In your November issue . . .
DECEMBER 9 IS THE FINAL DAY to sign up for the 2023 Dairy Margin Coverage (DMC) program at your nearest Farm Service Agency office.
EVEN THOUGH PAY PRICES on milk checks still start with a “2,” margins on making that milk continue to shrink due to high feed costs. In fact, feed costs and inflation may pose the biggest risk to milk check revenue in the upcoming year — especially if the economy slips into a recession.
WHILE THE ALL-MILK PRICE started the year at $24, peaked at $27, and then slid back down the hill to the $24 range, feed prices have largely moved up, up, and up. Premium alfalfa hay climbed every month from January’s $262 per ton to August’s $343 value. Corn and soybean prices started the year at the lowest point before peaking in summer. While off the summit top, both remain near historic highs.
RISK MITIGATION IS MORE PARAMOUNT than ever before. Despite high milk prices, feed costs triggered DMC payments in both August and September. Read more on the matter in the Editorial Comment, “Don’t fight volatility, manage it,” found on page 610 of this issue.
CME FUTURES PROJECT a $21.30 per hundredweight (cwt.) Class III milk price for November and December and a $22.35 Class IV.
BOTH CLASS CONTRACTS NEARLY MERGE to start out the new year with January-to-June Class III averaging $20.45 and Class IV at $20.60.
THE 2023 ALL-MILK PRICE PROSPECTS remained in a rather tight window over the past 90 days between $22.50 and $22.90. In making that prediction, USDA economists pegged a $19.65 Class III and a $20.35 Class IV milk price. Both forecasts were down from the prior month.
INFLATION HAS TAKEN OFF, and dairy is not immune. On the retail front, dairy product prices are up over 16% when compared to the same time last year. That contrasts to an 11% spike for the entire food and beverage category and 8% when looking at the general cost of living.
DON’T DOUBT THE FED’S DETERMINATION to stomp down inflation. “They are going to do what they need to do to get there — even if it means pushing the U.S. economy into a recession,” shared CoBank’s Tom Halverson. To date, there have been six interest rates hikes this year.
BUTTERFAT SET A FIFTH MONTHLY RECORD by moving to $3.66 per pound in October milk checks. That likely will be the last new leader board posting in this run, as spot butter notched the sixth largest drop in early November sales (see chart below). Turn to page 637 for more details.