October 21, 2016
CapitalPress.com
15
Dairy/Livestock
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Cow-calf returns continue to plummet
By CAROL RYAN DUMAS
$600
Capital Press
500
Cow-calf producers are
facing their lowest returns
since 2009 after two years of
record-high returns.
While returns can vary
widely by operation, the Live-
stock Marketing Information
Center estimates per-cow re-
turns on cost of production,
including pasture rents, will
drop to about $15 this year.
That’s a decrease of about
$285 per cow from last year
and an even more dramatic
decrease of about $515 per
cow from 2015.
LMIC estimates the cost
per cow at $806.25 and re-
turns at $821.22.
Every operation has dif-
ferent resources and costs,
and margins can vary great-
400
300
200
100
530.22
Cow-calf returns
Estimated returns after cash
costs including pasture rents.
(Dollars per cow)
Source: Livestock Marketing Information Center
Carol Ryan Dumas and Alan Kenaga/Capital Press
38.49
-89.54
0
$14.97: Down 97% from 2014
-100
1988 ’90 ’92 ’94 ’96 ’98 ’00 ’02 ’04 ’06 ’08 ’10 ’12 ’14 2016
ly. Year-over-year changes
in LMIC’s calculated returns
are more insightful than the
specifi c numeric levels, said
Jessica Sampson, agriculture
economist with LMIC.
The price of calves is a key
factor in this year’s equation,
and those prices have been
dropping signifi cantly all
year, she said.
For example, prices on
750-pound steer calves at
Oklahoma City last week
were $140 a hundredweight,
compared with $193 a year
ago. LMIC is forecasting
fourth-quarter calf prices to
be down 25 percent from a
year ago, she said.
After record-high prices in
2014 and the fi rst half of 2015,
calf prices fell in August of last
year. They recovered slight-
ly, but they’ve been falling all
year, she said.
“The hard part this year was
they got a lot lower a lot fast-
er than people expected,” she
said.
The simple answer to the
fall in prices is more available
animals. Record prices across
the cattle and beef sectors in
2014 and 2015 encouraged
producers to hold back cows
and heifers. That resulted in a
3.5 percent year-over-year in-
crease in total cattle inventories
on Jan. 1, she said.
A bigger cattle supply, low-
er fed cattle prices and losses at
feedlots are all infl uencing calf
prices, she said.
Production costs were down
in 2016 because of cheaper
feed and fuel and a slight de-
crease in pasture rents, but they
didn’t offset lower calf prices,
she said.
John Nalivka, owner of
Sterling Marketing in Vale,
Ore., said he’s a little surprised
LMIC thinks returns are going
to be so low.
“We’ve seen a pretty signif-
icant drop in prices, but it’s not
that bad,” he said.
In general, he expects re-
turns to run $100 to $125 per
cow, he said.
His calculations don’t in-
clude pasture rental costs, and
that’s probably the key differ-
ence between his estimates and
LMIC’s.
But Western producers had
a lot of grass this year and like-
ly didn’t rent as much pasture,
he said.
With total cattle inventories
expected to be up again by 2.5
to 3.5 percent on Jan. 1, LMIC
isn’t expecting an increase in
calf prices in 2017. In fact, they
could go slightly lower, Samp-
son said.
While Nalivka pegs the in-
crease at 2 percent, he thinks
returns will be down again next
year — to about $50 per cow.
Beef production will be up
5 percent both this year and
next. Pork will be up about 1.5
percent and poultry will be up
about 3 percent this year and
next, and there’s already some
pushback in retail beef prices
from consumers, he said.
Fall dairy product prices going up? USDA cheese purchase a disappointment
By LEE MIELKE
For the Capital Press
D
airy prices continued
sliding the second
week of October.
Cash block cheddar sank
to $1.5175 per pound Tues-
day but regained 3 1/4-cents
Friday, closing at $1.55, un-
changed on the week but 11
1/2-cents below a year ago.
The barrels dipped to
$1.4475 Thursday but inched
back a penny and a quarter
Friday, to $1.46, 5 cents lower
on the week, 18 cents below a
year ago, and a larger than nor-
mal 9 cents below the blocks.
Three cars of block traded
hands on the week and 19 of
barrel.
The blocks sustained Fri-
day’s turnaround on Monday,
jumping another 3 1/2-cents
on an unfi lled bid, as traders
anticipated Tuesday’s Global
Dairy Trade and Thursday’s
September Milk Production re-
port. They jumped 9 1/2-cents
Tuesday, to $1.68 per pound.
The barrels advanced 3
cents Monday and pole vault-
ed 12 cents Tuesday, hitting
$1.61.
FC Stone’s Dave Kurza-
wski wrote in his Monday
“Early Morning Update” that
“the bears continue to debate
good milk production in the
Midwest and Eastern regions,
along with Canadian import
restrictions of MPCs. The
Restaurant Performance In-
dex showed a contraction for
the fi rst time in 8 months with
softer sales and customer traf-
fi c. The bulls continue to say
retail and foodservice buyers
will continue to fi nd value in
cheese in the $1.50s where
they can continue promotion-
al activities confi dently.”
Midwest cheesemakers re-
port milk is readily available,
according to Dairy Market
News. Some say it has hit
the low point for the year and
is starting to come back up.
Dairy
Markets
Lee Mielke
Components are also increas-
ing. Inventories are long, but
not a major concern as holi-
day demand approaches and
exports improve.
Spot Grade A nonfat dry
milk fi nished last week at
87 cents per pound, down 4
1/2-cents, and 11 cents below
a year ago, with fi ve cars sold
on the week.
The powder was up a pen-
ny and a quarter Monday but
gave back a penny Tuesday,
slipping to 87 1/4-cents per
pound.
Cash butter fell to $1.77
Thursday but regained a
penny and a half Friday and
closed at $1.7850, down 6
1/2-cents on the week and 66
1/2-cents below a year ago.
Eight cars were sold on the
week.
Monday’s trading ignored
Friday’s small uptick and
inched a half-cent lower, then
lost a penny and a quarter
Tuesday, dipping to $1.7675
per pound, lowest spot price
since April 2015.
Butter demand dropped
17.95 percent from August
2015, while imports dropped
18.5 percent. Commercial
disappearance of butter was
up 0.9 percent from July,
with year-to-date butter use
through August up just 0.1
percent, according to USDA.
Cream supplies continue
increasing in the Central re-
gion, says DMN, and readily
available. Many processors
are gearing up to meet year-
end holiday needs. Invento-
ries are heavy but some pro-
cessors anticipate being short
in Fourth Quarter.
Western buttermakers re-
port strong retail demand
but cream is also readily
available. Lower prices are
generating interest. USDA’s
Foreign Agricultural Service
reported that the Japanese
government will offer a tender
for an additional 4,000 met-
ric tons of butter this month.
American processors hope the
narrowed price gap will make
U.S. butter more attractive.
FC Stone’s Kurzawski
says, “The general consensus
is that butter in the $1.70s will
incentivize holiday demand.”
He adds that Canada was out
recently with a 3,000 metric
ton butter tender. “The U.S. is
competitive at these prices,”
he said, “and Canadian buyers
are also interested in import-
ing U.S. cream.”
Global prices slip
Tuesday’s Global Dairy
Trade auction lost more
ground. The weighted aver-
age for all products offered
slipped 1.4 percent, after
dropping 3 percent Oct. 4,
ending four successive ses-
sions of gain.
Rennet casein led the de-
clines, down 4.5 percent, after
falling 3.7 percent last time.
Cheddar cheese was next,
down 3.7 percent, after losing
2.3 percent. Skim milk pow-
der inched 0.3 percent lower,
after dropping 3.9 percent last
time.
Lactose led the gainers,
up 5.6 percent, after leading
the declines Oct. 4 with a 9.7
percent plunge. Whole milk
powder was next, up 2.9 per-
cent Tuesday, after falling 3.8
percent. Butter was up 2.6 per-
cent, after inching 0.3 percent
lower last time. Anhydrous
milkfat was up 1.1 percent, af-
ter slipping 1 percent last time.
FC Stone equated the
average GDT butter price
to $1.8204 per pound U.S.
CME butter closed Tuesday at
$1.7675. GDT cheddar cheese
equated to about $1.4923 per
pound U.S. and compares to
Tuesday’s CME block cheddar
at $1.68.
By CAROL RYAN DUMAS
Capital Press
Cheese manufacturers and
brokers showed little interest
in USDA’s offer to buy surplus
cheese at a signifi cantly higher
price than cash markets.
In late August, USDA an-
nounced it would spend $20
million for approximately 11
million pounds of cheese to
assist ailing dairy farmers and
aid food banks and pantries.
But there were only three
takers in the Sept. 9-22 bidding
period, resulting in USDA pur-
chasing 3.4 million pounds
for $7.1 million at an average
price of $2.10 per pound.
Associated Milk Produc-
ers sold 768,000 pounds for
$1.5 million, Dairy Farmers of
America sold 384,000 pounds
for $767,328 and broker Mas-
ters Gallery Foods sold 2.25
million pounds for $4.84 mil-
lion. Bids ranged from $1.96
to $2.46 per pound.
The disappointing response
left $13 million on the table,
and that money’s gone because
the federal government’s fi scal
year has ended and those funds
went back into the U.S. Trea-
sury, said Lynne McBride, ex-
ecutive director of California
Dairy Campaign.
It’s unfortunate the full $20
million could not have been
used for donation and to help
dairymen, she said.
But it also begs the ques-
tion of whether there really is
a surplus of cheese if USDA
couldn’t buy cheese at a price
well above the CME spot
price, which was about $1.57
a pound during that time, she
said.
The lack of response makes
it evident the decision to pur-
chase cheese failed to meet ex-
pectations, she said.
On Tuesday, however,
USDA announced it will soon
offer another solicitation to
purchase $20 million of ched-
dar cheese to reduce cheese
surpluses that have reached
record levels.
CDC would prefer direct
assistance to dairy farmers and
continues to call on Congress
and USDA to provide direct
relief to dairymen, who have
been struggling with low milk
prices, she said.
“We continue to see dairies
in California close. We’re real-
ly disappointed by the lack of
response to this in Washing-
ton,” she said.
In the fi rst fi ve months of
the year, 53 dairies have gone
out of business, and more are
likely to close due to mounting
fi nancial problems, she said.
The situation is every bit as
bad as the 2009 crisis, and the
rate of closures is faster.
Yet assistance to dairy
farmers pales by comparison.
In response to the 2009 down-
turn, USDA purchased $60
million in dairy products for
domestic food programs and
spent more than $290 million
in direct relief to dairy farm-
ers, she said.
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