Dairy Outlook Sours

Idaho’s dairy farmers paid their bills in 2015, but not much more. And the outlook for 2016 isn’t much better.
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But it isn’t as bad as 2009 when the combination of high feed costs and falling demand squeezed many producers.
Rick Naerebout, director of operations for the Idaho Dairymen’s Association, said milk prices around $16 per hundredweight for the first nine months of 2015 helped make 2015 mostly a break-even year for Idaho’s 500 dairy operations. Milk prices slipped to around $14 per hundredweight in the last three months and are expected to hover near that level for the first half of 2016.
Naerebout expects to see moderate price recovery sometime in the second or third quarter of this year — maybe back to $15. Adding another $1 per hundredweight to that milk price will bring producers closer to the average break-even price of $16.
“Economics influence production,” Naerebout told producers and agricultural lenders during the University of Idaho Extension Agricultural Outlook last month. Increasingly, those economics are playing out on the global stage.
U.S. dairy farmers now export 15 to 17 percent of the nation’s dairy production, but a stronger dollar is pricing U.S. products above most competitors. That’s allowing inventories to build, pushing down U.S. milk prices.
According to the latest Dairy Products Report from the U.S. Department of Agriculture, inventories of many dairy products are up 10 to 20 percent over the previous month.
Butter production grew by 4.4 percent to nearly 151 million pounds in November, 7.6 million pounds above the five-year average. Butter prices have come down somewhat, but were still $1 a pound above global prices in early December. Yogurt production was also up 7 percent in November. Chobani continues to see growth of 8 to 10 percent annually.
American cheese production was down 0.3 percent to 377.3 million pounds — the first decline in production since August. Interestingly, Gouda production was up 139 percent over 2014 levels. Most of that production would be intended for export at a time when exports are facing headwinds.
Nonfat dry milk production is falling but still remains 5.1 million pounds above the five-year average. Skim milk powders production, also intended primarily for export, is up 44 percent to its highest level since August 2014.
“We’ve got to clear inventory and get close to global prices” before milk prices will improve, Naerebout said.
At the same time, Idaho dairy producers are watching their competitive milk price slip as local supply is outpacing processing capacity again. When processors had to bid for milk, producers could expect to receive the Class III price. Now it appears producers will receive Class III less 45 to 50 cents per hundredweight in the coming year. That puts Idaho with the second lowest milk price in nation, just above California.
As California dairies seek to move to greener pastures, they are looking past Idaho to the Dakotas or to the Southwest. Not only are prices higher in other regions, but natural resources appear to be less limited.
Many dairy producers are concerned about water and feed supplies given the recent settlement between groundwater pumpers and surface water users in southern Idaho. That agreement calls for a 13 percent curtailment in groundwater pumping.
Since corn and alfalfa are two of the thirstiest crops grown in Idaho, Naerebout expects to see both a reduction in acres and yields as crop producers strive to meet the agreement requirements. He expects to see feed prices increase as a result, although abundant hay stacks will likely dampen that increase in 2016.
Adding it all together, Naerebout said the years of double digit increases in dairy production that pushed Idaho to the third-largest milk production state in the nation are over. He expects to see annual growth average 1 to 2 percent going forward.

 
Source: MagicValley
 

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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