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Buckeye Dairy News : Volume 1 Issue 8
15- Measures of Competitiveness
Ernest Oelker, Agriculture Agent
This month: Total feed costs per hundredweight (cwt.) of milk sold
Competitive Level: Less than $6.00 per cwt. of milk sold
(May range from below $5.00 to around $8.00, depending on feed prices)
Calculation: Total cost of all feeds fed to all dairy cows and replacement heifers
? total cwt. of milk sold for the same period
Total feed cost per cwt. of milk sold measures the effectiveness of management in controlling the largest cost items in producing milk. You should carefully calculate the total cost of producing home grown feeds, including interest and taxes on real estate and depreciation on machinery and storage facilities. Compare this figure to market values to see if your crop production costs are reasonable. Many dairy farmers can purchase feed more cheaply than they can grow it.
If feed cost is above $6.00 per cwt. of milk sold:
Evaluate feed quality, feed production costs, and purchased feed costs. Frequently balance rations for all groups based on current feed analyses. Feed for high production if cows have the genetic potential. If cows do not reach their potential, evaluate facilities.
Keep dry periods below 60 days. Keep culling rates below 25 percent. Keep age at first calving below 24 months. Consider using BST.
Milk Price Outlook
Cam Thraen, Agricultural Economist
The announced Basic Formula Price (BFP) for June is $ 13.10 per cwt. for milk testing 3.5 percent butterfat. This price is up $2.22 over the May price and $2.36 higher than June 1997. The adjustment to the M/W base month price of $11.05 is a plus $2.05. The current butterfat differential for June is 21.7 cents. A year earlier the butterfat differential was 11.4 cents.
The strength of the $2.22 increase in the BFP was fueled primarily by the strong cheese and butter market prices in June compared to May. Remember the change in the BFP reflects the change in the MW base month price and the current month adjustment in the product prices. While the base month price declined from April's $11.82 to May's $11.05, cheese and butter prices showed strong increases.
What is ahead for July? In trading on July 9th both barrels and blocks remained unchanged from the previous week at $1.545 and $1.6075 respectively. The butter market remained unchanged in trading on July 10 with Grade AA prices at $1.985. At prices this high buyers are doing what they can to adjust their demand and it is likely that we will see more sideways trading and therefore the upward adjustment to the June MW base month price will not be as large as the previous month.
The current CME BFP futures prices for July and August are $14.50 and $14.08 respectively. The market is saying that, barring an unlikely strong reversal in the butter and cheese markets over the next three weeks, the July BFP should move up again into the $14.00 - $14.50 range.