September 5, 2017 at 3:32 p.m.
Sequestration may hit dairy again
February cow numbers in the 23 states, at 8.5 million head, were up 2,000 from January but 13,000 head less than a year ago. Output per cow averaged 1,722 pounds, down 58 pounds from a year ago. However, with February 2012 having an additional "Leap Day," the average daily basis production per cow was really up about 0.2 of a pound in 2013.
California output was reported as down 8 percent from a year ago but, again, the figures are skewed because of the leap day. Output per cow was reported to be down 155 pounds and cow numbers were down 2,000 head. Wisconsin was up 0.3 percent, on 4,000 more cows. Output per cow was unchanged. New York was down 2 percent due to a 35 pound loss per cow. Cow numbers were unchanged. Idaho was down 4.2 percent on a 70-pound loss per cow and 2,000 fewer cows. Pennsylvania was down 1.9 percent on a 10-pound loss per cow and 7,000 fewer cows. Minnesota was down 1 percent due to 15,000 fewer cows. Again, these totals are skewed because of the extra leap day.
Speaking of sequestration; not only will the dairy industry be denied the monthly Milk Production report but dairy producer MILC payments will be reduced by up to 8 percent. The Agriculture Secretary has to notify Congress first so it's not certain when this reduction will begin. The belief of many is that the suspension of the Milk Production report and now this is politically motivated by the Obama Administration. I'll have more on that ahead.
The Agriculture Department announced the April Federal order Class I base milk price at $17.66 per hundredweight, down 14 cents from March but $2.00 above April 2012 and equates to about $1.52 per gallon. That put the 2012 four month average at $18.16, up from $16.95 at this time a year ago and $17.19 in 2011. The University of Wisconsin's Dr. Brian Gould predicts the April MILC payment to producers will be 55.43 cents per cwt.
The AMS-surveyed butter price averaged $1.5909, up 5.2 cents from March. The nonfat dry milk price, at $1.5219 was down 4.3 cents. Cheese averaged $1.6402, down almost a penny, and dry whey averaged 60.94 cents, down 3.1 cents.
Meanwhile; cheese production remains active with manufacturers surprised at the volumes of milk available to the vats, according to USDA's March 15 Dairy Market News (DMN). Cheddar production in the Midwest and other parts of the country is reported to be strong with good sales reported. Retail sales are good with the upcoming Easter/ Passover period and promotions for "March Madness" being sighted as additional demand factors.
Current inventories of cheese are reported to be comfortable, according to DMN. Some manufacturers are expressing concern about future world milk supplies and are developing their strategies for second quarter inventories. Export sales for January were reported to be 13 percent above year ago levels.
The lagging AMS-surveyed block price average hit $1.6271, down 1.8 cents, while the barrels averaged $1.6039, down 2.1 cents.
AMS powder averaged $1.5169, down 1.3 cents, and dry whey averaged 61.09 cents, up 0.3 cent.
Western butter manufacturers are adding to inventories as cream is available, DMN reports. Some producers were reporting tighter supplies of cream. Central cream supplies receded slightly, with fewer Eastern cream spot loads cleared into the region. Domestic demand in the East has increased ahead of the Easter/Passover holidays, prompting some increases in butter production.
The Foreign Agricultural Service reports that exports of butter and milkfat for January 2013 totaled 9.5 million pounds, up 44 percent from January of 2012. Saudi Arabia, at 5.2 million pounds for the month, was the largest importer with a 71 percent increase above 2012. Those butter and milkfat exports accounted for 5.1 percent of butter production in the U.S. for the year, according to USDA.
Milk production in most areas of the nation is increasing along the seasonal trend. Florida production has shown only incremental increases during this year's flush, compared to previous years, with high grain prices and drought being cited as the primary limiting factors. Various milk shipments continue to be rerouted in the East due to the discontinuation of some milk distribution agreements. Numerous contacts have expressed concern regarding NASS's announcement of discontinuing the monthly Milk Production report.
The New Zealand milk production trend is moving lower seasonally and further pulled down because of dry conditions. A drought designation was declared for many regions of the North Island. Pasture conditions have deteriorated and the resulting lack of feed is causing a sharp decline in milk production. Farmers are drying off cows earlier than planned and cow slaughter rates are increasing. Australian production is also being affected by hot, dry conditions.
The drought in New Zealand will open the export doors, according to the March 15 Daily Dairy Report (DDR). DDR editor, Mary Ledman, discussed the topic in that week's Daily Dairy Discussion, a free download at the DDR website.
Whole milk powder (WMP), a product that is scarcely even produced in the U.S., is likely to become the key driving force in milk and other dairy product prices in the near future, Ledman wrote. She predicted that the drought will strengthen prices on the Global Dairy Trade auction and, as European countries turn from producing nonfat powder to whole milk powder to meet demand New Zealand can't, the U.S. will in turn will be a bigger supplier of nonfat dry milk to the world market and that will drive U.S. domestic dairy product prices higher.
That indeed took place as buyers responded to the rapidly declining production in New Zealand in Tuesday's Global Dairy Trade (GDT) auction. The index jumped 14.8 percent compared with the previous event, according to the DDR, which added that "The sharp rise in price suggests global buyers are beginning to take steps to ensure they have sufficient supplies until world milk supply comes back online." "WMP, at $2.32 per pound, was up 21.2 percent versus the previous event and the highest price recorded price since July 2008."
Ledman also warned in the March 15 "Daily Dairy Discussion" that the suspension of USDA's monthly Milk Production report was a "serious blow to the dairy industry" and charged that "Politics were at play." "The report was targeted," she said, "When you consider the reports that weren't suspended."
However, "If a budget resolution is not found in the near term," Ledman suggested, "The dairy industry has the opportunity to solve this problem itself." The dairy checkoff, which is funded by dairy producers, could make the state by state calculations and publish the report again, she said.
In other trade news; Cooperatives Working Together (CWT) accepted 24 requests for export assistance this week to sell 2.7 million pounds of butter and 2.7 million pounds of cheese to customers in Asia, Europe, the Middle East and North Africa. The product will be delivered April through September and brought CWT's year-to-date cheese exports to 34 million pounds, plus 41 million pounds of butter, and 218,258 pounds of whole milk powder to 24 countries. The sales are the equivalent of 1.2 billion pounds of milk on a milkfat basis, or the annual milk output of 57,400 cows, according to CWT.
Looking "back to the futures;" first half 2013 Class III contracts portended a $17.69 average on February 1, $17.82 on February 8, $17.61 on February 15, $17.57 on February 22, $17.41 on March 1, $17.60 on March 8, $17.55 on March 15.
Members of the nation's largest dairy cooperative, Dairy Farmers of America, gathered in Kansas City this week for their 15th annual meeting. DairyBusiness Update's Dave Natzke was there and reported details in Friday's DairyLine. He reported that about 1,500 attended and was both a celebration of productivity, sprinkled with some "mea culpa" for some past activities.
Last year was a strong financial year for the co-op, Natzke said, with record earnings and cash flow, built on net sales of more than $12 billion. The co-op marketed about 61 billion pounds of member and non-member milk, about 30 percent of the U.S. total. The average milk price paid by the co-op was $18.49 per cwt., down about $2 from 2011's record high.
Offsetting the positive side of the financial ledger was a $216 million charge related to lawsuits involving the co-op, most related to activities nearly a decade old. As reported in the past, earlier this year DFA settled a lawsuit in a class-action lawsuit in the southeastern U.S., for $159 million. And, this week, DFA was expected to settle a lawsuit regarding Chicago Mercantile Exchange cheese trading practices in 2004, for $46 million.
Looking forward, DFA leaders said the co-op's business partnerships and joint ventures were profitable for a fourth consecutive year. And, the co-op is positioning itself to be a bigger part of global dairy markets, which currently account for about 8-10 percent of DFA's commercial business. Dairy processing plants in Portales, New Mexico, Fort Worth, Colorado, and a new plant scheduled to come online this fall in Fallon, Nevada, will enable the co-op to produce dairy ingredients and products in high demand outside the U.S., Natzke concluded. Complete details are posted at www.dairybusiness.com.
The dairy industry's animal care program has achieved an important milestone, with 70 percent of the nation's milk now participating in the program. With the recent addition of several major cooperatives in the National Dairy FARM program (Farmers Assuring Responsible Management) more than two-thirds of the nation's cows will be covered by the industry's animal well-being effort, according to the National Milk Producers Federation (NMPF).
NMPF started the FARM program three years ago to provide a consistent, national, verifiable means of showing consumers and the food value chain how dairy products are produced. The number of cooperatives and processors subscribing to the program has continued to grow, and now includes farms producing 70 percent of America's milk supply.
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