September 5, 2017 at 3:32 p.m.

Dairy pricing will remain the same for now

By Lee Mielke- | Comments: 0 | Leave a comment

I learned an interesting fact of dairy life when I first began my career in this industry and that is, when milk prices are down, milk production goes up and when milk prices are up, milk production goes up. That hasn't changed.
October milk output in the top 23 states hit 15.2 billion pounds, according to USDA's preliminary estimate, up 2.5 percent from October 2010. Output in the 50 states was 16.2 billion pounds, up 2.1 percent. Revisions subtracted 10 million pounds from the preliminary September estimate, now put at 14.8 billion, up 1.9 percent from a year ago.
October cow numbers stood at 8.48 million head, up 10,000 head from September and 111,000 above a year ago. Output per cow averaged 1,787 pounds, up 20 pounds from a year ago.
California output was up 2.4 percent, thanks to 27,000 more cows and a 15 pound gain per cow. Wisconsin was up 1.7 percent, on a 30-pound gain per cow, though cow numbers were unchanged. New York saw a 0.2 percent decline on 1,000 fewer cows and unchanged output per cow. Idaho was up 1.7 percent on 10,000 additional cows but output per cow was steady. Pennsylvania was down 1.7 percent. Cow numbers were down 3,000 head and output per cow was off 20 pounds, and Minnesota was off 0.1 percent, despite an additional 1,000 cows but output per cow was down five pounds.
The biggest increase occurred in Texas, up a whopping 9.8 percent, thanks to 20,000 more cows and an 85 pound per cow average increase, followed by Florida, up 7.9 percent, and Arizona, up 7.2 percent. The biggest loss was in Missouri, down 1.8 percent, on 2,000 fewer cows and unchanged output per cow, followed by Pennsylvania, and Ohio and Virginia, both down 0.7 percent.
Meanwhile, the Agriculture Department's latest Livestock Slaughter report showed an estimated 242,800 culled dairy cows were slaughtered under federal inspection in October, down 4,000 from September, but 11,300 more than October 2010. The January to October 2011 dairy cow slaughter was estimated at 2.399 million head, up 98,300 from the same period in 2010.
The cash dairy markets only traded three days this week due to the Thanksgiving holiday. The 40-pound block cheese price saw another week of losses, closing Wednesday at $1.7875 per pound, down 4 1/2-cents, but still 32 cents above that week a year ago. The 500-pound barrels rolled 7 cents lower, to $1.80, still 36 cents above a year ago and the fourth week in a row to be above the blocks. Only seven cars of block traded hands on the week and eight of barrel.
Bill Brooks, economist at INTL FCStone, noted in the Nov. 23 eDairy Insider Opening Bell that more cheese has been available in the past two weeks than during the previous month.
Spot butter weakened for the fourth consecutive week, with four cars finding new homes. It closed Wednesday at $1.61, down 3 3/4-cents on the holiday week, and 6 cents below a year ago when the butter price melted down 22 cents, to $1.67. The butter price has plunged 27 cents in four weeks.
Cash nonfat dry milk was unchanged on the week, with Grade A holding at $1.45 and Extra Grade at $1.48.
Volatility is here to stay according to Paul DeBriyn, President and Chief Executive Officer, of Minnesota-based AgStar Financial Services. Speaking in Tuesday's DairyLine broadcast, DeBriyn said, "We are in a global economy and there are a whole lot of things that impact it." He cited economics, the number of people and geopolitical issues to name a few. He added that the issues we have today will "resolve themselves," but warned, "We'll have new ones so volatility is probably here to stay."
He brought out that risk management is an important part of the grains, swine, ethanol and poultry industries and dairy is making strides in that regard after dairy producers lost a third of their equity in 2009.
Checking the cupboard, the Agriculture Department's latest Cold Storage report shows that cheese and butter stocks declined seasonally in October, though cheese inventories remain higher than historical levels, according to the CME's Daily Dairy Report, and butter holdings remain lower.
Oct. 31 American cheese inventories stood at 614.7 million pounds, down three percent from September, four percent below those in October 2010, but 9.1 percent above the five year average for that date, according to the DDR.
Total cheese stocks amounted to 1.013 billion, down three percent from September, four percent below a year ago, but 13.6 percent above the five-year average.
Butter inventories, at 129.8 million pounds, were down 14 percent from September, 19 percent above a year ago, and down 19.1 percent from the average over the 2006-10 period, according to the DDR. eDairy's Bill Brooks said the butter inventory was higher than expected.
In politics, the Dairy Dairy Report also reported that dairy pricing mechanisms will remain intact for now, as the deadline ran out on the 12-member so-called "Supercommittee" to agree on deficit-cutting measures.
House and Senate Ag Committee leaders on the panel had crafted a new Farm Bill, which reportedly would have incorporated dairy reform based on the Dairy Security Act/Foundation for the Future, but the Supercommittee's "failure to reach a deal on an overall deficit reduction package effectively ends this effort," said Representative Frank Lucas (R-OK) and Senator Debbie Stabenow (D-MI). The two pledged to continue their work to reauthorize food and agricultural policy in the year ahead, the DDR said. The current Farm Bill expires in September 2012.
Dairy Profit Weekly editor, Dave Natzke, reported that the Supercommittee had until Nov. 23 to come up with a plan, which had to be approved by a simple majority in both houses of Congress, without amendment, by Dec. 23.
The overall Farm Bill package included $23 billion in cuts over the 10-year period, according to Natzke. Now, however, 2012 Farm Bill debate goes back to square one, although the plan offered to the Supercommittee may serve as the base for restarting discussions.
The next deadline for Congress is January 2013, when automatic budget cuts triggered in the law that created the Supercommittee, in the event of Supercommittee and Congressional failures to work out deficit-reduction plans take effect.
"Most say the automatic cuts are too drastic, especially for Defense," Natzke wrote. "And, next year is an election year, so any deficit plan developed during the year that makes painful cuts or raises taxes seems unlikely. So, look for this Congress to do what this Congress does best: Pass "continuing resolutions to keep kicking the can down the road."
Getting back to the increasing milk supply, growth continues in other parts of the world as well, according to the Daily Dairy Report, which points that, in the third quarter, milk production in New Zealand was 7.8 billion pounds (+10.5 percent from last year), while production in Australia was 5.2 billion pounds (+2.2 percent) and output in Argentina was 6.5 billion pounds (+12.5 percent). EU production was up approximately two percent in the Third Quarter.
Looking "back to the futures" combined with the announced Federal order Class III prices, the Class III contract's average for the last half of 2011 was at $18.72 on Sept. 29, $19.16 on Oct. 7, $18.97 on Oct. 14, $19.12 on Oct. 21, 19.36 on Oct. 28, and $19.54 on Nov. 4. The average for the first six months of 2012 stood at $16.63 on Nov. 4, $16.72 on Nov. 11, $16.78 on Nov. 18, and was at $16.77 an hour before the close on Nov. 23.
Milk production in the Southwest and California is steady to slightly higher, according to the USDA's weekly update. The Pacific Northwest, Utah and Idaho are near their seasonal production low points.
Production is steady in the Central region and increasing in the East with the increases building from South to North along the seasonal trend.
Class I use was much heavier the week before Thanksgiving with many bottlers at their largest production schedules for the year. Most balancing plants have concluded maintenance projects and are trying to make ready all available silos in preparation for the expected heavy milk supplies over the upcoming holiday week, USDA reported.[[In-content Ad]]


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