meal bull vs dairy

[Artifice]

Speaking with an Ag Lender in the NE, they have many borrowers near the edge.

With the wheat “crisis” taking meal and corn higher, slam, this is going to kill NE dairy.

NY PA, I will posit it will take out 15-20% by fall.

Weary older farmers, just can’t take it anymore.

Jump in dairy cow slaughter will add a bit to late summer, fall beef supply,

Lower milk supply will cause the cheese burden to subside through winter,

By late spring, milk will be in a bull market, headed to 20$+.

That is what I see.

Artifice

[jrsiajdranch]

YOu know arty your right.  All except for the going to 20 part.  If this grain market keeps up the fire than the chinese will pull out all stops to keep oceanic milk flowing putting more grain into that region to keep up with milk demand.

The US dairy herd has to drop off amother half million cows before we see 20+ milk at the farm. and with 5.50 corn in california that still is below cost of production.

Hay quality is horrible in a lot of places. and silage still has to be chopped I am feeling slapped around real hard right now.

ANd right now there are lots of guys who are just shell shocked at this run up 15-20% might even be to low a figure. Keep up the looking ahead though some day in the next decade milk will trade to 30 in the mailbox. I would say sooner rather than later. JR

[hardnox604008]

Hi JR,

I supose you're right about sharply higher milk prices somewhere down the road but the amount of financial carnage on the way to getting there is just almost too awesome to contemplate.

I've heard stories of Farm Credits having $5K/cow in turnkey dairy setups- maybe we'll be looking at a bailout for the "other GSE" before it is over.

I quit hogs in '94- never really saw how the modern structure was going to work from a supply control point of view. As it turns out the ROI on F/F hogs since then has been about 0 but there are still banks keeping plenty of production going.

Dunno, but it just galls me that the survivors won't necessarily be "more efficient" as the pseudo economists tell us, they're just too big to fail.

FWIW, h

And BTW, good luck to you- this has to feel like death by a thousand cuts.

[jrsiajdranch]

Noxie Yep shes a slow death.  I dom't normally copy articles in here from direct competition to SF but I thought this FJ blog by Jim was very good. I have been saying this same thing as this guy ion the know is saying for over two years now.  I think the banks are in such bad shape that allowing the big dairies to fold may have more of a ripple effect than we will know. Of course at some time it is going to get real bad anyway.

Last week, I had the opportunity to sit down with Jim Kielkopf, chief economist with AgriBank, based in St. Paul, Minn. He also was not the bearer of good news.

While the U.S. economy is in recovery, it’s been a slow, U-shaped recovery. Yes, gross domestic product, industrial production and personal income have all rebounded from the depths of the Great Recession in 2009. But unemployment figures continue to lag, which puts a drag on consumer spending. According to Global Insight, a global financial forecasting firm, rates of unemployment will remain high (above 6%) for another two or three years, perhaps even longer.

“High unemployment, nationally and internationally, means lower incomes and lower demand for meat, dairy, corn and soybeans,” says Kielkopf. “So producers can expect low margins for the next two or three years, and at least through 2011.

“Dairy herd reductions over the last year and a half did not affect milk production,” Kielkopf adds. “So there’s not a very positive outlook for growth, and dairy will still be the one sector with problems.”

Also last week, the July consumer confidence index (CCI) was released—showing the lowest level since February at 51.0. A CCI of 90 or above indicates a healthy economy, and we haven’t seen that since December 2007 when the Great Recession officially began.

For dairy to recover more quickly, highly leveraged, poorly capitalized large dairies will have to liquidate, says Kielkopf. But he also acknowledges lenders have been reluctant to pull the plug on problem loans because many of these are underwater—they owe more than they’re worth. Plus, if a facility sells for a low price, it can devalue the lender’s entire dairy portfolio.

SO we all die.

I emailed Jim and told him how foolish mister banker is being.  He doesn't want to lose money on one loan but he is willing to allow all of his dairies to lose to the point that some will fail from his greed.

Thanks for noticing. JR

[behog]

This whole dairy fiasco it just waiting to blow up and the longer it takes to blow the bigger its going to be.  The heat here in the east has been just some kind of terrible.  I am hearing reports of production being cut in half on some farms.  A lot of milk comes out of New York and PA and the heat is just cooking the hell out of us.  I am actually in Maryland but you might as well call me part of the PA milk shed as for the rest of Maryland it the same way.  Most of the dairys in Maryland are in the counties adjacent to PA.

Everybody wants to know where the butterfat and protein is and the Smart Guy with the feed can't seem to find it.  Florida went negative milk last week.  Feed prices are running rampant.  I heard 370 a ton today  for soy meal.  I am glad I have that 300 ton contract.  Corn is 4 dollars a bushel.  We are in a drought here and one of the big crop farmers is trying to push corn silage on the dairy but the dairy have no money to pay.  Several of the local balancing plants are talking of shutting down soon because of lack of milk.  Schools open just around the corner and beef prices are good forcing heavy culling.

Milk production has been up on fewer cows because it did not get hot last year all across the country.  Cows calved steady throughout the year.  I remember a hot year like this a long time ago and we did not get one cow settled in July or August.   All those  cows that are not getting pregnant now that came fresh earlier this year are going to be heading for the meat hook come fall and winter .  Farm credit told me that they have not wrote a single dairy loan in 10 MO. Because none of them pencil out.  FSA is out of money till October.  I asked about borrowing some and they immediately assumed that I was a dairy farmer.   The man at the local bank opens all the accountants for FSA borrowers and he told me that many of them are 300000 dollars loans and the money is gone in a week.  He said he is inundated with FSA request for checking accounts.

Its gonna blow and when it does look out .  We may see 30 dollar milk.

[belarus]

Too many heifer calves are available now that they can sex semen.

[mjalbers3]

Although I knew it would get here I was never sure how the milk processors would eventually accomplish what they had set about to do some 20-25 years ago.  The goal of the processor at the time was to integrate the dairy market into the same system as the hog market was going to to ensure a cheap supply of milk availability.  They tried this on the local level in our area through the uniiversities and extension service but never got the response they were looking for.  The next step was to find an integrator to bring money and expansion into the midwest and upper midwest from a source outside the area. The ultimate goal was to build facilities so large the banks could not let them go empty and the milk supply would continue to pour out irregardlessof the economic viabiltyof the operation untill enough finaciers lost enough money to make them profitable.  It is quite interesting to note that although the farm gate price has reduced by 50 % in the last 2 years the shelf price has only reduce 35 % in our area. very stable overproduction at a loss enabling some processors to post record profits.  Although I don't consider myself a conspiratorist I really don't believe most thing happen by chance.  We may get a breath of fresh air, 30 dollar milk I don't think so.

[jrsiajdranch]

mjalbers3 are you a dairy,am or just an interested observer?  I had a conversation with one of the upercrusts at the co-op yesterday who thinks this fall milk will fall out of bed.  I think they would like that as then they could push supply mgt. harder but he made some gpood points. JR

[belarus]

I've never owned milk cows but I owned pigs in 98.  What stops the milk processors from running milk to nothing?  Just asking cause nothing stopped the packers from running pigs to nothing once there were more pigs than shackles.  What happens if there is more milk than processing capacity?  In the pork industry they shut down plants to ensure that there was overcapacity.  I think the ability to produce only female replacements will be the end of family scale milk production in the US but I surely hope I'm wrong.

[mjalbers3]

In the business.