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

Milk prices inch higher, policy up in the air

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

The October Federal order Class III benchmark milk price is $18.22 per hundredweight (cwt.), up 8 cents from September but $2.80 below October 2012, $1.40 above California's comparable 4b cheese milk price, and equates to about $1.57 per gallon. That brought the 2013 Class III average to $17.82, up from $16.98 in 2012 and compares to $18.25 in 2011 and $14.36 in 2010.
Class III futures were trading late Friday morning at $18.86 for November and $18.35 for December. That would result in a 2013 average of $17.94, up from $17.44 a year ago and compares to $18.37 in 2011.
The October Class IV price is $20.17, up 74 cents from September and $1.63 above a year ago. The 2013 average now stands at $18.66, up from $15.56 in 2012 and $19.38 in 2011.
The product averages used in calculating the Class milk prices had cheese averaging $1.8025 per pound, up 0.6 cent from September. Butter averaged $1.5454, up 11.9 cents. Nonfat dry milk averaged $1.8366, up 2.8 cents, and dry whey averaged 57.31 cents per pound, down fractionally.
California's 4b cheese milk price is $16.82 per cwt., up 17 cents from September but $2.61 below October 2012. That put the 2013 4b average at $16.17, up from $15.16 at this time a year ago and compares to $16.41 in 2011.
The 4a butter-powder milk price is $20, up 53 cents from September $2.04 above a year ago. Its 2013 average now stands at $18.44, up from 15.18 a year ago and compares to $19.15 in 2011.
The dairy markets had a lot to absorb this week, including the Cold Storage, Livestock Slaughter, and Ag Prices reports, plus anticipating Friday afternoon's September Milk Production report.
Cash block cheese was up for the fifth consecutive week the last week of October, closing that Friday at $1.9025 per pound, up 2 3/4-cents on the week but 20 3/4-cents below a year ago. The barrels finished at $1.87, up a nickel on the week and 21 cents below a year ago. Nine cars of block traded hands on the week and only three of barrel. The AMS-surveyed U.S. average block price hit $1.7980, up 0.9 cent. Barrel averaged $1.80, up 3.1 cents.
Cheese production is active in the face of tighter milk supplies, according to Dairy Market News (DMN). "Demand is good enough for plants to look for additional milk, but price and availability are hindering deal making." Competition from Class II manufacturers for available milk is restricting access to additional spot loads for cheese, according to DMN.
Some plants are reconstituting nonfat dry milk and purchasing cream to bolster production schedules. Seasonal demand is good as retailers look to secure additional supplies for the upcoming holidays. Adding to the demand is current good export ordering, says DMN.
Cash butter reversed three weeks of losses, thanks to the Thanksgiving holiday ahead and the Cold Storage data, and closed Friday at $1.5325, up 5 3/4-cents on the week but still 35 1/2-cents below a year ago. Nine cars traded hands on the week. The AMS butter average was $1.5239 per pound, down 4.4 cents.
Butter production varies by region, being active in the West and Northeast but slower in the Central Region, according to DMN. Continued strong orders are driving Western and Northeast production. Inventories in those regions are also being used to meet orders but Central manufacturers report that orders from retailers are slower than expected.
Cash Grade A nonfat dry milk closed Friday at $1.91, up a penny, and Extra Grade held all week at $1.85. AMS powder averaged $1.8457, up 0.3 cent. Dry whey averaged 56.04 cents, down 1.1 cent.
Speaking of inventory, there's plenty on hand, according to the Agriculture Department's latest Cold Storage report. September 30 butter stocks totaled 233.25 million pounds, down a nice 30.7 million pounds or 12 percent from August but 37.4 million pounds or 19 percent above September 2012.
American cheese, at 661.27 million pounds, is down 7.1 million pounds or 1 percent from August but 19.6 million pounds or 3 percent above a year ago. The total cheese inventory hit 1.071 billion pounds, down 2.9 million pounds or 3 percent from August but 31.7 million pounds or 3 percent above a year ago.
FC Stone risk management specialist Chris Hildebrand said the report was "neutral to slightly bullish for cheese," and provided more bullish news for butter. "Both the fundamentals and some technicals are working in favor of the upside."
Milk supplies are described as tight nationally, according to DMN. Milk production in the South is beginning to show signs of improving with cooler temperatures and new feed supplies. Midwest output is mostly steady with higher components being reported, and California output is recovering from September's heatwave and component levels are showing improvements.
USDA's Livestock Slaughter report showed an estimated 258,600 dairy cows were slaughtered under federal inspection in September, down 7,400 from August, but 7,800 more than September 2012. The January-September 2013 total was estimated at 2.342 million head, 53,900 more than the same period in 2012. Through the third week in October, weekly cow slaughter has averaged about 60,600 head for the month.
Internationally; milk production in most countries is approaching seasonal low points of the production year. Volumes are mostly higher than year ago levels, continuing the trend that started during the summer.
Australian milk production is at or near the seasonal peak. Current production is trending 1-2 percent below last year, but industry analysts forecast year end totals to be about level with last year. New Zealand milk output is near the seasonal peak with estimates of a 4 percent increase over last year.
Cooperatives Working Together (CWT) accepted four requests for export assistance this week to sell 304,238 pounds of Cheddar cheese and 220,462 pounds of butter to customers in Asia and North Africa. CWT's 2013 exports total 111.6 million pounds of cheese, 81 million pounds of butter, 44,092 pounds of anhydrous milk fat and 218,258 pounds of whole milk powder to 37 countries.
The first public meeting for the 2013 Farm Bill Conference Committee was held this week. The National Milk Producers Federation (NMPF) stated in a press release today that "For America's dairy farmers, this is no time for a game of congressional trick or treat. The final product must provide farmers real stability, and not be a costumed disguise that masks the serious problems that will result if the House dairy program were enacted."
The Federation praised the Senate's Dairy Security Act as "the only option that will provide help to farmers when they need it most, while also limiting taxpayers' exposure through its market stabilization mechanism."
"In contrast, the proposal that finally emerged from the House is a bad trick: it would be fiscally irresponsible and ineffective. Lacking the Senate's market stabilization program, the House approach would cause farmers to suffer prolonged periods of poor margins, while taxpayers subsidize dairy processors through artificially-low milk prices."
The International Dairy Foods Association (IDFA) reports that the four principal conferees, Senate Agriculture Chairwoman Debbie Stabenow (D-MI), Ranking Member Thad Cochran (R-MS), House Committee on Agriculture Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN), are expected to meet in the coming weeks to determine if a general agreement can be reached on the major differences between the House and Senate bills. No further meetings of the committee have been announced at this time, and the House of Representatives will not be in session again until November 12.
IDFA "strongly encourages the Conference Committee to accept the House dairy language and to include its provisions in the final bill, according to an IDFA press release. "Milk prices would significantly increase and jobs will be lost if the Senate prevails over the House on this issue," IDFA wrote. "The conference should follow the lead of the House, which rejected this controversial new dairy program to impose milk quotas on dairy farmers."
California dairy producers and lawmakers are frustrated with their Agriculture Secretary. Sen. Tom Berryhill (R-Modesto), who sits on the Senate Agriculture Committee and is a Stanislaus County farmer, told Western United Dairymen; "I thought we did come to an agreement with the Dairy Institute about a dairy pricing mechanism that would allow my guys to stay in business."
Referring to fellow Ag Committee members Sen. Anthony Cannella (R-Ceres) and Chair Cathleen Galginai (D-Stockton), Berryhill pointed out, "The three of us thought there was an agreement. On the processor side they did not want to give anything. I thought it (the deal) was a happy middle ground. We all thought we had a deal that day and were very surprised to come back (after summer recess) and find everything had fallen out."
Berryhill said, Secretary Ross "has made her decision to kick this can down the road to June. We will have to live with that and it will put us back to the drawing board. We will have to sit down and talk some more."
"The industry's current financial crisis is driven in part by federal mandates on ethanol which are driving feed prices to record highs," said Berryhill. "Feed prices will continue high for the near future or so. This industry's dynamics have changed." Looking ahead, Berryhill says he remains committed to finding a solution. "Kicking that can down the road doesn't help anyone.
The Milk Producer's Council's Rob Vandenheuvel wrote in his October 24 newsletter that "Obviously, given the current financial state of the California dairy families (as evidenced in CDFA's own data, as well as the barrage of bank foreclosures and dispersal sales), there is ample evidence that CDFA has failed in their task to "bring about and maintain a reasonable amount of stability and prosperity in the production of market milk."
If this were a national crisis, we might understand. But the rest of the country is not feeling the same pain that California's dairy farmers are. How is it that the California dairy industry, in the middle of 38+ million California residents and an even larger market overseas to the West, is the home of the lowest priced milk in the country? Why are our dairies are being enticed to move to Colorado, Idaho, South Dakota, Kansas and other more rural areas?"The three major California cooperatives are working on a petition to submit to USDA that would create a Federal Milk Marketing Order in California.
DairyBusiness Weekly reports that The November 2013 California Dairy Review provided an update on four working groups of the California Dairy Futures Task Force, created by CDFA Secretary Karen Ross. Details are detailed in DBW and posted on CDFA's website.
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