Darin R. Bremmer, Ph - Vita Plus · Darin R. Bremmer, Ph.D Keeping a Steady Pulse in an Unsteady...

12/9/2011

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KeepingaSteadyPulseinanUnsteadyMarketplace

VitaPlusDairySum

mit2011

“WhyShipWaterWhenYou’rePaidforSolids?”

Eric C. Schwab, Ph.D.Darin R. Bremmer, Ph.D


VitaPlusDairySum

mit2011

Overview

• Consumer trends / dairy product use

• Meeting market demand?

• Farm – level examples & trends

• What knocks us off track?

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VitaPlusDairySum

mit2011

TrendsinConsumerDemandforDairyTotalProduction

Fluid* Butter NFDMAmerican Cheese

Other Cheese

5‐Yr Avg. Million Pounds

1985‐1989 54,256 1,223 1,360 2,924 2,865

1990‐1994 54,779 1,366 948 2,911 3,747

1995‐1999 54,763 1,244 1,185 3,312 4,372

2000‐2004 54,046 1,307 1,446 3,709 5,224

2005‐2009 53,897 1,526 1,701 4,006 6,041

% Annual Change

‐0.03% 1% 1% 1.5% 4.4%

Source: http://www.ers.usda.gov/publications/ldp/ldptables.htm

* Domestic milk. Butter, NFDM, and cheeses include imports


VitaPlusDairySum

mit2011

TrendsinConsumerDemandforDairyPerCapitaAnnualConsumption


0

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1975

1977

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Fluidx10

Butter

American Cheese

Other Cheese

Evap. & Cond.

Frozen

Dry Milk Products

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VitaPlusDairySum

mit2011

11.21.11 Prog. Dairyman pg18

Marketsegmentswithtremendousgrowth

• ‘Greek’ yogurt– Higher protein

– 2006 sales @ $60 Million with 2011 sales

projected at $1.5 Billion

– WSJ 07/29/2011: growth is ‘nothing short of astronomical’. New $100mil ID plant

• The granola bar evolution

• China (and others)– ‘One glass per kid’ (~126 mill lbs/d)

• ~3.5 million cows @ 35 lbs/hd/d

– Increasing wealth

– Supply likely from imports


VitaPlusDairySum

mit2011

SoHowDoWeRespond?

• The world is getting smaller

– And more affluent

• The market is global and we’re players

• Like it or not, market segments respond to the ‘local, sustainable, slow, natural, pure, etc.’ market essence

– ‘Greek’ yogurt is a prime example (it ain’t Greek)

• Produce a product to fit demand

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VitaPlusDairySum

mit2011

‐0.5

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0.5

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1.5

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2.5

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3.5

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May‐00

Sep‐00

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May‐11

Month -Year

Value ($/lb)

Fat

Protein

OS

FederalOrderButterfat,Protein,andOtherSolidsPrices:Jan2000‐Present $/lb Average

Fat $1.57

Protein $2.49

OS $0.13

Source: http://future.aae.wisc.edu

Prices Reflect Demand?


VitaPlusDairySum

mit2011

PercentofClassIIIPriceContributedbyEachComponent:Jan2000‐Present

‐5

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Jan‐11

May‐11

Month -Year

Percen

t

Fat

Protein

OS

% of Total Value

Fat 38%

Protein 59%

OS 3%

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VitaPlusDairySum

mit2011

What’sthatmeanonthefarm?

• More components to market = $$$ to you

– Protein: out‐values fat for 121 out of 141 (91%) months

• Example herd:

– 500 milking @ 80 lbs/hd/d reference

– FMMO30 average components (3.71 BF, 3.03 TP)

– What if we improve component output by 5%?

– Assumptions• Look only at Gross Returns from increased fat and protein output

• Ignore Other Solids (can’t really impact, not worth much)

• Too many ‘what if’s’ and ‘it depends’ situations to look at Net

• Not considering PPD, SCC, etc. etc.


VitaPlusDairySum

mit2011

Grossreturn/hd/dat5%increase

0.30

0.35

0.40

0.45

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

Jan‐00

May‐00

Sep‐00

Jan‐01

May‐01

Sep‐01

Jan‐02

May‐02

Sep‐02

Jan‐03

May‐03

Sep‐03

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Jan‐07

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May‐08

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Jan‐09

May‐09

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Jan‐10

May‐10

Sep‐10

Jan‐11

May‐11

Sep‐11

Year ‐ Month

Gross Returns $/hd/d

Average of $0.53/hd/d gross return over ~12

years

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VitaPlusDairySum

mit2011

What’sthatmeanonthefarm?

• Over ~12 yr period, average gross return of $0.53/hd/d

• Example herd:

– 500 milking @ 5% increase in component yield

– $265/d or $7,950/mo or $95,400/yr

– Or $1,144,800 over scenario span


VitaPlusDairySum

mit2011

HowAreWeResponding?

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VitaPlusDairySum

mit2011

UpperMidwestFMMO30– FatandProteinPercent

2.50%

2.70%

2.90%

3.10%

3.30%

3.50%

3.70%

3.90%

4.10%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


VitaPlusDairySum

mit2011

HowAreOthersResponding?

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VitaPlusDairySum

mit2011

Upper MW vs. Pacific NW – Protein %

2011 Protein spread persists

Courtesy of Adisseo


VitaPlusDairySum

mit2011

Upper MW vs. Pacific NW – Butterfat %

For 2011 Butterfat has converged

Courtesy of Adisseo

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VitaPlusDairySum

mit2011

UpperMWvs.Pacific.NWTotalYieldinMillionPounds

0

5000

10000

15000

20000

25000

30000

35000

40000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

FMMO30

FMMO124


VitaPlusDairySum

mit2011

It’sTimetoShipSolids

• Can we change these trends in the Upper Midwest?

• Can we improve milk components by 5%?

• Cheese plants are expanding in Upper MW.

• More people are ‘chewing’ their milk.

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VitaPlusDairySum

mit2011

Farm‐levelExamples


VitaPlusDairySum

mit2011

Milk True Protein, Monthly Average, %

2.9

2.95

3

3.05

3.1

3.15

3.2

3.25

3.3

3.35

Aug 03

Jan 04

Jun 04

Nov 04

Apr 05

Sep 05

Feb 06

Jul 06

Dec 06

May 07

Oct 07

Mar 08

Aug 08

Jan 09

Jun 09

Nov 09

Apr 10

Sep 10

Feb 11

Jul 11

Began balancing for Lysine and Methionine

HerdA‐ Protein

Feeding DLP

7% Increase

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VitaPlusDairySum

mit2011

HerdA‐ ButterfatButterfat, Monthly Average, %

3

3.2

3.4

3.6

3.8

4

Aug 03

Jan 04

Jun 04

Nov 04

Apr 05

Sep 05

Feb 06

Jul 06

Dec 06

May 07

Oct 07

Mar 08

Aug 08

Jan 09

Jun 09

Nov 09

Apr 10

Sep 10

Feb 11

Jul 11

Feeding DLP

13% Increase


VitaPlusDairySum

mit2011

HerdB– FatandProtein

2.7

2.8

2.9

3

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4

4.1

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4.4

4/1/07

5/1/07

6/1/07

7/1/07

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11/1/07

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5/1/11

6/1/11

7/1/11

8/1/11

9/1/11

10/1/11

11/1/11

Protein %

Fat %

4% Increase BF

7% Increase TP

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VitaPlusDairySum

mit2011

WeCANproducesolidsthemarketdemands

• 5% and greater improvements are possible

– Using content as an example

• You don’t have to sacrifice milk yield to obtain high component percentages

– Example herds are currently 30K RHA• 1000 and 1850 head herds

• Improvements realized in the face of “Murphy’s Law”


VitaPlusDairySum

mit2011

WeCANproducesolidsthemarketdemands

• These improvements realized in the face of “Murphy’s Law”

– (What knocks us off the tracks?)

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VitaPlusDairySum

mit2011

HerdA– ButterfatChallengesButterfat, Monthly Average, %

3

3.2

3.4

3.6

3.8

4

Aug 03

Jan 04

Jun 04

Nov 04

Apr 05

Sep 05

Feb 06

Jul 06

Dec 06

May 07

Oct 07

Mar 08

Aug 08

Jan 09

Jun 09

Nov 09

Apr 10

Sep 10

Feb 11

Jul 11

13% Increase

New EtOH plant

Really ‘fast’ starch


VitaPlusDairySum

mit2011

HerdB– FatandProteinChallenges

2.7

2.8

2.9

3

3.1

3.2

3.3

3.4

3.5

3.6

3.7

3.8

3.9

4

4.1

4.2

4.3

4.4

4/1/07

5/1/07

6/1/07

7/1/07

8/1/07

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6/1/11

7/1/11

8/1/11

9/1/11

10/1/11

11/1/11

Protein %

Fat %

4% Increase BF

7% Increase TP

PUFA

Butyric Haylage

Wet HMSC

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VitaPlusDairySum

mit2011

Whatcanholdusback?


VitaPlusDairySum

mit2011

HeatDamageandSpoilage

• Heat damaged protein is unavailable to rumen microbes

– Decreases microbial protein production

– Binds sulfur‐AA’s

• Spoilage

– Mold and rotten silage on top and sides of bunkers. Butyric haylage.

– Removing spoilage is important for microbial protein production

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VitaPlusDairySum

mit2011

TheGood,theBad,andtheUgly


VitaPlusDairySum

mit2011

Consistent,HighQualityBy‐products

• Difficult to balance diets with inconsistent by‐products

• Rumen microbes need time to adapt to dietary changes

• Bypass proteins supply metabolizable protein that can be directly incorporated in to milk protein– Many ingredients used to supply bypass lysine are heat processed

– Overheating will reduce lysine digestibility

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VitaPlusDairySum

mit2011

ByproductChallenges


VitaPlusDairySum

mit2011

Carbohydratesareimportant

• Rumen microbes

– Digest a variety of carbos

– Grow most rapidly on starch and sugars

• Rumen microbes need adequate surface are to digest starch in corn kernels

– Kernels in corn silage must be adequately processed

– Corn grain (dry and high moisture) has to be processed properly

• Ensiled corn (either corn silage or high moisture) needs adequate time to “soften”

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VitaPlusDairySum

mit2011

FactorsAffectingMilkFatSynthesisCanbeAdditiveandIntertwined

Milk FatDepression

High ROP Reduced Rumen pH

Amount andType of FatRumensin

Interacting factors make it difficult to solve MFD problems


VitaPlusDairySum

mit2011

Arewegoingtorespond?

• Focus on the end‐user

– Think global, act local

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VitaPlusDairySum

mit2011

TrendsinConsumerDemandforDairy

Fluid Butter NFDMAmerican Cheese

Other Cheese

Years Million Pounds

1985‐1989 54,256 1,223 1,360 2,924 2,865

1990‐1994 54,779 1,366 948 2,911 3,747

1995‐1999 54,763 1,244 1,185 3,312 4,372

2000‐2004 54,046 1,307 1,446 3,709 5,224

2005‐2009 53,897 1,526 1,701 4,006 6,041

% Annual Change

‐0.03% 1% 1% 1.5% 4.4%



VitaPlusDairySum

mit2011

Arewegoingtorespond?• Focus on the end‐user


• It CAN be done

– Improve gross income and IOFC

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VitaPlusDairySum

mit2011

Arewegoingtorespond?• Focus on the end‐user


• It CAN be done

– Improve gross income and IOFC

• Nutrition and Management

– The technology is there to improve components

– Minimize factors that cause variation

– Consistency is King


VitaPlusDairySum

mit2011

“WhyShipWaterWhenYou’rePaidforSolids?”

Darin R. Bremmer, Ph - Vita Plus · Darin R. Bremmer, Ph.D Keeping a Steady Pulse in an Unsteady...

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