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On Cows and Markets

By E.W. Lang

We're sixty days out from the week of $1 cheese and $10 something milk when the dairy industry was seeing the most abrupt and most dramatic slaughter - both literally and figuratively - perhaps in the history of food production. Milk-Feed Margins are now at near record levels.

It will take a year of these milk/feed margins, plus the most generous of government subsidies, plus significant refinancing against longer term equity - if there is any, for most milk producers to again be able to operate in a normal manner. 
That would be a manner similar to late 2014, when milk had been well over $20 for a year, old debts had been paid, interest and principal were made current at the bank, along with the depreciation schedule on the farm.

I don't expect a full year of $20+ milk and $11 to $14 feed margins, but it could happen. If you're thinking you should modernize from 50 in stanchions to 90 cows in a parlor, you're 40 years too late on that technology advance, and are likely better stay with what you're doing, unless you got a really good union job on the side. Even then, you'll have to keep working 90+ total hours, even when there are no surprises in the maternity pen or elsewhere. Re-capitalizing for 90 - or maybe even 900 - is going to be tough when milk is back to a historically normal $15 per cwt. Many will try, and some will succeed; it's a time tested rule of free markets and human nature.

Now, if you have been looking for a chance to liquidate it may be that "the time is now and the opportunity is today." It's a phrase I've used in the auction box when asking for money and it's apt today. Producers have an unexpected chance to summon the auctioneer, take the money and get out, particularly when current facilities need serious dollars for viable size and efficiency.

Witnesseth: At Premier Livestock Auction in central Wisconsin, top Holstein cows were $2100 to $3000 on Wednesday. Lots of good quality cows were $1450 to $2000. Top Springers sold from $1850 to $2000. Loads of two and three year olds brought $1800 to $2800. Most market cows were called stronger at 51 to 59 cents. McDonald's will need just a few more of those slaughter cows as they are going to discontinue the briefly lauded Beyond Meat burger.

Blocks ended the week at $2.58 per lb., down eight from Friday, and after being an all-time high $2.81 on Tuesday. Barrels ended today's trade at $2.40 per cwt., up 12 cents over the week. Class III Milk futures are $20.93 for June, which is down six cents for the week. July is up 46 cents at $21.64 and August is down 20 cents at $19.07 per cwt. The rest of this year was off 20 to 90 cents from Friday, last.

Spot milk was $1 under to $2 over Class this week compared to 50 cents to $2.50 over Class last week. That's some key information there. Orphaned tankers of milk, all priced over Class, perhaps only one week in the last 5 1/2 years. Oh, and someone said they dumped some skim milk out east this week. That's unconfirmed at this point.

Butter lost nine cents to close at $1.76 per cwt. In response, Class IV Milk Futures were down 26 cents per cwt. for June at $13.08, down 37 cents for July at $14.45, and down 44 cents for August at $14.49 per cwt.

The registered Holstein industry is saddened with news that long time, popular Classifier Ron Schaap has passed away. I knew Ron initially from his tenure as Herd Superintendent at the internationally renown Pinehurst Farms in Sheboygan Falls, Wisconsin. Ron put the 1000 lb. butterfat record on the EX-97 Bubaleah who's son, Copyright, dominated the Holstein show ring for fully a bovine generation. More recently, Ron was a sales representative for Dairy Agenda Today, where OCaM will be posted on Monday, Lord willing.

The October 12 to 19 National Dairy Show in Des Moines, Iowa, remains in the development process. Venue cost, event sponsorship and estimated entry fees are all being considered within any likely shutdowns and C19 cancellations in Iowa and elsewhere. An announcement is likely on July 16, with any 
entries to open on September 1.

Reader Comments
Comments posted do not express the viewpoint of Dairy Agenda Today or its staff members.

Larry Kleiner
July, 7 2020
Eric-Is it possible to help us understand the PPD?
June, 29 2020
you should be a chicken farmer,counting them before there hacthed NEGETIVE PPD WILL TAKE ALL PROFIT FOR NEXT SEVERAL MONTHS by then milk will be back 14-15 dollers