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jrsiajdranch
Veteran Advisor

From the parlor pit sunday morning addition

Well life on the farm has been busy.  We haven't been having anything out of the ordinary happening here. Just milkin and feedn and scrapin barns. Sure is nice to not have to fight the snow! 

 

Dairy product prices have fallen outa bed over the past 3 weeks. Friday the CME settled at

at 16.15 for Feb. milk, and 15.89 for march milk.

 

For tulare county California hay is over 300 a ton plus delivery.  Lots of hay is going for 200 a ton right around here. Out east they can't get quality hay from the very wet year they have had.

 

I talked to an accountant yesterday that is big into dairies here on the west side of the state (souix/lyons counties).  He says once again lots of red ink.

 

So where do we go from here?  I really thought 16 would hold in all milk prices for all months. SO breaking thru that barrier has been a little disconcerting.

THe reason is very clear. our exports are starting to back off. Just a little but processors are very concerned so they have drove the price down hard.

 

Out west some plants have implemented quotas.  They take the last two months as your base production average. Anything over that is priced at $1.50 a hundred under the base price  that means over quota milk in the North of California is bringing around 15.50 in the farmers check.

 

Our supplies of processed goods are growing and will continue to after today. Next week is what has become known as the Superbowl slump. Actually it started about 3 weeks ago.

 

You see the big game is responsible for some big purchases of dairy products especially cheese.  Most food service providers/ grocers have order the required food about 3 weeks before the big game to ensure supplies. That means processors and manufacturers have gotten this produced even before that.

Realize most cheddar cheese for cheese slices,shredded cheese,and cheese sauce has to age for a minimum of 12 days before it begins the packaging and processing routine.

 

Mozzarella is about 7 days. So orders, not deliveries have been set for about a month. 

 

That is why the slide for the last three weeks. SUPERBOWL Sunday!  This is why I hate the offseaseon!

 

We also have once again increased our production year over year. for 2011 we also added about 200,000 cows. With Texas leading the way.

 

SO now we see reduced demand (typical) and increased production. ( we have met the enemy and he is us!) 

 

So why is it that even in the face of red ink we still have expansion?  2 reasons. and they are the same for all farmers.

 

My costs on my farm are very much lower than the national average. by about 4 bucks a hundred. so at 18 dollar milk I am still making money. (just not much) So with my lower costs and the low cost of replacements relative to the cost to raise one small farms are adding cows.  And not just small farms but large farms who have low variable costs are as well.

 

2. the eternal optimism of the farmer. Haven't we all said it will be better next year? And there may be a reason for that hope. I just can't quantify it yet.

 

There is also a 2a reason.  Large farms over 2000 cows have the fixed costs which must be paid regardless of how many cows are going thru the parlor.  The difference is that for the first time in my brief years on the earth the variable costs do not mean more money for fixed costs. The breakeven's on these large farms are starting to eat into the money for fixed costs.

 

SW I think that is the biggest difference in todays market and even in the market of 2007.  The big guys ( I am talking in generalities and I know many of these guys, they ain't all bad) in the past were able to pay down debt with the addition of each new heifer. now she is usually just treading water. not costing but not making just providing cashflow.

 

SO where do we go from here?

 

Tell me how the drought in the SW and here in the western cornbelt works out and I will tell you how it works out! LOL

But in all seriousness the hay market may have more of an impact than the grains this year. Quality forages are the reason cows milk like they do. all other management techniques will not overcome poor forages. and right now with the continual ripping up of pasture grounds and hay ground roughages will be harder to come by.  And that means at some time serious herd liquidation. this month for the first time since I can remember we have had a reduction in the heifer herd by 1%. that bodes well for curbing milk production in the summer. Also there are a lot of cows that are gonna be a long ways off when they are dried up as the breeding cycle on many farms got really messed up due to this summers heat.

 

Soon Texas will be coming in with much lower or at least even production with last years numbers as they started their big run up in milk production in March of last year.

 

SO I have to agree with the experts for now. Milk is gonna hover between 16 and 17 for the first 6 months of the year. after that if corn and hay stay at this price then we may see forced liquidations.  That doesn't mean fewer cows just fewer farmers. Also they will come disproportionally from the smaller farmers as they will say nuts to it and sell the corn instead of keeping the cows with all their work.

 

SO once again the fabric of America gets torn.

 

On a lighter note here is some pics of a fee bunk we put in about 3 weeks ago.IM000035.JPG

 

IM000036.JPG

 

Be Safe and go Patriots!

 

* I sent these to some friends that is why the captions in the photo's.

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sw363535
Honored Advisor

Re: From the parlor pit sunday morning addition

Thanks Jr.
Very informative. I owe u .
Been watching ever since bigs moved in. Seems like they are either growing or struggling. But, much of it has just been relocating stress. They sure added a lot of miles to market.
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