Are High Feed Prices on the Horizon for 2021?
January 4, 2021
During the last few months of 2020, dairy producers began to take notice of the rising prices for several of their feed commodities. Corn markets began to tick upward, soybean meal took a giant leap and the demand for forage started to put pressure on the hay market.
With milk prices predicted to remain extremely volatile during the first few months of 2021, producers are anxious to know what to expect when the feed bill hits the mailbox. Here’s the current forecast:
$5 Corn a Possibility
Four-dollar corn was the new reality for 2020, but some analysts believe we could see the commodity hit $5 in 2021. Dan Basse, president of AgResource Company, is one of those analysts and says the sudden shift in the corn market is unrivaled.
“If I look back in my 40 years of being in this business, this happened so quickly in terms of loss of U.S. crop and world crop loss and the arrival of a big buyer (China), that it's almost unprecedented,” he told Chip Flory on “AgriTalk.” “I've been saying that I've never seen anything like this, and when you get the combination of the lower supplies and the higher demand, it's a rare combination.”
Basse says as hog production ramps up in China, and the Chinese resort to more refined production practices, the need for corn will continue to grow, causing prices to potentially hit that $5 mark.
In mid-December, the USDA projected the season-average soybean price for 2020/21 to be at $10.55 per bushel – up 15 cents from the agency’s November World Agricultural Supply and Demand Estimates (WASDE) report. This would be the highest price for soybeans since 2014, when price reached $10.10 per bushel.
While the price surge has been encouraging for soybean farmers, dairy producers have been left shaking their heads at the current price for protein.
If you were not able to forward contract protein commodities early this fall, there are still a few affordable protein options.
“The best way to look at the situation is comparing the 'value' of different protein options to determine which products are the best buys,” says Trent Dado a nutritionist with GPS Dairy Group.
To substitute the degradable protein in soybean meal, Dado recommends corn by-products including distiller’s grains, corn-gluten feed and corn gluten because they are still relatively affordable.
The most constant dairy feed commodity in 2021 has been forages, with quality alfalfa hay prices remaining steady and little decline as quality decreases.
In the Hay Market Demand and Price Report for the Upper Midwest, provided by the University of Wisconsin-Madison, the hay price summary for large square bales has averaged between $100-$200 depending on quality grade.
For dairy states such as Wisconsin and Minnesota, prices have remained relatively stable with a strong demand for dairy quality large square bales. In other parts of the Midwest, demand has dipped slightly as producers continue to use up their current supply, causing prices to remain rather consistent throughout the year.