Feed prices: Time to pull the trigger?

Hoard's Dairyman: 

Feed prices: Time to pull the trigger?

Date: 
Mon, 04/15/2013

Crop outlooks are rosy, feed prices are down, and milk futures are up.

by Dennis Halladay, Hoard’s Dairyman Western Editor

Can you hear a quiet question floating in the spring breezes: “Is it time to lock in feed?”

With grain markets down, milk futures up, and crop outlooks rosy — not to mention bad memories that are still fresh in dairy producers’ minds about what happened not long after this time a year ago — it’s certainly something to think about.

In many respects, spring 2013 is a case of déjà vu all over again. Remember?

A year ago, a mild winter meant corn, soybean and wheat plantings were going like gangbusters. USDA was forecasting the largest corn crop in history, which gave dairy producers high hopes for lower feed prices across the board. Poor milk prices (under $16) were the only ant spoiling the picnic.

Then came the near-nationwide drought that ruined everything.

So here we are in mid-April again. Winter continues to linger in some areas, bringing welcome rain to much of the Corn Belt. The Class III milk price is already $1.21 higher than a year ago, and June through December futures average $19.13, thanks to a terrible drought in New Zealand. On paper right now, Class III projects to a yearlong average of $18.55.

That’s huge; the all-time record is $18.37 set two years ago.

Meanwhile, feed prices at the Chicago Board of Trade (CBOT) are pretty much back to their low-ish rosy forecast levels in spring 2012. Corn is in the $6.30s (it peaked last year at $8.40), soybeans are barely above $14 (they almost hit $18 last year), and wheat is barely above $7 (it hit $9.42 last year).

Call us timid and conservative, but the combination of 20 percent cheaper feed and almost 20 percent higher milk prices looks way too tempting to pass up.

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