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CALMAR, Iowa - Do you know your income over feed cost? Your break even milk price? Or how about the strength of the dollar, or the heifer inventory in the United States?
All of these things will affect your bottom line, said Kristen Schulte, Farm and Ag Business Management Field Specialist with Iowa State University Extension at Iowa Dairy Days, held at six locations throughout Iowa in January.
Schulte said there are four major things that affect the dairy outlook: herd inventory, production, commodity prices and national/ global demand for dairy products.
There are several things that created change in the herd inventory, including reproduction efficiency, milk prices, cattle market prices, government policy and heifer inventory.
Currently, there is a high heifer inventory, which could negatively affect milk prices somewhat in 2012. Schulte said there is currently the largest heifer inventory in the United States since the early 1980s.
There are 5,000 fewer cows in Iowa than there was at the start of 2011, but the state is producing the same amount of milk.
There are about 9.2 million cows in the United States, and about 200,000 of those are in Iowa.
Factors affecting milk production include feed quality, climate and weather, management, technology and genetics.
Of all fifty states, Iowa had the second biggest gain in milk production in 2011. The RHA for the United States is 25,071 pounds and in Iowa it is 24,306 pounds.
The Livestock Marketing Information Center predicts a continued increase in the amount of milk produced in the United States.
Factors that affect national and global demand for dairy products include weather, the value of the dollar and foreign policy (trade barriers, tariffs, etc).
There continues to be a net export increase for US made dairy products. This is, in part, due to a growing world population and increase in the number of families who are "middle class" in countries such as India and China.  
She said the value of the U.S. dollar is the key to foreign markets, although global economic health, global demand and innovation of product is also important.
Schulte said regardless of government policy, the most basic aspect of economics affects milk price: supply and demand.
The World Agriculture Outlook Board predicts that milk prices in 2012 will be about $17.50 for Class III milk and that All Milk will average $18.70, if current conditions remain stable.
Schulte said the predicted price for corn will be in the $5.70 to $6 range.
She also encouraged producers who believe they will run short of hay before the next harvest to start buying hay now, as prices are unlikely to go down. Historically the price of alfalfa has gone up at a much faster rate than corn and other commodities and much faster than milk prices.
In summary, she said milk prices should remain good, at as high as 2011 but still profitable.
Schulte said looking dairy producers should watch for global market stability, margin management opportunities, feed commodity prices volatility and alternatives, maintaining and growing national demand and Farm Bill implications.
She encouraged everyone to calculate their income over feed costs, their break even price and basis (what is the average difference between closing futures and milk price received).
Anyone wanting assistance in these areas is encouraged to contact their local extension office.[[In-content Ad]]

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