Market Outlook
By Cathy Merlo
Many Expect Dairy Profitability Even After Price Drop-Off
Dairy prices have fallen 40% from this past year’s all-time highs, but many still predict a marginally profitable year for U.S. dairy producers in 2015. Now near $15 per cwt., milk prices are reacting to global dynamics, says Sara Dorland with Seattle-based Ceres Dairy Risk Management. Among them: record-high world milk production, China’s slowdown in dairy imports and Russia’s ban on western dairy products.
On the plus side, beef prices remain strong, a boost for cow-culling dairy producers. Lower feed prices are aiding U.S. dairies. Drought in New Zealand, which controls 45% of the world’s dairy trade, could curb milk output. That could “send global buyers scrambling, driving up spot prices in Chicago and eventually putting money in the dairy farmer’s bank account,” notes Matthew Gould, Dairy & Food Market analyst.
By June, global production should align better with demand, Dorland says. That could spur dairy prices to $18 by October.
By Nate Birt
Low Prices Really Do Have a Silver Lining
Farmers’ balance sheets have been hurt by low commodity prices in recent months, but Tommy Grisafi of Advance Trading says he’s optimistic over the long-term. Worldwide, people are increasingly consuming cheap food with more protein content.
“When we do have another weather event or supply event or some world event, it’s really hard to take that food away,” Grisafi tells “AgDay.” “[It’s] kind of like what we saw in Ukraine last year with the turmoil of Russia going into Ukraine and the wheat supply being disrupted and wheat moving up several dollars.”
Demand for U.S. crops is strong, and though “it feels like everything’s OK,” that can change. “If you ever take that away from someone, we’ll have an explosive rally.”
By Wyatt Bechtel
Cattle Inventory Increases As Slight Production Dip Is Forecast
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After cattle prices set record highs in 2014, cattle producers should expect a slight drop in those values this year. That’s according to CattleFax analysts, who presented their market outlook at the recent Cattle Industry Convention in San Antonio.
Despite the decline, CattleFax says profitability should remain high thanks to increasing global demand for beef and lower input costs. “Cow-calf producers will remain solidly profitable for the next several years,” predicts CattleFax CEO Randy Blach. Calves are expected to average $260 per cwt. in 2015, feeders should be at $220 per cwt. and fed cattle could hover around $157 per cwt. Exports have increased $13 billion in five years and are now at $26 billion. For 2014, beef export accounted for $352 per head in value. In 2020, it could be as much as $500 per head.
According to USDA’s 2015 Livestock and Poultry Outlook, beef production is slated to drop off slightly this year by 0.1% for a total of 24.2 billion pounds.
Yet the total cattle inventory actually rose 1.4% as of Jan. 1, with a total count of 89.8 million head.
Heifer retention has been on the rise, which explains the beef production drop-off when inventories are increasing. Currently, 4.1% more heifers have been added to the beef herd, and a 7.3% increase in heifers calving during 2015 is projected.
The beef cow herd is on the rise, too, with an estimated 29.7 million cows in production. That represents an increase of 2.1% from the same time in 2014.
