Nearby milk and dairy product prices are up, and the outlook for the rest of 2011 is decidedly better than at this time last month. That's much welcomed news for dairy farmers from Jim Dunn, dairy economist at Penn State University.
Dunn's August dairy outlook says the Class III milk futures price is $21.50 per hundredweight for August and will average $19.42 for the remainder of 2011. That assumes prices will drop about $0.80 a hundred each month to year-end.
Class IV futures prices, says Dunn, should average $19.10 for the rest of 2011. That implies a Pennsylvania all-milk price for the rest of 2011 of $22.28. For the entire year, the forecast average is $21.93 – $3.65 above the 2010 average price.
Looking ahead, current market conditions imply a Pennsylvania all-milk price average of $20.00 a hundred for the first seven months of 2012. Assuming average conditions, that would be about $1.94 less than the forecast 2011.
Margins may be scrunched by even higher feed costs
Penn State's measure of income over feed costs rose by $0.17 per cow per day in July to $9.10 – up 1.9% from June. Although the PA all-milk price was up $1.00 at $23.80 per hundredweight, feed costs rose by 48 cents/cow/day. That offset much of the higher milk price.
Higher feed costs were due to a $42 per ton increase in hay prices, plus increases in soybean meal prices. The Pennsylvania corn prices fell in July.
IOFC reflects daily gross income less feed costs for an average cow producing 65 pounds of milk. It's been steady for the past several months.
But Dunn predicts dairy farmers in Pennsylvania and probably elsewhere, will be buying a lot of feed to replace the corn silage that they won't get from their fields. "There's been a discussion among our extension educators about corn silage prices. The consensus is they'll be very high.
"The wet spring and very hot July has affected the hay crop as well," he adds. "I expect feed costs to be at historically high levels for the remainder of 2011 and the first part of 2012."
For more details, plus price and income over feed cost projections click on: http://dairyoutlook.aers.psu.edu/reports/DairyOutlookaug11.pdf.