Financial risk and resiliency on US dairy farms: Measures, thresholds, and management implications

Given the revenue and cost volatility with resulting tight profit margins in dairy farming, it is increasingly important to measure, monitor, and understand farm financial risk. Solvency, liquidity, debt repayment capacity, and financial efficiency measures can reveal potential problem areas and assist in financial risk management. Financial risk is defined as uncertainty about interest rates, willingness of lender to keep or put money into the business, ability to meet cash flow needs, and the market value of collateral. Financial resilience is defined as the ability to withstand events that impact firm net income. Solvency was measured by equity to asset ratio. Liquidity was measured by current ratio. Repayment capacity was measured by debt coverage ratio. Financial efficiency was measured by operational expense ratio and net farm income ratio. Critical thresholds for these farm financial measures include those determined by US agricultural lenders since maintaining access to outside capital is important for farm financial management. To demonstrate these concepts and measure financial risk and resilience, this research uses farm data from a balanced panel of 105 New York dairy farms from 2010 through 2019. Results reveal that there were 4 average, 2 good, and 4 poor financial years for these operations on average as measured by farm profitability. Solvency positions were relatively stable being based on long-term asset and liability values. During the poor years, the percent of farms below danger thresholds for liquidity and debt repayment capacity spiked.

Using institutional and behavioural economics to examine animal health systems

Economics provides a framework for understanding management decisions and their policy implications for the animal health system. While the neoclassical economic model is useful for framing animal health decisions on the farm, some of its assumptions and prescriptive results may be unrealistic. Institutional and behavioural economics address some of these potential shortcomings by considering the role of information, psychology and social factors in decisions. Framing such decisions under contract theory allows us to consider asymmetric information between policy-makers and farmers. Perverse incentives may exist in the area of preventing and reporting disease. Behavioural economics examines the role of internal and external psychological and social factors. Biases, heuristics, habit, social norms and other such aspects can result in farm decision-makers arriving at what might be considered irrational or otherwise sub-optimal decisions. Framing choices and providing relevant information and examples can alleviate these behavioural issues. The implications of this approach for disease policy and an applied research and outreach programme to respond to animal diseases are discussed.

Characteristics and functions of a minor FSH surge near the end of an interovulatory interval in Bos taurus heifers

The apparent function of a minor FSH surge based on temporality with follicular events was studied in 10 heifers with 2 follicular waves per interovulatory interval. Individual follicles were tracked from their emergence at 2 mm until their outcome was known, and a blood sample was collected for FSH and LH assay every 12 h from day -14 (day 0 = ovulation) to day 4. A minor FSH surge occurred in each heifer (peak, day -4.6 ± 0.2). Concentration of LH increased (P < 0.05) during the FSH increase of the minor surge but did not decrease during the FSH decrease. A minor follicular wave with 8.2 ± 2.0 follicles occurred in 6 of 10 heifers. The maximal diameter (mean, 3.4 ± 0.9 mm) of 77% of the minor-wave follicles occurred in synchrony on day -4.4 ± 0.4. Most (59%) of minor-wave follicles regressed before ovulation and 41% decreased and then increased in diameter (recovered) on day -1.9 ± 0.3 to become part of the subsequent wave 1. A mean of 3.7 ± 0.9 regressing subordinate follicles from wave 2 recovered on the day before or at the peak of the minor FSH surge. The growth rate of the preovulatory follicle decreased (P < 0.02) for 3 d before the peak of the minor FSH surge and then increased (P < 0.03). Concentration of LH increased slightly but significantly temporally with the resurgence in growth rate of the preovulatory follicle. A minor LH surge peaked (P < 0.0002) on day 3 at the expected deviation in growth rates between the future dominant and subordinate follicles. Results indicated on a temporal basis that the recovery of some regressing subordinate follicles of wave 2 was attributable to the minor FSH surge. The hypothesis was supported that some regressing follicles from the minor follicular wave recover to become part of wave 1.

Public and farmer perceptions of dairy cattle welfare in the United States

This research used surveys of the public and dairy farmers in the United States to assess perceptions and attitudes related to dairy cattle welfare. Sixty-three percent of public respondents indicated that they were concerned about dairy cattle welfare. Most public respondents agreed that animal welfare was more important than low milk prices but that the average American did not necessarily agree. Most public respondents had not viewed media stories related to dairy cattle welfare. Respondents who had viewed these stories did so on television or Internet. The United States Department of Agriculture (USDA) was viewed as the most accurate source of information related to dairy cattle welfare, followed by the Humane Society of the United States (HSUS) and the American Veterinary Medicine Association (AVMA). Both public and dairy farmer respondents viewed farmers as having the most influence on dairy cattle welfare. However, there was a general pattern of public respondents indicating that groups including USDA, HSUS, and AVMA had a relatively larger influence on dairy cattle welfare than did farmer respondents. In contrast, dairy farmers indicated that individual actors-farmers, veterinarians, consumers-had more influence than the public indicated. When asked about production practices, most public respondents indicated that they would vote for a ban on antibiotic use outside of disease treatment or for the mandated use of pain control in castration. However, a minority indicated they would vote to ban the use of recombinant bovine somatotropin (rbST) or to pay a premium for milk produced without rbST. With respect to explaining public support for the production practice bans and limits, respondents were more likely to vote for the restrictions if they were older, female, had higher income, or had viewed animal welfare stories in the media.

Defective secretion of Prostaglandin F2α during development of idiopathic persistent corpus luteum in mares

Five mares that developed idiopathic persistent corpus luteum (PCL) were compared with 5 mares with apparently normal interovulatory intervals (IOIs). Progesterone (P4) and a metabolite of prostaglandin F2α (PGFM) were assayed daily beginning on the day of ovulation (Day 0). Transition between the end of an initial progressive P4 increase and the beginning of a gradual decrease in P4 occurred on mean Day 6. The gradual decrease in P4 between Days 6 and 12 was less (approached significance, P < 0.06) in the PCL group than in the IOI group. The P4 concentration on Day 12 (before luteolysis in IOI group) was greater (P < 0.05) in the PCL group than in the IOI group. In a post hoc comparison, an interaction (P < 0.04) of group by day for Days 4 to 7 indicated that the end of the progressive increase in P4 was temporally associated with a transient increase in concentration of PGFM in IOI mares but not in PCL mares. Complete luteolysis (P4 < 1 ng/mL) occurred in the IOI mares on Days 13 to 15. Partial luteolysis (mean P4 decrease, 62%) occurred in 3 of the 5 PCL mares. Normalization to the day at the end of the most pronounced P4 decrease in the IOI mares and in the 3 PCL mares with partial luteolysis resulted in a day-by-group interaction (P < 0.05) for PGFM concentration. The interaction was partly from lower PGFM concentration on the day at the end of the pronounced P4 decrease in the 3 PCL mares than in the IOI mares. The peak of a transient PGFM increase and the day at the end of the most pronounced decrease in P4 were synchronized in each IOI mare but not in any of the 3 PCL mares. In the other 2 PCL mares, partial luteolysis did not occur, and a transient increase in PGFM was not apparent. Results tentatively indicated that the relationship between P4 and PGFM may be altered as early as Day 6 in PCL mares and supported the hypothesis that prostaglandin F2α secretion is defective in mares with idiopathic PCL.

Systemic effect of follicle-stimulating hormone and intraovarian effect of the corpus luteum on complete regression vs recovery of regressing wave-2 follicles in heifers

Each subordinate of the second follicular wave (wave 2) was monitored, and the outcome was classified as fully regressed (decreased in diameter to 2 mm) or recovered (decreased initially and then increased to become a growing follicle of the subsequent wave 1). The changing diameter of each follicle after emergence at 2 mm and plasma concentration of follicle-stimulating hormone were determined every 12 h from the day of ovulation (Day 0) to 4 d after the subsequent ovulation in heifers with 2 follicular waves per interovulatory interval (n = 10). The number and percentage of wave-2 subordinates that initially regressed and then recovered (7.2 ± 1.0 follicles; 33.2 ± 5.1%) were less (P < 0.0008) than the number and percentage that completely regressed (15.0 ± 1.7; 66.8 ± 5.1%). Follicles that later recovered initially reached maximal diameter on a later day (P < 0.0001) after emergence at 2 mm (4.3 ± 0.2 d) and at a larger (P < 0.0001) diameter (5.8 ± 0.2 mm) than follicles that completely regressed (3.2 ± 0.1 d; 4.7 ± 0.1 mm). The follicle-stimulating hormone surge that stimulated wave 2 began earlier and was more sustained in a subgroup with a high percentage of recovered follicles (61%) than in a subgroup with a low percentage (24%). Recovery began on Day -1.0 ± 0.1 when the follicles had regressed to 3.7 ± 0.1 mm. Diameter of subordinate follicles on Day -6 or before the expected days of luteolysis was greater (P < 0.05) when in the corpus luteum (CL) ovary than when in the non-CL ovary. During expected luteolysis, more follicles (P < 0.008) per ovary continued to regress when ipsilateral to the CL (9.2 ± 1.1 follicles) than when contralateral (5.8 ± 1.1), and more follicles (P < 0.02) recovered from regression when contralateral to the CL (5.0 ± 0.8) than when ipsilateral (2.2 ± 0.6). The hypothesis that the CL has a local effect on the development, regression, and recovery of the subordinate follicles of wave 2 was supported.

Concentrations of progesterone, a metabolite of PGF2α, prolactin, and luteinizing hormone during development of idiopathic persistent corpus luteum in mares

In experiment 1, daily blood samples were available from Days 0 to 20 (Day 0 = ovulation) in mares with an interovulatory interval (IOI, n = 5) and in mares that developed idiopathic persistent corpus luteum (PCL, n = 5). The PCL was confirmed by maintenance of progesterone (P4) concentration until end of the experiment (Day 20). Significant interactions of group and day revealed the novel findings that luteinizing hormone (LH) was lower (P < 0.05) in the PCL group than that in the IOI group on Days 0 to 4, and prolactin was lower (P < 0.05) on Days 1, 4, 6, and 7. In experiment 2, treatment with a gonadotropin-releasing hormone antagonist (n = 6) significantly reduced LH on Days 1 to 6 compared with the controls (n = 6) but did not support the hypothesis that low LH during the postovulatory period increases the frequency of PCL. In experiment 3, P4, PGFM (a PGF2α metabolite), and prolactin concentrations on Days 12 to 20 from 2 reported experiments were combined to increase the number of mares with an IOI (n = 11) or a PCL (n = 11). An abrupt and complete decrease in P4 (luteolysis) began on Day 13 in the IOI group compared with a gradual and partial P4 decline after Day 12 in the PCL group. Concentrations of PGFM and prolactin were lower (P < 0.05) in the PCL group than those in the IOI group on the day at the end of the most pronounced decrease in P4. The PCL mares were subgrouped into those with an abrupt but incomplete P4 decrease (partial luteolysis; n = 5) at the expected time and those without partial luteolysis (n = 6). There were no significant differences between the 2 subgroups in concentrations of PGFM and prolactin, but on a tentative basis (P < 0.10), the concentration of PGFM seemed more focused on the day of the most pronounced decrease in P4 in the subgroup with partial luteolysis. Results for PCL compared with IOI indicated (1) postovulatory LH and prolactin were lower, (2) treatment to reduce postovulatory LH did not increase the incidence, and (3) both PGFM and prolactin were lower on the day of the most pronounced decrease in P4.

Stimulation of LH, FSH, and luteal blood flow by GnRH during the luteal phase in mares

A study was performed on the effect of a single dose per mare of 0 (n = 9), 100 (n = 8), or 300 (n = 9) of GnRH on Day 10 (Day 0 = ovulation) on concentrations of LH, FSH, and progesterone (P4) and blood flow to the CL ovary. Hormone concentration and blood flow measurements were performed at hours 0 (hour of treatment), 0.25, 0.5, 1, 2, 3, 4, and 6. Blood flow was assessed by spectral Doppler ultrasonography for resistance to blood flow in an ovarian artery before entry into the CL ovary. The percentage of the CL with color Doppler signals of blood flow was estimated from videotapes of real-time color Doppler imaging by an operator who was unaware of mare identity, hour, or treatment dose. Concentrations of LH and FSH increased (P < 0.05) at hour 0.25 and decreased (P < 0.05) over hours 1 to 6; P4 concentration was not altered by treatment. Blood flow resistance decreased between hours 0 and 1, but the decrease was greater (P < 0.05) for the 100-μg dose than for the 300-μg dose. The percentage of CL with blood flow signals increased (P < 0.05) between hours 0 and 1 with no significant difference between the 100- and 300-μg doses. The results supported the hypothesis that GnRH increases LH concentration, vascular perfusion of the CL ovary, and CL blood flow during the luteal phase; however, P4 concentration was not affected.

Effect of corticotherapy on proteomics of endometrial fluid from mares susceptible to persistent postbreeding endometritis

The objective was to determine the effects of corticotherapy, in the presence and absence of uterine inflammation, on proteomics of endometrial fluid from mares susceptible to endometritis. In 11 mares, estrus was induced seven times with 5 mg PGF(2α) given at 14-day intervals. The first estrus was a control (no treatment). During the third estrus, mares received glucocorticoid (GC) treatment (20 mg isoflupredone acetate) every 12 h, for three consecutive days. The fifth estrus was the Infected treatment (intrauterine infusion of 1 × 10(9) colony-forming unit/mL Streptococcus equi subspecies zooepidemicus). Finally, the seventh was a combination of GC + Infected treatment (infusion of bacteria 24 h after the first GC treatment). At 12 h after the end of each treatment, uterine samples were collected and submitted to two-dimensional polyacrylamide gel electrophoresis (2D-PAGE) for protein separation and mass spectrometry. Both GC treatment and uterine lumen infection induced proteomic alterations in the endometrial fluid of susceptible mares, characterized by an increase, decrease, or both in the relative optic density and/or frequency of inflammatory acute phase proteins (APP), with major alterations occurring when corticotherapy was applied in the presence of an infectious process. Corticotherapy in the presence of infection increased α(1)-antitrypsin (AAT), transthyretin (TT), and actin, but reduced immunoglobulin G, whereas intrauterine infection increased haptoglobin (Hp) and apolipoprotein A-1 (ApoA-1) and decreased transferrin (TF). Infection reduced levels of α(1)-antitrypsin and transthyretin, whereas corticotherapy in the presence of infection increased their frequency. We concluded that GC influenced the immune response, not only as suppressors, but also as enhancers of local defense mechanisms, through an immunomodulatory action. Short-term corticotherapy could be beneficial for treatment of uterine infectious processes in the mare.

Citizen complaints and environmental regulation of Michigan livestock operations

Citizen environmental complaints filed against agricultural producers in Michigan were examined to determine farm and community factors influencing citizen complaints and the subsequent response of the farmer. Secondary citizen environmental complaint data were obtained from the Michigan Department of Agriculture from 1998 to 2007 with 1,289 observations. Citizen complaints were grouped into 5 categories: odor, surface water, ground water, combination, and other complaints. Complaints were further classified as nonverified or verified where verified meant that the inspected farm was not complying with relevant generally accepted agricultural and management practices. These data were used to examine how farm characteristics affected the likelihood of a verified complaint. Odor and surface water complaints accounted for 75% of all complaints. A probit regression analysis was used to estimate the probability of a verified complaint as a function of complaint type, farm characteristics, county characteristics, and seasonal factors. Results from the probit regression analysis revealed that larger operations, poultry, and hog farms received more nonverified complaints than other livestock farms. Surface water issues were 17% more likely to be verified complaints compared with odor issues, of which the surface water complaints often originated from sources other than neighbors. In contrast, odor issues were more likely to result from accepted management practices requiring no mitigation. Farms that received a verified citizen complaint were required to mitigate the complaint by implementing corrective practices. A log-level (log Y) regression was used to evaluate how farm characteristics influenced the cost to implement corrective practices on those farms receiving a verified citizen complaint. Costs to implement corrective practices to mitigate verified complaints were greatest for dairy operations and surface water complaints. Corrective practices required to mitigate a surface water complaint were predicted to cost 46% more than an odor complaint with an estimated average cost of $7,442. The most expensive practices were associated with manure incorporation, stream bank fencing, and controlling runoff.

Economic analysis of reproductive management strategies on US commercial dairy farms

Reproductive management has received increased attention in recent years as new technologies and programs have been developed to aid dairy managers in efficiently breeding cows and heifers. Efficient breeding of cows and heifers has become increasingly difficult as fertility has decreased because of a correlated negative response with milk yield. Dairy farm survey results were used to parameterize the economic analyses of reproductive management programs. Reproductive management program costs and the levels of reproductive performance achieved with such programs varied significantly among farms and were especially sensitive to on-farm labor costs. For example, visual heat detection requires more hours of labor per cow than use of an estrus synchronization program. Therefore, visual heat detection programs were relatively more sensitive to labor costs than synchronization programs. In addition, past reproductive performance was found to affect the determination of which reproductive program was optimal. Farms that had attained high levels of labor efficiency for visual heat detection in the past had less incentive to adopt a synchronization program than farms with less efficient visual heat detection.

Expected net present value of pure and mixed sexed semen artificial insemination strategies in dairy heifers

Sexed semen has been a long-anticipated tool for dairy farmers to obtain more heifer calves, but challenges exist for integrating sexed semen into commercial dairy farm reproduction programs. The decreased conception rates (CR) experienced with sexed semen make virgin heifers better suited for insemination with sexed semen than lactating dairy cows. This research sought to identify when various sexed semen breeding strategies provided higher expected net present value (NPV) than conventional artificial insemination (AI) breeding schemes, indicating which breeding scheme is advisable under various scenarios. Budgets were developed to calculate the expected NPV of various AI breeding strategies incorporating conventional (non-sexed) and sexed semen. In the base budgets, heifer and bull calf values were held constant at $500 and $110, respectively. The percentage of heifers expected to be born after breeding with conventional and sexed semen used was 49.2 and 90%, respectively. Breeding costs per AI were held constant at $15.00 per AI for conventional semen and $45.00 per AI for sexed semen of approximately the same genetic value. Conventional semen CR of 58 and 65% were used, and an AI submission rate was set at 100%. Breeding strategies with sexed semen were assessed for breakeven heifer calf values and sexed semen costs to obtain a NPV equal to that achieved with conventional semen. Breakeven heifer calf values for pure sexed semen strategies with a constant 58 and 65% base CR in which sexed semen achieved 53% of the base CR are $732.11 and $664.26, respectively. Breakeven sexed semen costs per AI of $17.16 and $22.39, compared with $45.00 per AI, were obtained to obtain a NPV equal to that obtained with pure conventional semen for base CR of 58 and 65%, respectively. The strategy employing purely sexed semen, with base CR of both 58 and 65%, yielded a lower NPV than purely conventional semen in all but the best-case scenario in which sexed semen provides 90% of the CR of conventional semen. Other potential advantages of sexed semen that were not quantified in the scenarios include biosecurity-related concerns, decreased dystocia due to increased numbers of heifer calves, and implications for internal herd growth.

Dairy cattle culling patterns, explanations, and implications

Culling patterns in the Upper Midwest and Northeast regions were examined from Dairy Herd Improvement records from 1993 through 1999. There were 7,087,699 individual cow lactation observations of which 1,458,936 were complete. A probit regression model was used to determine how individual cow and herd characteristics affected the likelihood of a cow being culled. The model predicted whether individual cows were culled each month. With a combination of observable cow and herd characteristics, as well as variables to capture state, year, and farm effects, the model was able to explain, with a 79.5 and 79.9% accuracy rate, individual cow cull decisions in the Upper Midwest and Northeast regions, respectively. Summer (- 11.5% in the Upper Midwest; - 6.4% in the Northeast) and fall (- 18.7% in the Upper Midwest; - 7.9% in the Northeast) calving vs. spring calving, higher than average milk production (- 1.7% per hundredweight in the Upper Midwest; - 0.5% in the Northeast), higher than average protein content (- 0.2% per additional percentage milk protein in the Upper Midwest; - 0.1% in the Northeast), higher milk production persistency (- 2.1% per additional percent persistent in the Upper Midwest; - 1.8% in the Northeast), and expansion (during the early years following the expansion) were associated with a reduced likelihood of a cow being culled. Lower than average fat content (0.04% per additional percentage butterfat in the Upper Midwest; 0.02% in the Northeast), and higher than average somatic cell count (8.8% for each unit increase in somatic cell count score in the Upper Midwest; 7.8% in the Northeast) were associated with an increased likelihood of a cow being culled. The study results are useful in describing patterns of culling and relating them to cow, herd, geographic, and time variables and can act as a benchmark for producers.

Custom dairy heifer grower industry characteristics and contract terms

This study examines a national survey of professional custom heifer growers. Sixty-five respondents from 23 states provided information on operation size and characteristics, management practices, and contract terms. Responding operation current heifer inventories ranged from 30 to 20,000 heifers and the average operation had more than 1200 heifers on-farm. The regional pattern of operation size was similar to the regional pattern of dairy farm size with heifer grower operations in the West and South regions being larger, on average, than those in the Midwest and Northeast regions. On average, 71% of total income was derived from the heifer-growing enterprise. Operations in the Northeast region derived the highest percentage of income from heifer growing while operations in the South region derived the least income from heifer growing activities. Many operations entered business to utilize excess facilities, labor, or feed. A majority of the operations had two to five dairy farm clients. Sixty-nine percent of respondents used some form of written contract. Just over 50% of the respondents indicated that a set daily charge per heifer per day was the primary type of contract payment. Although the most common charge was dollars 1.50 per heifer per day, average daily charge was dollars 1.52/heifer. Operations that took heifers from prior to weaning through to prefresh charged a weighted average daily charge of dollars 1.60 per heifer. Explaining price charges as a function of characteristics and contract terms revealed that size and number of clients were negatively related to price while specialization in heifer growing was positively related to price charged.

Managerial and financial implications of major dairy farm expansions in Michigan and Wisconsin

This study examines the experiences and results of major dairy farm expansions in Michigan and Wisconsin. Twenty dairy farms that had one-time herd size increases of at least 20% between 1988 and 1998 were selected, surveyed, interviewed, and analyzed. A case study format reveals individual experiences and problem solutions. On average, studied dairy farms increased herd size from 296 to 569 cows. The most commonly cited reason for expansion was increased profits. On average, net farm income and return to operator management and capital improved following expansion. The most profitable expansions were highly correlated with modernizing facilities. In addition, a decline in return on assets was, in several cases, due to taking on too many new partners relative to the increase in herd size. Dairy farms were able to increase milk production and experienced a significant decrease in labor and management expense per hundredweight of milk produced through expansion. Outsourcing and the use of consultants increased with expansion. Public relations problems were not substantial impediments for producers who took a proactive approach. Reflecting on the expansion experience, managers indicated that human resource, financial, operations, herd management, and strategic management skills were the most important skills to achieve a successful expansion.