August FMMO Class I base price up
The August 2014 federal order milk marketing order Class I base milk price is $23.87/cwt., up 85¢ from July 2014, and $4.99 more than August 2013.
Through the first eight months of 2014, the Class I base average is $23.13/cwt., up $4.74 from the $18.39/cwt. average for January-August 2013.
Dairy Margin Watch: July margins flatten out
Dairy margins were largely flat during the first half of July, as lower milk prices and lower feed costs largely offset each other over the two-week period, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC.
From a historical perspective, margins remain very strong at well above the 90th percentile of the past 10 years through the first half of 2015. Although deferred milk prices have declined recently, the market is drawing fundamental support from the latest USDA World Ag Supply & demand estimates (WASDE) report, which lowered the annual 2014 milk production forecast to 205.9 billion lbs. from 206.1 billion lbs. previously. The reduction was due to slower growth in milk per cow, and USDA also noted expectations for robust domestic demand and stronger NDM/SMP exports to support prices.
The 2014 all-milk price is expected to average between $23.25/cwt. and $23.55/cwt., which would represent a new all-time high.
Feed prices have continued to be pressured by a negative post-report drift from USDA’s quarterly grain stocks and acreage figures as well as the latest July WASDE. Old-crop corn ending stocks were raised 100 million bushels from last month to 1.246 billion while new-crop ending stocks increased 75 million bushels to 1.801 billion. New-crop soybean ending stocks showed an even larger increase of 90 million bushels or 28% from June to 415 million based on the larger production forecast from increased acreage. Neither the corn nor soybean ending stocks factor in the potential for a larger yield which was left unchanged this month. Current weather conditions suggest both the corn and soybean yield forecasts will be increased in the August WASDE.
Dunn: July dairy outlook
Penn State University’s measure of income over feed costs (IOFC) fell in June, but remains well above last year, according to the latest Dairy Outlook report from economist Jim Dunn. At $10.93/cow/day, the June IOFC is down 50¢/day (-4.3%) from May, with a decline in feed prices more than offset by a milk price decline.
IOFC reflects daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day. The average cost to feed a cow producing 65 lbs. of milk per day was $5.38/day, down 20¢ (4.0%) from May, with prices lower for soybean meal, corn and alfalfa hay.
The June 2014 Pennsylvania all-milk price of $25.10/cwt. was down $1.10 from May.
Measured another way, feed costs per hundredweight of milk produced averaged $8.28/cwt. in June, down 34¢ from May. With the lower milk price, the milk margin over feed costs was $16.82/cwt., down 76¢/cwt. from May 2014, but up $5.03/cwt. from June 2013.
Dunn’s forecast of the average 2014 Pennsylvania all-milk price is $24.89/cwt., which would be up $3.41 (15.9%) from 2013’s estimated price of $21.48/cwt.
The forecast all-milk prices for the rest of 2014 average $23.85/cwt., or $1.88/cwt. above the same period of 2013. Milk production is expected to grow by more over the corresponding months in 2013 in response to better margins.
Corn prices have fallen 8% since Dunn’s last report, ending at $4.17/bu. for the July 2014 contract. It looks like growing conditions in the Midwest will produce a very large crop, despite some flooding in the western Corn Belt. China, Brazil, and Argentina are all expected to have good crops, with the Chinese crop predicted to be a record. Soybean prices are down 2.3% from last month, which seems like a muted response to the bean-crop forecasts, which are also for an excellent crop on more acreage than last year. The latest USDA soybean acreage forecast seems too low and the growing conditions look good. Soybean meal is down 0.9% from last month.
The U.S. dollar is about the same vs. the Euro and Australian and New Zealand dollars since the June report.
To read Dunn’s complete Dairy Outlook report, click here.
Dairy replacement sales results from Turlock, Calif., on July 18. Prices $/head unless otherwise noted:
#1 Holstein springers: 2000-2950
#2 Holstein springers: 1400-1975
#1 Jersey springers: 1800-2200
#1 Jersey-X springers: 1500-2200
A special dairy heifer sale featuring 1,200-1,500 dairy heifers will be held Saturday, July 26, 10 a.m. A special consignment will be 500 Holstein heifers from the Joe Branco dairy.
Sulphur Springs Dairy Auction
Dairy replacement sales results from Sulphur Spring, Texas, on July 17:
Fresh cows: 1500-1825
Holstein Springers: 1500-1975
Breeding age heifers: 900-1325
Small heifers: 400-840
Heifer calves: 190-390