The start of 2019 is the perfect time to look forward to the thaw of springtime – or if the National Oceanic and Atmospheric Administration (NOAA) is correct, we might not freeze at all.
An El Niño is expected to form and continue through the Northern Hemisphere winter (90% chance) and persist through spring (60% chance), according to the NOAA.
“There are a couple of effects that are typical of an El Niño winter that we can expect in the Upper Midwest,” said Mark Stephenson, agricultural economist and director of the Center for Dairy Profitability with the University of Wisconsin. “Our temperatures should be somewhat warmer and drier than normal during the wintertime. Dairy cows like the kind of temperatures we get with a little warmer winter – between 30°F to 50°F; they would be very comfortable.”
Even if it’s a little drier this winter, much of the Midwest has experienced enough subsoil moisture from last summer’s rains that it shouldn’t cause any significant concerns going into spring, he said. However, one concern that could pop up is for alfalfa growers. A lack of snow ground cover to protect alfalfa if an extended cold snap moves in could cause some winterkill of the crop.
Silage Supply – Is There Enough?
Looking at the silage supply, Stephenson said in Wisconsin the supply is adequate, but the bigger concern is quality.
“Yield is not a big problem, but quality is an issue due to our unusual season. Some corn got planted very late; we hit a dry spell in many parts of the state for part of the year then received heavy rain, making harvest not only difficult but late,” he explained. “A fair amount of mold and mycotoxins are showing up in some of the feed tests, so producers will need to be careful when opening up new silage supplies.”
Often, producers try to supplement poorer quality silage by buying concentrates and mixing the ration differently.
“In ordinary years, that’s what you’d do, but I’m concerned that folks may not have the cash this year to buy a lot of extra supplemental feed. It’s been a long stretch of low milk prices for dairy producers, and I suspect we may see a hit on milk yields,” Stephenson said. “But this is the way the market repairs itself. If we start to slow down milk production, it tightens markets up a little bit and that, in turn, helps to bring milk prices back up to a more livable level. It’s the way markets work.”
Corn Silage Price & Expectations
Stephenson said the current feed values now put prices at about $28 per ton for 35% dry matter corn silage.
“I’m not sure you’re going to see a lot of corn silage being marketed at that price this year,” he said. “Again, if you don’t have the milk prices to support that sale price, nevertheless, that’s what the relative feed value looks like currently.”
Pricing is not only determined by supply and demand, but also off close substitutes like corn and alfalfa.
“Those are prices you see sold much more frequently than corn silage, and this is something the farmer gets to think a little bit about,” he said. “That’s why the $28 per ton is a competitive price with current corn and poorer quality alfalfa prices. Usually, we see corn prices rise through the storage season as we get to our next harvest, so expect silage prices to rise as well.”
Comparatively speaking, Stephenson believes milk prices are at the bottom of the current downtick.
“I expect milk prices are going to hit their bottom in December, close to $13.75 for Class III, but I’m forecasting that we'll see prices climb through most of 2019,” he said. “I don’t expect a huge price increase, but over the course of the year, I’m expecting that dairy farms will have about $1 to $1.50 per hundredweight (cwt) more, on average, in 2019 than they had in 2018.”
Headline image courtesy of the Center for Dairy Profitability, University of Wisconsin
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