MARKET WATCH FEED COTTONSEED MEAL UNDERVALUED. Price per unit of ration component (dollar per percentage point) COMMODITIES

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1 MARKET WATCH FEED Since feed is a significant contributor to total milk production costs, we need methods to identify feedstuffs that may meet the nutrient requirement of the dairy cow more economically than the feedstuffs currently in the ration. Several technologies exist to rate or rank the economic value of feedstuffs in addition to the one that this column uses. Nutrient values are derived using the composition and weekly market prices for a basket of 25 feeds available in the region. ket prices are gathered from both published and unpublished sources. Values are determined for rumen degradable protein (RDP), rumen undegradable protein (RUP), effective Patrick French RP Feed Components Patrick.French@ feedcomponents.com neutral detergent fiber (endf), non-fiber carbohydrates (NFC) and fat. For RUP, NFC and fat, only the fraction that is digestible in the small intestine is valued. For brevity, endf is referred to as a nutrient though it is a ration descriptor. When nutrient values are combined with the composition of a feed we arrive at a relative economic value of the ingredient. This gives us a global perspective of the feed s value. However, many times we may need a specific nutrient, so we have derived FARM EQUESTRIAN HOBBY COMMERCIAL It lasts a lifetime. Plan it right. COTTONSEED MEAL UNDERVALUED $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 drup dfat RDP dnfc Price per unit of ration component (dollar per percentage point) endf nutrient-specific values for the categories of carbohydrates, proteins, and fiber carbohydrates. The graph shows the monthly nutrient values over the previous two years. Digestible (d) or metabolizable RUP and fat are consistently the most costly nutrients on a per unit basis, and are currently in the range of $11 to $12 per percentage point. The other Feb. prices drup: $10.62 dfat: $12.60 RDP: $2.60 dnfc: $2.09 endf: $1.63 COMMODITIES Corn* (in tons) (in bushels). 5 Price 3-week CA $291 $5 ID $288 $7 IL $236 $7 nutrients, RUP, endf and dnfc, are in the $2 range. Although dnfc has a low per-unit cost, it contributes the most total nutrient cost since it is generally in the highest concentration in the ration. The table lists several feeds, their price and their value based on whether all nutrients (comprehensive) or specific sets of nutrients (carbohydrates, proteins or fiber) were used in their valuation. Feeds without shading indicate that the market price and derived value are similar. Undervalued feedstuffs when observing specific nutrient sets are citrus pulp and corn silage (carbohydrates), corn gluten meal (protein) and soyhulls and straw (fiber). Use of undervalued feedstuffs may reduce ration cost, but value is only one of several factors that should be considered when evaluating the inclusion of a new ingredient. PD Feb Price 3-week $ $ $ LESTERBUILDINGS.COM *Price quotes contributed by Western Milling, J.D. Heiskell, independent sources. Soybean meal* ($/ton). 5 Price 3-week CA $402 $29 ID $397 $34 IL $371 $34 Cottonseed* ($/ton). 5 Price 3-week CA $366 $24 ID $345 $16 IL $280 $10 Supreme hay ($/ton). 5 Price 3-week IA $220-$235 NT IL $260-$280 KS $270-$315 MO 0-0 NE $225 NT PA $240-$380 VA $244 $26 Source: USDA National Hay, Feed & Seed Summary 8 Progressive Dairyman Issue 5 ch 21,

2 ALFALFA HAY OVERVALUED ket Price Comprehensive Carbohydrate Protein Value Fiber Value Feed name $/T As-Fed Value, $/T As-Fed Value, $/T As-Fed $/T As-Fed $/T As-Fed Alfalfa, Good Alfalfa, Premium Alfalfa, Supreme Bakery/Candy Byproduct Barley, Grain Brewers Grains, 30% DM Canola Meal Citrus Pulp Corn Gluten Feed Corn Gluten Meal Corn Grain, ground Corn Silage, 35% DM Cottonseed Cottonseed Hulls Cottonseed Meal Ethanol Distillers Dried Grains Hominy Molasses Porcine Blood Meal Soybean Hulls Soybean Meal, 48% Straw Tallow Urea Wheat Midds The CALF HUTCH The SUPER HUTCH Agri-Speed Hitch PEN SYSTEM Indoor Works on tractors, pickups and choppers Bolts to draw-bar Makes chopping silage fun Built tough to pull even the largest wagons Increases productivity up to 25% Works with PTO Bergman Mfg. Inc. Barry Bergman Extremely undervalued feed Undervalued feed Extremely overvalued feed Overvalued feed A basket of 25 regionally available feeds and their recent prices A John Deere Allied Supplier FUTURES $6.80 $6.60 $6.40 $6.20 $6.00 $5.80 $5.60 $5.40 High: $6.63 Low: $5.49 Settle Corn Soybean meal Corn (dollars per bushel) May July Sept Dec 12 contracts $ $6.59/$6.27 May 12 contracts $ $6.58/$6.31 MAR. 7 Avg. 3-week settle High/Low High Low contracts $ $16.59 $357.30/$ May 12 contracts $ $16.90 $359.10/$ $375 $364 Soybeans (dollars per ton) High: $ Low: $ $353 $342 $331 Settle $320 May July Aug Sept Oct Dec 2013 Source: Chicago Mercantile Ex data High Low Issue 5 ch 21, Progressive Dairyman 9

3 MARKET WATCH gin Tracking down dairy profitability Normand St-Pierre Dairy Extension Specialist The Ohio State University In this column, we track down monthly profitability of the dairy industry across six regions of the U.S. In our analyses, income is based on the average milk production and milk composition in a given region for the month. Milk prices are calculated from Federal Orders component prices plus a producer price differential for Class I (fluid) milk based on a two-year average Class I utilization for the given month and a weighed average Class I differential in a region. Feed costs are estimated from the average cost of supplying the nutrients required for the production level and milk composition for each region. The required nutrients are net energy for lactation (NEL), metabolizable protein (MP), effective neutral detergent fiber (endf) and non-effective NDF (nendf). Requirements are calculated according to NRC (2001). Unit prices of the four nutrients are estimated from the composition and market prices of all major commodity feeds traded in a given region using the Sesame method. Income-over-feed costs (IOFC) are calculated on a per-cow basis. Milk-marginsover-feed (MM) are calculated on a per-hundredweight basis. The national MM is the weighed average MM across all six regions and is labeled the Cow-Jones II index (CJ2). More details on the methodology used were provided in the ch 1 issue. Average production is for lactating and dry cows combined. The national average of 59.7 lbs Table 1 Dairy productivity and profitability analysis, February. Northeast Southeast Midwest Southwest West Northwest National Productivity Milk yield (lbs/cow per day) Fat (%) Protein (%) Nutritional statistics NEL (Mcals/cow per day) MP (lbs/cow per day) endf (lbs/cow per day) nendf (lbs/cow per day) Dry matter intake (lbs/cow per day) Feed dry matter cost ( /lb) Gross feed effi ciency (lb milk/lb DM) Milk pricing Class I utilization (%) Average class I differential ($/cwt) $2.75 $4.64 $1.70 $2.81 $2.33 $1.85 $2.30 Producer price differential ($/cwt) $1.17 $3.59 $0.23 $1.05 $0.35 $0.53 $0.66 Per cow economics Gross income from milk ($/cow per day) $10.04 $10.42 $9.46 $11.45 $11.14 $10.75 $10.48 Nutrient (feed) costs ($/cow per day) $5.34 $5.15 $5.02 $6.64 $6.76 $6.51 $5.97 Income-over-nutrient-costs ($/cow per day) $4.70 $5.27 $4.44 $4.81 $4.38 $4.24 $4.51 Per hundredweight economics Milk price ($/cwt) $18.05 $20.24 $17.01 $17.88 $17.34 $17.62 $17.57 Nutrient (Feed) costs ($/cwt) $9.60 $10.00 $9.03 $10.37 $10.52 $10.68 $9.97 Milk gins over Feeds ($/cwt) $8.45 $10.23 $7.98 $7.51 $6.82 $6.95 $7.60 per cow per day translates to approximately 21,800 lbs per cow per year or 71 lbs per lactating cow per day. The cost of feeding the replacement herd is not factored in any of the calculations. Beware that the regions used in the analysis are not the same as the Federal Orders. For example, we merged the Florida (FO 6) and Southeast (FO 7) Federal Orders into a single region (southeast) because the two Federal Orders combined account for less than 5 percent of the national milk production. Nationally, the Cow-Jones II stood at $7.60 per hundredweight (cwt) in uary, indicating that, on average dairy farms were about breaking even in February. The CJ2 dropped by $1.15 per cwt from uary to February. This drop was entirely due to falling milk prices. Partial analyses conducted over five years suggest the following interpretation for the CJ2: less than $7.50 = unprofitable, between $7.50 and $8.50 = marginal profitability, between $8.50 and $9.50 = good profitability, over $9.50 = excellent profitability. The analysis is based on the cash market for feeds. Some producers may be faring better from having successfully used options and futures contracts. They should congratulate their purchasing managers, not their cows. Likewise, many dairy producers, especially in the Midwest, grow their own corn for less than the current cash market. Their cows should still be paying the cash price for the feeds they consume. Otherwise, their corn marketing managers should be fi r e d The situation for California producers (CJ2 = $6.82 per cwt) is, in fact, worse that what we are reporting. For our analysis, we are treating California as if it were operating as a Federal Order. As we all know, it is not. The CA February price for milk used in cheese production was over $2.00 per cwt less than Class III milk in the Federal Orders. Our calculations will be d to reflect this in the future. PD Now available to purchase Quality embroidery 3D logos Durable quality $9.99 each +shipping Order yours today at progressivedairy.com/hats 10 Progressive Dairyman Issue 5 ch 21,

4 MARKET WATCH CATTLE MARK ET WATCH. 5, Top Springer Top Average Medium Holstein Springer Shortbreds Open Heifers Light Open Heifers Heavy Heifer Calves Bull Calves Breeding Bulls Empire Livestock - Burton ket Vernon, NY (800) (sale 3/1/12) $1,650 $1,250 $450 $800 $900 Mammoth Cave Dairy Auction, Inc. Smiths Grove, KY (800) (sale 2/28/12) $1,690 $1,440 $330 $40 $670 $80 $110 $30 $105 New Holland Sales Stables New Holland, PA (717) (sale 2/29/12) $1,450 $1,375 $175 $1,275 $700 $900 $1,175 Mid-Georgia Livestock Auction Jackson, GA (770) (sale 2/28/12) $1,725 0 $800 $20 $140 $110 $10 Central Livestock Association Albany, MN (800) (sale 2/28/12) $1,560 $1,375 $1,250 0/cwt $44/cwt /cwt $18/cwt $1,025 $35 Equity Co-op Livestock Stratford, WI (715) Rocky Olsen (608) (sale 2/28/12) $1,825 $1,350 0 $725 0 $30 $1,200 Lake Odessa Livestock Lake Odessa, MI (616) (sale 2/28/12) $1,700 $ $300 Norwood Dairy Cattle Auction Norwood, MO (417) (sale 2/10/12) $1,475 $225 $175 $925 $225 $430 $45 $790 $190 $235 $105 $125 $30 Pipestone Livestock Auction ket Pipestone, MI (507) (sale 2/16/12) $1,900 $1,675 $109 $1,608 $83 $160/cwt $47/cwt $130/cwt $32/cwt Springfield Livestock keting Center Springfield, MO (417) Doug Thomas (417) (sale 2/28/12) $1,460 $1,340 $40 $1,210 $1,010 $110 $575 $165 $880 $85 $190 Topeka Livestock Auction Topeka, IN (206) (sale 2/28/12) $1,500 $1,085 $160 $1,575 $260 $30 $1,110 $135 Tri-State Livestock Sioux Center, IA (712) Mike Koedam (712) (sale 2/15/12) $1,900 $1,710 $108 $1,620 $135 United Producers, Inc. ion, MI (517) (sale 2/17/12) $1,675 $1,150 $600 $950 Brush Livestock of Colorado Brush, CO (970) (sale 3/1/12) $2,275 $2,040 $1,795 $65 $1,425 $175 $510 $930 Chehalis Livestock ket Chehalis, WA (360) (sale 2/24/12) $1,350 $1,290 $1,200 $110 $10 $120 $65 Producers Livestock Jerome, ID (208) (sale 2/22/12) $1,890 $240 $1,760 $170 $1,560 $398 $415 Smithfield Livestock Auction Smithfield, UT (435) (sale 3/1/12) $1,590 $390 $1,470 0 $110/cwt $10/cwt $120/cwt $11/cwt Toppenish Dairy Replacement Sales Toppenish, WA (509) (sale 2/27/12) $1,450 $115/cwt $115/cwt $5/cwt A & M Livestock Auction, Inc. Hanford, CA (559) (sale 2/15/12) $1,500 Sulphur Springs Livestock and Dairy Auction Sulphur Springs, TX (903) (sale 2/23/12) Escalon Livestock ket, Inc. Escalon, CA (209) (sale 2/1/12) $1,700 $1,250 Contact Judy about being included in Progressive Dairyman s ket Watch! judy@progressivedairy.com (208) = No = No test Decrease in price Increase in price Log on to to get auction reports from more locations! $900 $640 $35 /cwt $960 $135 $120/cwt $5/cwt $400 $125 $290 $45 $900

5 MARKET WATCH Washington 263 1, % % % MILK Iowa , % % % ARIZONA MILK PRODUCTION UP 7 PERCENT Minnesota 465 1, % % % Wisconsin 1,265 1, % 2, % 2, % Michigan , % % % New York 610 1, % 1, % 1, % California 1, , % 3, % 3, % Oregon 123 1, % % Arizona , % % % Idaho , % 1, % 1, % Utah , % % % New Mexico , % % % NOTE: The colored bar represents cumulative year-to-date milk production for. When it does not surpass the dotted line at the center of the box, it indicates state production is below the previous year s total (). When it does surpass the dotted line, it indicates production is above the previous year s total. Colorado , % % % Illinois , % % % Texas 435 1, % % % Kansas 123 1, % % % Missouri 93 1, % % U.S. Total 9, , % 16, % 16, % Indiana , % % % Ohio 270 1, % % % Pennsylvania , % % % Florida 120 1, % % % Virginia 96 1, % % % Vermont 133 1, % % % Still STALLing on Cow Comfort? On average a cow spends 40-50% of her day outside of the stall, close to 6 hours standing in front of the feed bunk We have tried interlocked rubber mats and although the benefits of rubber were obvious to us, we needed a floor that was not just cow friendly but farmer friendly. Three years after installing customized rubber rolls from Superior Mat and Comfort, we are very satisfied with the minimal maintenance of the product. Rick Schouten Schouten Corner View Farms Our natural virgin rubber is available in lengths over 150 and widths up to (519) (519) fax UNTIL SHE STARTS TO SHOW MORNING SICKNESS LIVESTOCK PREGNAY TESTS: AN EASIER ALTERNATIVE Delays in your breeding program cost time and money. Isn t it time to take the guesswork out of pregnancy detection? Ask about biopryn, a cost-effective, non-invasive, accurate pregnancy test for livestock BioPRYN is a registered trademark of BioTracking, LLC., Moscow, ID 12 Progressive Dairyman Issue 5 ch 21,

6 CALIFORNIA MILK COWS UP 29,000 OVER LAST YEAR Try to wrap your mind around this number: 140 loads of milk per day. That is the gain in milk supply in Number of cows (in thousands) Milk per cow (month) (lbs.) Total milk production (month) (in millions of lbs.) Year-to-date milk production (total) (in millions of lbs.) William Van Dam Alliance of Western Milk Producers California above uary of last year. Another way to look at this is: It is enough milk to supply a large cheese plant. It is the highest uary on record for California. Excellent weather in uary (which continued in February) has certainly played its part in this surge. The old adage that money makes milk has also played a part. Offsetting the drama of the huge increase is the favorable comparison to uary, which posted a gain of only 0.7 percent. For the whole year of the gain was 2.8 percent, so it is not likely the 6.5 percent gain will continue but 4 to 5 percent gains are likely. Another factor that will mitigate the gains has to do with overall plant capacity in the state which will, in turn, kick in the provisions of the production base plans which remain in place at the three big co-ops. It is now almost certain that there will be more milk produced than can be processed in California this spring. PD California 1, , % 3, % 3, % 95% 100% 105% Legend Monthly (in thousands) Annual percent Annual percent JAN. 12 Percentage of year-todate production versus previous year-to-date U.S. HERD STATS 9,250 December : 9,216 High: 9,217 Low: 9,089 9,225 9,200 9,175 9,150 9,125 9,100 9,075 Milk cows (in thousands) 1,825 1,800 1,775 1,750 1,725 1,700 1,675 1,850 December : 1,738 High: 1,816 Low: 1,687 Milk per cow 16,750 16,500 16,250 16,000 15,750 15,500 15,250 (in pounds, 30-day equivalent ) 17,000 December : 16,025 High: 16,709 Low: 15,387 Dec. daily avg. milk per cow: 57.9 lbs. Milk production (in pounds, 30-day equivalent) The Green Liner with the TRI-CIRCLE BARREL HEALTHY TEAT ENDS LESS SQUAWKS, FALLOFFS AND KICKOFFS FAST MILKING NEW! GREEN LINER NON-VENTED VERSION NOW AVAILABLE! The only liner that can guarantee teat end improvement within 6 to 8 weeks! 70% less liner slips over any other liner! Non-Vented Green Liner: Same great liner, just without the vent. The Green Liner NT-NV allows the ability to lower system vacuum while maintaining our claw vacuum recommendations agsales@lauren.com Issue 5 ch 21, Progressive Dairyman 13

7 MARKET WATCH DAIRY PRICES TOTAL CHEESE INVENTORIES DOWN $24 $22 $20 $18 $16 $14 $12 $10 $ Fluid milk prices (in dollars) CA Class 1 price Feb. : $17.03 High: $21.78 Low: $9.43 Feb. : $18.79 High: $23.84 Low: $11.40 Federal Class I price Apr May June July Aug Sept Oct Nov Dec Feb Katie Krupa Director of Producer Services Rice Dairy klk@ricedairy.com The three most recent USDA reports Milk Production, Cold Storage and Livestock Slaughter provided more bearish than bullish news, but there were some positive notes. According to the Milk Production report, total U.S. milk production for uary was up 3.4 percent with the majority of the growth coming from an increase in production per cow, as opposed to milking cow numbers. This increase is most likely due to unseasonably favorable weather across most of the country. Total milking cows increased just 0.8 percent considering the large number of replacements coming into the herd, the milking herd is remaining relatively steady. While the Cold Storage report showed that butter inventories were up 44 percent from last year, American cheese inventories were down 4 percent and total cheese inventories were 7 percent lower from last year s levels. Lastly, uary s Livestock Slaughter report showed no from last year s number of dairy cows removed from the herd. To me that number is bearish, given the current supply excess and number of replacements entering the herd. Class III futures have continued their downward slide in recent weeks. The ch to June price average has lost about 60 cents in recent weeks and currently trading around.15. The July to December average has lost about 30 cents and moved down to around $ Unfortunately the drop in milk price was not coupled with a drop in feed prices, and the milk feed margin has also shrunk in recent weeks. The current milk-feed margin that I use to analyze the market is showing the average margin for ch to June currently trading nearly $3 per hundredweight below the five-year average. The decline in Class III futures in recent weeks has been primarily driven by the decline in dairy powder prices. The nonfat dry milk spot prices have declined nearly 3 ½ cents, and the nonfat dry milk and dry whey futures prices have also decreased several cents for the upcoming months. Partly this decline is due to higher milk production and more milk being processed into powder products. These declines (and the more significant declines that were experienced earlier this year) have contributed to the decline in the Class III futures. In addition to the decline in Class III futures, Class IV futures for upcoming months have declined around 40 cents since mid-february. The dairy industry has been 14 Progressive Dairyman Issue 5 ch 21,

8 NEW BUTTER CROP PRICE STARTS CLIMB $23 $21 $19 $17 $13 Futures $11 Class III (in dollars) Apr May June July Aug Sept Oct Nov Dec Feb. : $16.06 High: $21.67 Low: $ Feb $2.50 Butter (weekly average in dollars). 3, : $1.42 High: $2.23 Low: $1.42 $2.25 $2.00 $1.75 $1.50 $1.25 3/3/12 2/4/12 1/7/12 12/3/11 11/5/11 10/1/11 9/3/11 8/6/11 7/2/11 6/4/11 5/7/11 4/2/11 3/12/11 Since February 14, the spot butter market has been relatively quiet. After declining drastically in previous weeks, the butter price traded around $1.40 plus or minus a couple cents during the end of the month. On ch 1, the butter price climbed nearly seven cents higher as we started trading the new year s butter crop. $1.48 $1.46 $1.44 $1.42 $1.40 $1.38 2/10/12 2/13/12 2/14/12 2/15/12 2/16/12 2/17/12 2/21/12 2/22/12 2/23/12 2/24/12 2/27/12 2/28/12 2/29/12 3/1/12 3/2/12 REQUIRED $2.25 $2.00 $1.75 $1.50 $1.25 3/12/11 $1.90 Feb. : $1.45 High: $1.74 Low: $1.15 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 Feb. 11, : $1.48 High: $2.15 Low: $1.27 4/2/11 Non-fat dry milk Apr 5/7/11 It has been a fairly mild couple weeks in the spot cheese market. Both blocks and barrels traded around the $1.48 price level, plus or minus a couple cents, for the last couple weeks of February. Entering ch these price levels are holding for blocks and barrels. 6/4/11 7/2/11 8/6/11 9/3/11 May June July Aug Sept Cheese (weekly average in dollars) 10/1/11 $1.50 $1.49 $1.48 $1.47 $1.46 2/10/12 2/13/12 2/14/12 Oct 11/5/11 2/15/12 2/16/12 2/17/12 Nov 12/3/11 2/21/12 2/22/12 2/23/12 Dec 1/7/12 2/24/12 2/27/12 2/28/12 2/4/12 2/29/12 3/1/12 3/3/12 3/2/12 Feb SUPERCHARGE YOUR LAGOON WITH BILLIONS OF BENEFICIAL BACTERIA BACTZYME Self dissolving - just toss them in! Easy application for controlled coverage (new generation technology not necessary to pre-mix) Expedites digestion easier pumping Maximum odor reduction Significantly assists in meeting regulatory requirements Affordable (benefits more than cover cost) Better soil penetration (increased crop production) Aeration not necessary Use less fertilizer Cleaner alleyways Proven performance since 1995 weakened in recent weeks and dairy producers across the country are nervous about remaining viable in the upcoming months. While margins are not the worst the industry has experienced, it is difficult to operate since most producers have not been able to fully recover the equity lost in On a positive note, cull cow prices are high and first-calf heifers are abundant, which allows producers to remove inefficient cows from their herd and operate at efficient levels. High cull cow prices could also help keep milk production from moving higher and further hindering the market. For now, we ll continue to keep an eye on the powder markets as the main driver for the dairy producer price. PD Contact us for the best in Bio Logical Solutions for your dairy, feedlot or hog operation! or blslagoontreatment.coml Issue 5 ch 21, Progressive Dairyman 15