dairy outlook: october 2021 - extension.psu.edu
TRANSCRIPT
Dairy Outlook: October 2021
Increases in feed prices have temporarily slowed, but remain at levels encouraging contraction ofour national dairy herds. Class III and IV milk prices currently are trending toward similar $18/cwtlevels for 2022.
Erin Goodling
Feed and Milk Prices Start to CoolMost of 2020 and the first half of 2021 saw a wave of ups anddowns first with milk prices, then with feed costs. Though feedcosts remain at near high levels, there has been some reprieve inprices heading into the fall. Certainly, the 2021 corn crop is abright spot for most producers in Pennsylvania. Yields in manylocations are 20% or more over historical farm averages.Producers are using this extra yield to build silage inventories orharvest shelled corn from the acres not needed for silage. With theprice of corn at very high levels, this homegrown corn will be aboost to the bottom line.
Milk prices are also starting to show some potential stability(Figure 1). Class III and Class IV futures have come intoalignment and are trending to the $18/cwt level for most of 2022.This should encourage a Pennsylvania All Milk Price to be around$20/cwt for the start of next year. USDA’s World Agricultural Supply and Demand Estimates (WASDE) reduced milk productionforecasts for 2021/22 as there is a slower growth in milk/cow (WASDE 2021). WASDE revised the all milk price at $18.45 /cwtfor 2021 and $19.20/cwt for 2022.
With the increase in domestic milk production that started in the second half of last year and has continued through this year,exports were crucial to balance the tsunami of new milk in the United States. Mexico is maintaining its status as the top customerfor US dairy products and purchases both non-fat dry milk and cheese, supporting both Class III and Class IV prices.
Figure 1: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)
*Predicted values based on Class III and Class IV futures regression (Goodling, 2021).
Page 2 Dairy Outlook: October 2021
Challenges RemainHowever, these bright spots can’t eclipse the significant challenges faced by the dairy industry. The biggest of these challenges isthe breathtaking inflation in farm inputs. The inflation started nearly two years ago with feed prices, followed by labor costs, andnow fuel and energy costs. And, as energy costs rise, so do fertilizer costs. There are many reasons for this inflation, from naturaldisasters to government policies, to continuing supply chain disruptions. While some of this inflation has been muted on farms inthe near term due to risk management practices of locking in input prices, those contracts will soon expire, and the full weight ofthese escalating input prices will hit the bottom line. Unfortunately, very few market observers believe input prices will retreat inthe near future, and they see high input prices challenging agricultural production through next year and into 2023.
Income Over Feed Cost, Margin, and All Milk PriceTable 1: 12 month Pennsylvania and U.S. All Milk Income, Feed Cost, Income over Feed Cost ($/milk cow/day)
¹Based on corn, alfalfa hay, and soybean meal equivalents to produce 75 lbs. of milk (Bailey & Ishler, 2007) ²The 3 year averageactual IOFC breakeven in Pennsylvania from 2015-2017 was $9.00 ± $1.67 ($/milk cow/day) (Beck, Ishler, Goodling, 2018).
Table 2: 12 month Pennsylvania and U.S. All Milk Price, Feed Cost, Milk Margin ($/cwt for lactating cows)
¹Based on corn, alfalfa hay, and soybean meal equivalents to produce 75 lbs. of milk (Bailey & Ishler, 2007) ²The 3 year averageactual Milk Margin breakeven in Pennsylvania from 2015-2017 was $12.33 ± $2.29 ($/cwt) (Beck, Ishler, Goodling, 2018).
Figure 2: Twelve month Pennsylvania Milk Income and Income Over Feed Cost ($/milk cow/day)
Page 3 Dairy Outlook: October 2021
²The 3 year average actual IOFC breakeven in Pennsylvania from 2015-2017 was $9.00 ± $1.67 ($/milk cow/day) (Beck, Ishler,Goodling, 2018).
Table 3: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)
Month Class III Price Class IV Price PA All Milk Price
Sep-20 $16.43 $12.75 $18.00
Oct-20 $21.61 $13.47 $18.80
Nov-20 $23.34 $13.30 $20.20
Dec-20 $15.72 $13.36 $18.80
Jan-21 $16.04 $13.75 $17.30
Feb-21 $15.75 $13.19 $17.40
Mar-21 $16.15 $14.18 $17.90
Apr-21 $17.67 $15.42 $18.40
May-21 $18.96 $16.16 $19.30
Jun-21 $17.21 $16.35 $19.10
Jul-21 $16.49 $16.00 $18.50
Aug-21 $15.95 $15.92 $18.40
Sep-21 $16.53 $16.36 $19.22
Oct-21 $17.90 $17.05 $20.99
Nov-21 $19.49 $18.19 $22.28
Dec-21 $19.24 $18.48 $22.34
Jan-22 $18.55 $18.41 $21.81
Feb-22 $18.29 $18.28 $21.63
Mar-22 $18.27 $18.37 $21.67
Apr-22 $18.26 $18.27 $20.89
May-22 $18.26 $18.23 $20.87
Jun-22 $18.28 $18.20 $20.87
Jul-22 $18.35 $18.16 $20.97
Aug-22 $18.36 $18.17 $20.98
Page 4 Dairy Outlook: October 2021
Sep-22 $18.32 $18.14 $20.95
* Italicized predicted values based on Class III and Class IV futures regression (Beck, Ishler, and Goodling 2018; Gould, 2019).
To look at feed costs and estimated income over feed costs at varying production levels by zip code, check out the Penn StateExtension Dairy Team's DairyCents or DairyCents Pro apps today.
Data sources for price data
• All Milk Price: Pennsylvania and U.S. All Milk Price (USDA National Ag Statistics Service, 2021)
• Current Class III and Class IV Price 8/13/2021 and 8/16-8/19/2021 (USDA Ag Marketing Services, 2021)
• Predicted Class III, Class IV Price (CME Group, 2021)
• Alfalfa Hay: Pennsylvania and U.S. monthly Alfalfa Hay Price (USDA National Ag Statistics Service, 2021)
• Corn Grain: Pennsylvania and U.S. monthly Corn Grain Price (USDA National Ag Statistics Service, 2021)
• Soybean Meal: Feed Price List (Ishler, 2021) and average of Decatur, Illinois Rail and Truck Soybean Meal, High Proteinprices, National Feedstuffs (USDA Ag Marketing Services, 2021)
ReferencesBailey, K. and V. Ishler. " Dairy Risk-Management Education: Tracking Milk Prices and Feed Costs ". Penn State Extension.Accessed 9/20/2017.
Beck, T.J., Ishler, V.A., & Goodling, R. C. 2018. "Dairy Enterprise Crops to Cow to Cash Project," the Pennsylvania StateUniversity. Unpublished raw data.
CME Group. " Class III Milk Futures Settlements ". Accessed 10/25/2021.
CME Group. " Class IV Milk Futures Settlements ". Accessed 10/25/2021.
Ishler, V. " DairyCents Mobile App ". Penn State Extension. #App-1010.
Ishler, V. " DairyCents Pro Mobile App ". Penn State Extension. #App-1009.
Ishler, V. "Feed Price List". Personal Communication. Accessed 10/21/2021.
Microsoft 2016. " Forecast.ets function ", Office Help Website.
USDA Ag Marketing Services, 2021. Milk Marketing Order Statistics. Accessed 8/21/2021.
USDA Ag Marketing Services, 2021. " National Feedstuffs: Soybean Meal, High Protein ". Summary of USDA AMS GrainReports. Accessed 10/21/2021.
USDA National Ag Statistics Service, 2021. Agricultural Prices, Quick Stats version 2.0. Accessed 10/21/2021.
WASDE.2021. World Agricultural Supply and Demand Estimates (September 2021). Accessed 10/21/2021.
AuthorsRobert C. Goodling, Jr.Extension Associate, [email protected]
David L. SwartzInterim Associate Director of [email protected]
Claudia Schmidt, Ph.D.Assistant Professor of Marketing and Local/Regional Food [email protected]
Page 5 Dairy Outlook: October 2021
Virginia A. IshlerExtension Dairy [email protected]
Tim BeckExtension [email protected]
Penn State College of Agricultural Sciences research and extension programs are funded in part by Pennsylvania counties, the Commonwealth of Pennsylvania, andthe U.S. Department of Agriculture.
Where trade names appear, no discrimination is intended, and no endorsement by Penn State Extension is implied.
This publication is available in alternative media on request.
Penn State is an equal opportunity, affirmative action employer, and is committed to providing employment opportunities to all qualified applicants without regardto race, color, religion, age, sex, sexual orientation, gender identity, national origin, disability, or protected veteran status.
This article, including its text, graphics, and images ("Content"), is for educational purposes only; it is not intended to be a substitute for veterinary medical advice,diagnosis, or treatment. Always seek the advice of a licensed doctor of veterinary medicine or other licensed or certified veterinary medical professional with anyquestions you may have regarding a veterinary medical condition or symptom.
© The Pennsylvania State University 2021
Code: ART-7358