Weather an important component to 2012 dairy story

The 2013 Agricultural Economic Outlook Forum was held recently, in an
effort to highlight the “Status of Wisconsin Agriculture,” an annual
report by the Department of Agricultural and Applied Economics, UW-Madison and
Cooperative Extension, UW-Extension.

Mark Stephenson, Director of the Center for Dairy Profitability and Director of
Dairy Policy Analysis, gave a presentation focused on the current dairy

“This year I think that if we look at what the story of milk is, it’s
really something that our climatologists would call the southern
oscillation,” Stephenson said. “That’s given us these big weather
patterns across the globe.”

Stephenson explained that often El Niño is the weather pattern where the
Pacific Ocean is a warm body of water, but the last two years in a row, there
has been a La Niña event, which causes a colder body of water in the Pacific
and that “impacts weather on both sides of the Pacific Ocean – both on the
eastern side where we are, providing us with drier, warmer, drought-like
conditions and on the other side of the Pacific Ocean (Australia, New Zealand)
typically more rainfall is happening there.”

This is part of the story of milk on both sides of the Pacific, he said. Last year’s
drought was mostly in Oklahoma and Texas. “This year… two-thirds of the
country is impacted by these dry weather conditions and rather warm rain. We
had a fair amount of that impact here in the state of Wisconsin as well.”

According to the report, the 2012 average milk price for the U.S. was 18.30 per
hundredweight. Wisconsin averaged at $19.23 per hundredweight.

The report states that the average number of milk cows in both the United
States and Wisconsin increased, 0.5 percent and 0.4 percent, respectively – the
U.S. from 9.194 million to 9.235 million and Wisconsin 1.265 million to 1.270
million. Milk per cow in the U.S. rose from 21,346 to 21,640 pounds – a change
upward of 1.4 percent. For Wisconsin, the increase was 3.6 percent, from 20,645
to 21,383 pounds.

Total milk production also increased in the U.S. to 199.8 billion pounds from
196.25 billion (up 1.9 percent). Wisconsin saw an increase to 27.2 billion
pounds from 26.1 billion (up 4.1 percent).

When considering the value of the dairy ration, calculated monthly by the
National Ag Statistics Service, Stephenson explained that the drought has taken
its value to a new high. “We thought we were at a new plateau of $7 per
hundred pounds of ration until the last couple of years,” he said, noting
that it was mostly a drought impact this time around. “Ethanol certainly
had some impact but drought is really the driving factor for this ration value
that is considerably above historic levels. I think our milk prices have not
caught up completely to where these feed prices have been.”

Stephenson said this has had an impact in a couple of different ways.
Production per cow shows the seasonal pattern – a fairly large increase in the
first quarter but then a sharp decline. Farms are not pushing animals as hard
since feed is expensive. A thin margin as well as an unusually high cull cow
price led to a reduction in cow numbers.

This is translated not just to dairy cows but also to dairy heifers. Stephenson
showed heifers as a percentage of milk cows in the national herd.

“While historically this number had been around 42 or 44 percent, we’ve
seen an increase over the past decade or so to where we were carrying nearly 50
percent of animals in comparison to milking cows as heifers,” he said.
“This last year we saw a decline in heifer numbers as well as a percentage
of the herd.”
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Source: Midwest Producer