Utah Ag Bankers Conference Alfalfa and Dairy Outlook

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1 Utah Ag Bankers Conference Alfalfa and Dairy Outlook Dillon M Feuz Utah State University Extension Feb 2018

2 Hay Market Most data provided by USDA- AMS, NASS & FAS

3 Utah Price vs National Price Utah Price National Price

4 Annual Utah Alfalfa Hay Price Model ( ) Supply 7 State May Hay Stocks National Corn Price Demand Exports of Alfalfa National Milk Price National Feeder Cattle Price

5 Change in Utah Alfalfa Hay Price Explained by change in Each Variable Variable Change $/Ton Alfalfa 7 State May Stocks 100,000 ton increase -$1.22 National Corn Price $1/bushel increase +$11.33 Alfalfa Hay Exports 100,000 ton increase +$1.57 National Milk Price $1/cwt. increase +$1.46 National Feeder Cattle Price $1/cwt. increase +$0.41 This model accounted for 93% of the variability in annual Utah Alfalfa Hay Prices in

6 Using Model to Explain 2016 versus 2015 Alfalfa Hay Prices 2015 average Price $ average Price $140 A decrease of $26 Hay stocks were up 245,000 7 states -$2.99 Corn Price decreased from 3.71 to $2.49 Exports increased by 300,000 $4.71 Milk Price decreased from to $1.59 Feeders decreased from to $25.24 Total predicted decrease in Utah Alfalfa -$27.60

7 Mil. Tons 120 US ALL HAY STOCKS December Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center

8 Mil. Tons 30 US ALL HAY STOCKS May 1 (Beginning of Crop Year) Data Source: USDA-NASS, Compiled & Forecasts by LMIC Livestock Marketing Information Center

9 Mar $3.62 May $3.70 Jul $3.77 Sep $3.84 Corn Futures as of early Feb Dec 18 $3.93 $ /cwt Dec 19 $4.10 in Utah Dec 20 $4.14 These prices are about a dime higher compared to one year ago futures.

10 Class III Milk Futures Early Feb 2018 Change from Month $/cwt 2016 January $ $2.90 February $ $3.40 April $ $1.50 June $ $1.95 August $ $1.10 October $ $0.85 December $ $0.25

11 Feeder Cattle Futures Jan 2018 Month Price Change from 2017 Jan $144/cwt +$14/cwt Mar $149/cwt +$20/cwt May $150/cwt +$5/cwt Aug $153/cwt +$10/cwt Oct $153/cwt -$1/cwt Nov $152/cwt -$4/cwt

12 Thous. Metric Tons 3000 U.S. HAY & HAY PRODUCT EXPORTS Annual Other Hay Alfalfa Hay Alfalfa Cubes Alfalfa Meal & Pellets Poly. (Alfalfa Hay) Data Source: USDA-FAS, Compiled & Analysis by LMIC Livestock Marketing Information Center

13 $ Per Ton ALFALFA HAY MONTHLY AVERAGE PRICE Received by Farmers, U.S., Crop Year Based on my annual model May Supplies -1,400k $17.08 Milk Price -$1.65cwt - $2.40 Exports growth 200K $3.14 Corn Price +$0.10 $1.33 Feeder cattle price even $0.00 Expected Price 2018 $19.15 MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR Avg. 11/12-15/ / /18 Data Source: USDA-NASS Livestock Marketing Information Center

14 Western States Prices AZ CA ID NV OR UT WA

15 DAG & Response Functions Practical Interpretations California is the leading market for alfalfa hay prices in the West All other states quickly respond to California lead Utah looks to Washington for price signals with no lag time THIS DOES NOT MEAN PRICES ARE EQUAL NOR MOVE BY EQUAL AMOUNTS

16 Summary May Hay Stocks, Corn Price, Exports, Milk Price and Feeder Cattle Price all impact Utah Alfalfa hay prices California is the leading market for Alfalfa hay prices in the West It appears Utah also looks to Washington state for price signals Prices likely $20/ton higher than a year ago

17 Dairy Market

18 Thou. Head 9425 DAIRY COW INVENTORY US, Average, Quarterly JAN-MAR APR-JUN JUL-SEP OCT-DEC Avg Data Source: USDA-NASS Livestock Marketing Information Center 02/07/18

19 Thou. Pounds 24 MILK PRODUCTION PER MILK COW , Annual Data Source: USDA/NASS Livestock Marketing Information Center 02/07/18

20 Bil. Pounds 56 MILK PRODUCTION US Total, Quarterly JAN-MAR APR-JUN JUL-SEP OCT-DEC Avg Data Source: USDA-NASS Livestock Marketing Information Center 02/07/18

21 $ per lb $1.90 OCEANIA SKIM MILK POWDER Biweekly $1.70 $1.50 $1.30 $1.10 $0.90 $0.70 $0.50 JAN MAR MAY JUL SEP OCT DEC Avg Data Source: USDA-AMS Livestock Marketing Information Center 12/19/17

22 $ per lb $1.80 EUROPE WHOLE MILK POWDER Biweekly $1.60 $1.40 $1.20 $1.00 $0.80 $0.60 JAN MAR MAY JUL SEP OCT DEC Avg Data Source: USDA-AMS Livestock Marketing Information Center 12/19/17

23 Milk Market Dairy Cattle numbers have increased US Milk Production up a little year over year Demand for milk & cheese a little lower Exports A lot of competition EU/World Supply up

24 Class III Milk Futures Early Feb 2018 Change from Month $/cwt 2016 January $ $2.90 February $ $3.40 April $ $1.50 June $ $1.95 August $ $1.10 October $ $0.85 December $ $0.25

25 Summary Milk prices $1-3/cwt lower than 2017 Probably below or near break-even for most producers