Fort Dodge Messenger, IA
01-25-07
Feed prices pressure dairies
By Kristin Danley-Greiner, Farm News staff
The hay market has seen prices rise, but with the surge in corn prices, hay
remains a cheaper feedstuff. Still, some farmers are finding themselves culling
their herds due to higher feed prices, particularly dairymen.
Paul McGill, owner of Rock Valley Hay Auction, said the hay market has been a
lot higher all year, but has tapered off a bit recently.
“It’s due to the nice winter we had until Christmas,” McGill said. “The weather
helped supplies last a lot longer than they would’ve. Grass hay is almost selling
better than alfalfa right now.”
Steve Barnhart, forages specialist at Iowa State, said summer prices are often a
bit lower than winter prices, but Iowa’s winter prices are slightly higher than the
past year. Shipments of hay to other drier states haven’t helped the supply
situation and pricing, either.
“Winter prices often increase toward late winter, particularly for high quality hay
that is usually in shortest supply,” he said. “All summer in 2006, reports from
Iowa, South Dakota and Nebraska ‘hay markets’ indicated that more high quality
hay was being shipped to Kansas, Oklahoma and Texas in response to their dry
conditions. The Nebraska prices seem to indicate that has taken some supply out
of the local market, and the option of alternate markets for the same hay, both of
which are influencing local prices.”
Robert Tigner, a farm management field specialist with Iowa State University
(ISU), said the rise in hay prices hasn’t been too different from past years. But,
feed prices for a number of farms are becoming a problem for those operations
that do not raise a lot of their own feed.
“Many of these dairy farms are the large scale farms that have been built in the
northwestern part of Iowa and a few that are in the Butler County area,” Tigner
said.
Dairy farms will have to compensate for the increase in feed prices, but adjusting
their feeding regimen. This can be done by using distiller’s grains and gluten as a
partial substitute for corn grain and some protein from soybean meal fed to dairy
cows, Tigner said.
“If by-product feeds are used, the new corn price will raise grain and silage costs
by approximately $1 per hundredweight of milk,” Tigner said. “However, the dairy
heifers may be able to use a new ration of corn stalks and wet DDGs instead of
the traditional corn, corn silage and hay diet. This change may reduce feed costs
by enough so that the overall effect of higher feed prices is only one-third to onehalf of the $1 I mentioned earlier."
Due to feed costs, McGill said the feedlot operators in his area are “scared to
death” with the way the markets have been swinging.
“Corn prices are a bigger problem than hay prices, but the producers have
definitely been sharpening their pencils, trying to figure out what to do, he said.
“The big corn surge this fall is making hay look cheaper all the time. The longterm effects will definitely hurt the cattle feeders and feeder cattle have dropped
so much we’re seeing a fair amount of cattle coming into yards since the first of
the year.
Robert Wisner, agriculture economist at ISU, said he expects hay prices to
increase even further into the early spring. Iowa average prices for all hay in
December as reported by the U.S. Department of Agriculture’s’ statistics service
were pegged at 11 percent above a year earlier, he noted.
“A lack of wheat pasture also has pushed a lot of light-weight feeder animals into
feedlots in the Southern Plains this past fall," Wisner said.
The dairy industry has been under stress due to the higher feed costs, but Tigner
said that other factors fueling the difficulties include higher fuel, fertilizer and
seed costs.
“But even with the past few months of higher corn and soybean prices, it is quite
possible that we have not seen the highs. With current demand from ethanol, a
year that has mild weather problems could spike corn prices much higher. Right
now we have $14 base milk prices offered through most of 2007 on the CME,
which should offset much of the feed price rise for most Iowa dairy farmers,
Tigner said. “There are several who were having some financial stress earlier this
year, though, who don’t need higher feed prices, but could use some time with
these higher milk prices to catch up on their financial position.
Tigner said new dairy farms and those seeking to expand will have to reconfigure
their business plans, not only because of the feed prices, but also due to rising
construction costs.
“Freestall barn construction costs have increased by as much as 20 percent in
the last five years. And dairy parlor manufacturing is no longer taking place here
in the U.S. for most of the milking equipment companies in Iowa, he said.
“Parlors have about 30 percent import taxes, which are passed along to the dairy
farmer.
Still, cattle farmers may find themselves in a more favorable situation when it
comes to feed costs than other livestock producers. Ed Kordick, economist at the
Iowa Farm Bureau Federation, said the ethanol industry has the potential to
make a huge impactî on the cost of feeding cattle.
“Although corn prices are going to historic levels, the DDGs from ethanol plants
are being used more and more in cattle operations to keep feed costs lower. In
Nebraska, feeding the co-products from ethanol saved some operations from
business failure that would have lost their supply of traditional feedstuffs due to
the drought, Kordick said. “Cattle and dairy cows have a competitive advantage
compared to other species, because DDGs can be fed at higher rates than to
swine, for example.