Missouri Dairy Business UpdateCommercial Agriculture
Volume 1, Number 4

December 2001

Milk Price Bottom

The latest USDA Dairy Outlook report, November 28th, 2001 predicts the following class III prices for the 4Q of 2001 and for 2002:

4th Quarter 2001
1st Quarter 2002
2nd Quarter 2002
3rd Quarter 2002
Annual for all of 2002
$12.50 to $12.80
$11.10 to $11.70
$10.50 to $11.40
$11.10 to $12.10
$11.20 to $12.10

The November Class III price was $11.31per cwt. As of today, December 3, 2002, if the futures market is a correct predictor, November holds the bottom for class III prices for the next twelve months. The following graph plots actual class III prices since January 2000 and then what the futures market is predicting for prices over the next twelve months.

Prices for 3.5% milk in the SE Order in Missouri and the Central Order in Missouri are estimated for the next year by adding $1.70/cwt for SE Order shippers and $.70/cwt for Central Order shippers to the class III futures.

Milk Prices in Missouri


Dairy Options Pilot Program Round IV approved next year.

"Dairy Profit Weekly" is reporting that Round IV of the popular Dairy Options Pilot Program, (DOPP), has been approved for next year. DOPP is a government risk management-training program that will pay for 80% of the cost of buying put options to put a floor under future milk prices for participating dairymen.

This year Dallas County in Missouri has been added to the list. That will make the following 13 counties in Missouri eligible for the program: Barry, Dallas, Douglas, Greene, Howell, Laclede, Lawrence, Newton, Ozark, Polk, Texas, Webster, and Wright.

Dairymen in those counties will be notified late next spring about the opportunity to participate in the program. Meanwhile, anyone wanting to learn more about it may check out the DOPP Website

http://www.rma.usda.gov/training/programs/dopp/doppq_a.html

Or the University of Wisconsin has a nice training web site about dairy risk management:

http://www.aae.wisc.edu/future/


Who Let the Cows Out!!!!!!!!!!!!

In 1950 Missouri contained almost a million dairy cows. Today that number is 140,000. The following map shows which counties lost their dairy cows, (White), and which counties kept their dairy cows, (Green). Counties with the darkest green kept 100% of the cow numbers they had in 1950. In many of the counties, the numbers dropped and then rose again in the 1970's and 1980's. Still it makes an interesting picture.

Milk Cows in 2000


Dairy Budget for 2002:

The following dairy budget for 2002 presents estimated costs and returns for dairymen in Missouri next year. The 17,500 pound expected milk production is close to our October statewide DHIA average of 17,507 pounds of milk.

The price of $12.60 reflects the net milk price net after hauling, advertising and all the other deductions are made from the milk check. This year the cost of raising the heifers is included in the budget also.

17,500 lbs milk, with cost of raising replacements included.

Estimated IncomePrice
Milk Sales (Price in $/cwt is NET of hauling, promotion, advertising & capital retain)$12.60 $  2,205
Cull Cow Sales 36% total cull rate, 32%sold. 4% death rate. $     130
Young Stock Sales $      55
Misc. Income (Gov. program, coop dividends, etc) $      25
Total Gross Receipts A $ 2,415
Estimated Operating Costs Per Cow
   Feed (Including waste)
     Lactating Cow: Forage $     357
         Concentrate $     618
     Dry Cow (Forage & Concentrate) $      90
     Heifer Raising (Forage & Concentrate) $     350
      Total Feed Costs $   1,415
Veterinary and medicine $      88
Other livestock material & services: (breeding, DHIA, BST, Supplies.) $     230
Dairy equipment & machinery costs: milking equipment repairs, feed prep, manure handling, (does not including forage production costs) $     120
Utilities $      45
Other (insurance, real estate repairs, misc.) $      67
Operating Interest (1/2 Operating Costs X 8%) $      79
Total Cash Costs Except Labor B $   2,044
Income over all Operating Costs except labor A-B $     371

Gross margin available for hired labor, family living, principal & interest payments, and new capital investments.


Update Tidbits

Tax Time
Anyone looking for a good easy to read reference on the latest changes in the tax code and their impact on farmers can download this 31 page extension publication "Tax Planning and Management Considerations for Farmers in 2001" from Purdue's website:
http://www.agecon.purdue.edu/ext/pubs/taxplan2001.pdf

Central Order Pooling Hearing Transcripts
The transcripts of the hearing held Nov. 14th and 15th regarding changing the pooling regulations for the central order are available at:
http://www.ams.usda.gov/dairy/central_pooling_standards.htm


Prepared by Joe Horner,  Dairy and Beef Economist, Commercial Agriculture Program, University of Missouri. To contact Joe, call 573-882-9339, or e-mail hornerj@missouri.edu. All copies of this publication are accessible through AgEBB.


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