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With the exception of the spot period for nearby Q4 2010, the forward profit margin outlook for dairy producers is unfortunately poor as negative returns are reflected throughout next year. In our last installment of this margin outlook in July, forward profit margins in 2011 were still projected around a breakeven level through the first half of 2011, although this has since changed as forward values of feed costs and milk have diverged over the past few months.
As of mid-October, profit margins for the first half of 2011 were projected at a loss of around $2.00 per hundredweight (cwt), with losses of about $0.80 per cwt projected in Q3 2011, which we have also started tracking since our last update in July.
How much is $13,552,485,816,852? Let’s consider one billion first. One billion seconds ago it was 1959. Now multiply one billion by 13,552 and you have our national debt. But don’t stop there – it is constantly growing. A number that is easier to comprehend is $43,371 – each American’s share of the debt. Why don’t you go ahead and tack it on to your balance sheet?
How did we get here?
In all but four of the last 30 years, our U.S. government has spent more money than it has brought in. The most recent federal budget deficit, fiscal year 2009, was $1.4 trillion – the largest in the history of the U.S. In terms of gross domestic product (GDP), the deficit was 10 percent in 2009 – the highest since World War II. Final numbers are not available for 2010, but the Congressional Budget Office (CBO) estimates it will be around $1.3 trillion.
The objectives of federal milk marketing orders (FMMOs) are to assure consumers of an adequate supply of wholesome milk for beverage purposes and to promote greater producer price stability and orderly marketing, says Bob Cropp, professor emeritus and dairy marketing specialist, University of Wisconsin – Madison. To achieve these objectives, FMMOs use classified pricing and pooling.
Initially, FMMOs had two classes, one for beverage milk called Class I and another for all manufacturing use milk, called Class II. Later, a third class was added for milk used to make soft manufactured products. A fourth class, Class III-A was added in 1993 in some orders for milk used to make butter and nonfat dry milk.
As we enter the fall months of the year, it appears that we finally have milk pricing that would put us in the black once again, but how long will it last? We are already seeing the Class III market on the CME fall below the cost of production for the first six months of 2011.
Beginning in 2009, we have endured unprecedented losses. For approximately 10 months, we experienced losses averaging $5 per hundredweight (cwt), which was followed by another eight months of less than breakeven prices. We have seen our cow loans stretched to the maximum, our feed loans out of compliance, our property values falling below desirable levels and our cow values falling as well.
The Cal Poly Classic Sale was held on Friday, October 15, 2010 at the Cal Poly Dairy Farm in San Luis Obispo, California. The sale pavilion was packed with sale goers, Cal Poly alumni and friends.
42 live and choice Holstein lots averaged $3,024, and 65 Holstein embryos averaged $438.00. 12 live and choice Jersey lots averaged $2,732, and 30 Jersey embryos averaged $312.50.
The Southern Great Plains Dairy Consortium partnered up with New Mexico State University and Texas AgriLife Extension to host the Dairy Industry Short Course, held recently in Amarillo, Texas. The short course, which took place October 12-14, was designed for extension agents and allied industry representatives who wished to learn more about the large herd management and the major issues impacting the industry in the Southwest.
This article was #24 in PDmag's Top 25 most-well read articles in 2010.
Summary: The National Dairy Producers Organization was established in the early fall of 2010. Doug Maddox and Gary Genske, both on the board of directors, explain the goals of the organization, which include establishing a unified voice in the dairy industry and restructuring the national milk pricing formula.
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Click here to see which article ranked #25.
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