Yearly Archives: 2012

Oct 02, 2012
At least three suicides by dairy producers have occurred this year in California’s Kings County, which adjoins Tulare County and makes up part of the nation’s No. 1 milk-producing region.

Financial stress is not only widespread in California’s San Joaquin Valley but across the U.S. There are reports that some dairies are losing $100,000 per month. Many expect this year’s dairy farm troubles to approach the severity of 2009’s crash-and-burn ordeal. Equity – or what was left of it – is vanishing, leaving many producers with little to show for years of hard work. Congress apparently doesn’t care enough about the industry’s woes, since it couldn’t or wouldn’t pass a farm bill before it recessed a couple of weeks ago.

So, it’s not unreasonable to ask if dairying is worth the hassle anymore.

I posed the question to Charlie de Groot, a third-generation dairy producer from Fresno, Calif., and one of Dairy Today’s 2012 Dollars & Sense columnists. His family operation milks 2,400 cows.

“In the short term, no, dairying is not worth the hassle, but we can’t just close the doors and move on to something else,” de Groot told me. “It’s not easy to get in and out of. A majority of dairy operations are family-owned and -operated, and so it isn’t just a job that we can quit. It’s a lifestyle that we’ve invested our time, talents and treasure into.”

That’s a pretty sobering assessment from a man who’s only 33 years old, with a wife and four children. Makes me want to look for help and hope. Which brings me to where I am today – at World Dairy Expo in Madison, Wis.

World Dairy Expo is the dairy industry’s show of shows. This dairy Disneyland at the Alliant Energy Center brings back the shine to the industry, if only for a few days. From Oct. 2 through Oct. 6, more than 65,000 people from 90 countries will visit Expo. They’ll come for the cattle show judging, award winners, educational seminars, the best in cattle genetics – and so much more.

Some 860 animal health, nutrition, equipment, marketing and dairy service companies will share their best and latest products and services. Millions of dollars have been invested in those companies and on these grounds. In the Madison area alone, the show has an estimated impact of $15 million on the economy. Behind the scenes, there will be more high-stakes meetings than most people would ever guess.

World Dairy Expo reflects the industry’s expertise, technology and commitment. It reveals the incredible focus of driven, intelligent people. It proves the U.S. dairy industry still dazzles, leads and performs.

World Dairy Expo may seem a world removed from the dairy you face every morning in California’s San Joaquin Valley, Idaho’s Magic Valley or the Texas Panhandle. It may be the furthest thing from your mind during that stressful meeting with the lender who’s ready to cut you loose. But maybe there’s something here for you – some thread of an idea, some possible product […]

September 27, 2012
By: Ed Clark, Top Producer Business and Issues Editor

Close to 11% of the U.S. corn crop was harvested prior to Sept. 1, which makes estimating the 2012 difficult.

Drought-driven corn shortage is a world-wide problem this year. “The U.S. is not the only one having trouble,” says Joe Glauber, USDA’s chief economist.

USDA’s latest forecast calls for global corn supplies to be down 4.1% in the 2012/13 marketing year, as a major drought has hit a number of key production areas, such as the EU-27 and the Black Sea region. The one major exception is China, the world’s No. 2 corn producer whose output is forecast to be higher in 2012.

Expect stronger corn production in the upcoming cycle from South America. “We’re anticipating better weather (in Argentina and Brazil) than last year,” Glauber says. “That part of the balance sheet (for 2013-14) hasn’t yet been planted,” however.

It’s possible that U.S. corn production could decline further in the Oct. 11 NASS Crop Production report, Glauber says, because next month’s numbers will reflect changes in harvested acres, which the September report did not.

One challenge for the department this year is to accurately calculate the 2012 crop, in part because harvest began so early. More than 1 billion bushels, close to 11% of the corn crop, was harvested prior to Sept. 1, which is actually in the old crop marketing year.

Questions Surround Soybean, Wheat Production
On soybeans, there are two major questions, Glauber says. One is planting and production in South American with global supplies so tight. The other is what happens to Chinese imports. “We think they will drop off a little bit,” Glauber says.

The wheat situation is decidedly different than that for corn and soybeans. U.S. wheat production is forecast to be higher this year, although global output is forecast to be cut more than 5%, as both European and Black Sea production is lower. Small grains were not included in USDA’s September Crop Report; rather the Small Grains Summary will be released Sept. 28.

One reason for the resurgence in U.S. wheat production is because winter wheat was on its way before the drought hit, and spring wheat was less affected by the drought than corn and soybeans, Glauber says. Even though global production is down, the situation is not dire like it was in 2007-08, however, when the world literally ran out of wheat, precipitating food riots in some importing nations. Stocks this year are much higher than back then, Glauber says. “The world had a phenomenal crop in 2011/12.”

*The grain markets are higher with beans leading the way, currently up 20 cents. The bulls are closely watching the seasonal patterns to determine potential harvest lows. Historically, corn and soybeans tend to put in the seasonal low during the first week of October, (15-year pattern, Moore Research).
*The outside markets are generally quiet with crude oil and natural gas trading lower, the dollar trending higher and equities bouncing slightly.
*Japanese Central Bank announcing they will be extending monetary easing by increasing their asset purchasing fund to 700 billion. This is an attempt to counter the strength of the yen and follows the U.S. Federal Reserve announcement last week to stimulate growth through additional quantitative easing.
*China domestic crush margins improving but still in the red.
*Russia Ag Minister reducing 2012 harvest estimate to 72-73 MMT’s; down from previous estimate of 70-75 MMT’s. Exports still estimated at 10-14 MMT’s.
*News wire poll estimating U.S. corn yield at 121.0 bpa versus USDA September estimate of 122.8 bpa. News wire poll estimating U.S. soy yield at 35.8 bpa versus USDA September estimate of 35.3 bpa.
*U.S. weather outlook is wetter for the Southern Plains and into the Southern Midwest in the 6-10 day outlook. Light rains will slow harvest progress in the ECB this weekend but mostly dry weather will dominate the entire Corn Belt into late next week.
*Moderate rains are forecasted late next week in Oklahoma, Kansas, Missouri, Iowa, Illinois and Indiana. After this event has passed, warmer and drier outlook should resume into the first week of October.
EARLY MARKET FEATURES
*The bulls resurface after a few days of liquidation.
*Rumors that China may have secured 4-5 cargoes of U.S. beans.
*Foreign and domestic feeders reportedly buyers of soymeal.

Distillers grain prices reached record high prices this summer due to both supply and demand factors that have largely resulted from the drought, says Darrell Mark, adjunct professor of economics at South Dakota State University during a recent iGrow Radio Network interview.

“The widespread drought has significantly lowered corn production for 2012, which has driven corn prices to record high levels,” Mark said. “As an input to ethanol production, these high corn prices have generated deeply negative margins for ethanol plants and have caused many to reduce production or shut down altogether. This reduced ethanol production correspondingly lowers distillers grain production because ethanol fuel and distillers grains are produced in fixed proportions. Thus, supply of ethanol coproduct feeds has declined this summer.”

He adds that on the demand side, livestock producers have bid up prices for distillers grains as they try to substitute it for drought-scorched pastures, record high hay and corn prices and limited availability of most feedstuffs.

“Interestingly, the slight pullback in South Dakota distillers grain prices in the last three weeks is likely due to the availability of silage that was cut in large quantities due to the drought,” he said.

Mark says the outlook for distillers grain prices going ahead will be highly dependent on the corn market.

“That, of course, is quite uncertain and highly volatile and will remain so until final yield estimates are available,” he said. “Some early yield estimates across the Corn Belt have sounded disappointing, but some have been better than expected too.”

USDA’s September crop production report only reduced national yield by 0.6 bushels per acre from its previous forecast.

“This was seen as somewhat bearish to the market,” said Mark, “but it might be the type of weakness to use to price two or three months of feed needs. Then see what harvest yields are before making more purchases.”

Mark points out that even at current price levels, there is some demand destruction occurring, which increases the potential for lower prices. It would take additional large reductions in corn production to spur the market much higher, he adds.

“Any decision to contract distillers grains now, at near record prices would be done with the belief that prices could move still higher,” he said. “While that could certainly happen, usually there is more downside possibility when prices of a commodity are at near record high prices. Still, if current prices offer an acceptable feeding margin, locking in distillers grain prices could be prudent risk management for some producers.”

For more information on this topic and to hear the iGrow Radio Network interview with Mark, visit iGrow.org.

Today’s USDA report is seen as bearish for corn prices, moderately bullish for livestock producers.

The prospect of larger-than-expected corn supplies after a season of drought dominated USDA’s World Agricultural Supply and Demand Estimates (WASDE) report today, consigning dairy forecasts to a relative nonevent.

Milk production, dairy demand and prices remained relatively unchanged from last month’s WASDE outlook. 2012 U.S. milk output is forecast at 199.9 billion pounds, down from 200 billion pounds projected in August but still higher than 2011’s production of 196.2 billion pounds.

USDA’s U.S. corn outlook reflected an increase in expected 2012-13 beginning stocks, which more than offset lower production. Today’s WASDE report put the nation’s 2012 corn crop at a 6-year low and pegged the soybean crop as the smallest in nine years. But, bucking expectations of shrunken corn supplies, USDA raised the carryover into the 2012-13 year by 160 million bushels from last month, to 1.181 billion bushels. It also raised expectations for higher feed usage.

The report was considered bearish for corn prices. December corn closed at $7.69 per bu., down 8¢.

The WASDE projections, however, may boost the outlook for livestock producers.

“High corn prices have been killing demand,” said Robin Schmahl, marketing and hedging specialist with AgDairy LLC.

Corn at $8 per bu. has resulted in heavier-than-normal livestock culling, slower ethanol production and fewer exports, Schmahl said.

“A weakening corn price will stop or slow dairy cow culling,” he said. Likewise, rising milk prices should help dairies “stop the bleeding,” added Schmahl.

Class III futures prices have surpassed $19 per cwt. on declining milk production and expectations of stronger demand in the coming months.

Today’s report estimated the 2013 All-Milk price at $17.85 to $18.85 per cwt., up from $17.80 to $18.00 per cwt. that USDA has estimated for 2012.