Should You Buy a Year’s Worth of Feed Today?
Farmers across the country are facing low milk prices. Fortunately recent feed prices have been forgiving. Brian Doherty of Stewart Peterson says producers should protect profits and lock in feed needs for the next year.
As a whole, producers are faring current depressed prices fairly well. Farmers continue to attempt to out produce the milk prices and as a result milk production is soaring in the U.S.
“We’ve had a good late summer, early fall weather, big production in the U.S. and cow slaughter isn’t as high as it needs to be,” he says. “Nobody seems to be making lots of money but they are doing ok.”
Doherty says cow slaughter numbers have to increase for a higher price to be possible. In fact, he says until the Nation’s herd shrinks, price could get worse before it gets better.
“Farmers try to produce their way out of low prices,” he says. “That usually compounds the issue until it gets painful enough that we have to liquidate.”
Low prices don’t always mean there’s no option to protect profits. In the current market, Doherty advises farmers to lock in feed.
“I would advise anyone who buys protein or corn to lock in a year’s worth,” he says. Doherty admits that’s a bold statement but he doesn’t believe feed being much cheaper is very realistic and more expensive feed is a real possibility.
“If you don’t think we can return to $7 or $8 corn, you’re living in an unrealistic world,” he says.
According to Doherty producers have nothing to lose by locking in feed. He says the downside risk is limited and the upside is basically unlimited.
“Lock in a year’s worth,” he advises. “If it gets cheaper, lock in two years’ worth.”