DairyBusiness Update for Feb. 28, 2013
February milk-feed price ratio dips lower
Lower milk prices and slightly higher hay prices offset small declines in corn and soybean prices, pushing the preliminary February 2013 milk-feed price ratio lower. Often debated for its relevance, the index is based on the current milk price in relationship to feed prices for a ration of 51% corn, 8% soybeans and 41% alfalfa hay.
The U.S. average milk price of $19.40/cwt. was down 50¢ from January and the lowest since August 2012. Average prices paid for corn and soybeans in February were down 7¢ and 10¢ per bushel from January, respectively, but hay prices rose to a record high $218/ton.
Current trend: February 2013’s index is the lowest since August 2012, and marks the 23rd consecutive month the milk-feed price ratio is below 2.0. The 2012 average of 1.53 was the lowest annual average since the early 1990s.
Source: USDA/NASS Ag Prices report, Feb. 28
Cull cow prices improve
Estimated U.S. February 2013 cull cow prices (beef and dairy combined) averaged $80.90/cwt., up $1.80 from January’s revised estimate, but $1.10/cwt. less than February 2012.
Current trend: Since slipping somewhat during September-November 2012, February marked the third consecutive monthly increase in cull cow prices, and the highest monthly average since July 2012.
Source: USDA/NASS Ag Prices report, Feb. 28
Milk COP steady in January, but well above a year ago
January 2013 total dairy feed costs were steady for a third straight month, helping hold the line on U.S. monthly average milk production costs. But, while the last quarter has been steady, feed and total costs to produce milk were well above those in January 2012.
Cost estimates are based on total farm costs per hundredweight of milk sold. Based on USDA’s January 2013 estimates:
• U.S. average feed costs were $15.10/cwt., up from $15.08 in December 2012 and $11.95 in January 2012.
• Operating costs (which include feed) were $18.25/cwt., down from $18.26 in December, but up from $15.09 in January 2012.
• Costs for allocated overhead, including labor, were $8.34 in January 2013, down from $8.43 in December, but up from $7.96 a year ago.
Add them all up, and total costs were $26.59/cwt. in January 2013, down a dime from December, but $3.54 more than January 2012.
The estimated all-milk price was $19.90/cwt. in January 2013, compared to $20.90/cwt. in December and $19.00/cwt. a year ago.
USDA/ERS Milk Cost of Production report, Feb. 27
CWT assists with 2.1 million lbs. of cheese, butter and WMP export sales
Cooperatives Working Together (CWT) accepted 12 requests for export assistance from Dairy Farmers of America, Foremost Farms, Maryland & Virginia Milk Producers Cooperative, Michigan Milk Producers Association and United Dairymen of Arizona to sell 1.122 million lbs. of cheddar and gouda cheese; 908,305 lbs. of butter and 44,092 lbs. of whole milk powder (WMP) to customers in Asia, the Middle East, and North Africa. The product will be delivered February through July 2013.
So far in 2013, CWT has assisted member cooperatives in selling 23.735 million lbs. of cheese, 12.824 million lbs. of butter and 132,277 lbs. of WMP to 24 countries on six continents. These sales are equivalent of 498.6 million lbs. of milk (milkfat basis).
Iowa-Nebraska January dairy budgets worsen
January 2013 dairy budgets got a little worse compared to December 2012 in Iowa and Nebraska, even though total costs declined, according to Robert Tigner, Extension Educator.
Total variable and fixed costs dropped 44¢/cwt. from December, to $20.44/cwt., with corn, soybean meal and hay prices down slightly. The budgeted break-even price for a freestall dairy with a 24,000-lb. rolling herd average (RHA) dropped by 21¢, to $22.69/cwt.
However, the January 2013 milk price of $19.98/cwt. was down $1.06 from December, and dn estimated 11.41¢/cwt. Milk Income Loss Contract (MILC) payment wasn’t enough to offset that decline. The January federal order producer price differential (PPD) was slightly lower, but cull cow prices were slightly higher.
Based on this budget, herds producing 24,000 lbs. of milk per cow per year saw a $2.12/cwt. return over variable and fixed costs. But, adding labor and management, producers realized a loss of $2.48/cwt. for January.
Current trends: The January total costs per hundredweight and break-even price for the 24,000-lb. RHA freestall herd are the lowest since August 2012; the actual milk price is the lowest since September 2012.
Contact Tigner at email@example.com.
MARKETS: Cheese prices down; Class III futures mixed
Today's market closing prices:
Butter: unchanged at $1.55/lb.
Cheddar blocks: down 1.0¢, to $1.5950/lb.
Cheddar barrels: down 1.0¢, to $1.57/lb.
Grade A nonfat dry milk: unchanged at $1.4975/lb.
Extra Grade nonfat dry milk: unchanged at $1.56/lb.
Class III milk: -7¢ to +14¢ through March 2014. Based on current CME closing prices, the 2012 average is $17.44/cwt.; the 2013 average is $17.84/cwt.; and the 2014 average is $16.48/cwt.
Corn, soybean and meal futures higher
Corn: +3¢ to +10¢ per bushel through December 2013. The 2013 average is $6.49/bu.
Soybeans: +2¢ to +17¢ per bushel through December 2013. The 2013 average is $13.88/bu.
Soybean meal: +$3.90 to +$7.10/ton through December 2013. The 2013 average is $400.89/ton.
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