Dunn: September dairy outlook

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Penn State University’s measure of income over feed costs (IOFC) rose 4% in August, according to the latest Dairy Outlook report from economist Jim Dunn. Declining feed prices combined with higher milk prices, pushing the August IOFC to $12.23/cow/day, up 47¢ from July, and $3.97/cow/day more than August 2013.

IOFC reflects daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day. The average cost to feed a cow producing 65 lbs. of milk per day was $4.54/day, down 21¢ (4.5%) from July, and the lowest of the year. The August 2014 Pennsylvania all-milk price of $25.80/cwt., up 40¢ from July and the highest since May.

Measured another way, feed costs per hundredweight of milk produced averaged $6.99/cwt. in August, down 32¢ from July. With the higher milk price, the milk margin over feed costs was $18.81/cwt., up 72¢/cwt. from July 2014, and up $6.11/cwt. from August 2013.

Dunn’s forecast of the average 2014 Pennsylvania all-milk price is $25.42/cwt., which would be up $3.94 (18.3%) from 2013’s estimated price of $21.48/cwt. He also provided early projections for 2015, forecasting a Pennsylvania all-milk price of $21.02/cwt., down $4.41 (17.3%) from 2014.

Looking at factors affecting costs and income, corn prices have fallen 5.6% since Dunn’s August outlook report, ending at $3.94/bu. for the September 2014 contract.

Expectations are that the corn and soybean crops will be records for both yield and total production are depressing prices. Soybean prices are down 11.5% from last month, reflecting the expectation of an excellent crop on greater acreage than last year. The current soybean meal price is up 15% from last month because meal supplies are short until new crop meal is available. The prices are much lower for future months.

The U.S. dollar is up against the Euro and the Australian and New Zealand dollars since last month, especially against the Euro, reflecting the negative impact of the Russian embargo on many exports from the EU, and the other impacts of the continuing problems with Russia, Dunn said. Russia’s actions will have less impact the U.S., which is less dependent on sales to Russia than Europe is.

The latest milk production report showed July milk production up 3.94% from the year earlier, the largest monthly increase this year over the same month of 2013. This is bearish, although given the margins so far this year, the surprise is that the expansion took so long, Dunn said. Several states had very large year over year growth. Arizona, Colorado, Indiana and Michigan all produced over 6% more milk than in July 2013.

All of the five largest dairy producing states had milk production increases greater than 3%. Michigan has now passed Minnesota as the sixth largest dairy state, having seen its milk production grow steadily for the past 15 years, to 9.1 billion lbs. in 2013.
The growth in milk production in July was in milk per cow rather than cow numbers. Although cow numbers were not collected for part of 2013, the national dairy herd this July is only 0.4% greater than in July 2013, so the growth in milk production is almost all more milk per cow. Cow numbers have been increasing very slowly, less than 0.2% per month, no doubt reflecting the high value for cull cows, Dunn said.
Milk production is expected to continue to grow for the rest of 2014 in response to better margins. Whether the rapid growth of July continues remains to be seen, but the lower futures prices in the intermediate future should dampen expansion.
 
Source: Dairy Herd

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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