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Milk Prices Up, But Not Profit Margins

by Mike Austin

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Those are the words of Senior risk management Advisor Mike North from first Capitol Ag on the current dairy situation. This week the USDA did release its June Supply and Demand numbers and for dairy they left production numbers unchanged while increasing their price forecast. They are now projecting the all milk price for 2013 to range from $19.60-$20.50 a hundredweight , while project The price range for milk at $18.95-$19.95 for 2014.

Also this week the USDA did announced the May price for milk at $19.80 per hundredweight, while here in Wisconsin the expected price is $20.50 per hundredweight. Both those prices are more than $3 dollars a hundred higher than last year at this time and on the surface that would have one think that profit margins are up for dairy farmers. However that is just not the case. Because of higher feed cost the combination of severe winter kill and lower expectation for both quantity and quality of the first crop alfalfa, farmers are feeling an economic squeeze.

A key factor in determining where margins head for the second half of the year will be the quality and size of our remaining cutting of alfalfa and also what happens with corn and soybean meal. Soybean meal is already down substantially from last year and even though corn planting has been a challenge, the USDA is only projecting an average corn price of $4.80 a bushel which would drop feed costs and raise the profit margin. But as always weather isi the wild card and even though its hard to think we'd see another drought following this cold wet spring, nothing is certainty in agriculture and if the crop would fall well below the current projections of a14 billion bushel crop, we could see the price of corn rise rather quickly.

Lets hope mom nature is a much more cooperative gal this year then last.