Optimism for 2010 may be tempered by rising feed prices. With last year’s cool growing season and delayed harvest, it’s been hard to get a handle on 2009 totals for major crops but several USDA reports released this week help clear the picture and provide a preview of dairy feed costs in 2010, according to Dairy Profit Weekly Editor Dave Natzke.

USDA released final 2009 Crop Production, as well as updated Grain Stocks and World Ag Supply & Demand Estimates reports, indicating both corn and soybean harvests were the largest on record, Natzke reported.

“Thanks to a record-high average yield of more than 165 bushels per acre, corn production totaled 13.2 billion bushels,” he said. Record-high soybean acreage pushed the total soybean harvest to 3.36 billion bushels.

But USDA raised 2009-2010 marketing year average prices despite the large crops, according to Natzke, due to strong domestic and export demand and use. The mid-range farm price for corn is projected at $3.70 per bushel; the soybean price is projected at $9.65 per bushel; and the soybean meal price was projected at $290 per short ton.

Those higher prices could moderate what should be a better financial year for dairy farmers, according to John Wilson, senior vice president of marketing and industry affairs for Dairy Farmers of America (DFA). Wilson said the “new normal” for corn prices will be in the $3.50-$4.50 per bushel range. So, even though DFA projects a $3 increase in milk prices in 2010, to $16.13 per cwt., higher feed costs will mean most producers will remain at breakeven levels.

Forage production, inventory up

USDA’s latest crop report also summarized 2009 hay and forage crops, according to Natzke. Overall dry hay production was up slightly from last year, and dairy farmers entered the new year with larger hay inventories. Production of other haylages and corn silage is down slightly, but overall supplies, combined with declining dairy and beef cows numbers, is helping bring hay and forage prices down from 2008 levels, Natzke said.

While USDA’s price forecasts cover marketing years, calendar year corn and soybean futures prices tumbled on the Chicago Mercantile Exchange following the report. As of the close of trading on Jan. 14 average corn futures prices were $3.99 per bushel, down an average of about 38 cents per bushel from pre-report closings; 2011 average prices were down about 30 cents per bushel, to $4.32 per bushel. In contrast to corn futures, soybean futures fell on Jan. 12 following USDA’s report, but rose on Jan. 13, before falling again on Jan. 14. As of the close of trading on Jan. 14, average soybean futures prices were down about 29 cents per bushel compared to pre-report closings, to $9.81 per bushel. 2011 average prices were down about 25 cents per bushel, to $9.75 per bushel.

Soybean meal futures followed the trend of soybeans. As of the close of trading on Jan. 14 average soybean meal futures prices were down about $7.50 per ton compared to pre-report closings, to $281.95 per ton. 2011 average futures prices were down about $8 per ton, to $275.43 per ton.

Report shows light herd liquidation in 2009

Meanwhile, the Agriculture Department raised its 2010 milk production estimate in its latest World Agricultural Supply and Demand Estimates Report, “reflecting the relatively slow pace of cow liquidation in late 2009.” Output is now expected to hit 188.4 billion pounds, up from the 187.9 billion projected a month ago.
Commercial dairy exports for 2009 were adjusted reflecting stronger skim-basis sales, but slightly weaker fat-basis sales. Import forecasts were reduced for 2009. Trade forecasts were unchanged for 2010. Fat and skim-solids ending stocks were forecast higher for 2009.

Ending stocks for 2010 were raised on a skim-solids basis but lowered on a fat-basis. Forecasts of butter and cheese prices were lowered as milk production forecasts were raised. However, relatively strong international demand should support prices for nonfat dry milk (NDM) and whey, the report said.

The 2010 Class III price was lowered from last month as lower expected cheese prices more than offset stronger whey prices. Look for a range of $14.75-15.55 per cwt., according to USDA, down from the $15.15-$15.95 projected a month ago. The 2009 average was $11.36.

The 2010 Class IV price forecast was raised from last month as stronger NDM prices offset weaker butter prices. USDA estimates a range of $14.70-$15.60, up a dime on both ends. The Class IV averaged $10.89 in 2009. California’s February Class 1 milk price was announced at $16.46 per cwt. for the north and $16.74 for the south. Both are down $1.76 and $1.75 respectively from January, but are $5.19 above a year ago. The Federal Class I base will be released Jan. 22.

FARM program designed to verify care

National Milk’s FARM program (Farmers Assuring Responsible Manage-ment) was unveiled at World Dairy Expo in 2008, and is online at www.nationaldairyfarm.com

The program is a series of standards that can be implemented on dairy farms if you want to affix your products with the National Dairy Farm logo.

National Milk is working this year with the dairy CARES program in California, reported Chris Galen, to make the FARM program available and workable there. He said there’s been a lot of attention on animal welfare issues, particularly on the West Coast and “because we are in a post-Proposition 2 environment in California, I think the folks there recognize that this particular dairy FARM program provides a way for farms there to independently verify their animal husbandry practices.”

Galen said they are also working in other parts of the country “with the backdrop that more attention is being paid to animal welfare and there’s more criticism of what’s happening on farms today so it’s important for us to play offense on this issue by having a program that’s been developed by the industry, but also has independent verification to assure consumers about the conditions under which dairy farm cows are kept on the farm.”

Galen admitted that some of the criticism can be dismissed as complaints from animal rights groups but “If they are able to make even tougher standards mandatory, either by laws or by the marketplace, and make certain that retailers and processors are demanding certain things, we’re far better being proactive in this regard than reacting to what others want to do.”

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.