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North Mountain Ag Services



February 9, 2015

Milk Margins Struggle

This past year dairy producers benefited from strong Chinese export demand.  The slowing of the Chinese economy serves as a good reason to question how much demand there will be in Asia for US dairy products in 2015.  Inventory reports in China indicate that large amounts of dried milk have been stored during 2014, only strengthening the argument that US exports face challenges.

Russia’s troubles with the EU and their embargo on shipments of EU milk and cheese are also a clear challenge for dairy farmers in various parts of the world.  With Asian and Eastern European demand forecasted to be soft this year, it is easy to wonder how many destinations exist for US milk in the coming months.

One bright spot in 2015 is the relief in feed costs that have resulted from the 2014 harvest.  We are recommending that our dairy clients price their milk for 2015 delivery at $19 per cwt or higher.  If Class III milk futures are being used as a hedge, target $16.50 as an average for the year.  When considering the upcoming demand challenges, we do not believe that 2014 milk price levels will be realized again this year.


Lean Hog Pricing

Lean hog futures have been under a great deal of pressure as reports of herd expansion and improved health give traders reason to be bearish.  High cattle cash prices have continued to support cattle futures.  We expect cattle prices to be a support for the hog market, with summer lean hog contracts being supported by higher demand.  Softer grain basis in Pennsylvania is a key piece to hog margin management this month.  Please consider giving us a call to assist in managing margins for your fourth quarter 2015 hogs.

As always, please call us for specific pricing targets that maximize your opportunities to protect and manage profit margin.

  • Brian Yingling

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