Dunn: Pennsylvania dairy outlook, review

Pennsylvania’s final 2012 milk price and feed costs numbers are now available, and the year as a whole turned out very differently than it looked a few months ago, according to Jim Dunn, Penn State dairy economist. The Pennsylvania all-milk price began high and drifted down to its summer doldrums, but rose $6/cwt. from its June low until its November high. After peaking in November at $23.60/cwt., the December Pennsylvania all-milk price fell by 50¢, to $23.10/cwt. 

The milk margin followed a similar path. Because the drought drove feed prices so much higher (and the bad weather in 2011 meant feed shortfalls for many northeastern farms earlier in 2012), most farms struggled from February through August or beyond. 

The average all-milk price of $20.07 was $1.08 above the five-year average of $18.99/cwt., but the milk margin was 53¢/cwt. below the five-year average. From a milk price perspective, 2012 was above average, but the milk margin per hundredweight tells a different story.

Penn State’s measure of income over feed costs (IOFC) fell by 6% (to $8.56/day) in December, lower than the previous two months, but higher than any other month in 2012. The December 2012 IOFC level was the highest December value in the past 5 years. 

December alfalfa hay and soybean meal prices rose from their November levels, with hay prices up 7% and soybean meal up 1.9%; corn was down slightly. Overall, this raised feed costs by 3.5%, to $6.46/day for a cow producing 65 lbs. of milk. 

Feed costs per hundredweight of milk produced was $9.93 in December. The milk margin, the estimated amount from the Pennsylvania all milk price that remains after feed costs are paid, was 6% lower than November, at $13.17/cwt.

“Dairy futures for the coming months are lower than the December’s levels, but not a lot, and the feedprice situation is lower, although still at a high level,” Dunn said. “Based on what is known now, IOFC will be less in coming months, but not dramatically so.”

Dunn forecasts a 2013 average Pennsylvania all-milk price of $21.39/cwt., $1.32 more than the 2012 average.

To see Dunn’s January 2013 dairy outlook, visit http://www.personal.psu.edu/faculty/j/w/jwd6/DairyOutlookjan13.pdf