The author is an assistant extension professor in the department of agricultural and applied economics at the University of Missouri.

The USDA Prospective Plantings report unveiled a major surprise in this year's corn acreage. With a whopping 93.6 million acres expected to be planted, new crop corn futures quickly moved lower. Another good crop in the bin this fall will keep downward pressure on corn prices and continue a steady decline in corn prices from the record-shattering highs of a few years ago. In fact, corn prices have moved lower than many corn prognosticators ever anticipated.

Lower feed costs have helped moderate a difficult financial situation for many dairy producers who currently face the lowest milk prices since early 2010. However, the effect of lower corn prices is not always felt equally across the country.

In late March 2013, the USDA Agricultural Marketing Service (AMS) reported single car unit Chino Valley, Calif., corn prices at $8.76 per bushel. By the same period in 2016, they fell to $4.82 per bushel. AMS reported Minneapolis corn prices fell from $7.15 per bushel to $3.23.

Larger corn supplies and cheaper transportation allowed for a 45 percent decline in Chino Valley corn prices while Minneapolis corn prices fell by 55 percent. The large reductions in corn prices are helpful to dairy producers, yet this direct comparison of corn prices may mask some of the regional effects of dairy feed costs.

The USDA Economic Research Service (ERS) estimates that 63 percent of Wisconsin dairy farmers' feed costs come from homegrown harvested feed compared to 26 percent in California. Dairy producers who buy a majority of their dairy feed may be in a better financial position today than those who grow more of their feedstuffs, as the total corn production cost reported by ERS has changed little over the 2013 to 2016 crop seasons. ERS reported 2013 total corn production costs at $676.66 per acre while they estimate 2016 at $679.72 per acre.

The situation has changed rapidly relative to a few years ago when those growing their own feed were in a better position to manage historically high corn prices. It bears watching how this change may affect regional milk production growth in the next few years.

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(c) Hoard's Dairyman Intel 2016
April 11, 2016
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