US Dairy farmers concerned about prices in year ahead

The average Class III dairy price for 2012 was $17.99, and dairy farmers will tell you that is not enough to operate today’s modern dairy farms with the high costs of inputs.

This past year also provided unneeded stress as farmers fought the drought and the challenge of putting up enough feed for the winter and early spring feeding season. But last week at the Western Wisconsin Ag Lenders Conference in Menomonie, lenders were told to expect higher dairy prices in 2013

Mark Stephenson, director of dairy policy analysis at the UW-Madison Center for Dairy Profitability, forecasts 2013 dairy prices to be slightly higher, and he believes feed costs will be much more manageable in the new year.

His forecasts call for “soybean meal prices to fall by about $70 a ton and corn prices at harvest this year will be about $1 lower than last fall,” he said. That corn price, though, may still be a little high.

Brenda Boetel, UW-Extension grain and livestock marketing specialist, said assuming we have a more normal growing and production year with a corn harvest in the neighborhood of 14 billion bushels, “producers should expect corn prices to land between $4.25 and $4.75 a bushel.”

The increase in dairy prices in 2013 should be seen across the country, and part of the equation, Stephenson said, is if producers respond to higher prices with a jump in milk production. He said the higher production toward the end of 2012 did surprise him somewhat, but it’s an indication of how producers react with higher prices. He hopes the better margins for dairy producers will stabilize cow numbers and that culling will still be strong if cow prices remain high in these tight beef markets. The high beef cow prices have allowed farmers to get rid of chronic problem cows and make money doing it, he added.

The numbers for 2012 show the increase in cows going to slaughter. For the first 11 months of last year, 2.84 million head went to slaughter. That’s up over 7 percent from 2011.

The numbers, from the Milk Producers’ Council, show that’s the highest 11 month slaughter total since 1986, when the Whole Herd Buyout program was in place. During that period, just more than 3 million cows went to market. By the time the December numbers are in, the 2012 numbers should be very close to 1986, as the mid-December report shows another 66,000 head went to slaughter, the third largest total for any week in 2012.

Stephenson expects Western states will be where production increases will respond the fastest to higher prices because that is where many new processing facilities are being built. States like Colorado and Texas are also responding to new plants with increased production, Stephenson said. In more traditional dairy areas like the Midwest and East, he expects more steady growth in milk production in response to slightly higher prices. Another reason for faster growth in the West is the availability of land to start dairies in places where new dairy plants are being sited.

Playing a big part in future milk price increases, Stephenson said, will be the world’s economy, which could lessen demand for our dairy products. He alluded to a potential sovereign debt crisis in Europe.

“If that happens that will spill over not only to our economy but also to Asian economies and could dampen demand,” he said. “(While China is the) 500-pound gorilla in the world of exports, our biggest and most consistent buyer has been Mexico and our second largest is Canada. But China is certainly an area where we are looking for some growth.”

Source – Bob Bosold, The Country Today

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