Dunn’s calculations reflect daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day. September 2015 feed costs were up 23¢/day (4.9%) from August’s revised estimate, to $4.90/cow/day. The September Pennsylvania all-milk price was estimated at $18.73/cwt., up $1.13/cwt. from August.
That left the preliminary September IOFC at $7.28/cow/day, up 51¢ from August and the highest margin in 2015. However it is down $5.73 from September 2014’s margin of $13.01/cow/day, which was the high for last year.
Measured another way, preliminary feed costs per hundredweight of milk produced averaged $7.54/cwt. in September, up 36¢ from August. With the higher milk price, the milk margin over feed costs was $11.19/cwt., up 77¢/cwt. from August, but $8.83 less than September 2014.
Dunn’s forecast of the average 2015 Pennsylvania all-milk price is $18.34/cwt., which would be down $7.31 (-28.5%) from 2014’s average of $25.64/cwt. He projects a 2016 Pennsylvania all-milk price of $19.21/cwt., up 88¢ (4.8%) from the 2015 forecast.
The monthly look at the market psychology included:
• The world’s financial markets were volatile again last month, but really changed very little. The underlying issues of a slowing Chinese economy, massive migration to Europe from the Middle East, and unpredictable Russian behavior remain. The strong U.S. dollar is undermining export opportunities for most agricultural products, depressing U.S. prices.
• Dairy exports fell in July, the third consecutive month of reduced exports. The Australian dollar is up 1.9%, the New Zealand dollar up by 2.7%, and the Euro by 0.6%. These higher currency values make U.S. dairy exports slightly more competitive. Nevertheless, the export picture overall is not optimistic, with China holding huge inventories in a falling economy, while European production is higher and U.S. milk production is up.
• Dairy futures market prices show stable prices for Class III for the rest of 2015 and the first half of 2016, with prices averaging just less than $15.88/cwt. The Class IV futures prices average about 19¢/cwt. more that Class III, at $16.07/cwt., reflecting the strength in the butter market. The September Class IV price was up $2.18/cwt. from August, to $15.08/cwt. Dunn’s forecast for the average Pennsylvania all-milk price for the next nine months is $19.20/cwt., up considerably from recent months.
• Corn and soybean markets have fallen somewhat because current forecasts for the 2105 crops are good. The earlier wet weather in the Corn Belt was much ado about nothing, since more typical weather followed and the crops recovered well. Since cold weather in the Midwest is late this year, the crops continue to mature.
Source: DairyHerd