Feed Prices Push Production Costs To Record High

September 28, 2012 — Higher feed and fuel prices pushed U.S. dairy farmer average milk production costs to another record high in August. Dairy Profit Weekly editor Dave Natzke reported on Friday’s DairyLine:
USDA economists said total production costs per hundredweight of milk sold were up about 4% from July and up 17% from August a year ago, with feed prices making up a bulk of the increase. Through the first eight months of 2012, average costs are up about 9% from the same period last year.
The higher costs are impacting dairy cow culling, but the numbers are a bit deceiving. USDA announced more than 2 million cows had been sent to slaughter through the first eight months of 2012, or about 128,000 more than a year earlier. However, during the same period, the U.S. milking herd declined by just 22,000 cows, an indication a large number of replacement heifers became milk producers.
Dairy farmers who were forced to sell cattle due to drought are getting a break from the Internal Revenue Service. The IRS announced this week it will extend the period in which producers forced to sell cattle due to the drought can defer taxes on those sales in counties listed as suffering from extreme or severe drought by the National Drought Mitigation Center. As with anything related to taxes, affected dairy producers should contact their tax preparers and IRS officials to make sure they are eligible for the tax deferral.
Finally, while dairy farmers are keenly aware of the impact of higher feed prices, consumers will feel it in 2013. Researchers with Rabobank, the world’s largest bank, warn that skyrocketing agricultural commodity prices are causing the world to re-enter a period of “agflation,” with food prices forecast to reach record highs well into 2013, rise as much as 15% by next June.

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