2014: Some uncertainty amid the optimism

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Like most dairy farmers, Corey Enright enters 2014 with a degree of uncertainty.

Will dairies start expanding again now that feed prices are dropping and milk prices are relatively high? Will that expansion cause milk prices to drop?

While attending the Vita Plus Dairy Summit in early December, Enright heard a number of farmers talking about expansion. “A lot of guys have proposals on the table,” he says. “They have plans for the next buildings in the future.”

“It’s so volatile, I really don’t know (what to expect in 2014),” says Enright, 35, who runs a 300-cow dairy with his father near West Bend, Wis.

The fact that feed prices have been going down is “huge,” he acknowledges, since he and his father buy all of their corn and commodities rather than raising their own.

Even lower feed prices?
Corn and soybean prices could fall even further this year.

According to Marty Foreman, senior economist with Doane Advisory Services in St. Louis, corn prices face substantial downside risk beginning this spring if planting goes smoothly. The December 2014 corn futures contract could fall to the $3.25-to-$3.50 range by late summer or fall, down more than $1 per bushel from current levels, he adds.

On Dec. 10, the U.S. Department of Agriculture projected that corn will average $4.05 to $4.75 per bushel during the 2013/14 crop year that ends on Aug. 31.

Bill Nelson, another senior economist with Doane, says cash soybean and meal prices are expected to be under downward price pressure during much of the year. Under normal weather conditions, late 2014 soybean prices may retreat toward $10 to $11 per bushel, maybe lower, he says. Meal prices would retreat back toward $300 to $325 per ton late in the year.

But weather remains an uncertainty.

Milk prices relatively strong
Bob Cropp, market analyst and professor emeritus at the University of Wisconsin, predicts that the all-milk price will average $19.40 per hundredweight this year, which will be down from approximately $19.85 in 2013, but still pretty good from a historical perspective. (The record was set in 2011 when the all-milk price averaged $20.14.)

Milk prices have been helped by a booming export market. Another record was set in 2013, with more than 15 percent of U.S. milk production (on a milk-solids basis) exported to other countries.

Low interest rates and a weak dollar have helped facilitate exports, since they make U.S. products cheaper for foreign buyers. On Dec. 18, the U.S. Federal Reserve Board said it would continue to keep interest rates low for the foreseeable future. But if the Fed’s “cheap money” policy ever changes, it will create some headwinds for exports since foreigners will have to pay more.

Despite the uncertainty that Enright and other farmers have going into 2014, there are plenty of opportunities.

For one thing, the dairy industry is undergoing rapid technological change. In talking to others at the Vita Plus Dairy Summit, Enright noted there is a lot of interest in robotic milking stations, since labor continues to be a concern. “I think that (robots) will really take off,” he says.

Other technologies are making it easier to spot health problems in animals, get them bred, and improve overall farm efficiency.

And, there is increased recognition of the role that farmers play in feeding a growing world population.



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