Dairy Outlook: June 2018

Milk price continued slow climb, but milkmargins remain tight. Current tumultuousenvironment in global trade may limit long termprogress.

Telephone-telegraph-pole-wire-1822040 by aitoff.Pixabay.com. cc0

Dairy Market Outlook April All Milk Prices continued the upward movement for thesecond month. Pennsylvania feed costs increased slightlywhile U.S. costs held steady, resulting in slightly bettermargins. The first quarter of 2018 resulted in an average AllMilk Price of $16.33/cwt, and an average margin of $10.28,which remains below the 3 year average breakeven margin of$12.33. Short term projections show a continuedstrengthening in the margin as a result of stronger milk priceforecasts and softer feed costs. However, the currenttumultuous environment in global trade may limit long termprogress.

Class Utilization Shifts in theNortheastFor the last several months, PA All Milk Price was nearing thelevels of the national All Milk Price. Some of this can beexplained by the milk class utilization trends for NortheastFederal Order 1 (Figure 1) and Mideast Federal Order 33(Figure 2), the 2 orders impacting Pennsylvania. Forcomparison, the national trends for all federal orders (Figure3) were also examined. PA has essentially lost 15% utilizationof Class I over the last 7 years, approaching the nationalaverage. With relatively constant Class II and Class IIIutilization, the Class I loss has gone to Class IV, resulting inweaker than normal prices in Pennsylvania. As this price shiftcontinues to occur, dairy operations will need to be strategic inreducing their cost of production to be more competitive in anon-Class I environment.

Figure 1: 10 year Northeast Federal Order 1 - Percent MilkUtilization by Class

Ag Marketing Service, USDA 2018.

Figure 2: 10 year Mideast Federal Order 33 - Percent MilkUtilization by Class

Page 2 Dairy Outlook: June 2018

Ag Marketing Service, USDA 2018.

Figure 3: 10 year All Federal Orders - Percent Milk Utilizationby Class

Ag Marketing Service, USDA 2018.

Income over Feed Cost, Margin, andMailbox Price TrendsTable 1: 12 month Pennsylvania and U.S. All Milk Income,Feed Cost, Income over Feed Cost ($/milk cow/day)

¹Based on corn, alfalfa hay, and soybean meal equivalents toproduce 75 lbs. of milk (Bailey & Ishler, 2007)

²The 3 year average actual IOFC breakeven in Pennsylvaniafrom 2014-2016 was $9.00 ± $1.67 ($/milk cow/day) (Beck,Ishler, Goodling, 2018).

Table 2: 12 month Pennsylvania and U.S. All Milk Price, FeedCost, Milk Margin ($/cwt for lactating cows)

¹Based on corn, alfalfa hay, and soybean meal equivalents toproduce 75 lbs. of milk (Bailey & Ishler, 2007)

²The 3 year average actual Milk Margin breakeven inPennsylvania from 2015-2017 was $12.33 ± $2.29 ($/cwt)(Beck, Ishler, Goodling, 2018).

Figure 4: 12 month PA Milk Income and Income over FeedCost

²The 3 year average actual IOFC breakeven in Pennsylvaniafrom 2015-2017 was $9.00 ± $1.67 ($/milk cow/day) (Beck,Ishler, Goodling, 2018).

Figure 5: 24 month Actual and Predicted* Class III, Class IV,and Pennsylvania Average Mailbox Price ($/cwt)

Page 3 Dairy Outlook: June 2018

*Predicted values based on Class III and Class IV futuresregression (Gould, 2018).

Table 3: 24 month Actual and Predicted* Class III, Class IV,and Pennsylvania Average Mailbox Price ($/cwt)

MonthClass IIIPrice

Class IVPrice

Average PAMailboxPrice

Apr-17 $15.22 $14.01 $16.43

May-17 $15.57 $14.49 $16.32

Jun-17 $16.44 $15.89 $17.17

Jul-17 $15.45 $16.60 $17.40

Aug-17 $16.57 $16.61 $18.25

Sep-17 $16.36 $15.86 $17.83

Oct-17 $16.69 $14.85 $17.49

Nov-17 $16.88 $13.99 $17.61

Dec-17 $15.44 $13.51 $17.04

Jan-18 $14.00 $13.13 $16.01

Feb-18 $13.40 $12.87 $15.57

Mar-18 $14.22 $13.04 $16.08

Apr-18 $14.47 $13.48 $15.59

May-18 $15.17 $14.55 $16.47

Jun-18 $15.66 $15.56 $17.22

Jul-18 $16.49 $15.96 $17.86

Aug-18 $16.93 $16.18 $18.19

Sep-18 $17.05 $16.25 $18.29

Oct-18 $16.92 $16.31 $19.07

Nov-18 $16.72 $16.34 $18.98

Dec-18 $16.53 $16.34 $18.88

Jan-19 $16.24 $16.06 $18.58

Feb-19 $16.17 $15.92 $18.48

Mar-19 $16.10 $16.03 $18.50

*Italicized predicted values based on Class III and Class IVfutures regression (Gould, 2018).

To look at feed costs and estimated income overfeed costs at varying production levels by zipcode, check out the Penn State Extension DairyTeams DairyCents or DairyCents Pro apps today.

Data sources for price dataAll Milk Price: Pennsylvania and U.S. All Milk Price (USDA,2018)

Predicted Class III, Class IV, and Pennsylvania Mailbox Price(average of the Eastern and Western PA mailbox Price)(Gould, 2018)

Alfalfa Hay: Pennsylvania and U.S. monthly Alfalfa HayPrice (USDA, 2018)

Corn Grain: Pennsylvania and U.S. monthly Corn Grain Price(USDA, 2018)

Soybean Meal: Feed Price List (Ishler, 2018) and average ofDecatur, Illinois Rail and Truck Soybean Meal, High Proteinprices, National Feedstuffs (Gould, 2018).

ReferencesBailey, K. and V. Ishler. “ Dairy Risk-Management Education:Tracking Milk Prices and Feed Costs ”. Penn State Extension.Accessed 9/20/2017.

Beck, T.J., Ishler, V.A., & Goodling, R. C. 2018. “DairyEnterprise Crops to Cow to Cash Project,” the PennsylvaniaState University. Unpublished raw data.

Dairy Records Management Systems. “DairyMetrics OnlineData Report system”. Accessed 9/14/2017.

Gould, B. 2018. “ Predicted Mailbox Prices". UnderstandingDairy Markets website. University of Wisconsin-Madison.Accessed 6/2/2018.

Gould, B. 2018. “ National Feedstuffs: Soybean Meal, HighProtein ”. Summary of USDA AMS Grain Reports. Accessed6/2/2018.

Ishler, V. “ DairyCents Mobile App ”. Penn State Extension.#App-1010.

Ishler, V. “ DairyCents Pro Mobile App ”. Penn StateExtension. #App-1009.

Ishler, V. “Feed Price List”. Personal Communication.Accessed 6/5/2018.

Microsoft 2016. “ Forecast.ets function ”, Office HelpWebsite.

USDA NASS, 2018. Agricultural Prices, Quick Stats version2.0. Accessed 6/5/2018.

Page 4 Dairy Outlook: June 2018

USDA AMS, 2018. Milk Marketing Order Statistics. Accessed6/5/2018.

The Dairy Outlook Newsletter is supported by an Annual USDARMA grant.

AuthorsDavid L. SwartzAssistant Director, Animal Systems Programsdls19@psu.edu717-385-5380

Robert C. Goodling, Jr.Extension Associate, Dairyrcg133@psu.edu814-863-3663

Timothy BeckExtension Educatortjb12@psu.edu717-870-7702

Virginia A. IshlerExtension Dairy Specialistvishler@psu.edu814-863-3912

Penn State College of Agricultural Sciences research and extension programsare funded in part by Pennsylvania counties, the Commonwealth ofPennsylvania, and the U.S. Department of Agriculture.

Where trade names appear, no discrimination is intended, and no endorsementby Penn State Extension is implied.

This publication is available in alternative media on request.

Penn State is an equal opportunity, affirmative action employer, and iscommitted to providing employment opportunities to all qualified applicantswithout regard to race, color, religion, age, sex, sexual orientation, genderidentity, national origin, disability or protected veteran status.

© The Pennsylvania State University 2018

Code: ART-5446