As we soon will be flipping the calendar to August, you likely already have your chopper in the shop. Yes, corn silage season is inching closer and closer. Mike North, president with ever.ag was a recent guest to AgriTalk, says there is a narrow window to get things priced in terms of silage.
“I think we can all appreciate the current balance sheet is still relatively tight,” he says.
Geography can be a tell-tell sign of tighter hay supplies and overall availability. North says the front range of the Rockies is a dividing line between those producers with more access to hay to those who don’t.
“Anything west of there has not gotten enough rain and forages are in short supply,” he says. “But as you come into the Midwest, most producers have had pretty good hay. So, it’s going to be a bit of a scramble for guys in the West more than the ones in the Midwest but from a silage perspective.”
Think Ahead
North encourages producers to take time now to figure out what it’s going to cost to put a crop in the ground for 2023.
“I like options because of how shorter term we have and how loose these markets have been in recent weeks. We should be thinking about 2023 as well,” North says. “The numbers are well north of $5, and I’ve heard even as high as $6 depending on the situation.”
North says as a dairy producer, if you see $5.60 corn that is a potentially good value.
“I may not like that price, but if we get something that blows up this winter, it’s not too hard to push corn back to $7.50 and suddenly $5.60 looks amazing,” he says. “I think we have to have a multi-year thought process.”
Will Stricter Regulations Come to the U.S.?
Europe is not adding more cows because of all the new environmental risks. New Zealand and Australia are in a similar position because of environmental risks, but also the weather has been compounding to shortening their production.
“We’ve become the balancer for world markets,” North says. “And if you give us a really high price for an extended period of time, will produce more milk.”
North says stricter regulations are not currently facing U.S. producers but is certainly finding its way into the discussion.
“I don’t think we have found its way here yet in terms of legislation or rulemaking,” he says. “But public pressures in Europe have led them to essentially say, there will be less cows here, period.”
Managing the Downside
North says whether you use Dairy Revenue Protection (DRP) or purchase options, managing the downside risk is vital.
“Taking an idle stance is not at all prudent,” he says.
Be active with your risk management when it comes to feed prices because North says it doesn’t take much to blow these markets up anymore.
“You have to touch this market one way or another. We believe option strategies are the best. But as we get towards fall, there’s an opportunity to become more aggressive, especially if prices are more elevated.”
To listen to the full conversation between Mike North and Davis Michaelson, click here: AgriTalk-7-26-22-Mike North - AgriTalk PM - Omny.fm
