The U.S. dollar is higher in the past month against the Australian and New Zealand dollars and the Euro. The Australian is 2% lower, the Euro 1% lower, and the New Zealand dollar 0.3% lower. These exchange rates will hurt our export competitiveness slightly.
Corn and Soybean Markets
Corn has remained low, trading in a narrow range between $4.20/and $4.40/bu. for the March contract since mid-November. Soybeans and soybean meal have fallen since mid-December highs, with beans down about 50¢/bu. March beans are at $12.72.bu. and March soybean meal at $14/ton. The Chinese concern about Genetically Modified Organisms (GMOs) is a recent concern in export markets. Whether this is an accurate reflection of consumer attitudes or a government method of protecting domestic producers in unclear, but this is potentially a problem since China is a very big customer. Given the overall state of food safety in China, GMOs would appear to be the least of their problems. It appears that Brazil and Argentina will have very good corn and soybean crops. This is increased competition for our exports. South American competition has been strong for soybeans for many years, and the soybean futures prices are lower for the May contract than for the March contract and the March contract than for the January contract. These negative returns to storage are recognition of the importance of the Southern Hemisphere production. We could see the same thing in the corn futures market in coming years, which would change corn storage practices.
Income over Feed Costs (IOFC)
Penn State’s measure of income over feed costs rose by 0.4% in December. This is an increase of 4¢/cow/day. The December value is $10.29/cow/day, the highest value since 2007. The increase in December is because of a higher milk price, which rose by 0.9% from November levels. Feed prices rose by 1.9%, because of a small increase in the corn price. The cost of feeding a cow rose by 9¢/day to $4.79. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day. Figure 1 and Table 2 showing the monthly data are appended.
The allocation of the revenue per hundred pounds of milk is shown in Table 3. The milk margin is the estimated amount from the Pennsylvania all milk price that remains after feed costs are paid. As does income over feed cost, this measure shows that the December PA milk margin was 0.4% higher than November.