commodities - progressive dairy€¦ · sets are corn silage and beet pulp (carbohydrates), corn...
TRANSCRIPT
MARKET WATCHMARKET WATCH FEED
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Chippewa Farm RepairBloomer WI 715-577-8372Portland Implement Inc.Cashton WI 608-654-5575Ridgeview EquipmentWatertown SD 605-886-2595Unverfehrt Farm SupplyCentralia IL618-493-7357
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Supreme hay ($/ton)
Sept. 7 Price 3-week change
IA $270-$290 NC
IL $260-$280 $20-$40
KS $250-$265 $15-$35 MO $175-$275 NCNE $275-$300 NC
PA $240-$390 $30 VA $235 NC
Source: USDA National Hay, Feed & Seed Summary
Soybean meal* ($/ton)
Sept. 6 Price 3-week change
CA $610 NC
ID $593 $2
*Price quotes contributed by Western Milling, J.D. Heiskell and independent sources.
Corn* (in tons) (in bushels)
Sept. 6 Price 3-week change
CA $352 $2
ID $342 $1
Price 3-week change
$9.86 .06¢
$9.57 .03¢
Sept. 6 Price 3-week change
CA $415 $5
ID $399 $9
Cottonseed* ($/ton)
COMMODITIES
Nov DecJuly2010
JuneMay Aug
dRUP
dFat
RDP
dNFC eNDF
JulyAug Sept Oct Nov Dec FebFeb Mar Apr May June July Aug Sept OctJan2011
Jan2012
Mar Apr$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20 Price per unit of ration component(dollar per percentage point)
DRY MATTER ECLIPSES 16 CENTS PER POUND
August pricesdRUP: $18.65 dFat: $11.69 RDP: $2.66 dNFC: $2.32 eNDF: $1.26
Patrick FrenchRP Feed [email protected]
Since feed is a signifi cant cost contributor, we need methods to identify feedstuff s that may meet the nutrient requirement of the dairy cow more economically than the feedstuff s currently in the ration. Several technologies exist to rate or rank the economic value of feedstuff s in addition to the one that this column uses.
Nutrient values are derived using the composition and weekly market prices for a basket of 25 feeds available in the region. Market prices are gathered from both published and unpublished sources. Values are determined for rumen-degradable protein (RDP), rumen-undegradable protein (RUP), eff ective neutral detergent fi ber (eNDF), non-fi ber
carbohydrates (NFC) and fat. For RUP, NFC and fat, only the fraction that is digestible in the small intestine is valued. For brevity, eNDF is referred to as a nutrient though it is a ration descriptor. When nutrient values are combined with the composition of a feed, we arrive at a relative economic value of the ingredient. � is gives us a global perspective of the feed’s value. However, many times we may need a specifi c nutrient, so we have derived nutrient-specifi c values for the categories of carbohydrates, proteins
and fi ber carbohydrates.� e graph shows the monthly
nutrient values over the previous two years. In recent weeks, the costs of protein and NFC have been increasing with the cost of digestible (d) RUP over $18 per unit for the fi rst time in several years. � is increase along with the rise in RDP has resulted in a 33 percent increase in protein cost
compared to a year ago. Fortunately, the costs of other nutrients are up modestly over this same time. After several months of escalating nutrient prices feed costs, the market cost for one pound of dry matter has eclipsed 16¢, which is the highest level on record.
� e table lists several feeds, their price and their value based on whether all nutrients (Comprehensive) or specifi c sets of nutrients (Carbohydrates, Proteins or Fiber) were used in their valuation. Overall, corn co-products dominate the list of undervalued ingredients; whereas blood meal and soyhulls are overvalued. Undervalued feedstuff s when observing specifi c nutrient sets are corn silage and beet pulp (carbohydrates), corn gluten meal (protein) and straw (fi ber). Value is only one of several factors that should be considered when evaluating the inclusion of a new ingredient. PD
8 Progressive Dairyman Issue 14 • September 21, 2012
Mar2013
JulyMay SeptDecSept2012
Low
High
Settle$6.50$6.75$7.00$7.25$7.50$7.75$8.00$8.25$8.50$8.75
Jan2013
May July Aug SeptOct Dec MarSept2012
High
Settle Low$350$375$400$425$450$475$500$525$550$575
FUTURESHigh: $8.40 Low: $6.72
High: $554.40 Low: $372.10
Corn (dollars per bushel)
CornSeptember ’12 contracts $8.08 +.08¢ $8.31/$7.89December ’12 contracts $8.12 +.10¢ $8.39/$7.95
SEPTEMBER 7 Avg. 3-week settle High/Low
Soybean mealSeptember ’12 contracts $535.25 +$27.36 $548.10/$516.50
October ’12 contracts $525.44 +$33.22 $538.40/$500.50
Source: Chicago Mercantile Exchange data
Soybeans (dollars per ton)
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Market Price Comprehensive Carbohydrate Protein Value
Fiber Value
Feed name $/T As-Fed Value, $/T As-Fed Value, $/T As-Fed $/T As-Fed $/T As-Fed
Alfalfa, Good 270 242 269 – 181Alfalfa, Premium 291 265 272 – –Alfalfa, Supreme 314 292 278 – –Bakery/Candy Byproduct 373 383 297 – –
Beet Pulp 258 200 387 – 307Brewers Grains, 30% DM 79 133 – 107 62
Canola Meal 407 372 – 290 –Corn Gluten Feed 285 358 246 256 216Corn Gluten Meal 755 875 – 925 –Corn Grain, ground 309 310 352 – –
Corn Silage,35% DM 82 86 114 – 98
Cottonseed 363 477 – 239 163Cottonseed Hulls 222 168 184 – –Cottonseed Meal 514 496 – 439 197Distillers Dried Grains (DDG) 326 516 – 369 182
Hominy 293 343 320 – –Molasses 238 245 252 – –Porcine Blood Meal 1178 1005 – 1124 –
Soybean Hulls 414 197 195 – 495Soybean Meal, 48% 581 520 – 474 –
Straw 137 199 227 – 333Tallow 817 733 – – –Urea 618 620 – 639 –Wheat Grain, ground 315 280 317 – –
Wheat Midds 323 306 194 – 149
SOYBEAN HULLS EXTREMELY OVERVALUED
A basket of 25 regionally available feeds and their recent prices
Extremely undervalued feed
Undervalued feed
Extremely overvalued feed
Overvalued feed
Issue 14 • September 21, 2012 Progressive Dairyman 9
Progressive Dairy Solutions, Inc.Matt Budine [email protected] [email protected]
Figure based on actually occurring feed cost and milk prices prior to June 4, 2012 (black line) and future pricing as of June 4 (red line) and Sept. 6 (blue line) for comparison.
2010 2011 2012 2013 2014
Cow Jones Index 2010-2013
Gaining equityBreakeven/cash flowing
Negativecash flowEquity burn
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FEED COST PER COW JUMPS UNEXPECTEDLYMARKET WATCHMARKET WATCH
September 6, 2012: 1,257
� is tool is widely used by dairymen, banks, accountants and brokers to help draw a picture of risk held by dairymen. We encourage the use of this tool in on-farm risk management.
� e fi gure is based on actual feed cost and milk price prior to June 4, 2012 (black line) and future pricing on both feed and milk as of the two comparative dates we ran this Cow Jones Index: June 4, 2012 (red line) and September 6, 2012 (blue line).
Jumping off from our CJI publication in June we know that actual feed cost per cow unexpectedly, for various reasons, jumped up an additional $1.60 per cow vs. the fi rst week of June predictions we published last time around based on CME commodity futures. � is jump drove all feeds, including dry stock, up $2.25 per hundredweight (cwt) heading into the summer dip in production. � is dramatic shift was obviously unexpected. What we see now is that
the projected Oct. 2012 milk price increased 3.72 cwt vs. June 8 price prediction. However, the lag in the milk income increase vs. the rapid increase in commodity expense caused dairymen to lose an additional $35 dollars per cow per month in July, August and September, according to our CJI (blue line). In the month of July 2012 alone, well-managed California dairymen still lost $52 per cow. It appears that the Class III and Class IV Milk price will settle in the cash fl ow breakeven in the next six months.
In looking at this index for risk management the bottom line is that the last half of 2012 and the beginning of 2013 will be an opportunity (average predicted CJI for Oct. ’12 to Mar. ’13 = 1,820) with the last nine months of 2013 riding between cash fl ow and breaking even (average predicted CJI for Apr. to Dec. ’13 = 1,570).
Dairymen can use this to do many things – we have heard it being used to load up on cattle then sell them off as the CJI moves from expansion mode into negative cash fl ow periods. We have also heard of
this being used for bankers to increase their confi dence in their client’s ability to pay on debt. Finally, we have seen brokers use this type of data to help lay out a plan for risk management. However a person decides to use the data, it is critical to understand it is a prediction based on actual past information and estimated future
information that is based on the CME. Knowledge is power; how strong are you going to be today and in the future? PD
Matt Budine is CEO and Luciana Jonkman are nutrition and management consultants for Progressive Dairy Solutions, Inc.
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10 Progressive Dairyman Issue 14 • September 21, 2012
MARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHMARKET WATCHCATTLE Warren Wagner
Market AdviserStewart-Peterson Inc.
Dairy slaughter for the week ending August 18 was 61,000 head, up 3,700 head from the week prior and the highest number of head sent to slaughter in 19 weeks. � e week ending April 7 saw 63,100 dairy cows slaughtered. Year-to date, 1.9186 million head have been slaughtered, compared to 1.8253 million head through this week last year. � at puts 2012 slaughter 5.11 percent higher than 2011 – or an average of 2,827 head more per week.
A delicate balance is in play
where slaughter is concerned. Feed costs have provided support to milk prices but have also made it expensive if not diffi cult to properly feed the herd. Corn futures contracts through July are holding at or near the $8 level. Bean meal keeps hitting new contract highs, with the September contract trading as high as $554.4 per ton on September 4. In general, expect slaughter numbers to stay strong if feed prices do. Future culling decisions will likely be based on locale: � ose with access
to alternative feed sources, or in pockets of the country where they could harvest something of a crop, will be able to feed animals more easily.
� e U.S. average price received for dairy cows in August was $80 per hundredweight (cwt), down $0.90 per cwt from a revised July price of $80.90 per cwt. � is is the third month in a row that dairy cull prices have declined. � e pullback in prices is not surprising in light of the increased slaughter numbers. In the six weeks ending August 18, dairy slaughter has averaged 6,267 more head per week than through the same time period in 2011. Dairy
cull price is $9.20 per cwt over the August 2011 price of $70.80 per cwt.
While cull prices have been pulling back, live cattle futures have been drifting higher. On August 31, the 2012 contracts averaged $127.3 per cwt and 2013 contracts averaged $134.5 per cwt. On July 24, the 2012 and 2013 contracts averaged $122.8 per cwt and $131.2 per cwt, respectively. Demand is expected to ease following the Labor Day holiday and prices along with it. PD
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Top Springer
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HeiferCalves
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Empire Livestock - Burton MarketVernon, NY (800) 257-1819 (sale 9/6/12)
$1,350$50
$1,150 $100
$1,100 NC
$900$100
$300 $150
$700 $200
$75$25
$75$10
$800NC
New Holland Sales StablesNew Holland, PA (717) 354-4341(sale 9/5/12)
$1,675$200
$1,525$175
$1,300$100
$1,425$225
$650$50
$875$150
N/T N/T $1,250
Central Livestock AssociationAlbany, MN (800) 733-6828 (sale 8/28/12)
$1,500 $150
$1,225$25
$1,200$15
$1,100$60
$95/cwt$15/cwt
$97/cwt$4/cwt
N/T N/T N/T
Equity Co-op LivestockStratford, WI (715) 687-4101Rocky Olsen (608) 434-4037 (sale 8/28/12)
$1,500$25
$1,350$25
$1,175$25
$900$25
$550NC
$875NC
$200NC
$145$50
$1,250$50
Lake Odessa LivestockLake Odessa, MI (616) 374-8213(sale 9/4/12)
$1,450$100
$1,100$100
$950$100
N/T $350$50
$600$150
$300NC
N/T$1,400$100
Norwood Dairy Cattle AuctionNorwood, MO (417) 746-4242 (sale 8/9/12)
$1,450$260
$1,100$50
$800$175
$1,080$80
$400$85
$930$210
$135$15
$165$10
N/T
Pipestone Livestock Auction MarketPipestone, MN (507) 825-3306 (sale 8/16/12)
$1,500$125
$1,379$17
$1,335$1
N/T$85/cwt$40/cwt
$115/cwt$22/cwt
N/T N/T $1,025
Spring� eld Livestock Marketing Center Springfi eld, MO (417) 869-9500 Doug Thomas (417) 840-9316 (sale 8/29/12)
$1,390$170
$1,275$85
$1,025$105
$1,190$240
$335$145
$840 $50
$155$35
$95 $35
N/T
Topeka Livestock AuctionTopeka, IN (206) 593-2522 (sale 9/4/12)
$1,375$25
$900$50
N/T N/T$1,000 $100
$1,400$40
$150$50
N/T$1,200$150
Tri-State LivestockSioux Center, IA (712) 722-0681Mike Koedam (712) 470-0198 (sale 9/5/12)
$1,450 $75
$1,345$104
$1,302$95
N/T N/T N/T N/T N/T$1,075$250
United Producers, Inc.Marion, MI (517) 294-3484 (sale 8/14/12)
$1,625NC
$1,475 NC
$1,200NC
$1,000NC
$400NC
$850NC
N/T N/T $1,000$100
Contact Judy about being included in Progressive Dairyman’s Market Watch! [email protected] • (208) 324-7513 NC = No change N/T = No test Decrease in price Increase in price
Log on to www.progressivedairy.com/marketwatch to get auction reports from more locations!
Issue 14 • September 21, 2012 Progressive Dairyman 11
NOTE: The colored bar represents cumulative year-to-date milk production for 2012. When it does not surpass the dotted line at the center of the box, it indicates state production is below the previous year’s total (2011). When it does surpass the dotted line, it indicates production is above the previous year’s total.
MARKET WATCHMARKET WATCHMILK
Texas440 NC
1,770 -3.5%779 -2.4%
5,757 102.5%
Utah90 NC
1,900 +3.3%171 +5.6%
1,153 108.0%
Vermont133 NC
1,640 +2.5%218 +1.9%
1,512 100.8%
Virginia96 NC
1,450 +0.7%139 +0.7%
1,037 101.7%
Washington261 NC
2,020 -1.7%527 -3.3%
3,687 102.9%
Wisconsin1,271 NC1,785 +3.8%2,269 +4.4%
15,915 104.0%
Arizona185 -3
1,915 +1.6%354 +0.8%
2,798 105.6%
California1,785 +11,960 -1.7%3,499 -1.0%
25,321 103.9%
Colorado133 NC
2,045 +1.7%272 +5.8%
1,866 107.7%
Florida123 NC
1,520 NC187 +3.3%
1,480 104.7%
Idaho579 +1
2,070 +1.0%1,199 +0.5%
7,906 103.2%
Illinois100 NC
1,550 +1.3%155 +3.3%
1,172 104.6%
Indiana176 NC
1,690 NC297 +2.8%
2,186 105.5%
Iowa203 -2
1,705 -0.9%346 +0.6%
2,600 101.6%
Kansas124 NC
1,780 +1.4%221 +2.3%
1,575 103.8%
Michigan376 NC
1,970 +1.3%741 +4.1%
5,228 105.4%
Minnesota465 NC
1,570 +1.6%730 +1.1%
5,321 101.1%
Missouri94 NC
1,195 +7.7%112 +4.7%
864 103.0%New Mexico
328 -42,060 -2.1%676 -2.7%
4,878 102.0%
U.S. Total9,227 -121,799 +0.4%16,600 +0.7%
119,101 103.2%
New York610 NC
1,825 +2.0%1,113 +1.9%
7,774 102.9%
Ohio270 NC
1,600 +1.3%432 +2.9%
3,132 103.9%
Oregon123 NC
1,755 -2.0%216 -1.8%
1,484 102.4%
Pennsylvania535 NC
1,620 -0.6%867 -1.5%
6,224 99.5%
MINNESOTA MILK PER COW UP 1.6 PERCENT
12 Progressive Dairyman Issue 14 • September 21, 2012
Legend
Number of cows(in thousands)
Milk per cow(month)
(lbs.)Total milk
production (month)
(in millions of lbs.)
Year-to-date milkproduction (total)(in millions of lbs.)
Percentage of year-to-date production versus previous year-to-date
Monthly change(in thousands)
Annual percentchange
Annual percentchange
Aug2011
Jan2012
Feb Mar Apr May June JulyOctSept Nov Dec
20102011
9,1009,1259,1509,1759,2009,2259,2509,2759,300 July 2012: 9,227 High: 9,271 Low: 9,121Milk cows (in thousands)
Aug2011
MarJan2012
Feb Apr June JulyOctSept Nov Dec
2010
May
2011
1,6751,7001,7251,7501,7751,8001,8251,8501,875
July 2012: 1,741High: 1,857 Low: 1,687
Milk per cow (in pounds, 30-day equivalent)
Aug2011
MarJan2012
Feb Apr May June JulyOctSept Nov Dec
2010
2011
15,25015,50015,75016,00016,25016,50016,75017,00017,25017,500
July 2012: 16,065High: 17,220 Low: 15,387
Milk production (in pounds, 30-day equivalent)
U.S. HERD STATS
July daily avg. milk per cow: 58.0 lbs.
Bob CroppProfessor EmeritusUniversity of Wisconsin – Madison
Florida123 NC
1,520 NC187 +3.3%
1,480 104.7%95% 105%100%
AUG ’12
U.S. TOTAL MILK PRODUCTION UP 0.7 PERCENTWidespread
drought has put some uncertainty in the level of milk production and milk prices for the remainder of this year and for 2013. Feed prices and feed availability will be a major factor in what happens to cow numbers and the level of milk per cow the rest of this year and 2013.
Of the 23 reporting states, only eight states had lower milk per cow than a year ago and only six states had less total milk production than a year ago. Some of the reported increases in milk production appear to confl ict with reports by dairy producers that their milk production had dropped off substantially for some days in July. Yet USDA’s estimates of milk production for states like Wisconsin was up 4.4 percent, Minnesota 1.1 percent, Michigan 4.1 percent, New York 1.9 percent and Florida 3.3 percent. But production was down 1.0 percent for California, all due to less milk per cow, and up just 0.5 percent in Idaho due to 0.5 percent fewer cows and just 1.0 percent more milk per cow. PD
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Issue 14 • September 21, 2012 Progressive Dairyman 13
Feb Mar Apr May July AugJune Sept Oct Dec Jan2012
Nov Feb Mar Apr May June July Aug SeptOct2009
Nov Dec Feb Mar Apr May June July Aug Sept Oct Nov DecJan2010
Jan2011
CA Class 1price
Federal Class I price$9
$11$13$15$17$19$21$23$25
MARKET WATCHMARKET WATCH TIGHTENING IN FAT SUPPLIESDAIRY PRICES
Aug. 2012: $17.59 High: $21.78 Low: $12.35Aug. 2012: $19.61 High: $23.84 Low: $14.02
Fluid milk prices (in dollars)
Mike NorthFirst Capitol [email protected]
� e U.S. drought has captivated market participants for months, causing milk futures prices to rise dramatically to levels above $20 per cwt for the fourth quarter of 2012 and averaging $19.25 per cwt for the fi rst half of 2013. � is movement has been reinforced by the fact that cow numbers have continued to retract since May, losing 44,000 cows since the April peak. � is trend began amid a lack of profi tability at the farm. In drought years it is common to see this trend continue as feed becomes scarce or profi tability wanes. With spot feed prices at record highs (corn at $288 per ton and soymeal at $534 per ton), many are projecting a continuation. However, as milk futures prices have climbed, many producers are penciling profi table margin opportunities (average 2013 Class III price is $18.76) looking forward ... enough of an opportunity to bring cows back to the farm. With replacement heifers readily available, this type of response can happen quickly. � e market waits for evidence of either further liquidation or a turn towards rebuilding. � e USDA will release the August milk production report on September 19.
While drought, and its impact on feed and milk prices, has captured the spotlight, a story of less media interest is operating in the background – one that is more in line with 2013 Class III price off erings (currently averaging $18.76 per cwt ). � is story revolves around product prices and their contribution to Federal Order milk pricing. At current levels, product prices suggest Class III milk price values closer to the middle-to-upper-$18-per-cwt zone. While guesswork drives futures prices, spot product pricing absolutely determines the present value of milk. With 2012 futures prices trading at levels much higher than the $18 to $19 levels suggested by the Federal Order formula, either milk prices must move lower or product prices must rise beyond current values. Of late, the former, not the latter of these scenarios has identifi ed itself as the winner. As we sort this out month by month, the market will remain in a state of fl ux, with volatility being the most identifi able characteristic of the marketplace. Ultimately the consumer (here and abroad) will dictate which price picture becomes reality. In the meantime, be sure to manage your margin opportunities as they arise – what is off ered by the futures market today and what you later pay or are paid are often two diff erent things. PD
Come see what’s new at Booth EH3205-3306World Dairy ExpoOctober 2-6, 2012
14 Progressive Dairyman Issue 14 • September 21, 2012
2010
2011
10/1/11
11/5/11
12/3/11
3/3/12
5/5/12
9/4/12
7/7/12
8/4/12
9/1/12
4/7/12
1/7/12
2/4/12
9/11/10
6/2/12
$1.25
$1.50
$1.75
$2.00
$2.25
8/29/12
8/30/12
8/14/12
8/15/12
8/16/12
8/17/12
8/20/12
8/21/12
8/22/12
8/23/12
8/24/12
8/27/12
8/28/12
8/31/12
9/4/12
$1.78
$1.82
$1.86
$1.90
$1.94
$1.98
Sept. 4, 2012: $1.85 High: $2.15 Low: $1.32Cheese(weekly average in dollars)
September 4 Global Dairy Trade pricing showed cheddar cheese rising 5.3 percent to an average price of $1.63 per lb. Presently, CME cash trading has block and barrel cheese trading at an average price of $1.80 (blocks – $1.82 per lb, barrels – $1.775 per lb), a dime off of its mid-August peak.
10/1/11
11/5/11
12/3/11
1/7/12
3/3/12
4/7/12
5/5/12
7/7/12
8/4/12
9/1/129/4/12
2/4/12
9/10/11
6/2/12
2010
2011
$1.25
$1.50
$1.75
$2.00
$2.25
$2.50Sept. 4, 2012: $1.83 High: $2.23 Low: $1.31Butter (weekly average in dollars)
8/29/12
8/30/12
9/4/12
8/15/12
8/16/12
8/17/12
8/20/12
8/21/12
8/22/12
8/23/12
8/24/12
8/27/12
8/28/12
8/31/12
8/14/12
$1.75
$1.80
$1.85
$1.90A recent tightening in fat supplies has been witnessed as school milk programs consume fl uid that throughout the summer has been balancing the demand for fat in both butter and ice cream production. Firming prices along seasonal lines have been witnessed both domestically and globally as buyers prepare for the coming holiday season. U.S. butter prices start September with a price of $1.86 per lb while Global Dairy Trade pricing of anhydrous milk fat rose to a U.S. dollar equivalent of $1.60 per lb.
MarFebOct NovAug2011
Jan2012
Apr MaySept June JulyDec
20102011
$1.20$1.30$1.40$1.50$1.60$1.70$1.80$1.90 July 2012: $1.26 High: $1.74 Low: $1.21Non-fat dry milk
Feb Mar Apr May June July Aug Sept Oct Nov Dec Feb Mar Apr May June July AugSept2010
Oct Nov Dec
Futures
Jan2011
Jan2012
2013 20142012
$11
$13
$15
$17
$19
$21
$23 Class III (in dollars)Aug. 2012: $17.73 High: $21.67 Low: $13.48
CHEDDAR CHEESE RISES 5.3 PERCENT
...as milk futures prices have climbed, many producers are penciling profi table margin opportunities (average 2013 Class III price is $18.76) looking forward ... enough of an opportunity to bring cows back to the farm. ”
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Issue 14 • September 21, 2012 Progressive Dairyman 15