usa beyond borders - fall 2012
DESCRIPTION
Beyond Borders is a magazine designed to promote dairy genetics, technology and management published by Semex.TRANSCRIPT
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Fall 2012
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Beyond
BeyondC: 100M: 11Y: 0K: 74
C: 80M: 0Y: 10K: 35
C: 80M: 0Y: 10K: 68
PMS: 7477
eliminate fertility worries
Life begins with a pregnancy. The top priority on any dairy anywhere in the world, begins and ends with getting live calves on the ground. We understand that without good fertility, you don’t have life.
Genetics for Life is all about reproductive solutions. We’re committed to the on-going research & development that developed the world’s only international fertility evaluation, Repromax. Semex’s Repromax sires improve your herd’s reproductive performance, longevity and profitability, one straw at a time.
Because at Semex, we understand that it all begins with a pregnancy. Genetics for Life.
TM
www.semex.com
Based on Sire Conception Rates from USDAApril 2012.
Higherconception rate2.6%
10
12
4
6
14
19
Genetics for Life.
Semex is well-known for the Power
of Balanced Breeding, Semex Works
Everywhere and Every Dose Counts.
Each of these has helped to bring us
to where we are today.
Genetics for Life is a reflection of
this evolution and it has been driven
by what we’ve seen and heard from
you. You’ve told us that you’re
looking for genetic solutions that are
designed to develop herds for life.
These solutions are required in
today’s global marketplace where
borders have truly melted away.
Our product is sourced, produced
and marketed everywhere cows are
found, without limits.
As our Chief Executive Officer Paul
Larmer states, “The need for genetic
solutions knows no borders.”
With that thought, we are proud to
present to you our newly designed
Beyond Borders magazine.
This magazine tells Semex’s story. It
features all that is Semex and shows
you the value of the Semex people,
product and services. We hope you
enjoy it and that like us, you believe
in Genetics for Life.
BEYOND BORDERS IS A MAGAZINE DESIGNED TO PROMOTE DAIRY GENETICS, TECHNOLOGY AND MANAGEMENT PUBLISHED BY SEMEX.Comments or submissions to the editor should be forwarded to Brenda Lee-Turner, Semex, 130 Stone Road West, Guelph, Ontario, Canada N1G 3Z2. tel: 519-821-5060, fax: 519-821-7225; email: [email protected]™, Genomax™, Genomax Plus™, Repromax™, ProMate™, ReproMix™, Premier™, HealthSmart™, ai24™, ShowTime™, .25Plus™, CVG™, Robot Ready™ and Calving Ease™ are registered trademarks of Semex.
China
Brawler
Renegade
Heifer Drift
ai24™
Repromax™ Milk Prices16
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It’s About You.
Life is an evolution, building on the past and adapting for the future. At Semex, our vision is directed by what we see in our clients’ eyes.
Genetics For Life is this evolution. It encompasses genetic solutions, how we will expand globally, our commitment to research & development, our training programs, and most importantly developing long-lasting, profitable herds and lifelong partnerships. Genetics For Life is all about enhancing lives and how we will feed the lives of tomorrow together.
What we hear, see and learn from you drives us. It’s about you and we’re evolving into tomorrow together.
PAUL LARMER, CEO, SEMEX
GENETICS FOR LIFEINTO TOMORROW TOGETHER
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Genetics for Life at Semex is about genetic solutions, our commitment to research & development and most importantly developing long-lasting,
profitable herds and lifelong partnerships worldwide. As the world grows smaller, we’re left wondering how we will
supply our growing population with water, commodities and even our milk.
The greatest of these populations is
the People’s Republic of China with 1.3
billion people. More than just a large
population, China’s living standards
are increasing and its middle class is
growing. And, it has rapidly expanded
its milk consumption and production in
the past few years.
This makes China a giant in the dairy
industry. As seen in Figures 1 & 2,
China’s consumption is still out-pacing
its production even though China is the
world’s third largest milk producing
country in the world.
Per capita dairy consumption in China is still relatively low compared to other Asian and European countries (see Figure 3). As this increases over the next 10-20 years, the current thinking is that the Chinese dairy market will continue to grow 10-15% annually.
In the 1990s, Semex led the highly successful 10-year Canada-China Integrated Dairy Cattle Breeding Project (IDCBP). This project was established to help strengthen China’s genetic and managerial base, increasing the quantity, quality and efficiency of milk production in China.
SEMEX BEYOND BORDERS: CHINA
Greg Dietrich, Semex Sales Manager, Asia, Middle East, Central & Eastern Europe
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Today China is very focused on improving its dairy production. Now, with almost 10 million cows, the need for efficiency is increasing. Chinese farms are generally small, with most being under 20 cows, but the number of larger farms with over 100 cows is growing quickly. In fact, there are about 900 larger dairies with 100 or more cows, the bulk of which are in the Chinese ‘dairy belt’ that produces 75% of the country’s milk.
This creates a major potential market for Semex. In 2012 Semex China was established with headquarters in Shanghai. A second site, including bull barns and semen processing, has been built in the southern province of Yunnan, and is home to Holstein and beef bulls imported from Australia. This location keeps the cost of semen down for local
Chinese dairymen and allows for year round collection.
Semex China is very passionate about the future of dairying in China.
“The semen market in China is gigantic,” says Junmin Zhang, Manager of Semex China. “It’s logical for Semex to be here, just like we are in other major dairy markets worldwide. In five years time we want to become the biggest breeding organization in China!”
Already Semex China is surpassing expectations. It ranks as a top sales country for Semex, and promises to deliver on its promise of Genetics for Life to the rapidly expanding Chinese dairy industry.
“It’s logical for Semex to be here, just like we are in other major dairy markets worldwide.”
101996
Production (mill t ECM) Consumption (mill t ECM)
Figure 1: Chinese Milk Production & Consumption (1996-2009)Data Source: IFCN
1998 2000 2002 2004 2005 2006 2007 2008 2009
30
20
40
50
60
70
80
1USA
Ranking 2India
3China
4Russia
5Brazil
6Germany
7France
8New Zealand
9UK
10Turkey
Production (mill)
Figure 2: World Top 10 Cow’s Milk Producing Countries in 2010 (MT)Data Source: FAO
01996 2000 2002 2004 2005 2006 2007 2008
China
India
Turkey
Russia
Poland
Kazakhstan
Canada
Germany
20091998
50
100
150
200
250
300
350
400
Figure 3: Consumption Comparison by Country (kg milk/capital)Data Source: IFCN
All photos supplied by Han Hopman.
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Semex customers and partners know that working with Semex as their genetic partner yields many benefits.
These benefits include access to our Genomax™ lineup, offering producers the brightest and best genomic young sires in the industry.
In August, Semex released one of the most
highly anticipated graduates its Genomax
program has ever seen, the #2 LPI sire and
Top 100 Holstein USA International TPI sire,
0200HO05929 Gen-I-Beq Brawler.
Extremely popular as a Genomax sire, Brawler
graduated with over 200 daughters in his
initial proof as a HealthSmart™ sire.
Semex’s HealthSmart sires breed cows that
are healthier, more fertile and cost the
dairy less money. These daughters have few
average days open, fewer difficult births and
fewer stillbirths.
THE PEDIGREESire: Baxter
Dam: Gen-I-Beq Shottle Barbi VG-85 4* 1 Superior Lactation Award
2nd Dam: Gen-I-Beq Champion Bambi EX-90 4*
3rd Dam: Braedale Baler Twine VG-86 32* Dam of Semex’s world famous
Braedale Goldwyn
1 Superior Lactation Award
2007 Holstein Canada Cow of the Year
4th Dam: Braedale Gypsy Grand VG-88 37* 2 Superior Lactation Awards
2003 Holstein Canada Cow of the Year
IN THE FIELD“People love these cows,” says CIAQ Progeny
Analyst Carl Saucier. “They’re easy to milk
and people love working with them.”
“His feet & legs are great, and he’s best
for foot structure, a deep sole and strong
pasterns. Graduating with a 78% Good Plus
and better tells us they’re cows built to last.
All of his best daughters have one thing
in common... Their dams are all sired by
strength bulls. ”
Semex Sire Analyst Mike West believes
Brawler offers dairymen what they’re looking
for to build a great, profitable herd.
GENOMAX™ GRADUATE: 0200HO05929 GEN-I-BEQ BRAWLER
Brenda Lee-Turner, Semex Marketing Communications Specialist
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DELABERGE BRAWLER LISIE VG-86-2YR-CANGEN-I-BEQ BRAWLER BLANCHE VG-86-2YR-CAN
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“He’s got low SCS, high Productive Life, Calving Ability, Milking
Temperament, big fat and protein deviations, good production and a no
holes type proof,” says West. “And, of course, he’s backed by the Gypsy
Grand family and their incredible reliability. With these credentials, it’s no
wonder guys like their Brawlers and are going back and using him again.”
Already used as an international sire of sons, Brawler is a special sire that
certainly has the makings to be a great and influential sire. He excels in
components, type and has appealing health traits that leave productive,
long-lasting daughters.
HOW TO USE BRAWLERBrawler is best used to produce hard-working cows with desirable type. He
will improve Feet & Legs and as a HealthSmart sire, delivers the functional
traits such as Productive Life, low Somatic Cell, Milking Temperament and
Daughter Calving Ability.
GENOMAX™ GRADUATE: 0200HO05929 GEN-I-BEQ BRAWLER
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NEW AUGUST RELEASE
Brawler defines Genetics for Life,
siring long-lasting, profitable
cows and represents the lifelong
partnerships that Semex is built on.
Brawler is Genetics for Life.
0200HO05929
GEN-I-BEQ BRAWLER
BAXTER x SHOTTLE
TM
AMIGO BRAWLER FAZYANE VG-85-2YR-CAN DELORME BRAWLER JOALYA PHOTOS: VICKI FLETCHERDAIGALE BRAWLER MATRIX VG-85-2YR-CAN
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Semex’s job is to provide our customers with the best, the most diverse and the most reliable source of genetics in order for them to be successful and profitable. This is at the heart of our Genetics for Life philosophy.
Vital to our customers’ success, Genomax™ sires are the youngest and brightest genomic sires available anywhere today.
Genomics has provided our industry with
the ability to more confidently select the
population’s best animals at a younger age.
Still a developing technology, many articles
were written earlier this year talking about
the limitation of genomic predictions.
These articles noted that initial genomic
predictions are often overestimated, with
the majority of bulls tending to go down
once they become progeny proven. At
Semex, we’ve worked hard to both analyze
and bring attention to this overestimation.
However, this does not change our
confidence in genomics, or our belief that
genomics provides our customers with
a great opportunity and advantage. Our
research confirms that even after accounting
for overestimation, the genetics from the
high genomic bulls still easily surpass
today’s best progeny proven bulls.
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C: 25M: 0Y: 30K: 75
C: 10M: 0Y: 5K: 50
C: 20M: 0Y: 20K: 65
PMS: 445
LEADING GENETICS
TM
Jay Shannon, Semex Global Dairy Solutions Manager
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Genomax™ sires are the youngest and brightest genomic sires that are available globally in the dairy industry.
Semex solutions target fertility, health and longevity to build a profitable herd for our clients.Semex’s dairy solutions and genetic sales tools are managed by Semex’s Global Dairy Solutions Manager, Jay Shannon. Contact Jay at: [email protected] © 2012
Leading GeneticsTM
3001of7
4,000+
Elite Females
Highest genomic bulls designated Genomax™
300 sires enter stud
THE BEST OF THE BEST
Young bullsgenomic tested
Select highest genomic females
Semex recommends 30-50%
Genomax™sire usage
GUIDING PRINCI
PLES
Use no more than half Genomax™ sires who are sons from non-proven sires
Use Genomax™ bulls with a differentmix of sires intheir pedigrees
Select Genomax™ sires in groups of three or more
#1, #2, #3 & #4 GPA LPI bulls11 of top 15 GPA LPI bulls14 of top 20 GPA LPI bulls
Source: CDN top 100 young bulls, August 2012.
Source: Holstein UK Animal Data Centre, August 2012.
#1 and #2 PLI genomic bulls4 of top 5 PLI genomic bulls
13 of top 25 PLI genomic bulls
#1 GPTA TPI bull #2 GPTA NM$ bull
2 of top 10 GPTA NM$ bullsGPTA TPI bulls
Source: Dairybulls.com, August 2012.
Average publishedLPI/TPI
After accounting for known genomic overestimation
GENETIC SUPERIORITY
Top 20ProvenBulls
Top 20Genomic
Bulls
SEMEX IS THEBEST SOURCE
FOR HIGHGENOMIC SIRES The USA, Canada, the UK and Italy share genomic
information, allowing us to compare genomic values
on all our bulls. This information tell us that Genomax
bulls aren’t just the best genomic young sires at Semex,
they’re among the very best in the world! This is a great
way to benchmark sire line-ups, and Semex sires clearly
leads the way.
In Canada, Semex dominates having the top four GLPI
bulls available, as well as 11 of the top 15. In the United
States, Semex has both the #1 GTPI and #2 GNM$ bull,
and two of the top 10 in both listings. In the UK, (which
offers a third party comparison for North American
genomics), Semex shines with the top two PLI genomic
bulls, four of the top five, and 13 of the top 25. This
makes it very clear that Semex is the world’s best option
for dairymen looking to harness the world’s most
powerful genetics.
Remember, breeding is a balance of risk and reward. At
Semex, we recommend our customers use 30-50% Genomax
bulls for optimum genetic advancement. To help mediate
the risk of using lower reliability sires, Semex endorses
three common sense breeding principles:
• Select Genomax sires in groups of three or more
• Use Genomax bulls with a mix of sires in their pedigrees
• Use no more than 50% of Genomax sires that are sons of unproven bulls
In order to find the world’s leading genetics, Semex uses
an extremely stringent selection process. We begin by
selecting high genomic females and then testing over
4000 young bulls per year. Only 300 of these 4000 tested
are good enough to enter the Semex stud. This selection
intensity provides Semex with a crop of young genomic
bulls that are second to none. Only one in seven of those
entering stud qualifying to be a Genomax sire, ensuring
that Genomax bulls are indeed the world’s leading genetics.
If you’re looking for the very best genomic sires with semen fertility and calving ease data, Semex’s Genomax Plus™ lineup is for you.
These bulls have all the merits of a Genomax bull, with high fertility semen qualifying them as a Repromax™ sire and calving data that also qualifies them as a Calving Ease™ sire. Use Genomax Plus bulls with confidence!
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Successful business managers know that carrying costs can negatively effect profitability. For dairy producers, inventory management comes in many different forms. You manage your feed, fuel and fertilizer inventories, knowing they’re critical to cash flow.
However, many dairymen might not realize that their heifer inventories may literally be eating away at their profits. Let’s take the example of a 100-cow milking herd and have a closer look. Using conventional AI semen, this herd will average four heifer calves born per month. If this herd’s average age at first calving is 27 months, we can estimate that they’re keeping an extra 12 heifers in inventory three months longer than they have to each year. Financially, calving heifers out at 27 months of age as opposed to the widely recommended 24 months costs this herd an estimated $15,000/year. This estimate is based on extra heifer rearing costs and reduced culling opportunity.
As feed availabilities tighten and hit pocket books following this summer’s drought, managing your heifer inventory and related reproduction program is critical. Key to this is timely heifer breeding.
The first place to look at is the age your heifers are when first bred. In order to get heifers calving in at 24 months of age you
must begin breeding at 13 months. This decision alone directly influences when your heifers will start to make you money. The sooner they’re bred, the sooner they’ll be pregnant, calving and paying you back!
Recently, the University of Guelph, OMAFRA, CanWest DHI, and EastGen (Semex’s partner) initiated the Calf-ETERIA project. The goal of this project was to get a sense of the decisions and tools dairymen are using when raising their heifers. In the winter of 2011, a survey was distributed asking participants questions about all aspects of their heifer-raising program, from newborn to first lactation. A total of 901 Ontario dairy producers responded.
The survey asked producers what age they planned to start breeding their heifers. The majority stated 14 or 15 months, answering 30% and 32% respectively. Only 20% of respondents indicated that their goal was to start breeding their heifers at 13 months of age or younger.
Using a small sub-group of 68 survey participant herds, early analysis compared when the producers said they planned to start breeding to when their their CanWest DHI data that had actually breeding dates. This information showed that 49% of these 68 participants bred their heifers at least one month later than their stated goal. When you break this information down even further, 22% of these herds bred their heifers two or more months later than they had planned.
This shows that many producers are not reaching their goal of getting semen into heifers when they plan to and they’re letting their heifers ‘drift’ a month or more past their target start date. The financial effect of this ‘drift’ adds up quickly as these heifers will be literally eating away at profits, calving well beyond the desired 24 months of age at first calving.
ARE HEIFER INVENTORIES EATING AWAY AT YOUR PROFITS?
Mark Carson, MSc., BSc. Agr., EastGen, Reproductive Strategy Manager
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Considerations to avoid the ‘drift’: • Make sure heifers regularly move into your breeding pen.
Scheduled pen moves ensure the right heifers get the right amount of attention.
• If you’re using visual heat detection, remember that you need to dedicate 30 minutes twice a day (morning and night). Visual heat detection should not be done during other activities such as feeding.
• Systems such as ai24™’s Heatime® need to be used correctly. Make sure you’re putting collars on heifers approximately 10 days before the breeding period starts to ensure maximum benefit.
• Quickly identify heifers you have not seen in heat. Work with your veterinarian to establish a protocol for heifers not seen in heat after the first 21 days of the breeding period.
• Regularly scheduled pregnancy checks are a must. This quickly identifies open heifers and allows you to deal with them appropriately.
Another tool we could use to improve our heifer reproduction management is utilize pregnancy rates.
The pregnancy rate essentially measures the speed at which heifers eligible to become pregnant actually became pregnant over a given period of time. Producers and consultants have used this figure effectively when assessing reproductive performance and in making the necessary changes to improve the lactating herd’s profitability.
Conception rates are higher in heifers, easily reach 60%, making a 35-40% heifer pregnancy rate achievable. Using this statistic in heifer programs will help herds assess if their heifers are being bred in a timely manner, and also if they’re getting pregnant from those breedings.
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C: 0M: 46Y: 73K: 0
C: 0M: 79Y: 100K: 11
C: 0M: 69Y: 100K: 4
PMS: 173
L E T U S P U T T I M E O N Y O U R S I D E
As a herd manager you know how valuable your time is. You need time to feed cows, time to treat cows, time to milk cows and time to breed cows. Most importantly, though, you need that precious time away from the cows to do the things that mean most in your life. Semex’s ai24™ whole herd management solution with both rumination monitoring and heat detection capabilities can’t put more hours in your day, but it can put more time on your side!
85% Heatdetectionrate
ROI less than18 months
Golden Oak Farm’s Ethan Heinzmann, Herdsman, and Nate Janssen, Dairy Operations Manager
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Launched in the US in 2011, our one-of-a-kind HR-Tag® offers dairymen a complete herd management program including both high activity and rumination monitoring. Rumination information is your first insight into a cow’s well-being. Any changes in her rumination are the earliest signs that she may have a potential health problem. And, we know that the earlier you can find out about any potential health problems, the sooner and cheaper it will be to deal with it.
With over a year of use under their belts, the folks at the 700 cow Golden Oaks Farm of Wauconda, Illinois believe in its effectiveness.
“We would certainly invest in the system again,” says Ethan Heinzmann, Golden Oaks Farm Herdsman.
“The rumination monitoring is a cutting-edge tool. The activity monitoring combined with rumination monitoring gives us a very skilled set of eyes watching the herd at all times.”
“The rumination monitoring we hope will help us elimate DA surgeries and take quicker and more accurate action on metabolic disorders. The activity monitoring allows us to breed cows in good standing heat and dramatically decrease the amount of hormones we use.”
Advantages of ai24’s HR-Tag:• One-of-a-kind technology
- Built-in microphone records and analyzes rumination
- Unique c ow motion sensor (three-dimensional acceleration meter)
- Filters head movements
• Multifunctional tags
- Identification, activity monitoring and rumination in one tag
• Unprecedented insight into individual cow health status
- Early identification of potentially sick cows, distressed cows or nutritional problems
- Identify problem cows before milk production drops
- Reduce drug use
• Unparalleled accuracy
- 99% tag read rate
- 85-90% true heat detection
• Easy to use
- Easy and secure attachment with safety buckle
- Simple to install
- Detailed graphic information with only a few key strokes
• Scalable
- Use as a stand alone or with PC
• High return on investment and saves time and money - ROI in less than 18 months
• Ideal for operations interested in the most accurate and simple whole health and reproductive management
To find out more about ai24 and the powerful HR-Tag, join Golden Oaks at their 2012 World Dairy Expo Virtual Farm Tour on Wednesday, October 3 at 12:00 pm!
85% heatTrue
detectionrate
Recordsruminationinformation
24 hoursbefore clinical signs of illness
Info stored forat least one year
Reduction in rumination maybe an early disease indicator
Save time
Identify sick cows
1 2
3
3 4
Assess data
85% heatTrue
detectionrate
Recordsruminationinformation
24 hoursbefore clinical signs of illness
Info stored forat least one year
Reduction in rumination maybe an early disease indicator
Save time
Identify sick cows
1 2
3
3 4
Take action
85% heatTrue
detectionrate
Recordsruminationinformation
24 hoursbefore clinical signs of illness
Info stored forat least one year
Reduction in rumination maybe an early disease indicator
Save time
Identify sick cows
1 2
3
3 4
Attach collar
85% heatTrue
detectionrate
Recordsruminationinformation
24 hoursbefore clinical signs of illness
Info stored forat least one year
Reduction in rumination maybe an early disease indicator
Save time
Identify sick cows
1 2
3
3 4
Collect data
– 14 – – 15 –
Semex’s Jersey program is Genetics for Life. The Jersey cow exemplifies this philosophy, working hard and being profitable on dairies everywhere. Working side-by-side with Jersey producers worldwide, we’re ensuring that the Semex Jersey cow is the cow that helps build the future’s long-lasting and profitable herds.
The launch of 0200JE00060 BW Renegade underscores this commitment. He debuts as a highly ranked progeny proven sire in August 2012, and is the newest edition to our Repromax™ and HealthSmart™ lineups.
This means that you can trust Renegade to be a highly fertile bull that sires daughters bred to be healthier, more fertile and cost dairies less money.
The Pedigree:Sire: Sunset Canyon Maximum
Dam: BW Centurion Iris Ex 95%6-09 305 34,440 4.8 1655 3.5 1212
Renegade’s impressive pedigree explains part of the reason for his early popularity and success as a Genomax™ bull. Two breed icons anchor his pedigree: His dam, BW Centurion Iris Ex 95%, has impressive production; and his paternal grandam, Tenn Haug E Maid Ex 93%, is a fountainhead of extreme butterfat yield and percent genetics. Also, his maternal grandam is an Excellent daughter of Duncan Chief himself, a son of the legendary global superstar Duncan Belle.
With long-lived, hard-working, money-makers as his foundation, the stage was set for Renegade to become an international super star as soon as he arrived as a highly sought after Genomax sire.
In the fieldAs his first crop daughters freshened, those who saw them were impressed by how consistent his daughters have been, with shapely, youthful udders and great feet & legs. This impression has been verified by his first type proof that displays a steep foot angle, ideal leg set, firm fore udders, high and wide rear udders, shallow udder depth and desirably placed teats.
On the production front, his milk proof of over 900 pounds of milk is enhanced by 86 pounds of fat and 47 pounds of protein, with appealing plus component percent deviations of +.23% fat and +.08% protein. This astonishing combination of production excellence ranks Renegade #1 for Cheese Merit $, Fluid Merit $, Net Merit $ and Productive Life!
Renegade also epitomizes Genetics for Life, ranking as the breed’s #1 sire for Productive Life at 6.8, a strong plus for daughter pregnancy rate and is one of the breed’s best for fertility.
Taken in total, these ‘Best in Breed’ evaluations push Renegade to the #2 GJPI sire at +251 in August.
JERSEYS ARE GENETICS FOR LIFE
Russell Gammon, Semex Jersey Program Manager
– 14 –
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BW RENEGADE KATIE ET749 YOSEMITE JERSEY & RICHARD CLAUSS, HILMAR, CA, USA
NEW AUGUST RELEASE
SUNSET CANYON RENEGADE C MAID VG-87%-2YR-USA, SUNSET CANYON & RIVER VALLEY, BEAVER, OR, USA (REVERSED) PHOTOS: FRANK ROBINSON
This sire of healthy cows can be used on a wide range of mainstream Jersey bloodlines, being free of Q Impuls’ influence and carrying only a touch of Duncan Belle genetics. His sire stack of Maximum x Sooner Centurion x Duncan Chief provides an even stronger legacy of strength, longevity and profitable productivity. He can be used to make taller, dairy cows with superior feet & legs, appealing and highly functional udders with high solids and longevity plus!
HOW TO USE RENEGADE:
JERSEYS ARE GENETICS FOR LIFE
– 15 –
0200JE00060
BW RENEGADEMAXIMUM X CENTURION
TM
TM
– 16 – – 17 –
A tale of two milk prices...
– 16 –
– 16 – – 17 –
Mike North, Sr. Risk Mgm’t. Advisor, First Capitol Ag
In 1859 Charles Dickens penned the novel, A Tale of Two Cities, that after selling more than 200 million copies has become held as one of the greatest literary works of all time. I remember reading this in an English literature class (and as a young man it wasn’t so appealing!), and tried to draw parallels from it to different societies throughout history.
You might recognize this famous quote from its text “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us.” As I look at our current dairy complexities, this story rings in my ears.
The US drought has captivated market participants for months, causing milk futures prices to rise dramatically to levels above $20/cwt for Q4 2012 and averaging $19.25/cwt for the first half of 2013. This movement has been reinforced by the fact that cow numbers have continued to retract since May, losing 44,000 cows since the April peak. While this trend may have begun amid a lack of profitability at the farm, it is common to see this trend continue in drought years as feed becomes scarce and profitability wanes. With spot feed prices at record highs (corn at $288/ton and soymeal at $534/ton), many are projecting a trend continuation built on this fact alone.
Will this be enough to bring cows back to the farm? We shall soon find out, and with replacement heifers readily available, this type of response can happen quickly.
However, as milk futures prices have climbed, many producers are penciling profitable margin opportunities despite the higher feed price picture.
A tale of two milk prices...
Continued on page 18...
– 18 – – 19 –
A futures market is today’s best guess at tomorrow’s outcome
Here is where Dickens jumps in. While drought, and its impact on feed and milk prices, has captured the spotlight, a story of less media interest is operating in the background. This story is more in line with 2013 Class III price offerings (currently averaging $18.76/cwt) and a far cry from the hopes of many for $20 plus announcement prices. This story revolves around product prices and their contribution to federal order milk pricing.
At current levels, product prices suggest Class III milk price values closer to the mid to upper $18/cwt zone. While guesswork, modeling and hope drive futures prices, spot product pricing absolutely determines milk’s present value. With 2012 futures prices trading at levels much higher than the $18-$19 levels suggested by the federal order formula, either milk prices must move lower or product prices must rise beyond current values. Lately, the former, not the latter of these scenarios has identified itself as the winner. As we sort this out month by month, the market will remain in a state of flux, while this tale of two stories plays out.
The one constant will be the volatility that has allowed prices to swing 40-50 cents on a daily basis. Again, the fate of price will rest in the hands of the domestic consumer and export buyer. Given consumer sentiment, restaurant performance indicators and the overall state of economic affairs both here and around the world, it is hard to put together a case for magnificent milk price opportunities.
While these two stories play out, we have some work to do. First, it is important to make a distinction between futures prices and final pay prices. A futures market is today’s best guess at tomorrow’s outcome, influenced also by a speculative presence in the marketplace. In the case of milk, the final pay price is a function of product prices as they trade around the country (or CME cash auctions in the case of California). In the case of feed, the price you pay may have a root in the futures market, but it is adjusted locally to better reflect local supply and demand, as well as freight.
It allows us to calculate margins and secure opportunities that may not even exist once the future is fully realized. It is the benchmark on which your forward contracting (both milk and feed) is based on. At any given point, futures prices can be grossly different than what is finally realized. This, for many, is their greatest mistake. They glance briefly at futures prices and believe that that must be the final outcome and then they go on about their business only later to find they were sadly mistaken.
We must be regularly monitoring these opportunities, capitalizing on them and framing a 2013 that we can look back on with satisfaction. Many believe that they can sit by idly and do nothing, and there are times when this is certainly called for. However, in a year such as this, I would submit to you that such action is a gamble of the highest order. Do not let the luster of futures price offerings distract you from the opportunity at hand. 2008 held such a moment, and the reward for inactivity was the misery of 2009.
As Dickens wrote “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness.” Do not leave 2013 to chance. Be intentional about your margins, and begin working the numbers hard as this tale of two prices works its way out.
Continued from page 17...
– 18 – – 19 –
C: 100M: 11Y: 0K: 74
C: 80M: 0Y: 10K: 35
C: 80M: 0Y: 10K: 68
PMS: 7477
HIGH FERTILIT Y SIRES
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– 20 –
C: 0M: 46Y: 73K: 0
C: 0M: 79Y: 100K: 11
C: 0M: 69Y: 100K: 4
PMS: 173
L E T U S P U T T I M E O N Y O U R S I D E
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