Tuesday, 28 August 2012

This is a great time to be a low input pasture based dairy farmer & it's going to get better!

This is a great time to be a low input pasture based dairy farmer & it’s going to get a lot better.

 Chaotic extreme weather conditions have caused the worst drought (for more than 50 years) across most of North America.The feed shortages will impact on every dairy farmer.
I feel very sorry for those farmers directly affected. Having worked in Australia during years of extreme droughts I know it’s very tough & stressful for both farmers & rural professionals.
 Corn/Soybean & to a lesser extent wheat prices are about to substantially increase. All purchased dairy feed will become very expensive. Low input pasture based farmers who don’t buy feed in will avoid the much higher costs but benefit from the expected higher milk prices.
Expect consumer food prices to increase worldwide as a result of the droughts in North America.

Low input pasture based dairy farmers could well benefit from the world climate chaos.

 To fully benefit of course your farm business should not be dependent on purchased feed. Buying any dairy cow feed will expose you to financial risk. I expect all traded dairy cow feed to rapidly increase in price to levels that make them unprofitable to feed. Extreme weather events are happening more often.
Extreme weather events are also a risk factor for pasture based systems. The world economy is very unstable so exchange rates jump all over the place. This increases the risk of purchased feeds.

I expect milk prices to recover quickly. 

The vast majority of dairy farms in the world use large tonnages of cereal or protein based feeds. So they are very exposed to price increases. The situation in North America is so serious that dairy cows are already being slaughtered as the farmers have run out of feed.
I’ve just travelled across the USA & Eastern Canada & heard everyone talking about the worst drought in history. The crops I saw were in a very poor state, severely stunted, no cob development & withering under the heat. Crops that normally feed dairy cows, pigs & poultry are a disaster & there will be either a very poor harvest or no harvest at all. Many confinement system farmers will be in serious trouble & it is expected that many dairy cows will have to be slaughtered. 
The USA & Canada are not the only arable countries to be badly affected by droughts. Argentina & Russia are in drought & West Australia is very dry affecting crop yields. In much of Europe extreme spring time rain & cold temperatures are impacting on maize crop yields.
Feed prices for dairy farmers are about to sky rocket as these extreme droughts impact on supply & demand. I would expect all feed costs to rapidly go up in price but protein prices will be horrendous. Europe is almost entirely dependent on imports of livestock protein feed from either USA or Argentina. 

Speculators are artificially boosting prices 
Third world nations who are dependent on food exports from the USA will be badly affected. The UK Spectator newspaper 18th August ran a front page article suggesting that rapid increases in food prices often resulted in street riots.
Sadly rain will be too late for many Canadian & USA farmers. A food crisis won’t help struggling economies either but may force a rethink about crops being used for fuel.