn State’s Ken Bailey in Feedstuffs (Dec. 12, ’05). “Global markets for dairy products still remain very strong.  As a result, the U.S. has been in a very favorable position to export surplus amounts of protein and lactose in the form of skim milk powder, lactose and whey products. That, coupled with adequate domestic demand and reasonably strong demand for milk fat products, has supported U.S. farmgate milk prices at levels above the five-year average. . . . While it is not clear how long these favorable conditions will last, it is clear that the U.S. dairy markets can find outlets for surplus milk components in export markets rather than in government programs. Over time, this strategy of exporting surplus components will become more important to the U.S. dairy industry if it is to continue to grow year after year.”

How Did Your Credit Score? asks author Shannon Linderoth in Dairy Herd Management (Dec. ’05).  “Your ag lender has developed a keen interest in this measure in recent years. . . . (F)ind out whether your lender uses three-digit FICO scores developed by the Fair Isaac Corporation, and how much weight these scores carry. . . . If you are a sole proprietor, for example, FICO scores have a more direct impact than if your dairy operates as a limited liability corporation. . . . If you use multiple lending institutions, ask each one to define its credit-scoring procedures. . . . Regularly check your personal credit score with credit bureaus. Contact the credit bureaus . . . at least once a year to obtain your credit score, as well as a full credit report. Correct any errors immediately.”  Free annual credit reports are available at www.annualcreditreport.com.  You can get a copy of your credit score for a fee at www.myfico.com or Equifax (www.equifax.com); Experian (www.experian.com); or, TransUnion (www.transunion.com).

Nutrition website moved (Farmshine, Dec. 16, ’05).  “Penn State’s Dairy Cattle Nutrition website has moved to a new address, www.das.psu.edu/dairynutrition/.  With the release of the new website, Penn State also offers several new resources including more Spanish-language publications, new spreadsheet tools, and DVD versions of popular videos explaining rumen fermentation, silage management, and rumen development.”

Moving on and on by editor Eleanor Jacobs in Northeast DairyBusiness (Dec. ’05) notes, “You can take milk price transitions to the bank. Northeast dairy economists, in our annual roundtable, say to expect lower milk prices and higher business costs, such as fuel, in 2006. How can you make this transition to lower prices less painful? Penn State economist Ken Bailey writes, ‘. . . . many need to assess their businesses now and take stock of their cost structure, production and component levels, financing, capital requirement, etc. The idea is this: How can you adjust your business in order to survive lower milk prices later? Good producers will do this now, rather than wait until the spring and be surprised.’ So be prepared. You do as much for your transition cows—why not your own transitions?”

Planning for Future Generations is the topic of Kevin J. Smith’s “Vested Interest” column in Lancaster Farming (Dec. 24, ’05).  “There is no precise formula for creating an intergenerational financial plan. But regardless of your goals for your loved ones and the future, taking the time to think through your goals and values is always the best place to start. . . Begin with taking a look at what’s most important to you when planning transfers.”  Smith advises getting together with family members and creating a ‘family mission statement’ that is signed by the family members and updated every few years. “It’s important to have legal documents in place that are coordinated with your family mission statement. . . . Wills aren’t the only crucial estate planning instruments . . . . You should meet with an experienced estate planning attorney to discuss your specific needs for documents that might include:  trusts, powers of attorney and directives for medical treatment.”

A step-by-step approach to quality milk by Donald E. Pritchard in Hoard’s Dairyman (Dec. ’05) builds on a paper by Pamela Ruegg, University of Wisconsin, “on the 10 smart things she thought dairy farms do to achieve high-quality milk.” The list includes: “1. Set performance goals; 2. Identify milk quality problems quickly; 3. Milk clean cows; 4. Standardize your milking routines; 5. Train your staff; 6. Maintain and update your milking system; 7. Have written treatment protocols; 8. Have a mastitis biosecurity plan; 9. Take proper care of your dry cows; and 10. Use appropriate consultants.”

Internet tool generates job descriptions (Dairy Herd Management, Dec. ’05). “Want a convenient way to generate job descriptions for your employees? Try the Job Description Generator from the Penn State Dairy Alliance.  Go to: www.dairyalliance.org/hr/jobdescription and fill in some pertinent information regarding the employee’s job responsibilities. The Web-based tool then writes the job description, and you can print a copy.”

Dairy Profit Team Program expanding (Farmshine, Dec. 2, ’05). “The program Governor Edward G. Rendell started to improve the performance and profitability of Pennsylvania’s dairy producers will expand in 2006. Under the Dairy Profit Team Program, the state’s dairy farmers receive coordinated professional business advice that prioritizes areas for improvement, develops action plans and routinely monitors their progress. . . . the Center for Dairy Excellence is now accepting applications for the training sessions in January and February. . . To be considered for the competitive program, visit www.centerfordairyexcellence.org, click on “News & Events” at the bottom of the page, complte and send in the one-page application. For more information, contact Gary Heckman at 717-346-0849 or gheckman@centerfordairyexcellence.org.

Management control booklet offered (Farmshine, Dec. 2, ’05). “A new edition of the Daily Milk Production Records for Management Control booklet is available to dairy producers. This record booklet encourages producers to focus on daily production allowing them to set goals and monitor these goals on a daily basis. Producers can track consistency over a period, and the booklet also provides a management checklist to improve profitability. . . . To get a copy of the booklet email info@centerfordaiyexcellence.org, or call the Center for Dairy Excellence at 717-346-0849, the Pennsylvania Dairy Stakeholders at 717-948-6328, or Dairy Alliance at 814-865-4682.”

Dairymen reminded of loan fund in Country Focus (PA Farm Bureau, Dec. ’05). “The PDA Center for Dairy Excellence asks dairymen: ‘Are you looking to fill up your barn? Are you looking to add cows to your present operation?’  The Machinery and Equipment Loan Fund (MELF) can help . . . by covering up to 50% of the total eligible costs. The current interest rate is only 2.25% if you have a preserved farm or are in an Agricultural Security Zone. If not, the rate is still a mere 3.25%. Link to www.pagrows.com or call 888-724-7697 for more information.”

Four Mistakes That Can Prevent Investment Success by Kevin J. Smith, CFP, is the “Vested Interest” feature in Lancaster Farming (Dec. 10, ’05).  “Successful investing requires making consistently sound choices. It also requires avoiding these four mistakes, . . . 1: Waiting to start building toward a major goal; . . . . 2. Investing conservatively for long-term growth; . . . . 3. Becoming too conservative after retirement; and, . . . . 4. Believing everything you read.” Contact Smith at 800-877-5344 or via e-mail at kjsmith@leggmason.com.

Pennsylvania Agricultural Statistics Service New Website is featured in Leon Ressler’s “Now Is The Time” column in Lancaster Farming (Dec. 10, ’05). “With a click of the mouse, there is now more agricultural data available at your fingertips. . . . Data users can search for county and state level data by commodity and easily download information for use in a database or spreadsheet.” Visit the website at www.nass.usda.gov/pa.

The Value of Efficiency by John Hibma appears in Farming (Dec. ’05). “An area of dairy management that warrants revisiting from time to time is the feed efficiency on our dairies. . . . Feed efficiency is defined as pounds of milk production divided by pounds of dry matter consumed. Along with income over feed costs (IOFC), feed efficiency (FE) provides us with another tool to evaluate the profitability of our dairy herds. Ideally we’d like to see an FE greater than 1.5 for an entire herd. . . . Feed rations that are formulated correctly will result in an FE ranging from 1.5 to 1.7. . . . Granted, there’s always more work that goes into managing a herd of cows averaging 80 pounds of milk compared to a herd that’s averaging only 50. At the end of the day, though, spending the extra money to produce more milk will result in higher feed efficiencies and will be more profitable in the long run. Tracking your FE and IOFC together will provide you with a useful means of analyzing feeding efficiencies and profitability in your dairy herd. Done correctly there should be no question that an increase in feeding efficiencies is more profitable.” Hibma can be reached at jhibma@ccfeeds.com.

Can You Afford to Stop Farming? asks an article by Marcia Passos Duffy in Farming (Dec. ’05).  “The first step is to take stock of how much it will cost to support off-farm living expenses . . . . You can do this first step by logging into an online estimator specifically designed for farm families at Purdue University’s “A Retirement Estimator for Farm Families” Web site: www.ces.purdue.edu/farmretirement. . . . Along with the “Can I afford it?” question, farmers also need to ask themselves what they are going to do if they’re not farming. . . . Communicating with your spouse about your vision of retirement lifestyle after farming is key. So is communicating among other family members about the issue of transferring the farm. . . . A national study done in 2003 . . . . showed that U.S. farm households had an average net worth of $545,869, compared with $395,500 for nonfarm households.”

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