Pay price, feed and retail price, January 2015

Update

Pay price moves up slowly as sales increase and shortages continue

By Ed Maltby, NODPA Executive Director

Hopefully, 2015 will be the year when processors start to recognize the realities of organic dairy production and the steady growth of demand in the retail market based on quality and production preference. USDA AMS reports that fluid milk sales for August 2014 were 204 million pounds, up 4.3% from August 2013, and up 10.7% year-to-date compared with last year. Interestingly, organic whole milk sales for August 2014 at 62 million pounds were up 14.1% compared with August last year and up 20.9% year to date compared with last year. Sales of the whole range of different organic reduced fat milk products (everything but whole milk products) for August were reported at 63 million pounds, were 16.2% above sales one year earlier and up 17.8% year to date compared with last year. This trend of whole milk sales increasing at a faster rate than reduced fat products is the opposite of previous years and of the non-organic market. This trend, together with the increased demand for grass milk, reflects that consumers are buying organic for quality, taste and production practices rather than purely on price.

In announcing an increase in pay price and change in regional pay price structure, CROPP CEO George Siemon announced, “In the development of this plan, we considered the following factors: an increase in costs on the farm from feed inputs and land rents; a slow-down in transitioning of farmland and farms to organic; customer input; competitive factors and a surge in market demand as the mass market embraces organic food.” CROPP’s comprehensive restructuring of its pay price is the result of years of work within the cooperative and reflects the producers’ requests for a more simplified format that can be more easily understood by producers, their lenders and transitioning producers. While raising their base pay price, CROPP is still using the MAP to allow them flexibility in responding to changes in supply and demand. CROPP posts its pay prices on their website at https://www.farmers.coop/producer-pools/dairy-pool/pay-price where there is more detail. The chart above is a simple summary of what the 2015 pay price will be for New England CROPP producers, along with what CROPP producers get under the Grassmilk program.

WhiteWave/Horizon pay price varies by region and producer and, unfortunately, is not disclosed publically. Talking with producers in the northeast region (Maine, Maryland, New Hampshire, New York, Pennsylvania and Vermont) their pay price average is:

January 2015_CROPPchart1

January 2015_Grassmilkchart2

Regional and individual buyers are reported as paying above these averages, with some exceeding the $40 per CWT. Upstate Niagara Cooperative is among the more aggressive buyers in the northeast and their current pay price is:

January 2015_thirdchart3

January 2015_4thchart4

Overall producers can be aggressive with their price negotiations, especially with locations nearer to processing plants and if they fit the various Grassmilk programs.
Feed costs are steady with no changes in sight, with soybeans between $24-26 per bushel and corn between $10-12 per bushel. Beef prices for cull cows are still high with no indication of any change.

January 2015_averageretailprice6

January 2015_retailpricegap6

January 2015_totalsales8

January 2015_cornchart8

January 2015_Soybeanchart9