DairyBusiness

Editor’s Update

By Dave Natzke

The third leg of sustainability – economics – is getting more attention. Are more consumers getting it?

“Sustainability” is like pornography: It’s hard to pin down a single definition, but almost everybody is pretty sure they know it when they see it.

In its narrowest definition, almost all eyes have been on the perceived “green” side of environmental and social issues. And that focus has paid “green” for some companies, marketers and producers who have been able to form consumer perceptions.

How much? As I regularly report, one need only check out the American Farm Bureau Federation’s latest quarterly Marketbasket Survey. In that survey, shoppers in 32 states reported paying $2.06 per half gallon of regular milk ($3.06 for a full gallon), but substantially more for what some perceive as more “sustainable.”

A half gallon of “rbST-free” milk was $3.38, about 65% higher than regular milk, with the retail markup equal to about $30.69/cwt. (That’s not the price; it’s the markup.) Organic milk, at $3.65 per half gallon, was about 80% higher than regular milk.

It’s not just milk. According to Farm Bureau’s survey, the average price for a dozen regular eggs was $1.53; the average price for a dozen “cage-free” eggs was $2.91, about 90% more than regular eggs.

How much of that markup is returned to producers? I’m no poultry expert, but in the dairy case, not much.

Producer viability

The third leg of “sustainability” is gaining attention, as more people recognize if sustainability isn’t economically viable, it probably isn’t, well, sustainable.

Earlier this summer, crop protection company BASF hosted a media summit to address what it called a “A Grounded Approach to Agricultural Sustainability.” Among the presentations, BASF reported results of a survey it commissioned regarding farmland stewardship issues. The survey results exhibited some gaps – and some surprising similarities – between consumers and growers.

• Consumers believe organically grown food is safest; growers think conventionally grown food is significantly safer than consumers do. Growers had the same opinions of conventional and organic food in terms of safety.

• Both consumers and growers believe farmland stewardship practices are better now than 10 years ago, and both agree practices will improve in the next 10 years.

• When buying crop inputs, growers place the most importance on product effectiveness. Consumers also think growers place significant importance on environmental impact.

• Consumers actually trusted chemical companies more than growers did.

“Consumers feel good about advances the agricultural industry has made, and are asking growers to continue to place importance on environmental impacts,” said Paul Rea, vice president of BASF U.S. Crop Operations. “In the end, it comes down to consumers having trust in growers, both to provide a safe food supply and to have minimal impact on our environment.”

According to Peter Eckes, president of BASF Plant Sciences, sustainability is a complex topic as agriculture strives to produce more food to meet the needs of a growing population, while using less acreage, water and energy – all while trying to stay profitable.

“Growers are often in the middle of actions by policy makers and the marketing chain, facing unintended consequences,” he said.

Of course, if you’re a crop input company, that’s what you’re expected to say. But Robert Thompson, former University of Illinois Urbana-Champaign ag policy chair, agreed, warning “sustainability” mandates eliminating use of modern technologies are short-sighted and misguided.

“Ag research will be critical to productivity growth,” Thompson said. “By 2050, food production must double. We could double acreage, with a huge environmental impact. About 70% of all fresh water is already used for agriculture, so that can’t be doubled. So we have to triple the ‘crop per drop’.”

Consumers are still evolving, wanting the fundamentals of quality, value and price, Thompson said. Most don’t understand sustainability; about 10% say they make purchasing decisions based on their perception of sustainability, he said.

Mike Geske, a Matthews, Mo. corn grower and National Corn Growers Association board member, said “sustainability” has been part of his business since he began farming. “Lower inputs are a moral imperative,” he said.

So is communication. “There is a lot of fragmentation,” Geske said. “There needs to be better dialogue, and industry must be better organized on public policy and education efforts.”

Dr. Jeffrey D. Armstrong, dean of Michigan State University’s College of Agriculture and Natural Resources, said ecological, social, cultural and economic factors must be addressed in a holistic fashion. He said human capital development is critical, and that the “sustainability discussion” must move to the “pre-competitive” state.

“Activists and some NGOs take a political/emotional approach for their version of sustainability,” he said. “The academic community must communicate better on a science-based approach.” He said public funding for agricultural sustainability is woefully short, and ag productivity growth has slowed in the last decade as the United States falls behind in pubic research.

“Just educating consumers isn’t going to get us out of this,” Armstrong said. “Consumers ‘vote’ on small bits of information, often based on perception. All aspects of sustainability should be taught in schools.”

That includes adequate economic returns to producers. “Margins don’t allow full adoption of sustainability,” Armstrong said.

“Consumers still want variety and choice, but they also want information on production practices,” said Terry Uhling, senior vice president, J. R. Simplot Co. “Consumers remain diverse, so we can’t paint them with a one brush. Economics, cost, safety, instantaneous convenience are changing the ‘face’ of the dinner table.”

As multi-national companies strive for product consistency, global “sustainability” standards will result, Uhling said.

J.P. Ruiz-Funes, senior vice president of corporate strategy and business development for Land O’Lakes, said the link of sustainability and productivity must be emphasized, and increased productivity must be the pillar of the message. He credited the Gates Foundation and others with helping lead to a resurgence of education to convert subsistence farming to commercial farming in developing countries. But while he is encouraged by funding for global food production research, the liveliehood of farmers must be addressed.

“Sustainability is the business of the business,” said Ruiz-Funes. “Environmental sustainability means we have to feed more people with smaller impacts on resources. One means to do that is through development of farmers in other countries.”

Roger Thurow, former correspondent of The Wall Street Journal and co-author of “Enough: Why the World’s Poorest Starve in an Age of Plenty,” offered a final perspective. He said food production will need to double by 2050 to meet growing population/prosperity needs.

“There are 1 billion people chronically hungry now, equal to 16% of the world’s population,” he said, urging people to become “outraged.” “People are dying from criminal negligence; starvation is the disease of the soul.”

Measuring ‘sustainability’

Nevin McDougall, senior vice president, BASF Crop Protection/North America, said “sustainability” may add business risks, and requires improved communication. Unfortunately, new technologies and science are not easily communicated. He warned private industry must avoid an “arrogant” stance regarding sustainability, instead developing transparent tools to measure their environmental impact.

BASF unveiled a new Eco-Efficiency Analysis tool – still in the development stages – which compares the social, economic and environmental profiles of products and production methods for use in on-farm management decisions. The tool could, for example, calculate a pesticide application’s impact on water or fuel usage, other input costs and crop yield, assigning an overall “sustainability score” to the product. It takes the product’s entire life cycle into account, from raw materials sourcing, to product manufacture, use and disposal.

Theoretically, the score would not only help growers tailor cropping systems to maximize profitability, but could also follow a crop all the way through the food/feed value chain, useful for marketers and consumers who make purchasing decisions based on “sustainability” issues.

FYI

For more information about the summit and to listen to a recording of the general session, visit http://www.agro.basf.com/agr/AP-Internet/en/content/news_room/press_conference/2010-basf-agricultural-solutions-media-summit.

To offer your own opinion or response, e-mail Dave Natzke, national editorial director, DairyBusiness Communications, e-mail: dnatzke@dairybusiness.com.

ACCOUNTING FOR PROFITS

By Ralph lizardo

Thank goodness 2009 is long gone. By the time this article is published, the second half of 2010 is also long gone. When I looked at the Class III Milk Futures yesterday, for the months of August 2010 to July 2011, it is roughly in the mid $14 range, an improvement from what we had seen in 2009 and early parts of 2010.  Hopefully this will have increased again by the time this article is published.

Dairy is economic driver

According to the Dairy Farming Today’s website, “America’s dairy industry is more than milk. It’s jobs and economic activity for the people of our country. It’s also a way of life for more than 60,000 farm families.” The worst economic downturn in the dairy industry since the Great Depression has caused many dairies to go out of business and the domino effect is too many to list.

To President Barrack Obama, Secretary of Agriculture Tom Vilsack, Senators and members of Congress, what are you going to do in response to the crisis that is being faced by the dairy industry and the millions of people it affects?

In May 2008, the Food, Conservation and Energy Act of 2008, also known as the 2008 Farm Bill, was enacted. The provisions of the 2008 Farm Bill that are most important to the dairymen include Milk Income Loss Contract (MILC) program, revisions to the Dairy Products Price Support program, and Federal Milk Market Order amendment procedures revisions. However, when the 2008 Farm Bill was enacted, the dairy industry’s economic situation was very different and did not address the issues that concern most dairymen today.

Milk pricing

Based on the Dairy Farm Operating Trends published by Frazer Frost, LLP, average milk income for dairies located in Southern California, the San Joaquin Valley, Kern County, Arizona, Idaho, New Mexico and the Texas Panhandle was between $16.84 – $19.11 per hundredweight during the time when the 2008 Farm Bill was enacted.

During 2009, the price of milk dipped for the same regions to $11.94 – $13.83 per hundredweight. It costs roughly $17 to produce a hundredweight of milk. It doesn’t take an accountant to tell you that the current situation is a recipe for disaster.

USDA investigates

It is highly likely that the next government intervention will not come until the passage of the 2012 Farm Bill.  The USDA is currently in its investigative stages of what will be included in the next Farm Bill.

On Jan. 6, 2010, the USDA established the Dairy Industry Advisory Committee (DIAC). The DIACairy will operate under the rules of the Federal Advisory Committee Act to advise Vilsack on issues impacting the dairy industry. The purpose of the DIAC is to review the issues of farm milk price volatility and dairy farmer profitability. The 17-member committee is to provide a report to Ag Secretary Vilsack on how the USDA should address these issues both short and long term.

The report will also include an assessment on the recent actions taken by USDA affecting the dairy industry. The committee members were selected from more than 300 nominations representing producer and producer organizations, processors and processor organizations, handlers, retailers, consumers, academia and state agencies.

Fair, competitive

In the addition, USDA and Department of Justice recently put on a public workshop in Wisconsin to examine the enforcement of antitrust and other regulations in the dairy industry. According to Vilsack, “the dairy industry has been hit particularly hard over the past 18 months, and, like other agricultural sectors, is experiencing consolidation and shrinking farm numbers. A fair and competitive marketplace is important not only for producers, but also for consumers.”

The milk pricing system, milk supply management and the recession that the nation is currently facing are critical factors in the crisis in the industry and dairymen across the nation must unite to find a common solution. Be active and participate in the various workshops and town hall meetings that are being conducted throughout the United States. While we wait for the results of the USDA’s findings and new rules and regulations are set in place, every dairyman must look at their own dairy operation to find ways to increase efficiencies and decrease costs.

FYI

■ Ralph C. Lizardo, CPA, senior manager, Frazer Frost, LLP, in Visalia, Calif. Contact him by e-mail at: rlizardo@frazerfrost.com or call, 714-990-1040 ext. 178.

Opinions & sacred cows

by Ron Goble

Monsanto can breathe a collective sigh of relief. The U.S. Supreme Court in early summer ruled in favor of Monsanto, 7-1, and reversed the lower court’s ban on Roundup Ready alfalfa (RRA), which had thousands of growers unable to take advantage of  the advanced technology.

“This Supreme Court ruling is important for every American farmer, not just alfalfa growers. All growers can rely on the expertise of USDA, and trust that future challenges to biotech approvals must now be based on scientific facts, not speculation,” stated David F. Snively, Monsanto senior vice president and general counsel.

“This is exceptionally good news received in time for the next planting season. Farmers have been waiting to hear this for quite some time,” said Steve Welker, Monsanto alfalfa business lead. “We have Roundup Ready alfalfa seed ready to deliver and await USDA guidance on its release. Our goal is to have everything in place for growers to plant in fall 2010.”

The high court ruled favorably on the side of Monsanto in the case that centered on the U.S. Department of Agriculture’s procedures in approving biotech alfalfa.

In the lower court case, environmental groups and individual organic alfalfa farmers sued USDA, claiming its decision to grant deregulated status to glyphosate-tolerant (Roundup Ready) alfalfa violated the National Environmental Policy Act (NEPA).

The ninth circuit court determined that USDA should have done an environmental impact statement (EIS) before making the deregulation decision, and the court ultimately halted almost all planting and sales of Roundup Ready alfalfa pending issuance of the impact statement.

The highest court said the District Court “erred in entering the nationwide injunction against planting RR alfalfa, for two independent reasons: 1) because it was inappropriate for the District Court to foreclose even the possibility of a partial and temporary deregulation, it follows that it was inappropriate to enjoin planting in accordance with such a deregulation decision; 2) an injunction is a drastic and extraordinary remedy, which should not be granted as a matter of course.”

The court documents went on to explain that if a less drastic remedy was sufficient to redress their injury, no recourse to the additional and extraordinary relief of an injunction was warranted.

The case could have far-reaching impacts on environmental policy as well as on the lower court’s decision on biotech sugar beets. Prior to the injunction, Roundup Ready alfalfa was planted by approximately 5,500 growers across 263,000 acres. Alfalfa is the fourth-largest crop grown in the U.S., with 23 million acres grown annually.

If environmentalists want to obtain an injunction for NEPA violations it still must go through a four-part test: 1) the party must have suffered irreparable harm; 2) the remedies available at law must not adequately compensate for the injury; 3) a remedy in equity is warranted; and 4) a permanent injunction must not do the public interest a disservice.

Since almost every area of our lives is impacted by an over-reaching environmental lobby, this decision is a breath of fresh air, for sure! At a time when it seems we can no longer drill for oil in America, no longer build oil refineries, no longer build nuclear power plants or more clean-burning coal plants, maybe this decision is a small indication we are returning to common sense decision making.

“All growers can rely on the expertise of USDA, and trust that future challenges to biotech approvals must now be based on scientific facts, not speculations.”

–David F. Snively

Monsanto Sr. VP

Have an opinion or response? E-mail Ron Goble, Associate publisher/editor, Western DairyBusiness at: rgoble@dairybusiness.com

Marketing

by Matt Mattke

A unique approach to evaluate ‘what if’ scenarios

When it comes to markets, anything is possible. Market uncertainty requires a new approach that examines those possibilities, helping provide the confidence to make marketing decisions and the discipline to execute them.

Market Scenario Planning_sm is one such approach. It provides producers with actual data showing how a marketing decision will impact his or her weighted average price. The producer may decide to sell X amount of milk, or may decide to do nothing. Market Scenario Planning_sm will reveal the net effect of any action or inaction on the producer’s bottom line. In order to derive what the impact will be of any potential marketing decision, “what-if” scenarios must be run.

The “what-if” analysis is the cornerstone of this process. It examines a marketing decision, or a series of marketing decisions, from an objective viewpoint that when it comes to markets, anything is possible. There is nobody who knows for sure where prices will go, and just when a person thinks they have it all figured out, the market throws a curve ball.

A classic example is the period from May 1998 to October 1999. The milk price went from $11/cwt. up to $17/cwt., back down to $11/cwt., back up to $18/cwt., and then back down to $11/cwt., all in less than an 18-month period.

Who’s market outlook would have seen that coming? Who would have thought that type of price swing in such a small window of time was possible? The answers: no one’s outlook. Nobody saw it coming.

So why try to outguess markets that cannot be outguessed? All that is certain is that prices will either go up or down. Sometimes those moves will be small, and other times those price moves will be large.

The key is being prepared for whatever the market does. Constantly running the “what-if” scenarios will help producers to navigate through the volatility and the uncertainty, and help keep them focused on what prices are theoretically capable of – not focused on somebody else’s price outlook.

Next month, we’ll explore Market Scenario Planning_sm further.

Market Scenario Planning_sm is a service mark of Stewart-Peterson, Inc.

FYI

ν Matt Mattke, Market360® dairy advisor at Stewart-Peterson, can be reached via e-mail: mmattke@stewart-peterson.com, phone: 800-334-9779 or visit www.stewart-peterson.com.

Human Resources

by Felix Soriano

“I don’t believe in giving a bonus or incentive pay to my employees.” “I tried it once and it didn’t work.” ”They’re getting paid to milk cows, why should I pay more for them to try harder?”

These are comments I hear from some dairy producers when I suggest implementing incentive programs for employees. The reality is that, when designed and executed properly, and done at the right time, bonus programs do work. Incentives will increase performance and drive productivity, improving efficiency and the bottomline profitability.

Here is my “Top 10” list of tips to help you get the most out of any incentive plan:

1) Don’t implement any bonus program until performance is at your standard expectations. Don’t use incentives to correct problems or poor performance. Use incentives to achieve goals and improve productivity, efficiency and profitability.

2) Keep it simple. Bonus structures must be simple and easy to understand by workers.

3) Use few performance parameters. Develop the bonus program based on one or two parameters; three at the most. When working with milkers, focus only on SCC, parlor throughput and milk flow in the first minute.

4) Keep track of performance daily. Post the performance numbers for employees to see. Payout can be weekly or monthly, but feedback should be daily.

5) Give employees the tools and support they need. Don’t set up unrealistic goals and expectations. Do employees have all the tools to achieve them? Employees can get frustrated if the bonus is impossible to achieve because the milking units are not working properly, or the mixer isn’t properly maintained.

6) The bonus plan should be flexible. As goals are accomplished, increase your expectations. Some parameters may also change based on the time of the year.

7) Set bonus eligibility conditions. Set up rules and conditions to prevent workers from breaking rules to get the incentive pay. For example, when implementing a bonus program for calf care workers based on number of calves weaned, establish a baseline or budget for use of feed and medicine. Develop feeding and treatment SOPs to ensure things are done properly and at the right time.

Workers should be properly trained. Before implementing any bonus structure, employees must understand the importance of their job, their role in achieving the goals, and why, how, when and what they are supposed to do to achieve excellent performance and productivity.

9) Communicate and explain the bonus structure. Review the plan with your key employees or supervisors before meeting with the rest of the team. Get their feedback, then hold an employee meeting to explain the bonus structure, seeking feedback and opinions.

10) Separate incentive pay from regular pay. Issue separate bonus checks or pay in cash, giving it out on a different day than their paycheck. Pay incentives on time.

Also, share the incentive program with your veterinarian, nutritionist and/or consultant, and get them involved in the program.

Remember, when done right bonus programs can be an effective way of rewarding individual employees or teams for excellence.

FYI

■ Felix Soriano is a labor management and human resource consultant with APN Consulting LLC, Warrington, Pa. Contact him via phone: 215-738-9130, e-mail: felix@apndairy.com or visit www.apndairy.com.

It’s your money

By Verlyn de Wit

One reason many of our business transactions are irrevocable is to get the tax treatment we desire. Consider that:

• Gifts to charity are not tax deductible if you can take it back later.

• You must “cut all the strings” of  income and enjoyment, or property given to children will be in your taxable estate.

Revocable vs. Irrevocable

I can’t think of any area of the law where the concept of revocable (ability to change or undo) and irrevocable (you get the picture) is more important than in the area of trusts.

For example, assume that your revocable living trust provides a $100,000 gift to your church at your death. You won’t receive a charitable deduction now since you can remove the gift provision from your trust at any time. However, if you place $100,000 in a qualified irrevocable trust, you will receive a charitable deduction today and continue to receive income from the trust even though the money doesn’t pass to charity until your death.

Irrevocable trusts can be powerful!

Leaving “goodies” on the table

Folks have a natural aversion to doing anything irrevocably.  Unfortunately, substantial benefits are sometimes left on the table to avoid the unlikely event of a negative turn of circumstances.

One key area where I have seen people forfeit great gain because of fear of the unforeseen is with life insurance ownership.  Life insurance is taxable in your estate if you own the policy, or have any “incidents of ownership.” These “incidents” may be as small as the ability to borrow from the policy or change its provisions, even if the powers have not been exercised. The penalty of having life insurance included in your taxable estate is huge – up to 45% of the policy death benefit can go to taxes. A $1 million policy can be whittled down to a mere $550,000 with Uncle Sam as the unexpected beneficiary.

The irrevocable rescue

To avoid this disaster, folks need to establish an irrevocable trust as the owner of their life insurance. If properly drafted, this irrevocable trust would save $450,000 in taxes in our example above. But now the questions arise, “What if one of my children goes off the deep end?” or “What if my children need the money in the trust before I die?”  These are good questions that need to be asked.  And you know I wouldn’t ask them unless I had an answer!

Irrevocable and flexible intersect

One key requirement of the irrevocable life insurance trust is that the Grantor (person who establishes the trust, and usually is the person on whom life insurance is purchased) may not change the terms of the trust. It’s like the country song, “What part of irrevocable don’t you understand?”

However, in the last number of years I have seen leading-edge attorneys draft irrevocable trusts that establish the position of “Trust Protector” (TP). All trusts have a trustee, but the TP role is entirely different. The TP can change the terms of the irrevocable trust while it is in operation. The irrevocable becomes flexible.

The provisions which can be changed are limited, and it would probably be best not to have the grantor’s attorney, or a beneficiary of the trust act as the TP. All of this requires competent legal expertise – we are now performing brain surgery on an irrevocable trust!

Here are some of the powers I have seen given to the TP:

• Terminate the trust.

• Impose terms and conditions under which the beneficiaries may receive property.

• Change the beneficiary(ies) of the trust to another trust.

• Modify the financial powers of the trustee.

• Modify the terms of the trust to achieve a desirable tax result.

• Remove the trustee.

Conclusion

The TP may be a new concept to some attorneys, and therefore viewed as “risky”.  So don’t subject your counselor to an immediate on-the-spot exam.  If you want to sound sophisticated and informed perhaps you’ll want to say, “I have reading about using a Trust Protector in an irrevocable life insurance trust, can I come over next week to talk about it?”

Your attorney will probably say, “That’s a good idea, after all, It’s Your Money.”

FYI

■ Verlyn De Wit helps successful dairy producers make smart decisions about their money.  He can be reached toll-free at 1-888-468-1728 by e-mail at vdewit@sammonsrep.com or snail-mail at 1270 Eastside Dr., Sioux Center, IA  51250. Securities offered through Sammons Securities Co., LLC. 4261 Park Road, Ann Arbor, MI  48103. Member FINRA and SIPC.

■ Neither Western DairyBusiness nor Verlyn De Wit is qualified to offer legal or tax advice. Consult your attorney and/or tax professional for a qualified opinion regarding your personal situation.

Milk Matters

By Joseph O’Donnell

Milk, fermented products, cheese, butter, nonfat dry milk powder are the stuff of commodities. These products drive milk production, processing, marketing, promotion, economics, nutrition education and, to a degree, research in the areas of nutrition and product development. The dairy world turns on these products and consumer nutritional health depends on these products.

Research, for its part, works to add efficiency at all production levels including extending product lines and most importantly discovering new truth about the nutritional benefits of these products.  Research naturally moves to exploring for new discoveries by looking at the fine details of the core product – milk.

No exaggeration!

It is not an exaggeration to compare the great detail required to put a man on the moon to the engineering that nature invested in designing and producing milk. It took us decades to get to the moon but it took nature hundreds of millions of years to get milk to where it is today.

Unraveling that bit of biology requires a lot of time and effort. So far several generations of scientists have been dedicated to the endeavor. The good news is that we are starting to see some results. The century before us focused on basic nutrition. These scientists established that milk is the most nutritionally complete food on earth. They went on to show how milk efficiently delivers this nutrition with all the nutrients being highly digestible. As a result, once populations increased their milk consumption, deficiency diseases were severely mitigated.

In the U.S. the official recommendation is to consume three servings of dairy products each day.  This is based on science.  This science started through funding from dairy farmer check-off dollars but rapidly spread to include much larger government funding because of its success and importance to national health and security. Countries around the world recognized this and started setting up similar dietary goals for milk.  Notably, China with its 1.4 billion people has a current goal of 2 servings of dairy per day.  What’s next?

Unbelievable technology

Think again about the technology behind putting a man on the moon. Think about all the systems that must be developed and fully integrated. Not only the physics of building a rocket that will get there and back again but the physiology of maintaining a living body in the process.

Milk has to take a wide collection of essential nutrients from one living being and integrate them into a biochemical system that allows each nutrient to operate at top efficiency when ingested into another living being.  That digestive system is a long process in itself so the milk has to be constructed to deliver specific benefits at specific places along the journey. This implies that something like a protein may have a certain effect early on in the digestive process but a very different effect further down the path. Furthermore, these molecules of milk will be doing more than delivering nutrients; they will be triggering physiological responses in the recipient – responses such as satiety, immunity and many others. Expand this to all the hundreds of different kinds of molecules in milk and you can see that comparing this to sending a man to the moon is not hyperbole.

I opened by talking about dairy commodities. The kind of research I describe above pushes our knowledge envelope of milk components to a place that doesn’t address commodities directly. The initial products to come from this type of current and near term research will be from those components of milk that have a marketable nutritional benefit and can be separated or at least enriched in some stream of milk processing. The companies who jump on this bandwagon could make a fortune. What about the initial investors, the dairy farmers?

New discoveries

While these new products will help create huge markets for specialized milk components, markets that will expand each year as new components are developed and new health benefits discovered, volume sales of dairy will likely remain with the commodities – foods affordable by the world’s population. The nutritional advantages uncovered by this research and initially marketed in specialized products will soon be recognized at the commodity level as well. My prediction is that the successful marketing of specialized dairy products will drive consumers from all countries to include commodity products as part of a daily diet. This is the ultimate return for the dairy farmers who believe profoundly in the wholesomeness of their product and who started this research ball rolling – steady, increased demand for milk, nature’s most perfect food.

FYI

■ Dr. Joseph O’Donnell is executive director of the California Dairy Research Foundation. He can be reached at 530-753-0681. Information on the California Dairy Research Foundation can be obtained from the organization’s web site at www.cdrf.org.

(To see the charts associated with this article, view the online version of Western DairyBusiness at www.dairybusiness.com)

Dairy Financial Times

by Bruce Miles

We have completed our year-end cost study for what will go down in history as possibly the worst for the dairy industry. It has been well published by now the record numbers of dairy either in default, facing foreclosure or worst yet completely out of business. While cooperatives and manufacturers have been recording double-digit profits, dairymen have lost anywhere from $2.00 per cow per day up to $5.00 per cow per day.

The cost study includes more than 14 billion pounds of milk produced from many of our western dairy clients. With the gross milk price received of $12.40 per cwt, dairymen could not keep up with the total cost of producing milk at $16.10 per cwt. The only positives to come out of 2009 were the fact that feed costs were down from an average cost of $9.22 to $8.26 per cwt and total expenses down from $17.41 to $16.10. With this being said, the milk price was down over $5.00 per cwt from 2008. Thus dairymen found themselves eating though equity and getting their operations pushed to the brink of disaster.

Regionally, dairymen found similar results:

So it’s perfectly clear now, high prices in 2008 did not produce high incomes due to record high feed and production costs. So when milk prices fell in 2009 and feed costs came back down, dairymen felt the pinch. Not shown in any of these numbers is the $1.50 per cwt needed for principal repayment and living expenses. So how did this happen? Why has it been allowed to go on for so long? Who is going to survive? Plenty of questions, but shouldn’t our leaders have better answers than the ones they are giving you?

FYI

Bruce Miles, CPA in Costa Mesa, Calif., with Genske, Mulder & Co., LLP, a certified public accounting firm representing clients who produce 12% of the nation’s milk in 29 states. Bruce can be reached at 949-650-9580 or e-mail him at bruce@genskemulder.com

On the Edge of Common Sense

By Baxter Black, DVM

Late night calls are usually not good news. Especially if it is the police calling to tell you that a car has hit a cow on the highway. Jack got the call at 11:15pm Friday night. The local police all have his number because he knows the country, all the ranches and all the brands and…he’s the one they always call! “The driver’s shaken up but nobody’s injured, the cow’s upside down in the bar ditch on Post Road a mile east of Highway 90, and we can’t get her out.”

It was down the road from Jack’s house.  He got dressed, pulled on his boots and made sure he had a lass rope in the pickup. As soon as he turned onto Post Road he could see the flashing lights in the distance. He arrived quickly and noted that the City Police, the Highway Patrol, and the Sheriff’s department were all in attendance. Headlights lit up the area like a raid on a bootleg tavern!

The vehicle involved was skewed sideways in the center of the gravel road. It was a small quarter-ton oriental vehicle with an odd sounding name like Tonka or Hilo or Crustacean. Three teenagers, a boy and two girls were huddled in the cab. The cow was trying to right herself but the bar ditch held her like a hot dog bun. She couldn’t get onto her side enough to get her feet on the ground.

Jack got a rope around her front leg and head to see if they could manually get her rocking and eventually pull her out.  The three lawmen furnished the muscle but no amount of tugging could dislodge her. It did, however, make her madder! Rethinking his plan, Jack suggested they tie the rope to the little round pipe bumper on the back of the Crustacean. The driver squared the rig around to get good leverage. On the first try the little pickup spun out on the gravel road. Cowboy logic followed and soon the two girls were in the back of the pickup to add weight. Jack stood by the cow, the kids were ready, and the lawmen were standing in front of the city police car. It would have been an interesting scene from the bird’s eye view; a small circle of bright light in a black night on a deserted road with no habitations within two miles.

“You boys better get behind your car,” Jack advised, “When this ol’ darlin’ gets loose she’s liable to come right for ya!

The three stood, arms folded across their chest, wearing Kevlon vests, pistols, handcuffs, Mace, ammo, flashlights, truncheons, Swiss Army knives, walkie-talkies and steel-toed shoes. They looked like the front line of the Oakland Raiders! They harrumphed.

“Give her gas, kid!” yelled Jack.

The cow popped out, righted herself, saw the triumvirate of those who “Protect and Serve,” and charged! If you’ve ever seen a bucking bull clean the gawkers off the fence at a rodeo, you can imagine the scene! In the blink of an eye she wheeled to the pickup and jumped! The girls sailed over the side!  The cow got her front paws up in and slid back, jamming her front legs down between the bed and round bumper.

Miraculously, she lifted out her feet and turned back into the island of light. The law had scattered, the teens were hidden and Jack, The Observer, immediately became The Target! He made toward the pitch-black edge of the stage. In a matter of seconds she ran him down, left him in a clump of cat claw, and left the country! At the bottom of the police report, filed later that predawn morning, was the comment, “It is apparent according to witnesses, that cows can see in the dark.”

FYI

Baxter Black is a cowboy poet and ex-veterinarian raised in New Mexico and now lives in Benson, Ariz. He has written 12 books and recorded more than a dozen audio and video tapes, and is a syndicated columnist and radio commentator.

Books, videos, CDs and tapes by Baxter Black can be purchased through www.baxterblack. com.

Opinions & sacred cows

By Ron Goble

When John Wooden, 99, died on June 4, the world lost a great man.

Most people knew him as the greatest basketball coach of all time. No one came close to his success. Wooden’s record speaks for itself. He led the Bruins to 10 NCAA championships, including an unmatched streak of seven in a row from 1967 to 1973. Over 27 years, he won 620 games, including 88 straight during one historic streak.

But few knew that Coach Wooden spent his first four years at UCLA working two jobs. And it isn’t surprising to me that Mr. Wooden had a dairy connection. From 6 a.m. until noon he worked at a dairy in the San Fernando Valley, as a dispatcher of milk trucks and troubleshooter. At the end of his dairy shift, the not-yet-famous coach, would sweep out the place. Then he’d come into Westwood to coach his Bruins.

While Wooden was famous for his coaching success, his real success was teaching young athletes how to live life. His former players don’t talk about his coaching as much as how he instilled in them the importance of good character. Coach Wooden developed “The Pyramid of Success,” a graphic laundry list of character and personal traits that he used to inspire his players and  thousands of other athletes, well after his coaching career ended.

Each athlete learned Wooden’s “pyramid,” which summed up his personal code for life. The base and foundation of the pyramid is industriousness, friendship, loyalty, cooperation and enthusiasm. The second level is self-control, alertness, initiative and intentness. The third level is condition, skill and team spirit. The fourth is poise and confidence, which all lead to the top block of the pyramid – competitive greatness.

It doesn’t stop there. The left side of the pyramid mentions ambition, adaptability, resourcefulness, fight and faith. The right side includes sincerity, honesty, reliability, integrity and patience – all essentials in life’s journey.

My youngest son, Ryan, recalled how Coach Wooden inspired him as a young basketball player. Later in life, Ryan was blessed to work at UCLA as an assistant men’s golf coach for five years, and crossed paths on several occasions with Coach, who he respectfully addressed as “Mr. Wooden.”

We can all learn from Coach Wooden because his message is timeless and will impact the lives of individuals for years to come. Here is some of my favorite Wooden wisdom:

•“Be more concerned with your character than your reputation, because your character is what you really are, while your reputation is merely what others think you are.”

•“Learn as if you were to live forever; live as if you were to die tomorrow.”

•“Don’t give up on your dreams, or your dreams will give up on you.”

•”The main ingredient of stardom is the rest of the team.”

•”Success comes from knowing that you did your best to become the best that you are capable of becoming.”

Even with his staggering accomplishments, Coach Wooden remained humble and gracious. He said he tried to live his life by advice from his father: “Be true to yourself, help others, make each day your masterpiece, make friendship a fine art, drink deeply from good books – especially the Bible – build a shelter against a rainy day, give thanks for your blessings and pray for guidance every day.”

That pretty much says it all. Thanks Coach!

Have an opinion or response? E-mail Ron Goble, Associate publisher/editor, Western DairyBusiness at: rgoble@dairybusiness.com