Dairy margins projected healthy through 2023
Strong international demand for dairy products and China’s growing appetite for milk powder will make 2014 a banner year for dairymen, according to analysts.
The Food and Agricultural Policy Institute at the University of Missouri is projecting a U.S. all-milk price of $20.59 per hundredweight in 2014.
“Milk prices at that level, when combined with declining feed costs, should lead to strongly positive profit margins for most dairy producers,” FAPRI economists stated in the U.S. Baseline Briefing Book, released last week.
FAPRI projects income over feed costs at $9.82 per hundredweight in 2014.
Even with a strong rate of growth in U.S. milk production, expected to jump 4.9 billion pounds in 2014 to 206.1 billion pounds, demand should be strong enough to prevent a decline in milk prices, the report states.
That demand sets the stage for another year of strong growth in 2015, up another 5.3 billion pounds to 211.4 billion pounds.
FAPRI’s projections, based on information available in January, set the all-milk price at $19.01 and IOFC at $9.72 in 2015.
Its longer-term projections have the all-milk price declining from $18.33 in 2016 to $17.47 by 2023, with an average of $17.86 for 2015 through 2023. IOFC is projected at $9.40 in 2016, declining to $8.61 in 2023, with an average of $9.01 for 2014 though 2023.
Producer margins are projected relatively high, but they are based on calculations in the new margin insurance program in the farm bill, said Scott Brown, ag economist with the University of Missouri.
The path ahead looks reasonable, but there will be volatility, which the projection models don’t include. Not all years are going to turn out as good as they look in the projections, he said.
But feed costs, in general, will continue to move lower, and from a historical standpoint, costs will be closer to what the industry is used to, he said.
Farm prices for corn are projected at $4.17 a bushel for the 2014/15 marketing year, down from $4.42 last marketing year and an average of $5.18 in the five years previous. The corn price is expected to average $4.00 a bushel for 2015/16 through 2023/24.
Farm prices for soybeans are projected at $9.84 a bushel for the 2014/15 marketing year, down from $12.57 last marketing year and an average of $11.55 in the five years previous. The soybean price is expected to average $9.82 a bushel for 2015/16 through 2023/24.
With average growing conditions, hay production could increase in 2014, but local supplies could still be very tight in parts of the country affected by drought. National average hay prices could drop to $140 a ton in 2014, which might not reflect local conditions, FAPRI reports.
The all-hay farm price is projected at $143.92 a ton in the 2014/15 marketing year, down from $179.06 last year and is projected to average $138.38 for 2015/16 through 2023/2024.
On the export front, nonfat dry milk is projected to increase 56 million pounds in 2014 to 1.29 billion pounds, rising to 1.57 billion pounds in 2023. American cheese is expected to increase 4 million pounds in 2014 to 184 million, rising to 260 million in 2023. Other cheese is expected to decrease 17 million pounds in 2014 to 475 million pounds, then rise steadily to 541 million pounds in 2023. Butter is expected to increase 3 million pounds to 188 million in 2014, rising to 224 million in 2023.
The number of U.S. milk cows is projected to increase 55,000 cows in 2014 to 9.274 million, increasing to 9.67 million in 2023. Milk production is projected to increase to 235 billion pounds in 2023.
Idaho’s cow numbers are projected to steadily increase from 574,000 head in 2014 to 618,000 in 2023. California’s cow numbers are projected to grow 15,000 head from 1.782 million in 2014 to 1.796 million in 2017 then steadily decline to 1.780 head in 2023.