Image provided by: University of Oregon Libraries; Eugene, OR
About Capital press. (Salem, OR) 19??-current | View Entire Issue (Jan. 3, 2019)
Friday, January 3, 2020 CapitalPress.com Subscribe to our weekly dairy or livestock email newsletter at CapitalPress.com/newsletters 7 Dairy Milk margins expected to drive herd expansion By CAROL RYAN DUMAS Capital Press TWIN FALLS, Idaho — Dairy farmers are likely to respond to a long-awaited rebound in milk prices by adding cows to the national herd. U.S. milk-supply mod- els show that producers tend to expand cow num- bers when income over feed costs is $11.50 per hun- dredweight or more, and margins topped that mark in June, James Carr, West Coast dairy director for INTL FCStone, said. In Idaho, the mailbox milk price is in the $21 range and feed costs are probably just over $9, he said. Margins were in a mediocre range earlier this year, and U.S. cow num- bers dropped as producers tried to shore up cash flow, he said. While Idaho’s cow count was up 19,000 head in Novem- year James Carr ber over year, the milk cow herd nation- wide was down 27,000 head, according to USDA National Agricultural Sta- tistics Service. But with higher milk prices, Carr expects cow numbers to grow over the next three or four months. “We should have some strong production in the U.S.,” he said. Production will be con- strained in the first quarter of next year but is expected to move higher in the sec- ond and third quarters, he said. Income over feed costs is also improving in the Carol Ryan Dumas/Capital Press File Flat milk production should help prices stay relatively steady, an analyst says. EU, Australia and New Zealand, and he expects milk production to increase Concern accompanies higher dairy prices By CAROL RYAN DUMAS Capital Press The rising prices of milk and dairy products are caus- ing concern over the ability to pass on those increases through the supply chain to consumers, Ben Laine, a dairy analyst with Rabo- bank, said. Different sectors of the supply chain absorb changes in prices in different ways. But at the end of the day, it comes down to the con- sumer, he said. With much of the world recovering from, in the midst of, or on the verge of some degree of reces- sion, there’s concern over consumers’ willingness to accept or withstand higher prices, he said. “We’ve seen that in other parts of the world, partic- ularly South America,” he said. While Brazil’s economy is coming back, Argentina is still suffering — and domes- tic consumption of dairy products there has contin- ued to contract as the reces- sion worsens, he said. “It’s not as dire in the U.S. or Europe, but it’s still a concern,” he said. In the U.S., domestic dairy commercial disap- pearance slowed in the third quarter of 2019 to just 0.5% after a robust 3.5% increase in the first half of the year, Rabobank analysts reported in their latest Dairy Quar- terly report. “Softening domestic demand is attributed to ris- ing retail and food service prices. Looking forward, U.S. dairy demand will con- tinue to grow but at lower rates as higher prices and a weaker economy … impact consumer spending,” they said. A weaker economic out- look is based on a height- ened probability of a reces- sion in the second half of 2020, they said. At the farm level, U.S. producers are hesitant to expand production despite higher milk prices, Laine said. He thinks most pro- ducers are leaning toward seeing if the higher prices are going to be sustainable, he said. But U.S. milk production is showing signs of life after months of stagnation. Milk production was up 1.3% year over year in Septem- ber and October, and pro- ducers added 5,000 cows to the national herd in each of those months, the analysts said. “This is the beginning of a return to more nor- mal year-on-year milk pro- duction growth of 1.3% to 1.5%,” they said. Additional growth in milk production will vary region to region, Laine said. Expansion in some areas will depend on whether there’s a buyer for more milk. Another factor is feed quality due to late plantings and early snow. Even if feed is available, poor quality feed will affect production in the EU and New Zea- land. Drought in Australia will probably keep a lid on production there, he said. Currently, prices for manufacturing milk in the U.S. are significantly higher than in the rest of the world but they should start to align as they weaken in the U.S. and strengthen in other regions, he said. Restrained production growth globally and good demand should support milk prices through the first quarter of 2020, but they’re likely to weaken in the second and third quar- ter as production moves higher, he said. On the product side, U.S. prices for fresh Amer- ican-style cheese have been high the last three or four months due to strong sales of mozzarella cheese that left less milk for cheddar production, some other production issues and good demand, he said. Water Stocks of all U.S. cheeses have been below year-earlier levels for most of the year, but they are expected to recover into 2020 before drawing down seasonally, he said. Butter stocks are nor- mal, and he doesn’t see any- thing to pressure prices. But global milk powder stocks are in a critical area of stocks to use, and any hic- cup will send prices higher, he said. U.S. and global powder stocks are forecast at low levels in 2020, and prices are already expected to move a little higher, he said. “In general, I think it’s going to be a volatile year but a decent year” for U.S. producers, he said. “There’ll be opportuni- ties to lock in good prof- its but also times where we drop below breakeven,” he said. PUBLISHES ST FEBRUARY , 2019 FEBRUARY 7 1 TH AD AD SPACE SPACE DEADLINE DEADLINE JANUARY 16 TH AT JANUARY 4 th , 10AM 2019 Capital Press Ag Weekly will focus on this most crucial resource in an award-winning special section. Capital Press File Cows feed at a dairy near Kuna, Idaho. Higher milk pric- es may impact consumer demand, analysts say. per cow, he said. It will also depend on producers’ financial situa- tion. After several years of low prices, they might need to get things back in order and take care of deferred maintenance, he said. “The outlook for milk production growth depends on whether those additional dollars go toward expand- ing production or repairing balance sheets. Our industry sources suggest the latter,” the analysts said. RESERVE YOUR SPACE FOR THE UPCOMING WATER EDITION Place your ad by Thursday January 16th at 10AM Let this special section deliver your advertising message to our print and online readers. CONTACT YOUR SALES REP TODAY OR CALL 800-882-6789 S147840-1 TA K E T H E N E X T L E A P F O R W A R D JohnDeere.com 7 210 to 330 engine hp S162983-1
