Beef and Dairy Outlook November 15,

2012

John J. VanSickle, Professor sickle@ufl.edu (352) 294-7634

Food & Resource Economics Dept. UF/IFAS

Milk production costs & returns per hundredweight sold, by State, 2011 1/

New All

Item California Florida Georgia Minnesota York Wisconsin States

dollars per cwt sold

Gross value of production:

Milk sold 17.74 23.84 18.73 19.76 21.39 20.14 19.67

Cattle 1.46 1.76 1.13 1.74 0.96 1.39 1.38

Other income 2/ 0.94 1.20 1.21 1.05 1.20 0.87 0.96

Total, gross value of production 20.14 26.80 21.07 22.55 23.55 22.40 22.01

Operating costs:

Feed--

Purchased feed 9.13 11.12 8.46 6.28 7.56 5.64 8.08

Homegrown harvested feed 3.95 2.39 1.87 7.68 5.72 7.44 4.82

Grazed feed 0.03 0.06 0.27 0.09 0.17 0.10 0.09

Total, feed costs 13.11 13.57 10.60 14.05 13.45 13.18 12.99

Other--

Veterinary and medicine 0.58 0.58 0.60 0.85 1.10 0.98 0.77

Bedding and litter 0.08 0.01 0.02 0.41 0.42 0.32 0.23

Marketing 0.28 0.15 0.20 0.19 0.28 0.22 0.22

Custom services 0.43 0.49 0.72 0.64 0.73 0.35 0.54

Fuel, lube, and electricity 0.67 1.03 1.03 1.08 0.97 1.02 0.83

Repairs 0.39 0.55 0.55 0.80 0.69 0.60 0.56

Other operating costs 3/ 0.00 0.00 0.00 0.00 0.01 0.01 0.00

Interest on operating capital 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Total, operating cost 15.55 16.39 13.73 18.03 17.66 16.69 16.15

Allocated overhead:

Hired labor 1.43 2.52 1.84 1.02 1.47 1.66 1.49

Opportunity cost of unpaid labor 0.39 0.55 3.74 4.48 2.58 3.03 2.11

Capital recovery of machinery and equipment 4/ 2.59 4.70 3.90 5.42 4.28 4.22 3.34

Opportunity cost of land (rental rate) 0.00 0.02 0.10 0.03 0.02 0.03 0.02

Taxes and insurance 0.13 0.15 0.17 0.22 0.28 0.25 0.18

General farm overhead 0.42 0.53 0.42 0.64 0.76 0.77 0.59

Total, allocated overhead 4.96 8.47 10.17 11.81 9.39 9.96 7.73

Total costs listed 20.51 24.86 23.90 29.84 27.05 26.65 23.88

Value of production less total costs listed -0.37 1.94 -2.83 -7.29 -3.50 -4.25 -1.87

Value of production less operating costs 4.59 10.41 7.34 4.52 5.89 5.71 5.86

Supporting information:

Milk cows (head per farm) 1,021 927 192 89 136 118 182

Output per cow (pounds) 22,121 18,110 15,588 20,373 19,675 20,135 20,711

Milking frequency more than twice per day (percent of

farms) 17.37 17.69 3.02 8.25 11.79 11.37 9.77

Milk cows receiving bST (percent of cows) 5.01 0.00 0.00 19.05 13.77 22.06 8.81

Organic milk sold (percent of sales) 1.32 0.00 0.00 2.97 4.19 3.83 2.77

Nearby Corn with 10, 20 and 50 Day Moving Averages

Nearby Corn (10/15/12 to 11/12/12) and Fundamentals for 2011/12 Crop

2011/12 Nov WASDE (10/11) (Oct/Nov/Chg)

M HarvAcres__________ 84.0/84.0/NC Yld bu/acre_________ 147.2/147.2/NC Beginning Stocks ____1,128/1,128/NC Production_______12,358/12,358/NC Imports_________________28/29/+1

Tot Supplies Mbu____ 13,514/13,515/+1

Feed&Res__________4.562/4,547/-15 Food,Seed&Ind______6,421/6,437/+16

Ethanol&by-prod__5,000/5,011/+11 Dom Use MBu______ 10,983/10,984/+1

Exports MBu________ 1,543/1,543/NC

Total Use MB_______ 12,526/12,527/+1

Ending Stocks Mbu_______ 988/988/NC Stocks/Use______ 7.89%/7.89%/NC

Price $/bu________ 6.22/6.22/NC

Dec 12 Corn (10/15/2012 to 11/12/2012) and Fundamentals for 2012/13 crop

2012/13 Nov WASDE (10/11) (Oct/Nov/Chg)

M HarvAcres__________ 87.7/87.7/NC Yld bu/acre_________ 122.0/122.3/+0.3

Beginning Stocks _______988/988/NC Production_______10706/10,725/+19 Imports_______________75/100/+25

Tot Supplies Mbu___ 11,769/11,814/+45

Feed&Res__________4,150/4,150/NC Food,Seed&Ind_____5,850/5,867/+17

Ethanol&by-prod__4,500/4,500/NC Dom Use MBu_____ 10,000/10,017/+17

Exports MBu________ 1,150/1,150/NC

Total Use MB______ 11,150/11,167/+17

Ending Stocks Mbu_______ 619/647/+28 Stocks/Use______ 5.55%/5.79%/NC

Price $/bu_________ 7.80/7.60/NC

Quarterly Corn price, 1960 - 2012

Corn prices 2008-12 with Average for 2007-11

What to expect in 2013

• Global issues (EU/China/Argentina/Brazil/FSU)are still weighing over the market. – Exports 10.3% of 2012/13 projected use for corn, 393

MB lower than in 2011/12 at 1,150 million projected in 2012/13 (750 MB lower than June estimate)

– Feed and Residual Use in 2012/13 412 MB less than 2011/12. The November 2012/13 estimate is 4,150 MB.

• Fundamentals. – Year end Projected stocks at 647 MB, indicating

stocks/use for corn is 5.79% ($7.80), compared to 7.88% in 2012 ($6.25)and 8.64% in 2011 ($5.18).

Nearby Soy Meal Nov 14, 2011 to Nov 12, 2012

May 12 Soybeans Nearby Soybeans

Quarterly Soybean Prices, 1959-2012

Nearby Soy Meal, and Fundamentals for 2011/12 Crop

2011/12 Nov WASDE (11/12) (Oct/Nov/Chg)

Mill HA____________ 73.8/73.8/NC Yld bu/acre_________ 41.9/41.9/NC Beginning Stocks______ 215/215/NC Production________3,094/3,094/NC Imports_______________16/16/NC

Total Supply MBu___ 3,325/3,325/NC

-Crushings MBu__ 1,703/1,703/NC -Exports MBu____ 1,360/1,362/+2

-Other Use Mbu_________92/91/-1 Total Use MBu______ 3,155/3,155/NC

Ending Stocks__________ 169/169/NC Stocks/Use________ 5.36%/5.36%/NC

Price ($/bu)______ $12.50/$12.50/NC

Meal Price ($/ton)_393.53/393.53/NC

Nearby Soy Meal with fundamentals for 2012/13 Crop

The initial June WASDE report forecast price for SM was $350/ton (335 – 365) Nov was $470 (455-485)

2012/13 Nov WASDE (11/12) (Oct/Nov/Chg)

Mill HA____________ 75.7/75.7/NC Yld bu/acre________ 37.8/39.3/+1.5 Beginning Stocks______ 169/169/NC Production______2,860/2,971/+111 Imports_______________20/20/NC

Tot Supply Mbu __ 3,050/3,160/+110

-Crushings MBu__ 1,540/1,560/+20 -Exports MBu____ 1,265/1,345/+80 -Other Use Mbu______115/115/NC

Total Use Mbu____ 2,920/3,021/+101

Ending Stocks_________ 130/140/+10 Stocks/Use____ 4.45%/4.63%/+0.18%

Price_________ $15.25/$14.90/-0.35 Soy Meal Price ______$485/$470/-15

Soybean Seasonality, prices 2007 – 2012, average price 2007-2011

Soybean Meal prices 2008 to 2012, average 2007 - 2011

What to expect in 2013 for Soybeans

• Global issues (EU/China/Argentina/Brazil) still weigh over the market. This supports added volatility in the market. – Exports 44.5% of 2012/13 projected soybean use,

down 17 million bushels from 1,362 million bushels in 2011/12 to 1,345 million bushels projected in 2012/13

• Fundamentals. – Year end Projected stocks of 140 MB, giving

Stocks/Use for soybeans 4.6% ($14.90)compared to 5.4% in 2012 ($12.50)and 6.55% in 2011 ($11.30). It was 18.6% in 2006/7 ($6.43)

Chinese Imports

• A top executive of a large Chinese trading firm was quoted estimating that China's corn and soybean imports could reach 20 and 80 million metric tons respectively by 2015. That's just three years from now. That would translate into nearly 800 million bushels of corn and nearly 2.94 billion bushels of soybeans. That's nearly 300 million bushels more than this year's U.S. soybean crop will likely be and suggests that USDA may again be under-estimating the strength of Chinese demand. In fact, the corn import number would approach 800 million bushels, which four times China's corn imports from this past year. Yet, USDA is forecasting a 60% drop in the current year corn imports. One thing that USDA-WASDE is very good at is under-estimating Chinese demand.

US Drought Monitor, Nov 2011 & 2012

U.S. Drought Monitor. Oct – Nov 2012

Nov 2012 and 2013 Milk Price forecasts

• The milk production forecast for 2012 is raised due to higher 3rd quarter production for milk/cow. The 2013 production estimate is unchanged.

• Cheese prices for 2012 are forecast lower, but unchanged for 2013. • Butter prices for both 2012 and 2013 are forecast lower as butter

stocks grow. • The Class III price forecasts for 2012 is unchanged from last month

but Class IV price is forecast lower due to lower butter prices. • Class III and IV prices are forecast higher for 2013 as a result of

higher whey and NFD milk prices. • The all milk price is forecast at $18.50 - $18.60 per cwt in 2012,

unchanged from last month. The forecast for 2013 is raised to $19.10 - $20.00 per cwt.

Class III Milk Price (DA), Oct 12, 2011 to Oct 12, 2012

Class III milk price, 11/07 to 11/12

Milk Prices, 2007-2012

Milk and feed prices, 2006-2012, and 2013 forecast What decision is right for you?

Year Class III Class IV All Milk Corn Soybeans Soy Meal

2006 11.89 11.06 12.90 2.00 5.66 174.17

2007 18.04 18.36 19.13 3.04 6.43 205.44

2008 17.44 14.65 18.29 4.20 10.10 335.94

2009 11.36 10.89 12.83 4.06 9.97 331.17

2010 14.41 15.09 16.26 3.55 9.59 311.27

2011 18.37 19.04 20.14 5.18 11.30 345.00

2012 Oct 17.60 16.10 18.55 6.22 12.50 393.53

2012 Nov 17.60 16.05 18.55 6.22 12.50 393.53

2013 Jun 16.70 15.95 17.75 4.60 13.00 350

2013 Aug 17.20 16.45 18.30 8.20 16.00 475.00

2013 Oct 18.20 17.25 19.45 7.80 15.25 485.00

2013 Nov 18.30 17.40 19.55 7.60 14.90 470.00

Live Cattle prices, 11/15/11 to 11/14/12

Live Cattle Prices 2006-2012

Feeder Cattle Price, 11/15/11 to 11/14/12

Feeder Cattle Price, 2006-2012

USDA forecasted Live Cattle Prices, 2011 to 2013

Year/Quarter Steers Barrows/Gilts Turkeys Broilers

$/cwt $/cwt Cents/# Cents/#

2011 annual 114.73 66.11 102.0 79.0

2012 annual 122.47 60.73 105.8 85.2

2013/I 120-128 60-64 95-101 85-91

2013/2 121-131 65-71 100-108 86-94

2013/3 125-135 65-71 104-112 85-93

2013 annual 123-133 62-67 101-109 85-92

Fed cattle prices are forecast higher for 2013, reflecting tighter supplies of fed cattle through 2012 and into 2013.

Beef and Dairy Outlook Nov 15, 2012

John J. VanSickle, Professor sickle@ufl.edu (352) 294-7634

Food & Resource Economics Dept. UF/IFAS

Weekly Milk, Corn and Meal prices, 9/11 to 11/12