Dairy
May
1999
DO DAIRY FARMERS NEED TO WORRY ABOUT Y2K?
Extension Dairy Specialist, MSU
The challenge of dairy farming is evident! You can do everything right and still be subjected to problems beyond your control such as weather, mechanical failure, low prices, insect infestation, crop disease and just plain bad luck. It is no wonder that rural American farmers throughout our history have so often turned to prayer and faith to give them strength to face their family challenges along with the problems listed above. It is an environment for character building. Farmers seem to have the ability to face one challenge after the other and still remain successful.
And I know the potential Y2K problem is no exception. There has been a lot of speculation about what will happen at 12:01 a.m. Jan. 1, 2000. Will the electricity go off? Will the phone work? Will my milking machines and farm equipment keep working? Fortunately government agencies and private industry have worked hard to reduce the havoc that could occur. There is no doubt that everyone will experience some incon- venience due to Y2K. It will probably just be a series of simultaneous headaches instead of a hopeless crash. The question is how well prepared will you and your dairy farm be to survive the inconvenience.
What is Y2K
Y2K is short for "Year 2000". The problem refers to the inability of many computer systems and embedded chip systems to recognize "00" in a two-digit date as the year 2000. Many chips and systems will interpret "00" as the year 1900, or some other erroneous number. Another possible problem is that not all software programs recognize that Y2000 is a leap year. If not corrected, these problems will cause many systems to simply shut down and others will give unpredictable and erroneous results.
The Y2K problem is really just a technical error. In the early days of computers, data storage was very expensive and limited. One megabyte of memory cost about $600,000 in the '60's to manufacture and a 100-megabyte disk drive was the size of a washing machine. As a result, programmers used any trick they could to conserve storage space or memory. One of their methods was to reduce four-digit years to two digits, cutting date-related storage requirements in half. So, 1955 became "55", 1998 was "98" and so on. Up until now, "00" was assumed to be 1900. But next year it could also be 2000.
Today's trouble is that too many of the old programs and hardware have outlived their expected lifespans. They are the information processing "backbone" of modern society. The people who developed these programs have gone on to other things or died, or the company that created them is no longer in business.
Most people think that only their desktop computers will be affected. This is possible but these problems can be corrected rather easily. The biggest unknown with regard to the Y2K problem stems from "embedded chip systems." Embedded chips are microchips with the software code actually burned into them. Embedded chips are everywhere. It is estimated that there are over 25 billion in the United States. They are in satellites, traffic lights, weapon systems, fax machines, cellular phones, VCR'S, irrigation equipment, milking equipment, tractors, combines and other equipment. It is estimated that only 2 to 5 percent are expected to fail at the millenium. But 2 percent of 25 billion is still 500 million chips that will fail.
What should I do?
Preparation is the key to preventing a catastrophe on your farm. Dairy farming has been identified as one of the most vulnerable agricultural enterprises. But you can become Y2K compliant. Here are suggested steps.
- Inventory -- conduct an inventory of all automated systems on your farm, especially the equipment critical to normal operation. Determine if the system is Y2K compliant. This also involves your power company, feed, fuel, and equipment suppliers and farm commodity buyers.
- Repair -- Try to get letters from your power company and suppliers assuring Y2K compliance. There are three options for addressing your non-compliant systems: (1) Upgrade to the latest Y2K compliant version if available; (2) Replace systems with systems that are Y2K compliant; (3) Fix systems by scanning all systems and programs to check for date routines or date storage fields and fix them to create compliance.
- Contingency Plans -- Consider the systems that must function for your business to function. What happens if one or more of those systems fail? Contingency planning is developing a plan if critical systems fail. For example, what will you do if the power goes out or your milking machines fail to operate?
You may not be able to determine if you are completely compliant but there are some items you can expect to be non-compliant. Here are a few.
- Computers (built prior to 1995, 386 models and older)
- Tractors, trucks and autos (built after 1988 and prior to 1997) They may not start.
- Equipment with automatic timers (pipeline cleaning equipment)
- Some electronic fuel pumps
- Computer feeders
- Electronic telephones
There are many other items on your farm that may have a problem chip.
Suggested Preparation
- Have a generator ready to run your milking and feeding operation. If it is PTO driven, make sure your tractor is Y2K compliant.
- Secure and file hard copies of important documents. This list includes birth certificates, marriage licenses, religious records, Social Security lifetime earnings, deeds, titles, mortgages and loan agreements.
- Have vehicles fully fueled on December 31, 1999.
- Create backups of all your critical computer files.
- Be prepared personally to subsist for three to five days without power and other services. This may include having food, common household goods, and some cash on hand.
No one knows the outcome of Y2K. I believe everyone needs to be prepared and they should not wait until the last minute. In fact, last minute panic may cause more problems than the problems caused by Y2K. There is no excuse for this catching you by surprise. Fix what you can NOW.
For other information about Y2K, call the Animal and Dairy Sciences department at Mississippi State University, or check the MSU Extension Service web site at http://www.ext.msstate.edu./homepage/cas//Y2K/.
UPCOMING
EVENTS May
27 9:00 a.m. Statewide
Dairy Field Day June
4 All
Breed Dairy Heifer Sale June
5 12:00 Noon All
Breed Dairy Heifer Sale July
6-7 Farm
Bureau Commodity Conference
Newton, MS
McComb, MS
Pontotoc, MS
MS STATEWIDE DAIRY FIELD DAY
Coastal Plain Branch Experiment Station, located on old Highway 80 South near Newton, will be the site of the 1999 Statewide Dairy Field Day.
As you can see below, the program is outstanding. We believe we have a program which exhibits practices that can improve your profitability. If you need additional information, please call the Animal & Dairy Sciences Department at MSU.
STATEWIDE
DAIRY FIELD DAY REGISTRATION
& VIEW EXHIBITS 8:30
a.m. PROGRAM 9:20
a.m.
Mississippi State University
Coastal Plain Branch Experiment Station
Newton, Mississippi
May 27, 1999
TOUR PROGRAM
- FEDERAL
ORDER REFORM
Dr. Cary "Bill" Herndon, MSU Agricultural Economics - OSTPARTUM
RECOVERY & FERTILITY
Dr. John Fuquay, MSU Animal & Dairy Sciences - DIETARY
ORGANIC TRACE MINERAL SUPPLEMENT FOR LACTATING COWS
Dr. Jim Tomlinson, MSU Dept. of Animal & Dairy Sciences - PERFORMANCE
OF HOLSTEIN COWS ON RYEGRASS PASTURE WITH AND WITHOUT BST
SUPPLEMENTATION
Mr. Joey Murphey, Coastal Plain Br. Exp. Sta. - HOW
MUCH MILK IS IN RYEGRASS
Dr. Bill Tucker, MSU Animal & Dairy Sciences - FREE
STALL BEDDING CHOICES
Dr. Reuben Moore, Animal & Dairy Sciences, MSU - FEATURED
PRESENTATION MANAGING DAIRY COWS DURING HOT WEATHER
Dr. Joe West, Dairy Scientist
University of Georgia
HONOR
ROLL HERDS* Dairy County No.
Cows Lbs
ECM** 2X/3X RHA
Milk RHA
Fat RHA
Prot DOT MACTOC
FARM OKTIBBEHA 205 95.2 2X 25420 953 821 03/11/99 DAVID
ROBINSON & SONS RANKIN 133 79.9 2X 19698 709 611 03/22/99 STEWARD
FARM INC TATE 390 78.5 2X 22654 803 722 03/22/99 COASTAL
PLAIN EXP STA NEWTON 161 74.1 2X 21074 782 675 03/08/99 MELVIN
NICHOLSON NEWTON 126 73.5 2X 22628 813 719 03/01/99 JODY
DEBLANC PIKE 37 72.0 2X 0 0 0 02/25/99 BRAD
BEAN AMITE 224 70.9 2X 21421 804 689 03/03/99 JEFCOAT
& WILLIAMS DAIRY JONES 66 68.2 2X 20665 709 645 03/17/99 TIM
WEEKS COPIAH 59 68.2 2X 0 0 0 02/27/99 ROWZEE
JERSEY FARM NEWTON 149 68.1 2X 16687 757 633 03/16/99 TURNIPSEED
DAIRY MONROE 460 68.0 2X 19087 699 603 02/28/99 CAL
MAINE FOODS DAIRY HINDS 1617 67.3 3X 19478 708 621 03/12/99 MILTON
AND TERRY JEFCOAT JONES 223 66.1 2X 21294 730 666 03/08/99 NORTH
MISS BR EXP STATION MARSHALL 87 65.3 2X 20003 732 657 03/15/99 CLEMMER
AND HILL DAIRY TIPPAH 186 63.7 2X 19470 664 608 03/16/99 ELWAYNE
MAST NOXUBEE 177 63.4 2X 17859 655 560 03/18/99 KNIGHTS
DAIRY FARM JONES 131 63.2 2X 19603 679 627 03/10/99 PAUL
W EDWARDS JONES 135 62.1 2X 18027 639 595 02/28/99 THOMPSON
BROTHERS MARSHALL 131 62.0 2X 19435 698 624 03/10/99 GOTTAGO
DAIRY COPIAH 150 61.0 2X 16830 673 556 03/10/99 JERRY
CORKERN LEAKE 92 61.0 2X 14801 535 510 03/06/99 J
& J JERSEY JONES 10 60.6 2X 16338 692 606 03/17/99 FREEMAN
DAIRY PIKE 137 60.5 2X 19434 642 648 03/03/99 JIMMY
TUCKER & SONS PIKE 208 60.2 2X 15858 606 502 03/02/99 CHEEKS
DAIRY JONES 135 59.7 2X 17044 614 556 03/24/99 *
Top 30 herds enrolled on supervised DHIA testing
programs by test day energy corrected milk.
** ECM = (.3246 x test day milk) + (12.86 x test
day lbs fat) + (7.04 x test day lbs protein)
Dairy Economist, MSU
March BFP Rebounds by $1.35, Increases to $11.62
The Basic Formula Price, or BFP, recovered somewhat from the disaster that was experienced with February's price plunge of $6.00 -- which was the largest one-month decline in the history of the BFP and former M-W price series -- when the USDA reported a March BFP of $11.62 per hundredweight (cwt.). This rebound was expected because most of the dairy industry believed that last month's huge decrease was an overreaction and the BFP had fallen too far, thus February's BFP of $10.27 was too low and not representing the current dairy demand and supply market situation. Despite the $1.35 increase in the BFP, there is still a large difference between the March Class I price of $19.35 and the Class III price of $11.62 per cwt. ($7.73 compared to the record of $10.42 in February).
The dairy market continues to be burdened with substantial increases in milk production all across the country. The spring flush is showing signs of ebbing in the South as warmer weather occurs. The extremely hot, dry weather in Florida has forced milk output to fall sharply and producers have begun to cull cows to help manage forage requirements. Florida handlers have ceased exporting milk and expect to be importing 10 to 20 truckloads per week by the end of April. Southeast manufacturing plants have been under less pressure, but remain at near full capacity processing excess milk supplies. But, the surge in spring milk output is just beginning in the Northeast and Upper Midwest regions which will place an even greater burden on the dairy market and downward pressure on milk prices. Dairy farmers should be aware that the recent $6.00 plunge in milk prices will be translated into much lower milk prices and revenues when the April "settlement" mailbox check is received in mid-May. The March BFP was reported at $11.62 per cwt. which represents an INCREASE of $1.35 cwt. (+13.1%) ABOVE the February BFP of $10.27. This year's March BFP is $1.19 per cwt. (or -9.3%) LOWER than the March 1998 BFP price of $12.81. Dairy producers need to remember that the February BFP will be used as the base price to calculate the April Class I and Class II milk prices and the February Class III milk price. Because about 80 percent of Mississippi milk is utilized as Class I and Class II products, farmers will not realize any additional revenues from this $1.35 rise in the March BFP until they receive their "settlement" checks in mid-June as payment for milk sold in May.
Milk Production Milk output continues its dramatic increase throughout the U.S. as the spring flush ends in the South and commences in the northern regions of the country. The USDA reports that March milk production was 4.0% higher than March 1998 (March was the month with the largest volume of milk produced during 1998). Favorable weather and ample, high-quality forages have enhanced milk output where milk output per cow has increased more than 60 pounds when comparing March 1998 to March 1999. During the first three months of 1999, U.S. milk production realized a 3.3% increase (+ 1,307 million pounds) compared to the same period of 1998 while milking 42,000 fewer cows.
The largest quarterly increases in output were registered in the western states of Nebraska (+12.7%), New Mexico (+12.2%), Idaho (+8.3%) and California (+7.6%). Of the 11 Southeastern states, the only state recording an increase in production between these time spans was Florida (+2.6%) while every one of the other 10 states saw a decrease in milk output. Mississippi dairy farmers produced 160 million pounds during the first quarter of 1999 while milking 39,000 cows compared to producing 169 million pounds with 43,000 milk cows. These data indicate that Mississippi production fell nine million pounds (-5.3%) while regional production in the Southeast fell 112 million pounds (-3.2%) between these quarters which perpetuates a long term trend of diminishing milk output in the state and across the Southeast. With national milk output increasing and Southeast production falling, it becomes very apparent this region is becoming more and more dependent on imported milk supplies from places like New Mexico, the Midwest and the Northeast to meet the needs and demand for dairy products by the area's consumers.
Dairy Product Prices
The burden of the excess milk supplies produced during the spring flush period has begun to show signs of weakening dairy product prices, especially for butter and cheeses (nonfat dry milk prices are already at price support levels). Butter prices have been very unstable while the spread between block and barrel cheese prices have widened in late March and early April. Cheese prices on the Chicago Mercantile Exchange (CME) have been virtually constant during this five-week period with 40# block prices remaining exactly the same but, barrel prices have experienced some movement and decreased during this time span. On the CME, 40# block prices were reported at $1.3300 per pound on March 19 and on April 23 and did not change at all over this period. Barrel prices did fell 5.25 cents from $1.3025 on March 19 to $1.2500 on April 23 and concerns have focused on the increasing price spread (8 cents) between black and barrel prices. During this same four-week period, CME butter prices have declined 18.00 cents per pound (-15%) from $1.2000 on March 19 to $1.0200 on April 23. The butter market is being described as "unsettled" with buyers reluctant to purchase large quantities in anticipation of substantial decreases in future butter prices. Nonfat dry milk (NDM) prices on the CME have been flat because the current market prices have been at the government price support level, as illustrated by the fact that Grade A NDM prices were reported at $1.0500 since February 19 (for nine straight weeks). However, the USDA's Commodity Credit Corporation (CCC) continues to increase the amount of weekly purchases and has bought more than 31.5 million pounds of non fortified NDM between March 19 and April 23. The NDM market is obviously weak with market prices being propped up by the CCC and with growing volumes of excess milk supplies being processed into milk powder products.
Near-term Market Outlook
The outlook for the dairy market over the next several months actually looks remarkably good considering the flood of "spring flush" milk that is troubling the industry. However, a continuation of favorable weather conditions that may spur even more excess milk supplies will eventually cause milk prices to fall in the $10.00 per cwt. range. Most market analysts believe that the $1.35 increase recorded in the March BFP returned milk prices to a level which more correctly represented the demand and supply situation in the dairy market. Therefore, the April BFP is expected to remain in near $11.60 and in the $11.00 range through early summer. On April 23, BFP futures contracts settlement prices were reported at $11.62 for the April contract, $11.36 for May, $11.09 for June and $11.49 for July. However, large February and March BFP movements illustrate AGAIN the severe variability of milk prices and points to the fact that dairy farmers remain saddled with the exceeding difficult task of trying to deal with sizeable fluctuations in the size of monthly milk checks.
USDA Releases Final Decision for Federal Order Reform
Secretary of Agriculture Dan Glickman announced on March 31, 1999 the USDA's plans for Federal Milk Market Order (FMMO) reform, which is being referred to as the "Final Rule." The release of the Final Rule has been much anticipated by the dairy industry since the 1996 Farm Bill was passed by the U.S. Congress which required the USDA to consolidate Federal Order (FO) areas and decrease the number of FO's to a range of between 10 to 14 order areas. The language found in the 1996 Farm Bill also authorized the USDA to consider "reforms" of FMMO extending from changing how milk prices are estimated to revising Class I price differentials. The USDA is required to complete the FMMO reform process by October 1, 1999 and the Congress has 60 days from March 31 to introduce any changes in the provisions of the Final Rule. The USDA expects to conduct dairy producer referendums in each FO during August with producers and/or coops voting either yes or no, with no modifications. A two-thirds approval majority will be required to implement each FO. The Final Rule does satisfy the mandate from Congress and has reduced the number of FOs to 11, where the Southeast FO (containing Mississippi and surrounding states) has increased its geographic size by including the southern third of Missouri, the remaining northwest section of Arkansas, and the southwest portion of Kentucky.
The Southeast FO will not be affected very much by adding these additional areas since significant amounts of the milk being produced in these regions were already being pooled in processing plants located in the current Southeast FO. The Final Rule also proposes to alter how classified milk prices are calculated which will then change and influence farm-level milk prices. The Final Rule purports to utilize a Class III price that will be estimated using the value of butterfat and other milk solids used in manufacturing cheeses and creates a Class IV price based on the value of milk components employed to make butter. The Class II price will have a 70-cent differential added to the Class IV (butter) price and the Class I price will have a location differential added to the Class III (cheese) price. While there are numerous other "reforms" proposed in the Final Rule, the most controversial issue centers on whether to change Class I price differentials. Much discussion focused on two plans (referred to as Option 1A and Option 1B) for revising these differentials -- with most of the industry supporting the adoption of Option 1A. The Final Rule plan is neither Option 1A nor Option 1B, but is a scheme which simply added 40 cents per cwt. to the Option 1B pricing surface that the USDA supported in its Proposed Rule that was released in early 1998.
The Final Rule does alter Class I price differentials and lowers these differentials in most regions of the country from those used under the current milk pricing scheme. Obviously, the manner which these location differentials are revised depends on the region of the nation. But generally speaking, Class I differentials will increase in the Upper Midwest and Florida while all other areas of the country find decreases amounting to as much as $1.20. In Mississippi, the Final Rule reduces Class I price differentials as little as 13-cents per cwt. in the northern tier of counties and as much as 58-cents per cwt. in the counties along the Gulf Coast. Crude estimates indicate that this plan will cause Mississippi milk producers to suffer reduced revenues of about 30 to 40 cents per cwt. and lower gross receipts around $2.25 million. Also, these changes in Class I differentials alters the competitive relationships between handlers and dairy processors which may force the closure of individual plants.
Dairy industry reactions to the Final Rule have not been positive and not one industry sector has expressed satisfaction of the reforms of FMMO, but many believe that the Final Rule does contain some needed improvements. Clearly, most of the opposition has centered on decreases in the Class I price differentials where producer and several processor organizations have expressed concerns. Legislation has been introduced in the U.S. House of Representatives (House Bill 1402) that would require the USDA to implement Option 1A, which is similar to the current Class I differentials. It is imperative each and every dairy farmer to learn how the provisions of Final Rule are expected to affect her/his own dairy operation.
Southeast F.O. #7 "Blend" Price Decreases to $18.19 in March
The Southeast Federal Order Milk Market Administrator reported the March 1999 "blend" or uniform prices for milk delivered in Federal Order (FO) #7 at $18.19 per cwt. (for 3.5% Butterfat milk) in Zone 7, see the Mississippi map for zones (Zone 5 minus $0.25, Zone 6 minus $0.10, Zone 8 plus $0.10, Zone 9 plus $0.20, Zone 10 plus $0.32, Zone 11 plus $0.50, and Zone 12 plus $0.57 per cwt.). The March "blend" price of $18.19 for Zone 7 of FO #7 represents a DECREASE of 80 cents per cwt. compared to the February price of $18.99. The March 1999 blend price is $2.63 (or 16.9%) ABOVE the March 1998 blend price of $15.56. The decrease in the March blend price occurred because both the Class I and Class II milk prices fell by $1.07 per cwt. and despite a slight increase in the Class I utilization rate (and corresponding minor changes in the Class III utilization rates). Class I utilization rose 0.2% (from 78.7% in February to 78.9% in March), while Class II utilization remained unchanged (at 6.9% in both February and March) and Class III utilization decreased by 0.2% (from 14.4% in February to 14.2% in March). The March Zone 7 "blend" price was calculated using: (1) the January BFP price of $16.27 plus the $3.08 Zone 7 Class I differential for a Class I price of $19.35; (2) the January BFP price of $16.27 plus the 30 cents per cwt. Class II differential for a Class II price of $16.57; and, (3) the March Class III price of $11.62 (which is the BFP). Please consult the map in this newsletter to determine which Zone the plant you sell your milk to is located in FO #7. A dairy producer's uniform price and the amount of his milk check is affected by where the plant that processes his milk is located in the Southeast FO and NOT by where the milk was produced on the dairy farm.
UNIFORM
or "BLEND" PRICE FOR MARCH 1999 ZONE
5: $17.94 ZONE
9: $18.39 ZONE
6: $18.09 ZONE
10: $18.51 ZONE
7: $18.19 ZONE
11: $18.69 ZONE
8: $18.29
CLASS
1 PRICE FOR MAY 1999 (using March 1999
BFP) ZONE
5: $14.45 ZONE
9: $14.90 ZONE
6: $14.60 ZONE
10: $15.02 ZONE
7: $14.70 ZONE
11: $15.20 ZONE
8: $14.80
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Last Modified: Wednesday, 18-Feb-04 11:10:08
URL: http://msucares.com/newsletters/dairy/1999/199905.html
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