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Drought-driven rise in hay prices eats into dairy margins, especially out west

It’s not enough that the prices for fuel and fertilizer keep going up but everything dairy producers use to feed cows also is on the rise. Such across the board increases in costs slices into the difference between expenses and income. Now, drought in the gut of the nation has withered supplies of hay enough that many dairy producers must ante up more dollars for that key ingredient of a dairy herd’s diet.

“The cost to produce a hundred pounds of milk will remain relatively high this winter with high corn, soybean meal and hay prices as well as increases in energy and other input costs. Current alfalfa hay prices are high compared to a year ago, especially in the west and southwest,” reports Bob Cropp in the November Dairy Situation and Outlook.

There’s a distinct regional spread in the increased hay prices, Cropp reports, with Wisconsin and the eastern United States faring better.

“For example, October hay prices were 88 percent higher for both California and Idaho, 80 percent for Arizona, 79 percent for New Mexico and 44 percent for Texas compared to 14 percent in Wisconsin and just two percent for New York. The average for the U.S. was 72 percent higher hay prices,” Cropp says.

With projected lower milk prices margins for milk, production is likely to trend lower in 2012. Lower margins ought to stop the growth in the nation’s cow numbers and dampen the increase in milk per cow. USDA is forecasting a 1.4 percent increase in total milk production for 2012. Such an increase could keep the Class III price in the range of $16.30 to $17.25 for any given month in 2012, the Dairy Situation and Outlook concludes.

View the complete November Dairy Situation and Outlook here:
http://future.aae.wisc.edu/dairy_situation.html