BURLEY, Idaho — Moderating feed prices and strong dairy exports will bring improvement to dairy operations in 2014, but market shocks, volatility and near breakeven margins will continue to challenge producers.
While dairymen aren’t totally healthy, they may be in a little better position than the last couple of years in 2014, Wilson Gray, University of Idaho extension livestock economists, told producers during the University’s agricultural outlook seminar on Dec. 11 in Burley.
Greater availability of forage and feed will bring significant relief in feed prices in the near term, but volatility in milk prices and the cost of inputs are a part of doing business, he said.
There’s no doubt, however, that feed prices will moderate in the short term. Drought in the Southern Plains in 2011 and widespread drought in 2012 were game changers for feed grain and hay prices. And winter kill of alfalfa in the Midwest last year exacerbated the tight supply of alfalfa, he said.
While the West still has some drought issues, conditions have improved in most of the country, and 2013’s improved crop season is bringing feed prices down, he said.
Corn is down from last marketing year’s average of $6.90 a bushel to $4.20 and is likely to come down another 15 cents, given a normal crop year and the slowing ethanol demand as blenders hit the “10 percent blend wall,” Gray said.
Alfalfa is coming down off the national average of $210 a ton in the 2012/13 marketing year to $185 a ton and should come down another $50 as winter kill areas go back into alfalfa production due to demand, he said.
High feed prices culled a lot of cows and reduced the U.S. milk cow herd by 10 percent in 2012. Culling continued at a slower pace this year, and total numbers are up a bit due to a good supply of replacement heifers, he said.
Idaho’s cow inventory dropped 1 percent in 2012 and was down 10,000 head in October compared with Jan. 1. Those cow numbers had been growing at 4 percent to 6 percent a year from the early 1990s until 2008 but that growth slowed to 1 percent to 2 percent over the last few years and appears to be leveling out, Gray said.
Future demand from Chobani for its Greek yogurt plant in Twin Falls, however, could fuel renewed growth. The company’s first phase of production requires 2 million pounds of milk per day, but its 5-year plan is to ramp up to 7 million pounds per day. That would require an additional 60,000 to 70,000 milk cows, he said.
With fairly stable U.S. cow numbers but a slight increase in U.S. milk production, the all-milk price in 2014 is expected to range between $18.25 and $19.25 per hundredweight, down from $19.40 to $19.90 in 2013, according to the Livestock Marketing Information Center (LMIC).
LMIC projects prices for Class III milk for cheese to range between $17.75 and 18.75, up 1.39 percent from 2013. The CME futures market is only projecting those prices in the low to mid $17s, while a forecasting group moderated by the University of Wisconsin is projecting Class III between $17 and $18 per hundredweight.
Domestic demand for dairy has stabilized and is improving and growth in U.S. dairy exports – which were up 26 percent January through September over the same period in 2012 – is expected to continue, he said.