Dairy margins were flat to weaker over the last two weeks of January, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC. Deteriorating milk prices combined with steady to slightly higher feed costs were responsible for the margin tightening.
From a historical perspective, dairy margins remain below average, with the exception of the fourth-quarter of 2016. Opportunities are better into 2017, when milk futures prices are higher relative to spot values.
Weakness in spot milk continues, pressured by heavy production and high stocks relative to demand. The USDA’s December 2015 milk production estimate was up 0.7 percent compared to a year earlier, and November's estimate was revised upward to reflect a 0.7 percent increase.
Feed prices held relatively steady from mid-January, although higher futures trade in corn encouraged additional sales in the cash market, with producers needing to pay bills ahead of the spring planting season. Soybean meal prices have been pressured by the beginning of a record South American soybean harvest, with the expectation of added export competition, given the continued strength of the U.S. dollar relative to the Argentine peso and Brazilian real.
Visit the Margin Manager website. PD
—Compiled by Progressive Dairyman staff
