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Veteran Advisor

From the parlor pit 12-14

Well first off it is my little sis's birthday today. She moved to Idaho this fall with her Family best cow milker in the world!

 

Anywho the bad economic news for consumers just keep coming.  Last month home foreclosures were the highest in 9 months.  This type of economic data just kills the dairy price and yesterday class 3 Jan milk dropped 60 cents!

 

Welcome to my nightmare.

 

Just how does it look historically?

 

We can best track the dairy farmers progress by looking into the milk to feed ratio.

 

I selected 4 years. 85.95.2005. and this year.

 

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Other Milk Related Prices > Milk-Feed Price Ratio

Source :
Show by Year | Year on Year | Show / Download Full Data | Plot this data

Area : US
Select Years (Hold the Ctrl key to select multiple years)

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Lots of guys will be outa feed very soon. Many have used up all equity. Banks whose customers have used up LOC now will no longer lend money for feed.  The train wreck is here.
 
Lets talk Peak milk!

 

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18 Replies
Veteran Advisor

Re: From the parlor pit 12-14

Sorry to hear that.  Tough situation.

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Veteran Advisor

Re: From the parlor pit 12-14

jrsiajdranch,

 

Thanks for sharing the chart, although I'm still trying to figure out what exactly it's telling me. When I was in Wisconsin this summer, a bank board member told me the dairy folks are mostly paid up on their debt and are able to make loan payments easier than in the past. Because the dairyman is carrying less debt, do you think more will be able to survive this 'peak milk' scenario you build?

 

Thanks,

 

Mike

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Veteran Advisor

Re: From the parlor pit 12-14

Around here, most of the dairies have been buying up land, so they wouldn't be at the mercy of grain prices, and because of environmental regulations of where they can spread manure.  As long as they don't have a big debt load on the land, I figure they can hold out through this, compared to the dairy man who has to buy most of his feed.

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Senior Contributor

Re: From the parlor pit 12-14

First, if your going backwards, how long do you keep digging in the hole?  Only you and your family can answer that.  In my area 100% of the farm land is being purchased by dairy farmers at all time high prices.  The land across from my homefarm is rented to dairyfarmers for $300 per acre.  I know that in my area the farms have all their feed needs covered for 18 months. They run there own feed needs. Some who recently expanded may have debt problems.  The problem in the dairy industry is many dairy farmers expanded only with cows and now must purchase their feed needs.  I do not feel any pity for that group.  Why, all they offered was $50 per ton for hay and $50 per ton for HM corn for years around here. Now, they don't have profit. 

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Senior Advisor

Re: From the parlor pit 12-14

Jr, everyone else has posted a different tune than what you did......also, you have been preaching demand destructiom for two years............well you are still at..........i figure until you quit, everything is still intact..........weakest link breaks first.......

 

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Senior Contributor

Re: From the parlor pit 12-14

 

Another reason some dairies are prospering could be cause they hedge their feed needs. Last summer's  drought was one of the easest for buying call options. The drought was well advertised and the price of corn was slow to take off. I know I bought half my 2011 corn crop back for 20cents  in sept options and got 2/3 of the price move.

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Senior Contributor

Re: From the parlor pit 12-14

About a month ago a dairy man close to me beat out a hog farmer at 14000$ and acre on some crappy land. I don't know but it seems that the dairy guys in my area are doing pretty good.
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Veteran Advisor

Re: From the parlor pit 12-14

Sorry Mike I was in a hurry this morning. THe black line in the graph represents the line where major expansion is warrented and usually happens.  The feed ratio at 2 is generally considered breakeven.

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Veteran Advisor

Re: From the parlor pit 12-14

Just calling it like I see it. Hey if I am wrong that is fine.  As to the demand destruction don't look now but hows them exports holding up for ya?

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