Overall Global Dairy Trade auction prices rose. California’s March Class 4 milk prices were mixed. Pacific Northwest dairy margins are a mixed bag, too. This and other U.S. dairy economic news can be found here.
GDT index up 2.1 percent
Providing a glimmer of sunshine in what has been an otherwise gloomy stretch for dairy markets, the index of dairy product prices rose 2.1 percent during the latest Global Dairy Trade (GDT) auction, held April 5.
Prices for anhydrous milk fat, cheddar cheese, lactose, skim and whole milk powders rose, but butter prices declined.
The next auction is April 19.
California Class 4 prices mixed
California's March 2016 Class 4a/4b milk prices compared to the previous month and year are:
• Class 4a: $12.41 per hundredweight, down 87 cents from February and $1.01 less than March 2015. The first quarter 2016 average is $12.98 per hundredweight, 34 cents less than the same period a year ago.
• Class 4b: $13.24 per hundredweight, up 19 cents from February, but 73 cents less than March 2015. It is 50 cents less than the comparable March FMMO Class III price. The first quarter 2016 average stands at $13.12 per hundredweight, 71 cents less than the same period a year ago.
The March 2016 Class 4b price includes the temporary change to the state’s Class 4b milk pricing formula. That adjustment is scheduled to expire July 31. A public hearing will be held April 11-12 in Sacramento, California.
March global dairy price index plunges to lowest level since 2009
The world’s consumers paid far less for dairy products in March, according to the latest United Nations’ Food and Agriculture Organization (FAO) Food Price Index.
Continuing a downturn since last October, the March 2016 FAO Dairy Price Index declined 8.2 percent from February to the lowest level since June 2009. The dairy index includes global average prices for butter, cheese, and skim and whole milk powders.
Prices for all dairy commodities fell, but butter and cheese were the most affected, reflecting a build-up of stocks in major exporting countries. In the case of milk powders, the declines have been contained by continued sales of skim milk powder to intervention stocks in the European Union.
The FAO Food Price Index is a measure of monthly changes in international prices of a basket of five food commodities – cereal, vegetable oil, dairy, meat and sugar. While the overall FAO Food Price Index rose slightly in March 2016, it’s still 12 percent less than a year ago. Other than dairy, March prices for all other commodities were steady to higher.
Dairy states’ 2016 hay acreage lower
With hay prices trending lower, U.S. hay producers intend to harvest 54.3 million acres of all hay in 2016, according to the USDA’s annual Prospective Plantings report released March 31. While down just slightly from actual harvested acreage in 2015, if realized, 2016 acreage will be the smallest area harvested for all hay in quite some time.
Record-low area harvested for all hay is expected in several major dairy states, including California, Illinois, Indiana, Michigan, New York, Pennsylvania, Vermont and Wisconsin in 2016.
Read Prospective plantings: 2016 hay acreage expected to remain steady
Northwest supply of high-quality hay tight
The latest Northwest Farm Credit Service hay and dairy market snapshots report supplies of available high-quality dairy hay are short. For those who must buy, high-quality new-crop hay prices are forecast near historic highs.
In contrast, feeder hay supplies are high, and prices are falling. As a result, the price differential between high-quality dairy hay ($160 to $180 per ton, delivered) and feeder hay ($60 to $80 per ton) is $100 or more per ton across southern Idaho and Washington.
The good news for the region’s dairy farmers, on-farm hay inventories are high. Facing this inventory carryover, corn silage markets are quiet and expected to fall from 2015. Early reports in Southern Idaho suggest corn silage prices between $27 and $33 per ton in the field, with the majority of contracts settling in the upper end of that range.
Read Northwest FCS Dairy Market Snapshots
Northwest dairy margins examined
A preliminary review of 2015 financial results in the Pacific Northwest reveals there were profitable dairies in 2015, and there were those that weren't.
In southern Idaho and central Washington, results showed dairy farm profits ranged between $0.60 and $0.80 per hundredweight; losses were between $0.80 and $2.60 per hundredweight, according to the latest Northwest Farm Credit Service dairy market snapshot. Losses are more common in western Washington, where the average loss was approximately $1 per hundredweight, with a range of between $0.50 and $1.25 per hundredweight.
Milk break-even prices are estimated as high as $17.50 per hundredweight in western Washington, and $14.50 to $15.50 per hundredweight in central Washington and southern Idaho.
Despite margin pressure, replacement dairy cow prices remain stable. Holstein cow prices generally start between $1,600 and $1,800 per head throughout the Northwest. Jersey cows are selling at a slight premium.
California statewide average costs
California fourth quarter 2015 statewide milk production costs averaged $18.08 per hundredweight, down slightly from the previous quarter, according to the California Department of Food and Agriculture’s April 2016 California Dairy Review. Including an allowance for management and return on investment, statewide total costs averaged $19.74 per hundredweight, unchanged from the previous quarter.
The statewide averages were also down slightly from the fourth quarter of 2014.
Fourth quarter 2015 costs and costs plus allowances were highest in the North Coast region, with lowest costs in southern California. By region, fourth quarter costs on a per-hundredweight basis (excluding allowances for management and return on investment) were as follows:
• North Coast: 2014 – $27.47; 2015 – $29.47
• North Valley: 2014 – $18.30; 2015 – $18.02
• South Valley: 2014 – $18.22; 2015 – $17.71
• Southern California: 2014 – $17.31; 2015 – $17.44
• Statewide average: 2014 – $18.39; 2015 – $18.08
Average “mailbox prices” paid to California producers averaged $15.79 per hundredweight in the fourth quarter of 2015, according to CDFA. PD
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Dave Natzke
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