|
south central WI | These are just some thoughts of mine and some of what I have heard recently at some meetings. Dont take any marketing advice from me, I'm usually wrong!
Currently (and for the last 4 years) we are in a down trend. Juat too many cows. There is always hope on the futures market, but it drops down to below COP when it finally arrives. This is how all bear milk markets act. (I'm 95% class III so that's what I am talking about). June markets are at $16 and futures are beyond that. I've resisted forward contracting because an advisor felt that milk was going to rally. He has been feeling that for a few years though. Last spring/summer there was a chance of selling some near $17, but he felt it was going higher. It took a crap and now I'm down $3-4/cwt.
A couple weeks ago I was at a free meeting with another advisor group. He had a chart with past milk price history. We are in a pretty consistent $14-18 trading range. A few months below and, if you remove 2014, only a handful of months above. That's the last 10 years! Actually all of history if you are talking the high prices. That was the push I needed to help me forward contract some milk. I can lock in above $16, some above $16.70, for everything after May. The contracts open above $16, so I am selling some out through October. As the months roll on I will forward sell some more, and out farther if the bear market trend continues. I can pay bills at that price, not so much at $14. Above $16 is the upper half of the trading range. In fact since Jan 2015 we are averaging only $15.40 and survived this far. If I can get an extra dollar on top of that I will be in a lot better position.
I believe every month last year and this year was available above $16, so technically the loss is my own fault. Chasing the big bucks and not settling into reality. I'm also able to forward contract through my milk plant. That locks in a market for me and also frees me of any margin calls.
Here's some averages I ran (if i typed the info in correctly)
Price averages
Since 2010 $16.92
Since 2010, taking out all of 2014 $16.23
2010-2013 $17.05
2011-2013 $17.93
2015-11/18 $15.40
Eventually the market will correct. I dont know when and I need to stop guessing. From the sounds of it there are just too many cattle out there. The price wont drop until they are killed. There may be some small farms that will go out (and some big ones), but there are enough new big farms being built that the cow numbers will likely increase in the near term.
Last thought (hopefully as I'm already late to my fire meeting): I need to accept the fact that I should just sell at a profit and not look for the record years. Selling milk below COP means I NEED to have the high years to average out. If the high years dont come soon enough, you're screwed. Lots of people complain about the huge farms. That doesnt help anything. They are here to stay. I've heard people claim the big farms have special deals with processors etc. What if they just did math and forward sold at a profit every month? | |
|
Milk price futures/thoughts
