In some of the first good financial news for dairy producers in a long time, feed prices collapsed last week after China cancelled orders to buy U.S. corn. Even before the cancelations, China had been cutting back on its purchases, according to Sarina Sharp, analyst with the Daily Dairy Report. Through April 20, Chinese commitments to buy U.S. corn were 39% lower than at this point last year and 63% less than in April 2021.
“China has not been the only importer eschewing U.S. corn,” Sharp said. “Even after the recent selloff, American grains and oilseeds are simply too pricey to attract international buyers, and late-season rains in Brazil were better than expected, so massive yields are expected from the country’s second corn crop.”
According to Reuters, U.S. commitments to export corn to foreign markets outside of China as of late April were at their second-lowest level in two decades. Sales to Japan, another large market for U.S. corn, have been moving at their slowest clip in over 20 years, down more than 40% from year-ago volumes, she added.
“Because Brazil lacks the infrastructure to simultaneously store record-breaking corn and soybean crops, elevators are pushing overseas sales to make room for another bumper harvest,” she noted. “Importers around the world are moving their business to South America, and with good reason.”
Soybeans out of Brazil are currently selling for about $2/bu. below prices offered at U.S. ports, and at least two loads of Brazilian beans were expected to land in the United States last week.
“Assuming normal weather, the United States is expected to produce considerably more corn and slightly more soybeans than it did last year,” Sharp said. “Slow U.S. crop exports could help speed the transition from today’s scarcity to anticipated abundance this fall.”
Even so, feed prices remain high. Average March feed expenses for a typical dairy accounted for $14.65/cwt. of milk revenue on the typical U.S. dairy operation, according to the Dairy Margin Coverage program’s feed cost formula released last week. With the March all-milk price at $21.10/cwt., Sharp noted that left just $6.45 to cover all other expenses including labor, energy, interest on debt, and fixed costs.
“Declining corn futures prices could slowly result in reduced feed expenses, but most dairy producers won’t enjoy the full impact of the recent selloff, because the price of on-farm inventories likely has already been locked in,” Sharp noted. “This includes last year’s corn silage, which accounts for a majority of a typical dairy ration. Many dairy producers have also contracted to buy at least some of their future needs for soybean meal, grain, and byproducts, so they will not benefit from today’s lower prices until they’ve used up their contracted tonnage.”
Even so, the drop in feed prices is welcomed news for dairy producers.
