Dairy feed costs coming down

August 17, 2008 07:00 PM
Jim Dickrell

You could almost hear a collective sigh of relief across dairy country when USDA released its August 12, potentially bin-bursting crop report.

The biggest surprise was the projected corn yield, at 155 bu./acre, bringing in a total crop of 12.3 billion bushels. If realized, this would be the second largest corn crop in U.S. history—and welcome relief for every dairy producer who buys corn to power milk production. (Follow this link to USDA's Feed Outlook report.)

Whether such a crop actually reaches the bin is entirely dependent on the weather between now and Thanksgiving. As one grower told AgDay TV last week, he'll need a frost-free season at least that long to get his crop to mature. "Weather will have the final say on this crop,” adds my colleague, Chip Flory, editor of ProFarmer Newsletter.
As I've driven nearly 2,500 miles in the last month  across the Midwest, crops look two to three weeks behind normal. But given my wind shield surveys of Wisconsin, Minnesota, Iowa and Missouri, USDA could be right.

The corn in these four states was a deep green, though uneven in some fields. Soybeans were coming on strong across the region. Third-crop alfalfa—at least in Wisconsin last week—was picture perfect.

And feed prices are starting to reflect the potential bin buster. One Wisconsin County Extension Specialist told me corn had dropped to $4.25 at an elevator in Outagamie County, and he expected it to drop below $4 by harvest. Still, $5.15/bu. corn that was more common in eastern Wisconsin is a far cry from the $7 and $8 at the worst of the price run-ups in June.

An Iowa Extension dairy budget, updated monthly by Robert  Tigner, showed some positive numbers already last month with corn dropping to $5.28/bu. and protein at $420/ton. Of course, farmgate milk prices in Northeast Iowa were also at $19.43/cwt.

At the July feed costs, Tigner figured a break-even cost of $17.93/cwt milk price for a 20,000 lb. herd and $16.70 for a 24,000 lb. herd. If feed prices continue to drop, those should fall further—and might stay ahead of declining Class III prices.

As I talk to producers and their consultants, the question most commonly asked is whether to lock in feed prices. With weather still a risk to fill ears and pods the next 30 days, and more risk of getting the crop out of the field, does it make sense to lock now?

I do know this: Like the Iowa budgets, you need to know if current feed prices and current milk prices leave you in the black. Locking in one side of the equation and not the other is just bad algebra.

Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at jdickrell@farmjournal.com.


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