Compared to a month earlier, Penn State’s measure of IOFC fell by 10.4%, with milk prices unable to maintain strength against steady feed costs. Dunn’s calculations reflect daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day.
With stable feed prices, February 2015 feed costs were up just a penny from January 2015, to $5.34/cow/day. However, the preliminary Pennsylvania milk price averaged $18.08/cwt. in February, down $1.12 from January.
That left February’s IOFC at $6.41/cow/day, down 74¢ from January 2015 and $5.34 less than February 2014.
Measured another way, feed costs per hundredweight of milk produced averaged $8.21/cwt. in February, up 1¢ from January. With the lower milk price, the milk margin over feed costs was $9.86/cwt., down $1.14/cwt. from January 2015 and $8.36 less than February 2014.
Dunn’s forecast of the average 2015 Pennsylvania all-milk price is $19.36/cwt., which would be down $6.28 (24.5%) from 2014’s average of $25.64/cwt.
Dunn’s monthly look at the market psychology included:
• The latest USDA Milk Production report showed December milk production up 2.0% from a year earlier, the seventh consecutive sizable monthly increase. This is bearish, although the increase was expected. The growth in milk production is half in milk per cow and half in higher cow numbers. The national dairy herd this January is 1% greater than in January 2014.
• Cheese and butter prices changed slightly in the past month, while powdered product prices have moved in opposite directions. Non-fat dry milk prices are up 3.8%, while dry whey is down 11.8%.
• The value of the U.S. Dollar is still rising, up against the Euro, Australian and New Zealand dollars. That continues to hurt all U.S. agricultural exports, including dairy products. Thus, U.S. dairy exports continue to be weak. Chinese dairy imports are falling.
With the falling exports, the increased milk production will weaken dairy prices, since our domestic market grows by much less than the recent milk-production growth rate.
• Corn and soybean meal prices have risen since last month, by 0.3% and 4.4% respectively.
To read Dunn’s complete Dairy Outlook report, click here.