Fiscal cliff … government shutdown … farm bill. Ooops, sorry, the farm bill hasn’t happened yet. But it will … eventually!
You know, after everything that has happened in Washington lately, I’m not sure that we really want a farm bill. Be careful for what you wish!
Remember that most representatives and senators who will be voting on the final version of the bill are pretty much clueless about farming in general, and dairying in particular. I am worried that the inevitable compromise bill reached between the House and the Senate will look like a Frankenstein patchwork of semi-idiotic ideas.
Favorable markets
Meanwhile, the markets are currently moving favorably for dairymen. It is always difficult at best to forecast prices more than a couple of months ahead, but judging on current Chicago Mercantile Exchange (CME) cash and futures prices, dairymen should be enjoying a pleasant pre-Christmas season.
Currently, nonfat dry milk stands at a multi-year high on the CME, trading above $1.80/pound. After a relatively steady fall in price throughout late summer and early fall, butter closed above $1,50/pound last week, gaining more than 5 cents/pound.
Meanwhile, cheddar blocks closed above $1.90/pound for the first time in more than six months. Hopefully, this rise in price will last a bit longer than the one we experienced last May, which lasted only four days above $1.90/pound.
Meanwhile, dry whey prices have been holding steady around 56 cents/pond. These prices explain the encouraging $18.22/cwt. Class III price that was just announced for October.
Both the Class III and Class IV futures for the next few months are very good — much higher than what was anticipated just a few months ago.
Other side
Of course, milk prices don’t mean a thing unless one looks at what it costs to produce milk. Because feed costs represent the largest cash costs on a typical dairy, we now have a nearly fanatic trance in regards to feed costs.
Although the markets of byproduct feeds do not operate in perfect harmony with the corn and soybean markets, they nevertheless are heavily influenced by them.
Corn prices
Last July, in spite of a temporary rise in the December corn futures, I stuck my neck out and predicted corn prices at $4/bushel in December. I made this forecast because I just don’t have much faith in preliminary U.S. Department of Agriculture reports.
However, I have immense faith in the productivity of American farmers; and they’re about to prove me right again. Last week, December corn futures closed at $4.27/bushel, down 13 cents/bushel for the week.
When all is suddenly done, the national corn crop should be in the neighborhood of 14.2 billion bushels this year. That’s a lot of corn! This drop in corn price is coupled with soybean meal November futures now trading under $400/ton.
These prices are indicative of a substantial reduction in feed costs and, thus, a significant improvement in milk margins. I know that this will be a temporary relief on most Ohio dairy farms.
Enjoy the season
Soon, we will be celebrating Thanksgiving — my favorite American holiday. You see, I was raised in Canada where Thanksgiving occurs in October and has nothing to do with the Pilgrims celebrating a successful harvest.
In fact, it’s really not a big holiday up there. I have learned to enjoy very much the American spirit surrounding Thanksgiving. This year, as usual, I will be eating far more turkey, mash potatoes, sweet potatoes and stuffing than I should.
Surrounded by my family and close friends, we will make sure to take a long moment to thank the American farmers for the bountiful and wholesome food they provide us from their work.Make sure that you spend time with your family even when there are cows to be milked … like every day.
