Cattle and dairy remain two of the hardest hit ag commodities. Many hay producers argue hay demand will not decrease. In the short term that is true. The response by cattle producers is to slow rate of gain on feeder calves until prices improve. Delaying the movement of calves to feedlots may increase hay demand.
Foodservice demand crashed. Dairy processors have begun to enforce quota, base, or whatever you want to call shipping allocations. Dairy producers over their allocation are being forced to dump milk or receiving significantly less for their over-base milk. The financial incentive for dairy producers is to quickly reduce production. A change in ration may be enough to ease milk production on an individual operation. However, on a national level, there will be fewer dairy cows.
Dairy is the first wave of lost forage demand, cattle is further down the road but will follow.
If you market hay to dairies or feedlots have conversations with your customers now. Find out what they are thinking, make a plan. No one in hay, cattle, dairy or any other commodity operates on a 30% margin. Cattle and dairy prices are unprofitable and something has to change.
April 21, 2020
|Current Price||30 Day Change||1-Year Change|
|Feeder Cattle (April)||$1.17/Lb||-5%||-23%|
|Class III Milk (May)||$10.47||-21%||-34%|
|Alfalfa (Premium Northwest)||$197/Ton||-7%||-7%|
Perdue University professor James Mintert, "In the short run I don't expect a big impact on feed demand because the animal are still out there. But these kinds of price changes do suggest smaller livestock production, smaller feed consumption going forward. Not so much in 2020 but in 2021. .... There are concerns for livestock feed producers down the road."