Growth in domestic production expected to push down price
By CAROL RYAN DUMAS
The USDA Economic Research Service forecasts lower milk prices in 2012.
The decrease in the all-milk price from 2011 is forecast at a low of 25 cents per hundredweight and a high of $1.95 per hundredweight, according to the latest Livestock, Dairy & Poultry Outlook. The decrease for Class III milk going into the cheese vat is forecast at a low of 70 cents per hundredweight and a high of $1.40 per hundredweight.
The expected drop in milk price is attributed to higher domestic milk production and stronger competition abroad. But the agency is also expecting feed prices to moderate.
Bernie Faber, a dairyman in Salem, agrees the milk price could drop as much as $1.95 per hundredweight, but feed prices will be determined by availability and how much is exported.
"My biggest problem is cost and availability with alfalfa hay," he said.
In some areas, it's $300 or more per ton, he said.
Dairymen are short on on-farm forage and will be looking for new supplies, which will increase prices. And more farmers who were growing silage corn for dairies are no longer interested because it's easier to grow corn for grain, he said.
Corn and other feed commodities have come down in price, but dairymen won't see any relief on hay prices until the new crop comes in May, said Jack Davis, a Kuna, Idaho, dairyman. There seem to be more acres in hay this year.
As for the milk price, futures are showing a decrease of $1.50 per hundredweight, with prices close to $17 per hundredweight, and he thinks milk prices could be in the $16 range this spring. With cost of production at $17 to $18, it's going to be tight, he said.
"That isn't going to cash flow for some people. It might be just kind of a break-even year -- with your fingers crossed," he said.
And a downturn in exports, such as what happened in 2009, could have milk prices going to "hell in a handbasket," he said.
"It's just like being in Vegas every day," he said.
In Sunnyside, Wash., Tony Veiga is dealing with a shortage of good-quality hay and rising corn prices, he said.
Most dairymen in his area have turned to corn silage to replace hay, but the problem is the lack of hay and reliance on corn silage drives up the price for both, he said.
Dairymen have been able to lock in some feed and forage prices and have seen some relief in corn prices the last few months, but other grains, like barley, are approaching corn prices, Faber said.
Cost of production in Oregon is a strong $18 per hundredweight, and he thinks it's going to be a tough year for dairies that are highly financed. Most people are still digging their way out of 2009, he said.
On the positive side, dairymen should see better prices for culls sold for beef, he said.
Livestock, Dairy, and Poultry Outlook: http://www.ers.usda.gov/Publications/LDP/