Holstein World: Describe the breeding program of Hilmar Holsteins & Cranehil Genetics. What attributes do you focus on and what are the current service sires that you are using? Who are the key cow families that you are working with?

Ryan Matheron: At Hilmar Holsteins we strive to breed a herd of cows that excel in production as well as type. When selecting bulls to use in our operation we look for that same protocol including feet and legs, udders, and secondary traits. We are currently using bulls like Mac, Baxter, Frosty, Doleman, Pontiac, Airraid, Billion, Lou, Toystory and Shottle. Some of the key cow families we are presently working with are the Laurie Sheiks, Ravens, Delilias, and Hillarys. We also have some exciting homebred families we are working on developing. At this present time out of our 1700-milking Hilmar herd there are just over 200 registered cows. There are 16 Excellents, 65 Very Goods and 76 Good Plus cows.

Holstein World: Share with our readers a little bit about your background. What led to you being involved in the Registered Holstein business? What keeps you active in the business today?

Ryan Matheron: My grandfather started Hilmar Holsteins over 50 years ago. He always had and enjoyed working with good registered cattle. I believe this is where my family’s love for the Holstein cow stems from. When I was young I was very involved in the 4-H and FFA programs. I started out showing at our local fairs, then the California Holstein Show and even the Western National. While in high school, I was fortunate enough to be part of the state winning dairy judging team. After graduating from high school, I then went on to Cal Poly were I majored in Dairy Science with an Ag Business minor. While at Cal Poly I was the herdsman at the foundation dairy and was a member of the judging team. While on the dairy judging team we traveled to various places and visited numerous operations. During college I also had the opportunity to do a summer internship at Carrousel Farms, which was definitely an exciting experience.

The greatest part of being involved in the Registered Holstein industry is the people you meet along the journey. I have met some great people and even made some greater friendships all because of the Holstein cow. Currently I am the President of our local Holstein Club and I was just elected to the State Board of Directors, which I am very excited about.

Holstein World: Describe for our readers the different operations you are involved in - Hilmar Holsteins & Cranehill Genetics. What are your key responsibilities and what are some of the general stats…Number of animals, Acres farmed, Location, Type of facilities, etc.

Ryan Matheron: Hilmar Holsteins is a family run business between my father, Duane, uncle, Dale, brother, Aaron, and myself. The herd consists of 1700 milking cows and a total of about 3600 females. We raise another 80 to 100 breeding bulls, which are sold annually. All cows are housed in a free-stall operation and are milked in a rotary parlor twice a day with no BST. Our current rolling herd average is 25,600 lbs of milk. We farm about 500 acres of all irrigated land including corn, oats, sudan and alfalfa. Hilmar Holsteins is located in Hilmar California, which is about an hour south of Sacramento.

Cranehill Genetics is a partnership between Emanuel Azevedo, Joe Oliveira, and myself. It consists of 30 head total and numerous embryos yet to calve. All three of us have dairy operations so the cattle are housed at each of our locations.

Holstein World: Are there specific areas not directly related to dairy production that will have a “trickle-down” effect on milk prices? For example, increased ethanol production and the climbing price of corn?

Lee Mielke: Sections of the farm bill like EQUIP, CSP and energy offer opportunities for dairy farmers to offset costs associated with meeting environmental requirements as well as provide income to offset increased feed costs due to ethanol production.

Consumer perceptions will also impact producer bottom lines. rbST free milk, organic milk, milk from cloned animals, animal rights, drugs used on animals are a few of the issues that challenge the dairy industry.

Dave Natzke: With ethanol, you””ve highlighted one of the major issues. We””re headed for record milk prices this year. Unfortunately, with high costs related to feed and energy, profit margins will be tight. Due to security issues and energy concerns, the U.S. seems to be developing a “cheap fuel” policy, by subsidizing domestic ethanol production to decrease our reliance on foreign oil. In doing so, we have created massive growth in ethanol infrastructure, creating additional competition for corn and soybeans. It”’’s estimated ethanol production used about 20% of the total U.S. corn crop last year, and that”’’s expected to continue to rise.

As stated above, meeting environmental regulations add costs to production, but don””t add to the milk price.

Any immigration policy that sharply restricts labor supply could have a negative impact on dairy producers.

Holstein World: What are the primary concerns of dairy producers with the 2007 Farm Bill?

Lee Mielke: Milk prices, I”m sure is number one. Environmental regulations would be at the top of the list, along with what impact budget constraints will have on ag spending and what affect world dairy politics may have on the dairy title of the U.S. farm bill

Dave Natzke: The primary concern is that, in troubled budgetary times, an adequate “safety net” is established to protect dairy producers in the event milk prices drop drastically. Many producers believe the current federal dairy prices support program and a counter-cyclical program – such as MILC in some form – can do that. Other Farm Bill proposals include some sort of milk income insurance program.

Other chief concerns include environmental regulations: not only what they regulate, but how much it costs the individual producer to meet those regulations. Will large capital investments be needed to meet rules covering manure or odor management, for example.

Holstein World: How would the termination of the Dairy Export Incentive Program (DEIP) affect our milk prices?

Lee Mielke: USDA is NOT terminating the DEIP. It assumes that there will be no ned of it, considering the current supply and demand balance. DEIP is not mandatory and the Agriculture Department can use it as it sees fit, though National Milk and others have charged that USDA has not used the DEIP as Congress intended.

I hope that USDA’s decision to not use the DEIP is not based upon the success of the CWT export assistance program.

Dave Natzke: As Lee noted, I know of no one who has proposed eliminating DEIP. However, it has been used so little over the past few years, I doubt people would miss it if it was eliminated – under current market conditions.

DEIP was designed to helps exporters of U.S. dairy products meet prevailing world prices for targeted dairy products and destinations. Due to market conditions and large export subsidies by the European Union and others, “world” dairy product prices were usually lower than U.S. prices, therefore the government also had to subsidize exports (through DEIP) to help lower the cost to foreign buyers. Under the program, USDA pays cash to exporters as bonuses, allowing them to sell certain U.S. dairy products at prices lower than the exporter’s costs of acquiring them. The major objective of the program is to develop export markets for dairy products where U.S. products are not competitive because of the presence of subsidized products from other countries.

Currently, however, a weaker U.S. dollar, reduced foreign export subsidies, a drought in Australia (normally a larger exporter) that has limited world dairy product supply, and heavy demand for some dairy products in developing countries, has raised world dairy product prices to where U.S. prices are now competitive. According to the latest annual report from the U.S. Dairy Export Council, fewer than 2% of the exports in 2006 were assisted by the government or the Cooperatives Working Together (CWT) export assistance program.

Market conditions change, and the structure of DEIP should be retained for the time when, or if, it is needed again.

Holstein World: Describe for us the “regional dairymen’s” views and feelings regarding the 2007 Farm Bill.

Lee Mielke: Although I don’t believe I have much of a handle on this answer, states with larger dairies are likely opposed to extending the MILC program and states with smaller dairies, farmers likely oppose the reduction in the percentage of MILC payment and question whether the $9.90 support price is high enough.

I think most producers support the price support program and the Federal order program, although there are producer groups who are supporting their termination.

Dave Natzke: While regionalism has always added controversy to U.S. dairy policy, I believe differences more often than not are now defined by the style/size predominant in a region, not necessarily by geography. The West, predominated by fewer but larger herds, therefore would likely oppose any federal policies that have constraints based on herd size. The Midwest and Northeast, predominated by more smaller herds, may favor different policies altogether.

Take the two major U.S. federal dairy polices, for example. Between 2000 and 2005, the Dairy Price Support Program (DPSP) cost about $2.3 billion; the Milk Income Loss Contract (MILC) program about $2 billion. Not a big difference, but how the money was divided makes a big difference.

Under the Dairy Price Support Program, USDA purchases excess dairy products from the market, reducing supply and thus, boosting milk prices. It is not based on milk production per farm. One of the major items purchased by USDA is nonfat dry milk, produced in large quantities in the West, and the major product purchased by the government to boost milk prices. During the period 2000-2005, the West received 92% of DPSP payments; the Midwest, about 1%; and the Northeast, about 3.5%. Look for the West to continue to favor DPSP.

On the other hand, under the MILC program, payments are limited to the first 2.4 million pounds of milk production for each producer. Some smaller herds may not reach that total for the whole year. Other herds may reach that production cap within months, or less. Thus, the larger herds receive the payment on a smaller percentage of their total annual milk production. For the period 2000-2005, producers in the Midwest received 46% of all MILC payments; the Northeast, 24%; and the South, about 15%. The West, with its larger herds, received about 15% of total MILC payments.

In general, by region, the Northeast and Midwest support MILC; the West supports DPS.

Currently, MILC provides full payment to 85% of U.S. herds, but covers only 45% of total U.S. milk production. Due to changes in size distribution of dairies, the amount of milk eligible for MILC payments has decreased by 10% since December of 2001. Increasing the payment eligibility to 4.8 million lbs. per year would increase full coverage to 93% of the herds and 56% of the milk. So, in the upcoming 2007 Farm Bill debate, don’t be surprised if the MILC payment is increased to cover 4.8 million lbs. per year to make it politically palatable for large producers in the West.

Other regional differences may result from federal milk marketing order rules, which are not covered under the Farm Bill.

Holstein World: After a bit of a break from blogging last week due to some technical difficulties, Im happy to say we are off and running with another great topic for discussion. This week we will be focusing on the Farm Bill. Answering questions for us and reviewing the impact the bill will have on the dairy industry are Lee Mielke from DairyLine Radio, and Dave Natzke from Midwest DairyBusiness. If you have any questions or comments you”d like to share with us or Lee and Dave, feel free to send them my way at sschmidt@dairybusiness.com.

Share with our readers the current discussion behind the USDA’’s preliminary decision to include Milk Income Loss Contract (MILC) program payments in the 2007 Farm Bill.

Lee Mielke: I think MILC was included because of the political reality of who now controls Congress. Key senators from states like Vermont and Wisconsin are strong supporters of the MILC and the program is consistent with the way other commodities are treated. And, the President expressed support for the MILC program while on the campaign trail in the last election.

Dave Natzke: First, a bit of review. The original MILC was established in the 2002 Farm Bill, but had an expiration date of Sept. 30, 2005. To “extend” MILC required a separate piece of legislation, and the Agricultural Reconciliation Act of 2005 reauthorized the MILC through Sept. 30, 2007, with the intent of having it sunset with the 2002 Farm Bill.

However, due to special requirements of the Deficit Reduction Act of 2005, which almost everybody overlooked at the time, the extended MILC program (also called MILCX) actually reauthorized payments only until Aug. 31, 2007, or one month short of the expiration date of the 2002 Farm Bill. Subsequent efforts to extend MILCX for one more month failed, in part due to budget concerns. Also, opponents of the program hoped that because the program was no longer tied to the Farm Bill, it might just go away. (It should be noted that the Deficit Reduction Act of 2005 also reduced the payment level to eligible dairy producers, from 45% of the difference between $16.94 per cwt. and the Class I price in Boston, to 34% of that difference.

So in reality, the Bush administration’s proposal to place MILC back in the 2007 Farm Bill is really just putting it back where it started, probably so it is no longer a separate budget item, and that program costs can be adequately budgeted and managed by USDA.

The impacts of last fall’s elections make it more likely MILC will be included in the 2007 Farm Bill. The Midwest and Northeast – with a larger share of “small” dairy producers who benefit the most from MILC – gained leadership posts on agriculture and, perhaps even more importantly, appropriations committees in both the Senate and the House. Those committees not only help set policy, but also decide how much funding it receives.

Holstein World: MILC is not part of the current Farm Bill, but a separate program and line in the federal budget. Why was the decision made to include it in the 2007 Farm Bill and will this have an effect on how funds are allocated?

Lee Mielke: MILC was part of the 2002 farm bill but was unsettled. It continued as a separate item, attached to a different piece of legislation but supporters wanted it extended so that it would coincide with the actual farm bill.

It should not have an effect on how funds are allocated. The total amount that USDA budgeted for the price support program and MILC is only $793 million for 10 years.

Dave Natzke: As far as I know, MILCX has no set federal funding level. It maintained milk price triggers to determine when payments to producers would be made, but did not set spending limits. Therefore, it’’s fairly open ended, and probably difficult to budget.

How will putting it back into the Farm Bill impact the way funds are allocated? Under USDA’s latest proposal for the 2007 Farm Bill, dairy producers would continue to be eligible to receive an MILC payment if the Class I price in Boston in any month falls below $16.94 per cwt. However, USDA’s proposal gradually reduces payment rates over time. For fiscal year 2008, the proposed payment rate would remain at the current rate of 34% of the difference between $16.94 per cwt and the Class I price in Boston. For subsequent years, the payment rate would be phased down to 31% in FY 2009, 28% in FY 2010, 25% in FY 2011, 22% in FY 2012, and 20% in FY 2013-2017.

Additionally, MILC payments would be based on 85% of the 3-year average of milk marketed during fiscal years 2004-06. This policy change would make the MILC program consistent with the other farm bill counter-cyclical programs that are calculated on historical production bases.

What has always been the most controversial part of MILC is that it limits payments to a maximum of 2.4 million pounds of milk per farm annually. Under the latest USDA proposal, future payments would remain subject to that limit.

Adding MILC to the Farm Bill provides additional controls on payments. Under USDA’s plan, MILC payments would also count towards a producer’s overall counter-cyclical payment limit of $110,000 annually, helping to limit payments to producers with multiple dairy operations. The new adjusted gross income eligibility cap of $200,000 annually would also apply to MILC payments.

I would like to start out by saying I appreciate being asked to respond to this discussion. Similar to Dr. Hansen, I am quite passionate about this topic, and also am confident that I have both the practical knowledge (being raised on the 600-cow Bomaz Farms in Wisconsin) and the academic knowledge and experience to provide a response to the points made.

I agree with many of the points made by Dr. Hansen about the ideal Holstein cow. Dairy Cattle Judging has been a huge part of my life, and is something that I am proud of my accomplishments in, however the conformation that is considered “ideal” is not the most “functional”. Part of this is cow size, and part of it is dairy strength being confused with angularity. Dr. Hansen has done a good job of explaining the reasons for a different “ideal”, because clearly the fertility and longevity of the Holstein can be improved, and I do not need to revisit those statements. We have good longevity information, and instead of telling the cows how they should look, we can make significantly more progress if we simply listen to the cows tell us how they need to look to be the most profitable and longest lasting! The moderate sized cows with shallow udders that are not extremely dairy last the longest - now we need to make sure this type of cow is rewarded in classification programs. Classification programs are useless if they are not an indicator of longevity, and currently only the linear traits, and their combination into UDC and FLC are the only indicators of longevity, while final score has almost no impact on overall longevity.

My solution to the problem varies substantially from Dr. Hansen”’’s solution of crossbreeding. Why do we need to crossbreed to change the Holstein cow? Over the last 50 years we have made Holsteins that are genetically capable of producing more than 8,000 lbs more milk per lactation than they were in 1960. We also have changed the way cows look substantially, so we have proven we can change the cow through genetics. We now know that our perception of the way cows should look had flaws and needs to be corrected. Do we need to crossbreed to do this? I don””t think that is the only answer. We can also create the correct “ideal” cow and strive to get there.

Furthermore, most people interested in crossbreeding are interested in improving the fertility and longevity of their herd. This is a message that I advocate to everyone - we must pay attention to PL and DPR in selection programs. We will be increasing the weight on these important characteristics by a combined 5 percentage points in the upcoming change to the TPI formula, which will reward those sires that have highly fertile, long lasting daughters. Furthermore, if a certain producer wants to put more or less weight on PL, DPR, SCS, or Daughter Stillbirth (DSB), they certainly can do that in their own breeding program.

The real question is, must we crossbreed to change the fertility and/or longevity within our breed (or within our herd), and the answer is absolutely not. Is crossbreeding one way to improve those important traits? Yes, but it will have negative effects on production. If we analyze the paper that Dr. Hansen refers to, we find that tables 4, 5, and 6 provide some very interesting information that cannot be forgotten in this discussion. The fact is that the pure Holsteins out produced both the Swedish Red X Holstein crosses and the Montbeliard X Holstein crosses by about 2,000 lbs of milk, 45 lbs of fat, and 40 lbs of protein per lactation! This is substantial! The equivalent is similar to using a Holstein sire that is -2000 PTAM, -45 PTAF, and -40 PTAP. Would any of you be willing to use a sire with these kinds of numbers?

To be fair, the study does state that only 61% of Holstein cows calved back in a second time within 17 months after first calving, while significantly larger numbers of crossbred cows calved back in (average 76%) in the same time frame. While this is an impressive difference, I have data from one of our Alta Advantage® herds with 1600 cows that shows daughters of high PL sires (n=116) return for a second lactation 78% of the time, while daughters of low PL sires (n=91) return for a second lactation only 52% of the time, therefore proving that effective sire selection for this trait can have even more impact in a single generation than crossbreeding.

Likewise, the study states that the days open of the Holstein cows is 14 days longer than the Scandinavian Red. Again an impressive difference that is equivalent to the expected difference from using a Holstein sire that is 3.5 for DPR. There are Holstein sires that are nearly this high, and again more “real world” data shows that within another Alta Advantage® dairy that 75 daughters by one of the highest DPR bulls in the breed - KCK Bardale Blastoff (DPR=3.0) - have an average of 26 less days open than the rest of the herd, again showing that as much or more progress can be made in this important trait in a single generation than what can be made through crossbreeding. Equally as impressive is that production was not sacrificed, as these daughters are producing as much as their contemporaries.

I””m passionate that we can change the Holstein breed effectively through proper sire selection WITHIN the breed. Focusing more on traits like PL, SCS, and DPR will help facilitate this change while not losing the production that is proven in the California trials. When these traits are accurately evaluated in progressive dairies, like those sires tested through the Alta Advantage® program, we can be confident in the evaluations. We can””t be scared of these relatively new traits that can help our breed - instead we need to embrace them and use them to our advantage!

Respectfully submitted,

Dr. Nate Zwald
Alta Genetics

Holstein World: To begin this week in the All Breeds Blog we will be hearing a response from one of our readers regarding last week’s discussion on crossbreeding. Kevin Jorgensen of Waupun, WI, has been working in the AI industry since 1992 and is currently employed as a SMS Evaluator for East Central/Select Sires as a SMS Evaluator – a position he has held since 1998. Kevin is also a Registered Holstein breeder and his herd operates under the Ke-Jo prefix.

As purebred dairy publications, Holstein World and All Breed Access, are proud to promote the purebred dairy cow and the people who work with them. We are delighted to see the enthusiasm of each person who contacted us last week regarding this issue and are happy to share their views, opinions and experiences with the rest of our blog audience. If you would like to weigh in on this subject, please contact Sarah Schmidt at sschmidt@dairybusiness.com.

Kevin Jorgensen: In response to Dr. Hansen’’s conversation last week about crossbreeding, yes, there are things about the Holstein cow that could be different and we need to continue to make strides in the right direction. That passion about making cows better is what gets most of us up every morning to either milk cows or work with dairy producers. However, many of the problems that Dr. Hansen talks of have more to do with what geneticists over the last 30 years were telling the industry that we need to breed and select for numbers and production solely. Single trait selection caused some of these other problems. If we used a balanced breeding approach, we could have averted many of the issues we are facing today.

Another point I”d like to mention in response to his answers regards size. First of all, it for the most part has very little to do with longevity unless you are talking about the 64 inch plus cows of which there are very few. Ag Engineers who design 44 inch stalls are dictating which cow is ideal. The cow isn”t saying she is too big. Ask producers that have renovated their barns to bigger stalls if size is now a problem. Secondly, the whole issue of crossbreeding never seems to look very long term into the equation. I hear of how well the crosses compare to pure Holsteins for production but the comparisons are always in first calf heifers and it is always on a fat corrected milk basis. If you start looking at second and subsequent lactations, the Holstein often is milking 3000-4000 pounds more. This can”t be ignored! That is a lot of milk if you are milking hundreds of cows. Additionally, Dr. Hansen never talked about the type aspects of what happens to the crosses as they age or the udder issues of F2′’s. Additionally, they are worth less which affects your balance sheet, the bull calves are worth less, and all of this is hardly ever mentioned.

I could go on an on but the reality of the situation is that crossbreeding is not a silver bullet to challenges that producers face and we as a Holstein industry need to start talking about the good things that Holsteins offer. There is a myriad of sire choices available for every breeding philosophy which is great because BREEDERS should have the freedom to decide which kind of cow they like and select for the traits that they deem important to them. Additionally, this big tent allows for improvement of the breed and I believe that we can solve the issues that Holsteins face without crossbreeding. I aspire to the fact that if we have once created a sire like Durham that meets the needs of the type conscious breeder and the commercial dairyman alike, that we can do it again.

I work with commercial and registered breeders alike and breed and develop my own animals. The greatest part of my travels in this business have been all the forms of success that I have found. Selecting for type, selecting for milk, breeding for red and white or breeding commercial cows that pay the bills. There is no one right way or wrong way to breed cows or be successful.

Another aspect of my involvement in this industry is working in the sale industry. I help producers buy and sell cows both commercially and elite registered animals. I find it ironic that with all the problems that Holsteins have, there are countless producers with extra cattle to sell. Most of these folks that do (especially large producers) are not crossbreeding and most employ that balanced approach to breeding as well as provide superior cow comfort and care. We need to learn lessons from these producers versus add other breeds to the mix.

I finish with an example of why I don”t agree with crossbreeding. 15 years ago in my first job out of college, I also worked for one of the companies that Dr. Hansen used to work for. Each year, I was sent to Nebraska to mate cows for two weeks. One of the stops I made in 1992, the producer wanted all his Jerseys mated to Holstein and all of his Holsteins mated to Jersey. About 1/2 of the cows were crosses already and quite honestly, they were really nice cows. In 1993, when I went back, the producer greeting me at his milkhouse was almost crying. He said in the last year his cows have gotten considerably worse and was sick about it. We went to the barn, and the F2′’s had been calving since shortly after I left. It was a train wreck! They weren”t milking and the type was awful. I will never forget the pain in that producer’’s eye and it drives me every day to deliver results for the producers I work with. There will be many more producers with that same pain in their eyes after they”ve tried crossbreeding on their farm.