Dairy Outlook: February 2019

Pennsylvania and U.S. All Milk Price remained at the $18.00 and $17.00/cwt levels, respectfully. This was just below the October prices, ending a four month upward trend. Class III prices continued a downward path since September 2018 and seemingly having reached it's own plateau in January 2019. A bright spot has been Class IV prices, which have been steadily climbing since September 2018. Feed costs for November were mixed with the U.S. feed costs remaining relatively level to the previous month, while Pennsylvania prices continued on an incremental climb upward, eroding the milk margin and income over feed cost within Pennsylvania.

 

Pennsylvania feed costs are now approaching an 11 year average for the first time since the end of 2015 (Figure 1). This level is not near the high feed prices experienced in 2008 or 2011 through 2012, but they could get there if this increase continues. It is also interesting to see how Pennsylvania milk margins have evolved over the last 11 years (Figure 2). For most of the 21st century, milk margins were on three-year cycle of high, average, and low. Since 2015, there have been two major shifts. First, the cycle appears to have condensed into a two-year period, with the extremes of the highs and lows being less dramatic. More important is the second shift. This price swing has been at or below the 11 year margin average, making it challenging to meet cash flow demands of the dairy enterprise. While projected to be better than 2018, 2019 will continue this mediocre margin trend.

 

Figure 1: Eleven year Pennsylvania Feed Cost/cwt¹ Trends (2007 - Present)

 

Figure 2: Eleven year Pennsylvania Milk Margin/cwt¹ Trends (2007 - Present)

 

 

Table 1: Twelve month Pennsylvania and U.S. All Milk Income, Feed Cost, Income Over Feed Cost ($/milk cow/day)

 

Table 2: Twelve month Pennsylvania and U.S. All Milk Price, Feed Cost, Milk Margin ($/cwt for lactating cows)

 

Figure 1: Twelve month Pennsylvania Milk Income and Income Over Feed Cost ($/milk cow/day)

 

Figure 2: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)

 

Table 3: Twenty-four month Actual and Predicted* Class III, Class IV, and Pennsylvania All Milk Price ($/cwt)