Dairy Outlook February 2019: A Provisional Price Plateau

Pennsylvania and U.S. All Milk Price remained at the $18.00 and $17.00/cwt levels, respectfully. This was just below the October prices, ending a four month upward trend. Class III prices continued a downward path since September 2018 and seemingly having reached it's own plateau in January 2019. A bright spot has been Class IV prices, which have been steadily climbing since September 2018. Feed costs for November were mixed with the U.S. feed costs remaining relatively level to the previous month, while Pennsylvania prices continued on an incremental climb upward, eroding the milk margin and income over feed cost within Pennsylvania.

Pennsylvania feed costs are now approaching an 11 year average for the first time since the end of 2015 (Figure 1). This level is not near the high feed prices experienced in 2008 or 2011 through 2012, but they could get there if this increase continues. It is also interesting to see how Pennsylvania milk margins have evolved over the last 11 years (Figure 2). For most of the 21st century, milk margins were on three-year cycle of high, average, and low. Since 2015, there have been two major shifts. First, the cycle appears to have condensed into a two-year period, with the extremes of the highs and lows being less dramatic. More important is the second shift. This price swing has been at or below the 11 year margin average, making it challenging to meet cash flow demands of the dairy enterprise. While projected to be better than 2018, 2019 will continue this mediocre margin trend.

Figure 1: Eleven year Pennsylvania Feed Cost/cwt¹ Trends (2007 - Present)

¹Based on corn, alfalfa hay, and soybean meal equivalents to produce 75 lbs. of milk (Bailey & Ishler, 2007)

Figure 2: Eleven year Pennsylvania Milk Margin/cwt¹ Trends (2007 - Present)

Income Over Feed Cost, Margin, and All Milk Price Trends

Table 1: Twelve month Pennsylvania and U.S. All Milk Income, Feed Cost, Income Over Feed Cost ($/milk cow/day)

¹Based on corn, alfalfa hay, and soybean meal equivalents to produce 75 lbs. of milk (Bailey & Ishler, 2007)
²The 3 year average actual Milk Margin breakeven in Pennsylvania from 2015-2017 was $12.33 ± $2.29 ($/cwt) (Beck, Ishler, Goodling, 2018).

Table 2: Twelve month Pennsylvania and U.S. All Milk Price, Feed Cost, Milk Margin ($/cwt for lactating cows)

¹Based on corn, alfalfa hay, and soybean meal equivalents to produce 75 lbs. of milk (Bailey & Ishler, 2007)
²The 3 year average actual Milk Margin breakeven in Pennsylvania from 2015-2017 was $12.33 ± $2.29 ($/cwt) (Beck, Ishler, Goodling, 2018).

Figure 1: Twelve month Pennsylvania Milk Income and Income Over Feed Cost ($/milk cow/day)

²The 3 year average actual IOFC breakeven in Pennsylvania from 2015-2017 was $9.00 ± $1.67 ($/milk cow/day) (Beck, Ishler, Goodling, 2018).

Figure 2: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)

*Predicted values based on Class III and Class IV futures regression (Gould, 2019).

Table 3: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)

Month Class III Price Class IV Price PA All Milk Price
Jan-18 $16.88 $13.99 $18.90
Feb-18 $15.44 $13.51 $18.40
Mar-18 $14.00 $13.13 $17.00
Apr-18 $13.40 $12.87 $15.90
May-18 $14.22 $13.04 $16.00
Jun-18 $14.47 $13.48 $16.40
Jul-18 $15.18 $14.57 $16.70
Aug-18 $15.21 $14.91 $17.00
Sep-18 $14.10 $14.14 $16.20
Oct-18 $14.95 $14.63 $16.40
Nov-18 $14.44 $15.06 $17.10
Dec-18 $13.78 $15.09 $18.10
Jan-19 $13.96 $15.48 $18.30
Feb-19 $14.05 $15.93 $18.52
Mar-19 $14.39 $16.06 $18.75
Apr-19 $14.57 $16.26 $18.17
May-19 $15.06 $16.40 $18.48
Jun-19 $15.48 $16.50 $18.74
Jul-19 $15.90 $16.61 $19.11
Aug-19 $16.20 $16.73 $19.32
Sep-19 $16.40 $16.84 $19.48
Oct-19 $16.39 $16.90 $20.24
Nov-19 $16.32 $16.91 $20.21
Dec-19 $16.20 $16.77 $20.08

*Italicized predicted values based on Class III and Class IV futures regression (Beck, Ishler, and Goodling 2018; Gould, 2019).

To look at feed costs and estimated income over feed costs at varying production levels by zip code, check out the Penn State Extension Dairy Team's DairyCents  or DairyCents Pro apps today.

Data sources for price data

  • All Milk Price: Pennsylvania and U.S. All Milk Price (USDA National Ag Statistics Service, 2019)
  • Current Class III and Class IV Price (USDA Ag Marketing Services, 2019)
  • Predicted Class III, Class IV Price (Gould, 2019)
  • Alfalfa Hay: Pennsylvania and U.S. monthly Alfalfa Hay Price (USDA National Ag Statistics Service, 2019)
  • Corn Grain: Pennsylvania and U.S. monthly Corn Grain Price (USDA National Ag Statistics Service, 2019)
  • Soybean Meal: Feed Price List (Ishler, 2019) and average of Decatur, Illinois Rail and Truck Soybean Meal, High Protein prices, National Feedstuffs (USDA Ag Marketing Services, 2019)

References

The Dairy Outlook Newsletter is supported by an annual USDA RMA grant.

 
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