Dairy Excel: Feed quality critical from here on out

I hope that all readers of this column had a wonderful and pleasant Fourth of July. The corn market, however, could not wait until the Fourth to begin shooting some impressive fireworks. On June 30, the USDA issued two bearish reports: the updated acreage figures and the quarterly grain stocks report as of June first.

The USDA estimate of 92.282 million planted corn acres was approximately 1.5 million acres more than the average trade guess.

In addition, the June 1 corn stocks figure came in at 3.670 billion bushels, a figure well above the loftiest trade estimate.

When we combine the extra 345 million additional bushels in the stocks report with the extra 1.7 million planted acres, the net effect is that the USDA has “found” an additional 600+ million bushels of corn — corn we didn’t know was there the previous day.

So it shouldn’t be a surprise that the December 2011 corn futures dropped from a high of $7.20 June 9 to a low of $5.76 on July 1, with a slight recovery since ($6.08 as of this writing).

Where are grain prices heading?

Although $6 corn is by no means cheap corn, feed prices should keep coming down from the highs that we experienced in late spring.

From now until harvest, the grain markets should be highly sensitive to the weather due to the very late planting in the eastern portion of the Corn Belt — no need to show figures for Ohio…

So expect wide gyrations in grain prices over the next three to four months.

Encouraging milk prices

Fortunately for our dairy producers, milk prices have risen gradually over spring.

The June Class III and IV prices released on July 1 stood at $19.11 and $21.04/cwt, respectively. Historically, these are very, very strong prices and should result in significant profits for our producers, but historically corn has not been at $6+/bu, and soybean meal at $375+/ton.

We estimate that a Class III of roughly $16 to $17/cwt is currently required just to break-even on an average Ohio dairy farm.

What is also very encouraging is that the milk futures from July to December 2011 are averaging $18.30 for Class III and $19.28 for Class IV. Thus, if the traders are right, we should have very solid milk prices at least until Christmas.

But none of these prices are guaranteed and producers should at least be drawing a risk management plan.

You gotta produce milk to sell milk

Milk prices are important, but irrelevant unless one has milk to sell. I am very concerned about our cows’ productivity later this year when many dairymen will be forced to feed first cut forages that were harvested under very challenging conditions, and likely of moderate to poor quality.

This year it will be more important than ever to segregate forages based on quality so that better quality forages be fed to the animals in greater needs, i.e., your best cows.

Hopefully, fall will not bring an early frost so that we can balance solid cow diets using good quality corn silage as the primary forage source. For Ohio and western Pennsylvania, the quality of the forage crops that we harvest from now on will be a big determinant of the profitability of our dairy farms next year.

This is not a time to look for volume and yields; forage quality from harvest to feeding should be the focal point.