commodities - progressive dairy · source: chicago mercantile exchange data soybeans (dollars per...

MARKET WATCHMARKET WATCH FEED

Normand St-PierreExtension Dairy SpecialistOhio State [email protected]

I had to drive to a meeting in Indiana. As I drove, I could see some awful-looking cornfi elds in western Ohio and most of Indiana. I think, in the end, the devastation of this year’s drought will actually be greater than what is currently forecasted. Feeds should be purchased wisely. Although all feed prices are historically high, some are relative bargains compared to others.

� e feed table reports bracket prices for each feed. � e Low and High values delineate the 75 percent confi dence range for a feed. If you can buy a feed at a price less than the Low, then it is a bargain. If the market price exceeds the High, then it is overpriced. � e ‘Status’ column provides you with a quick indicator of

a feed status: a ★ indicates a bargain feed; a ■ denotes an overpriced feed; a blank entry indicates that the feed is priced about right. Lastly, a few feeds carry a special status symbol: a is shown if a feed is grossly overpriced (in which case only the High column has a price and the reported price is the calculated breakeven price), a feed is grossly underpriced (in which case only the Low column has a price and the reported price is the calculated breakeven price) or if we are in no position to judge a feed status. � e

third option occurs, for example, with the diff erent grades of alfalfa hay. We can calculate what each grade is worth, but we do not have suffi cient market information to identify an accurate market price for each grade with which we can compare to the values calculated by Sesame. So we report the same price for the Low and High. � is

price is in fact the breakeven price for the feed in question.

Sesame determines the nutritional worth of feeds through the determination of the economic values of the nutrients. Having determined the implicit market prices for the important nutrients, we can calculate the average cost of supplying the nutrients required for a reference cow. In this column, I use as a reference a cow weighing 1,400 lbs, producing 70 lbs per day of milk containing 3.7 percent fat, 3.1 percent true protein and 5.7 percent other solids. Nutrient costs are expressed three diff erent ways in the nutrient table: $ per cow per day, ¢ per pound of dry matter (DM) and $ per hundredweight of milk. Beware that these feed costs do not include the costs of feeding the dry cows and the replacement herd. PD

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Binkley & Hurst LPLititz PA 717-626-4705Richland PA 888-414-7581Dayton VA 800-735-3584 Warner TractorTroy PA 570-297-2141Graham Dairy SupplyGreensburg PA 724-834-3162Mercy’s Farm EquipmentMontgomery Ctr. VT 802-326-4143Catskill TractorFranklin NY 607-829-2600Automated Farm SystemsPendleton SC 864-646-9841

Table 1Item1 Northeast Southeast MidwestNEL (¢/Mcal) 19.8 16.4 12.5

MP (¢/lb) 40.9 47.3 53.6

e-NDF (¢/lb) -5.1 1.6 2.2

ne-NDF (¢/lb) -6.8 5.0 9.1

Nutrient costs ($/cow per day)2 7.78 8.07 7.31

Nutrient costs (¢/lb of feed DM) 15.8 16.4 14.9

Nutrient cost ($/cwt of milk) 11.11 11.53 10.441 NEL = Net energy for lactation; MP = metabolizable protein; e-NDF = effective neutral detergent fi ber; ne-NDF = non-effective NDF2 1,400-lb cow producing 70 lbs/day at 3.7% fat, 3.1% protein and 5.7% other solids

Supreme hay ($/ton)

Aug. 15 Price 3-week change

IA $270-$290 $20

IL $260-$280 $20-$40 KS $215-$250 NCMO $175-$275 NC

NE $275-$300 $50-$60

PA $275-$325 $35-$65

VA $235 $25 Source: USDA National Hay, Feed & Seed Summary


CA $420 NC

ID $390 $5

IL $325 $7

Soybean meal* ($/ton)


CA $610 $8

ID $595 $2

IL $560 $32

*Price quotes contributed by Western Milling, J.D. Heiskell, independent sources.

Corn* (in tons) (in bushels)


CA $350 $1

ID $343 $2

IL $292 $9

Price 3-week change

$9.80 .03¢

$9.66 .06¢

$8.17 .25¢

Cottonseed* ($/ton)

COMMODITIES

BLOOD MEAL OVERPRICED

8 Progressive Dairyman Issue 13 • September 1, 2012

Mar2013

JulyMay SeptDecSept2012

Low

High

Settle$6.50

$7.00

$7.50

$8.00

$8.50

$9.00

Jan2013

May July Aug SeptOct Dec MarSept2012

High

Settle Low$350$375$400$425$450$475$500$525$550$575

FUTURESHigh: $8.49 Low: $6.53

High: $554.20 Low: $374.00

Corn (dollars per bushel)

CornSept ’12 contracts $8.00 +0.39¢ $8.20/$7.80Dec. ’12 contracts $8.02 +0.50¢ $8.24/$7.76

AUGUST 17 Avg. 3-week settle High/Low

Soybean mealSept. ’12 contracts $530.19 +$36.42 $546.30/$512.30Oct. ’12 contracts $507.89 +$25.53 $521.10/$491.60

Source: Chicago Mercantile Exchange data

Soybeans (dollars per ton)

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Northeast Southeast MidwestFeed name Low High Status Low High Status Low High Status

Alfalfa hay, supreme (190 RFV) $293 $375 $305 $384 $279 $346

Alfalfa hay, premium (170 RFV) $260 $342 $277 $356 $252 $319

Alfalfa hay, good (150 RFV) $202 $284 $226 $305 ★ $208 $275 ★

Alfalfa hay, fair (130 RFV) $154 $236 $188 $267 $173 $240

Alfalfa hay, low (110 RFV) $104 $186 $146 $225 $135 $202

Bakery byproduct $369 $408 ★ $347 $391 $297 $349 ■

Beet pulp - - $319 $319 $293 $328 ★

Blood meal - $857 ■ - $868 ■ - $867 ■

Canola meal $368 $401 ■ - - $366 $392 ★

Citrus pulp $283 $315 ■ $285 $321 - -

Corn grain, ground $368 $402 ★ $342 $381 $294 $342

Corn silage (32% DM) $81 $109 ★ $95 $121 ★ $88 $110 ★

Cottonseed hulls - - $97 $202 ■ $130 $221 ■

Cottonseed meal $405 $450 $438 $490 $435 $472

Cottonseed, whole $286 $399 $303 $418 $266 $366

Distillers dried grains $374 $438 ★ $419 $488 ★ $417 $461 ★

Feather meal $660 $742 $639 $746 ★ $636 $712

Fishmeal, Menhaden - $729 ■ - $718 ■ - $697 ■

Gluten feed $303 $346 ★ $333 $374 ★ $315 $346 ★

Gluten meal $677 $759 - - $678 $759

Hominy $326 $362 ★ $325 $367 $292 $332 ★

Linseed meal - - $408 $408 $384 $420 ★

Malt sprouts - - - - $283 $320 ★

Meat meal $561 $613 ★ $526 $587 ■ $491 $540 ■

Molasses $256 $287 ★ $224 $256 ★ $180 $224

Rice bran - - $396 $396 - -

Sorghum grain, rolled - - $335 $335 - -

Soybean hulls $235 $235 $277 $380 $301 $368 ■

Soybean meal, expeller $597 $651 $608 $680 $599 $649 ★

Soybean meal, 44% $469 $502 ■ $461 $503 ■ $433 $466 ■

Soybean meal, 48% $525 $565 ■ $509 $561 ■ $483 $522 ■

Soybeans, roasted $561 $602 ■ - - $505 $552 ■

Sunfl ower meal - - - - $272 $315 ■

Tallow $843 $966 $714 $842 - $633 ■

Wheat bran $228 $304 ■ - - $283 $334

Wheat feed - - $342 $382 $298 $344

Wheat middlings $262 $326 $336 $336 $298 $342

CORN SILAGE A BARGAIN

Issue 13 • September 1, 2012 Progressive Dairyman 9

MARKET WATCHMARKET WATCH Have we hit bottom yetMargin

Normand St-PierreDairy Extension SpecialistOhio State [email protected]

Table 1 Dairy productivity and margin analysis, May 2012Northeast Southeast Midwest Southwest West Northwest National

ProductivityMilk yield (lbs/cow per day) 54.92 43.21 53.64 62.96 64.19 65.11 59.51

Fat (%) 3.58 3.55 3.59 3.50 3.57 3.63 3.58

Protein (%) 2.96 3.00 2.92 3.00 3.04 3.10 3.00

Nutritional statisticsNEL (Mcals/cow per day) 28.03 24.33 27.60 30.42 31.06 31.62 29.54

MP (lbs/cow per day) 4.05 3.43 3.95 4.52 4.63 4.74 4.34

eNDF (lbs/cow per day) 9.42 8.59 9.34 9.93 10.07 10.18 9.74

neNDF (lbs/cow per day) 3.14 2.86 3.12 3.31 3.36 3.39 3.25

Dry matter intake (lbs/cow per day) 44.90 40.90 44.50 47.30 48.00 48.50 46.44

Feed dry matter cost (¢/lb) 13.00 11.90 12.40 14.80 14.60 15.00 13.81

Gross feed effi ciency (lb milk/lb DM) 1.22 1.06 1.21 1.33 1.34 1.34 1.28

Milk pricingClass I utilization (%) 38.7 77.1 11.3 35.2 20.0 23.4 24.8

Average class I differential ($/cwt) $2.75 $4.60 $1.70 $2.81 $2.33 $1.85 $2.28

Producer price differential ($/cwt) $1.06 $3.55 $0.19 $0.99 $0.47 $0.43 $0.63

Per-cow economicsGross income from milk ($/cow per day) $9.76 $8.78 $9.01 $11.14 $11.17 $11.49 $10.39

Nutrient (feed) costs ($/cow per day) $5.82 $4.85 $5.51 $6.99 $6.98 $7.28 $6.42

Income-over-nutrient-costs ($/cow per day) $3.94 $3.93 $3.50 $4.15 $4.19 $4.21 $3.97

Per-hundredweight economicsMilk price ($/cwt) $17.78 $20.32 $16.80 $17.70 $17.40 $17.65 $17.46

Nutrient (Feed) costs ($/cwt) $10.60 $11.22 $10.27 $11.10 $10.87 $11.18 $10.76

Milk Margins over Feeds ($/cwt) $7.18 $9.10 $6.53 $6.60 $6.53 $6.47 $6.70

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� e national Cow-Jones II – an index tracking dairy margins across the nation – averaged $6.70 per hundredweight (cwt) in July. � is was less than the breakeven value of $7.50 that marks the threshold of positive milk margins for the dairy sector taken as a national aggregate. But it was better than the $5.64 we had in May. � is may come as a surprise considering the substantial increases in feed prices that we have experienced recently. A lot of this has to do with timing. I don’t have a bunch of staff working for me like the USDA. So I estimate feed prices only once per month, generally around the 15th.

In July, however, I had to use prices that were prevailing on July 9 because of the printing schedule. On that day, Chicago spot prices for corn and 48 percent soybean meal were $6.92 per bu and $438 per ton, respectively (i.e. mostly before the large surge in prices). As I write this column in mid-August, the same spot prices stand at $8.42 per bu and $550 per ton. It is quite amazing what a month of bad news in the Corn Belt can do to feed prices. Nationally, average milk prices are going up but not as fast as feed costs. � erefore, we don’t expect the Cow-Jones to reach the profi tability threshold anytime soon.

� e Cow-Jones II tracks down monthly margins in the dairy industry across six regions of the U.S. In our analyses, income is based on the average milk production

and milk composition in a given region for the month. Milk prices are calculated from Federal Orders component prices plus a producer price diff erential for Class I (fl uid) milk based on a two-year average Class I utilization for the given month and a weighed average Class I diff erential in a region. � e analysis is based on the cash market for feeds. Feed costs are estimated from the average cost of supplying the nutrients required for the production level and milk composition for each region. � e required nutrients are net energy for lactation (NEL), metabolizable protein (MP), eff ective

neutral detergent fi ber (eNDF) and non-eff ective NDF (neNDF).

Requirements are calculated according to NRC. Unit prices of the four nutrients are estimated from the composition and market prices of all major commodity feeds traded in a given region using the Sesame method. Income over feed costs (IOFC) are calculated on a per-cow basis. Milk margins over feed (MM) are calculated on a per-hundredweight basis. � e national MM is the weighed average MM across all six regions and is labeled the Cow-Jones II index (CJ2).

Average production is for

lactating and dry cows combined. � e national average of 59.5 lbs per cow per day translates to approximately 21,700 lbs per cow per year or 70.8 lbs per lactating cow per day. � e cost of feeding the replacement herd is not factored in any of the calculations. Beware that the regions used in the analysis are not the same as the Federal Orders. For example, we merged the Florida (FO 6) and Southeast (FO 7) Federal Orders into a single region (Southeast) because the two Federal Orders combined account for less than 5 percent of the national milk production. PD


MARK ETWATCHAugust 15, 2012

Top Springer

Top Average

Medium Holstein Springer

ShortbredsOpen

Heifers Light

Open Heifers Heavy

HeiferCalves

BullCalves

Breeding Bulls

Empire Livestock - Burton MarketVernon, NY (800) 257-1819 (sale 8/9/12)

$1,400NC

$1,250 NC

$1,100 NC

$1,000NC

$450 $150

$900 $100

$100NC

$85$15

$800$50

Mammoth Cave Dairy Auction, Inc.Smiths Grove, KY (800) 563-2131(sale 8/14/12)

$1,430 $110

$1,350$110

$1,200 NC

$1,100NC

$300$40

$650$60

$160$20

$120$5

N/T

New Holland Sales StablesNew Holland, PA (717) 354-4341(sale 8/15/12)

$1,475$50

$1,350$25

$1,200$100

$1,200NC

$600$150

$725$100

N/T N/T N/T

Mid-Georgia Livestock AuctionJackson, GA (770) 775-7314 (sale 8/14/12)

$1,450$25

$1,200$25

$1,125$75

N/T$410$30

$850$150

$200$10

$140 $20

N/T

Central Livestock AssociationAlbany, MN (800) 733-6828 (sale 8/14/12)

$1,350 $75

$1,200NC

$1,185$35

$1,160$310

$100/cwt$6/cwt

$101/cwt$8/cwt

N/T N/T$825$85

Equity Co-op LivestockStratford, WI (715) 687-4101Rocky Olsen (608) 434-4037 (sale 8/14/12)

$1,475$100

$1,325$25

$1,150$50

$925NC

$550NC

$875NC

$200$25

$195$60

$1,200NC

Lake Odessa LivestockLake Odessa, MI (616) 374-8213(sale 8/14/12)

$1,600NC

$1,200NC

$850$50

$600$150

$400$50

$700$50

$300$100

N/T$1,300$200

Norwood Dairy Cattle AuctionNorwood, MO (417) 746-4242 (sale 8/9/12)

$1,450$260

$1,100$50

$800$175

$1,080$80

$400$85

$930$210

$135$15

$165$10

N/T

Pipestone Livestock Auction MarketPipestone, MI (507) 825-3306 (sale 8/16/12)

$1,500$125

$1,379$17

$1,335$1

N/T$85/cwt$40/cwt

$115/cwt$22/cwt

N/T N/T$1,025

NC

Spring� eld Livestock Marketing Center Springfi eld, MO (417) 869-9500 Doug Thomas (417) 840-9316 (sale 7/24/12)

$1,220$50

$1,190$50

$920$40

$950$140

$480$50

$790 $85

$120$130$40

N/T

Topeka Livestock AuctionTopeka, IN (206) 593-2522 (sale 8/14/12)

$1,350$125

$850$135

N/T N/T$900

$100 $1,360$90

$200$60

N/T$1,050$125

Tri-State LivestockSioux Center, IA (712) 722-0681Mike Koedam (712) 470-0198 (sale 8/15/12)

$1,525 $200

$1,449$31

$1,397$28

N/T$122/cwt$26/cwt

N/T N/T N/T$1,075$250

United Producers, Inc.Marion, MI (517) 294-3484 (sale 8/14/12)

$1,625NC

$1,475 NC

$1,200NC

$1,000NC

$400 NC

$850NC

N/T N/T $1,000$100

Brush Livestock of ColoradoBrush, CO (970) 842-2801 (sale 8/2/12)

$1,675$25

$1,550$85

$1,405$95

$1,435$160

$325 $650 N/T N/T N/T

Chehalis Livestock MarketChehalis, WA (360) 748-3191 (sale 8/10/12)

$1,300$100

N/T$1,100

NCN/T N/T N/T N/T

$50$15

$1,000$100

Producers LivestockJerome, ID (208) 324-4345 (sale 8/8/12)

$1,540 $230

$1,470$175

$1,220$10

N/T N/T N/T N/T N/T N/T

Smith� eld Livestock AuctionSmithfi eld, UT (435) 563-3259 (sale 7/19/12)

$1,175$75

$1,175$175

N/T$1,150

NC$65/cwt$75/cwt

$80/cwtNC

N/T N/T N/T

Toppenish Dairy Replacement SalesToppenish, WA (509) 865-2820 (sale 7/6/12)

$1,325$225

$1,100 $200

$1,125$25

$1,100NC

$120/cwt$30/cwt

$115/cwt$7/cwt

$100NC

$120NC

N/T

A & M Livestock Auction, Inc.Hanford, CA (559) 582-0358 (sale 8/1/12)

$1,270$380

$1,220$80

$1,090$90

$1,045$5

$310 $810 N/T N/T N/T

Sulphur Springs Livestock and Dairy AuctionSulphur Springs, TX (903) 885-7739(sale 8/2/12)

$1,300$110

$1,050$25

$1,050$25

N/T$500

$150 $850

NC$270

NC$210 NC

$775

Escalon Livestock Market, Inc.Escalon, CA (209) 838-7011(sale 7/26/12)

$1,300 $175

$1,100 $200

$1,050$200

N/T$90/cwt $10/cwt

$100/cwt$25/cwt

N/T N/T$1,000

NC

Contact Judy about being included in Progressive Dairyman’s Market Watch! [email protected] • (208) 324-7513 NC = No change N/T = No test Decrease in price Increase in price

Log on to www.progressivedairy.com/marketwatch to get auction reports from more locations!

MARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHCATTLE

NOTE: The colored bar represents cumulative year-to-date milk production for 2012. When it does not surpass the dotted line at the center of the box, it indicates state production is below the previous year’s total (2011). When it does surpass the dotted line, it indicates production is above the previous year’s total.

MARKET WATCHMARKET WATCHMILK

Texas440 NC

1,785 -3.5%785 -2.2%

4,978 103.3%

Utah90 -1

1,825 +3.1%164 +5.1%

981 108.3%

Vermont133 NC

1,610 +1.9%214 +0.9%

1,294 100.6%

Virginia96 NC

1,450 NC139 NC

897 101.7%

Washington262 -3

2,000 NC524 NC

3,162 104.1%

Wisconsin1,271 NC1,775 +2.0%2,256 +2.5%

13,640 103.9%

Arizona188 -6

2,010 +1.5%378 +2.7%

2,444 106.4%

California1,783 +11,975 -0.5%3,521 +0.3%

21,820 104.7%

Colorado133 +1

2,010 +1.0%267 +5.5%

1,593 107.9%

Florida123 NC

1,660 +1.8%204 +5.1%

1,298 105.3%

Idaho578 NC

1,990 +1.5%1,150 +1.5%

6,707 103.6%

Illinois100 NC

1,610 +0.6%161 +2.5%

1,017 104.8%

Indiana176 NC

1,745 +1.7%307 +4.8%

1,889 105.9%

Iowa205 -1

1,740 -2.0%357 -1.4%

2,253 101.8%

Kansas124 NC

1,790 +1.4%222 +2.3%

1,354 104.1%

Michigan376 +1

1,965 +0.3%739 +3.6%

4,487 105.6%

Minnesota465 NC

1,615 +0.3%751 -0.3%

4,598 101.2%

Missouri94 NC

1,265 +4.5%119 +2.6%

752 102.7%New Mexico

332 -42,035 -3.1%676 -1.9%

4,202 102.8%

U.S. Total9,241 -191,804 +0.5%16,670 +0.9%

102,442 103.6%

New York610 NC

1,795 +1.4%1,095 +1.4%

6,658 103.1%

Ohio270 -1

1,630 +3.5%440 +5.0%

2,700 104.1%

Oregon123 NC

1,730 NC213 +0.9%

1,267 103.1%

Pennsylvania535 -1

1,610 -0.6%861 -1.9%

5,357 99.7%

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Legend

Number of cows(in thousands)

Milk per cow(month)

(lbs.)Total milk

production (month)

(in millions of lbs.)

Year-to-date milkproduction (total)(in millions of lbs.)

Percentage of year-to-date production versus previous year-to-date

Monthly change(in thousands)

Annual percentchange

Annual percentchange

July2011

Jan2012

Feb Mar Apr May JuneAug OctSept Nov Dec

2010 2011

9,1009,1259,1509,1759,2009,2259,2509,2759,300 June 2012: 9,241 High: 9,271 Low: 9,121Milk cows (in thousands)

July2011

MarJan2012

Feb Apr JuneAug OctSept Nov Dec

2010

May

2011

1,6751,7001,7251,7501,7751,8001,8251,8501,875

June 2012: 1,804High: 1,857 Low: 1,687

Milk per cow (in pounds, 30-day equivalent)

July2011

MarJan2012

Feb Apr May JuneAug OctSept Nov Dec

2010

2011

15,25015,50015,75016,00016,25016,50016,75017,00017,25017,500

June 2012: 16,670High: 17,220 Low: 15,387

Milk production (in pounds, 30-day equivalent)

U.S. HERD STATS

June daily avg. milk per cow: 60.1 lbs.

Bob CroppProfessor EmeritusUniversity of Wisconsin – Madison

Vermont133 NC

1,610 +1.9%214 +0.9%

1,294 100.6%95% 105%100%

JUNE ’12

EXPECT a DECREASE IN COW NUMBERS BY FALL

� e eff ect of high temperatures and humidity on milk production was already evident in USDA’s release of its June Milk Production report. Milk per cow for the 23 reporting states and estimated for the U.S. was just 0.4 percent higher than a year ago. But of the 23 reporting states, only fi ve had less milk per cow than a year ago – California, Texas, New Mexico, Pennsylvania and Iowa – and three had no change – Oregon, Virginia and Washington. But hot and humid weather continued to persist during July, which likely will show a great impact on milk per cow for the month of July.

After increasing month-to-month starting back in October of 2010, both for the 23 reporting states and the U.S., milk cow numbers have declined for two consecutive months, May and June. For the 23 reporting states, cow numbers were still 0.7 percent higher than a year ago and, for the U.S., 0.5 percent higher. But with the anticipated feed situation, we can expect more states with a decrease in cow numbers by fall. PD

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The weather is changing; make sure you don’t let their energy FA

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Feb Mar Apr May July AugJune Sept Oct Dec Jan2012

Nov Feb Mar Apr May June July AugOct Nov DecSept2009

Feb Mar Apr May June July Aug Sept Oct Nov DecJan2010

Jan2011

CA Class 1price

Federal Class I price$9

$11$13$15$17$19$21$23$25

MARKET WATCHMARKET WATCH SPECULATED DECLINE IN MILK PRODUCTIONDAIRY PRICES

Katie KrupaDirector of Producer ServicesRice [email protected]

Aug. 2012: $16.55 High: $21.78 Low: $10.93Aug. 2012: $18.28 High: $23.84 Low: $13.48

Fluid milk prices (in dollars)

Although weather has been the fi rst thing on many dairy producers’ and traders’ minds, there has been other bullish news to come along in recent weeks. According to the USDA’s June Milk Production report, total U.S. milk production was up less than 1 percent, with the growth coming from both a slight increase in milk cows and a slight increase in production per cow. � e slowdown reported in June leads many to believe that the subsequent milk production reports will report a very slight growth in production or even a decline in production from year-earlier levels.

Recent hot weather in many parts of the country, but most notably in the Midwest, coupled with negative profi t margins primarily for producers in the West, has many speculating that milk production reports for both July and August will show a decline in total production. Adding fuel to the fi re is the USDA’s Weekly Dairy Cow Slaughter report. For the four July weeks that have been reported, there has been a 12.5 percent increase in slaughter rates from last July. With declining milk production, the amount of product being produced has also been declining and again the decline is expected to continue for the next couple months.

As we have seen the supply side of the equation slowing, the demand side has been favorable. Although the dairy demand has not been expanding in leaps and bounds, exports are holding up as 2012 is shaping up to possibly be a slightly better year than 2011 and, domestically, butter and natural cheese consumption has been decent due to recent promotions (thanks in part to lower dairy prices this spring).

So what has this bullish news meant for milk prices? In the recent weeks the Class III futures average for October to December has increased roughly 50 cents to around $19.50, with the average price spiking as high as $19.75 on August 9. � e January-to-June 2013 price average has increased more than 60 cents and is now trading over $18.50.

For many of you, these higher milk prices will be eaten up by higher feed prices but, for those of you who have had a good growing season, the upcoming months are looking to be profi table. Class III futures prices for the second half of 2013 are currently trading around $18.25, which is lining up with lower feed prices that are currently trading on the exchange. � ese higher milk prices and lower feed prices are actually creating an opportunity

Come see what’s new at Booth EH3205-3306World Dairy ExpoOctober 2-6, 2012


CASH CHEESE PRICE CONTINUES TO CLIMB

for producers to hedge the margin between the milk price and the feed prices at higher-than-average levels. While this strategy may not be best for everyone, we are seeing an increase in producer hedging of both milk and feed prices for the end of 2013. PD

Katie Krupa is the director of

producer services with Chicago-based Rice Dairy, a boutique brokerage fi rm off ering guidance, analysis, and execution services on futures, options, spot and forward markets. You can reach Katie at [email protected]. Visit www.ricedairy.com. � ere is risk of loss trading commodity futures and options. Past results are not indicative of future results.

10/1/11

11/5/11

12/3/11

9/3/11

1/7/12

3/3/12

4/7/12

5/5/12

7/7/12

8/4/128/11/12

2/4/12

8/20/11

6/2/12

2010

2011

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50Aug. 11, 2012: $1.73 High: $2.23 Low: $1.31Butter (weekly average in dollars)

8/10/12

8/13/12

8/15/12

7/27/12

7/30/12

7/31/12

8/1/12

8/2/12

8/3/12

8/6/12

8/7/12

8/8/12

8/9/12

8/14/12

7/26/12

$1.60

$1.65

$1.70

$1.75

$1.80Since bottoming at $1.30 in early May, the cash butter price has made a steep climb higher. In recent weeks, the cash butter price moved up over 10 cents and is now trading over $1.75 for the fi rst time since November 2011.

MarFebOct NovAug2011

Jan2012

Apr MaySept June JulyDec

20102011

$1.20$1.30$1.40$1.50$1.60$1.70$1.80$1.90 June 2012: $1.26 High: $1.74 Low: $1.21Non-fat dry milk

2010

2011

10/1/11

11/5/11

12/3/11

9/3/11

3/3/12

5/5/12

8/11/12

7/7/12

8/4/12

4/7/12

1/7/12

2/4/12

8/20/11

6/2/12

$1.25

$1.50

$1.75

$2.00

$2.25

8/10/12

8/13/12

7/26/12

7/27/12

7/30/12

7/31/12

8/1/12

8/2/12

8/3/12

8/6/12

8/7/12

8/8/12

8/9/12

8/14/12

8/15/12

$1.68

$1.72

$1.76

$1.80

$1.84

$1.88

Aug. 11, 2012: $1.82 High: $2.15 Low: $1.32Cheese(weekly average in dollars)

Like the cash butter market, the cash cheese price has also been climbing since May. In recent weeks the average block/barrel price has climbed nearly 13 cents to over $1.83. Although we would expect to run into resistance at these levels, buyers are still stepping in to buy product at these higher prices.

Feb Mar Apr May June July Aug Sept Oct Nov DecAug2010

Feb Mar Apr May June JulySept Oct Nov Dec

Futures

2012

Jan2011

Jan2012

2013 2014

$11

$13

$15

$17

$19

$21

$23 Class III (in dollars) July 2012: $16.68 High: $21.67 Low: $13.48

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