Beef and dairy veterinarians will continue shifting toward a more consultative and less reactive role in 2018 and into the future, with consumer and regulatory trends helping drive that change.
The FDA’s new Veterinary Feed Directive (VFD) rules have been in place for one year, but impacts on the ground will continue through 2018 and beyond. The VFD rules place purchase and use of medically important feed-grade antibiotics under the oversight of veterinarians. Multiple products that producers could purchase over the counter (OTC) prior to January 1, 2017 now require a VFD order from a veterinarian. That sounds simple, but the implications reach deeply into our beef and dairy production systems.
For beef producers in particular, the impacts of the VFD rules were not necessarily evident until they completed a full year’s production cycle. For many, the stressful fall season of weaning, shipping and receiving calves has involved using medicated feeds to prevent and control disease outbreaks. Some of those producers experienced a sudden wake-up call when, first, they discovered they need a VFD to obtain products they’ve previously bought OTC. Secondly, some found their veterinarians could not legally write a VFD because the intended use did not conform to the product labels.
By law, medicated feeds cannot be used in “extra-label” applications. That was the law before the new VFD rules and it remains the law today. But when medicated feeds, particularly those containing chlortetracycline (CTC), could be purchased OTC at the local feed store, some producers became accustomed to using treatment regimens or addressing diseases outside the label specifications.
For a recent article in Bovine Veterinarian, we asked a group of veterinarians about questions they’ve received or challenges they’ve encountered over the first full year under the new VFD rules. The most common issues involved producers who were surprised their veterinarians cannot, or will not, issue VFDs for off-label applications. Some producers also remain unclear on the difference between duration of treatment and expiration date of the VFD. A VFD drug must be fed during the time covered by the VFD. If treatment extends beyond that expiration date, a new VFD is needed.
Beyond these growing pains though, the VFD rules, and a growing emphasis on antibiotic stewardship will provide significant benefits to producers, veterinarians and consumers.
The VFD rules include a key provision with potentially long-reaching and positive results. In order for veterinarians to write VFD orders, they must have a valid Veterinarian-Client-Patient Relationship, or VCPR. The federal government and some states have legal definitions for the VCPR, but in essence, it means the veterinarian has first-hand familiarity with the producer, the operation and the animals involved.
That provision could generate the most far-reaching impacts of the VFD rules. Initially, some producers just see another expense in developing a VCPR to obtain their VFD orders. Once involved though, the veterinarian can evaluate the entire operation and potentially identify potential management changes and non-drug preventative methods for improving animal health, welfare, performance and profitability. These might include better vaccination protocols, facility designs, animal-handling practices, nutrition, genetics or biosecurity practices, all leading toward reduced reliance on antibiotics. In many cases, financial gains from these improvements could far exceed the extra vet bill.
In a recent presentation, Kansas State University veterinarian Mike Apley, DVM, PhD, said the new rules, along with some growing pains, have helped generate collaboration between veterinarians and clients in developing better disease-prevention protocols to reduce the need for antibiotics, which aligns with the goals of the regulation.
So will the rules slow the emergence of antibiotic-resistant pathogens as the FDA intends? Maybe, or maybe not. Will they create stronger relationships between producers and veterinarians, resulting in better overall management that benefits cattle well-being, producer profits and consumer confidence? In many cases the answer is yes.
Beef and Dairy Markets Affect Demand for Services
As commodity prices and market fundamentals affect your clients’ returns, they also affect demand for veterinary services. The extent and direction of that effect can depend on the types of services a veterinary business offers, and the amount of revenue a veterinarian generates from drug sales versus consulting.
Growth in cattle numbers means more doses of vaccines, dewormers, antibiotics and other animal-health products. On the other hand, higher cattle numbers generally mean lower beef and dairy prices, and subsequent belt-tightening at the producer level can result in less demand for veterinary consultation services.
Greg Henderson, editor of Farm Journal’s Drovers magazine, and Mike Opperman, editor of Farm Journal’s MILK magazine, offer these summaries of the 2018 outlook in their respective markets.
Beef Cattle: Strong Demand Helps Balance Supply
Demand was the key to holding livestock markets in the black during 2017. Price risk is always possible this year, but analysts say risk and volatility is reduced at this point in the cattle cycle. That’s because prices are well below the peaks of a couple years ago, and market fundamentals have replaced much of the market’s emotion. Generally, analysts expect 2018 cattle prices will be somewhat lower on an average basis than in 2017. That’s due to further increases in supply of beef and all proteins. Economist John Nalivka, with Sterling Marketing, says total red meat and poultry supplies increased 10% since drought-related lows in 2014. Per capita red meat and poultry supplies will near 222 pounds in 2018, or 20 pounds more than the low of 202 pounds in 2014. Nalivka notes that beef exports amounted to 11% of production in 2017, and he projects another 4% gain in 2018, with beef exports reaching a record high of 3 billion pounds.
Feeder cattle numbers will be up for the third consecutive year, on-feed numbers will increase and total beef production is projected to jump another 4% in 2018 to record highs. However, CattleFax CEO Randy Blach says beef exports are better than anticipated, domestic demand has been good, consumer spending and consumer attitudes have all been very positive. While the demand picture is positive, Blach says feeder cattle prices will stay flat, ranging from $135 to $160 per hundredweight in 2018. He anticipates modest, yet solid profit margins in the calf market.
Dairy Cattle: Supply Challenges Continue Through First Half of 2018
Looking into 2018, there’s a common reoccurring theme: too much milk and not enough room for it. In a nutshell, that’s what’s driving the milk-price dive. Most economists look at 2018 as a tale of two halves. Milk prices are projected to bottom out in the first half in the high $13 to mid $14 range. But prices are expected to rise in the second half of the year as production and inventories reach a more equitable balance. University of Wisconsin economist Bob Cropp says prices could reach over $16 per hundredweight in 2018, for an average around $15.20.
Production and inventories aren’t just an issue here in the States – they are global problems. While butter may be in short supply in France and other parts of the European Union, there’s more powder and other products in storage than we literally know what to do with. And as production continues to grow, albeit at a slower rate, those inventories won’t clear out until prices entice a sell off.
China’s imports in 2018 of dairy products will continue to grow, albeit at a slower pace of 8% year-over-year,” says Dan Basse, president of Ag Resource Company based in Chicago, Ill. Basse adds that even with low milk prices, feed costs should remain relatively low. He expects corn and soybean meal prices to remain flat at least into summer. He projects corn prices to range from $3.30 to $3.75 per bushel into spring. Soybean meal will range from $305 to $350 per ton into mid-year, he says. Non-feed costs, and especially labor expenses, continue to grow and compete with feed costs for the greatest impact on costs of production. Expect those costs to continue to rise.