Analysts expect lower dairy feed costs

Analysts say dairy feed costs will be significantly lower this year compared to the last three years, pushing profits up. “Overall, we’re going to see lower feed cost,” said Katelyn McCullock, dairy economist with Livestock Marketing Information Centre. Combined with record-high milk prices in the first half of 2014 that are expected to taper only slightly in the second half, it’ll be a profitable year for dairymen, she said.

LMIC expects the all-milk price to average $20.50 to $22 per hundredweight and the average Class III milk price to average $19.25 to $20.75 in 2014. Profits will be better than last year and the best for the last five years, she said.

US growers are expected to plant 4% fewer acres of corn this year, increase soybean acres by 6 percent and hold steady on hay acres, according to USDA National Agricultural Statistic Service in its prospective plantings report issued March 31. While corn acres are expected to be down, they are still historically high at 91.7 million acres, and better yields are expected as the Midwest returns to more normal weather, she said.

In addition, stocks on hand are a lot higher than last year. LMIC projects ending stocks for the 2013/14 marketing year at 1.6 billion bushels, double the previous year’s ending stocks of 821 million bushels, she said.

Drought in the Midwest, the major corn-growing area, in 2012 lowered production and ending stocks last year, she said. Annual corn prices for last year’s crop averaged $4.40 a bushel. LMIC expects that average price to fall to $4.20 for this year’s crop, she said.

Harvested hay acres are expected slightly higher, and yields are expected to increase with more normal weather in the East and Midwest. Prices will vary by region, but LMIC expects overall hay prices to be lower than last year, she said.

LMIC projects an average all-hay price for this year’s crop at $150 a ton, compared with $180 for the previous year’s crop. Alfalfa hay is projected at $175 per ton, compared with $200 a ton for the previous crop. Other hay is projected at $105 per ton, compared with $139 for the previous crop.

Hay prices are expected higher in the West due to drought but still lower than prices for the previous crop, she said. LMIC doesn’t track soybean prices, but with planting intentions record high, prices are expected to decline relative to a year ago, she said.

The Upper Midwest doesn’t have much to worry about in terms of feed costs, but California has severe water problems, and very hot weather is expected there and in the Southwest. Principal crop acreage is expected down 500,000 acres in California — which seems conservative given the circumstances — down 500,000 acres in Texas and down 14,000 acres in Arizona, she said.