Big Bale Alfalfa © 2011 - ACX
Alfalfa prices in the USA are based purely on market conditions driven primarily by domestic dairies. So far in 2011, alfalfa prices have been somewhat volatile. This is the result of lack of carry-over hay supplies from 2010 and increasing demand for alfalfa in all market sectors. Furthermore, prices of alfalfa have not yet settled because of the long, cool spring and unseasonal rains.
As the world has sadly learned, innocent children in China have suffered as a result of tainted milk products. The cause of the illnesses and a few fatalities is apparently traced to the chemical melamine, known to falsely inflate protein levels of watered-down milk. Essentially, a small dairyman sells his milk to a milk collector who, in turn, sells the milk to a dairy producer for processing, packaging, and marketing to consumers. Somewhere in the supply chain, water and melamine were added to the raw milk to increase both volume and profits.
To help stabilize feed costs, Japan’s Ministry of Agriculture, Forestry, and Fisheries (MAFF) announced a $415 million subsidy. Compound feed costs have seen significant increases due the the doubling cost of corn. According to the USDA Gain Report, the money will help absorb feed cost surges and will last until March 2009. Nearly 75% of imported corn to Japan is used for miscellaneous livestock feed, and almost all corn is imported from the United States. The subsidy represents more than 16.5% of the total cost of corn used for feed according to USDA.
US dairies on the west coast have one BIG advantage over their Pacific Rim (namely, Japan) counterparts: Strong milk prices. The graph below indicates a 2007 surge in milk prices that far exceeded hay prices. In fact, notice how US milk prices nearly doubled in one year from the Summer of 2006 to 2007. Strong milk prices allowed US dairies to remain competitive and produce abundant dairy products, which probably explains why milk prices are now leveling off. Pacific Rim dairymen need a similar surge in milk prices so they may continue to operate without losing money.
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