February 27, 2012

US dairy income to fall on rising feed costs

US dairy income is forecast to drop by 6% this year on the back of higher feed prices, the USDA said Thursday (Feb 23).

At its annual outlook forum, the USDA said the dairy industry may step back a bit from last year's healthier milk prices and the cost of doing business is climbing.

Farm debt will climb as well, said Timothy Park, an economist with the USDA Economic Research Service, and farm income across agriculture will fall. But the news is not entirely discouraging; prices for cattle and calves, a secondary income source for dairy farmers will climb by 3%.

Farm asset values will climb, and farmers who grow enough corn and soy to sell will benefit from higher prices for those commodities, economists said. Corn prices will climb by 8.3%, Park said.

Fertiliser prices are projected to ease by 0.001%, the department said.

Dairy farmers are coming off a year with record-high milk prices, having seen the price for milk used in cheese and other manufactured foods, the biggest part of the business in the north country climb to an average of US$18.37/100 pounds, from US$14.41 a year earlier.

Even with declines projected this year, milk prices will remain favourable for farmers, said Robert Cropp, a dairy economist at the University of Wisconsin-Madison, in his published annual outlook. Both Cropp and the USDA predict a modest increase in milk production.

Milk prices will depend on production, he said, as well as on expectations of tight supplies of stored cheese, butter and other dairy goods.

The Northeast as a whole will see net farm cash income fall about 14%, the USDA said, but the situation is worse in poultry-producing areas such as the Southeast, where net farm cash income could fall by more than 20%.