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Bill extending MILC program to be considered by House
By Lee Mielke

National Milk is lobbying Congress to fund a national Johne’s Disease Control Program and possibly an indemnity program. Chris Galen reported that this is an annual ritual. The Johne’s educational program was included in the 2002 farm bill but it has to be funded each year and, because NMPF is the primary supporter, it has to “sell” it to Congress each year.

Last year Congress appropriated about $13.5 million for the program. This year, the House only allocated about $8 million so NMPF will have to seek a higher figure in the Senate. In 2004, Congress appropriated nearly $19 million, Galen said, “So the funding is being reduced, which is a big problem.”

Another challenge is Mad Cow Disease. USDA has been spending about $1 million a week on testing animals in the past year and a half and have only found two, Galen said. He admits that funding will likely be scaled back but “they’ve been spending an extraordinary amount of money looking for needles in a hay stack and what they really should be doing is focusing on some of these other diseases that are an issue in the industry, including Johne’s.”

The issue was raised at NMPF’s recent dairy producer conclaves, according to Galen, and interest was expressed for an indemnity program where Uncle Sam gives producers the option of selling their Johne’s-positive herds to the government, so NMPF would like to include that in the next farm bill.

The Federation tried to include it in the 2002 farm bill, Galen said, but “We only ended up with this modified program. There is interest in having an indemnity program similar to existing brucellosis and BVD programs.”

An amendment to the Agriculture Appropriations bill was approved this week by the House Appropriations Committee that extends dairy’s MILC program through September to coincide with other commodity programs.

USDA’s latest Dairy Products report pegs March butter production at 142 million pounds, up 5 million pounds from February and 19.6 million above a year ago. Nonfat dry milk totaled 128.1 million pounds, up 10.6 million from February and 18.8 million above 2005.

American-type cheese totaled 338.4 million pounds, up 34 million pounds from February, and 6.9 million above a year ago. Total cheese output, at 809.7 million pounds, was up 88.7 million pounds from February, and 12.2 million above a year ago.

Downes-O’Neill economist, Bill Brooks, said that the report shows “we’re producing quite a bit more milk than we can consume and the surplus is being diverted from the vat into butter and nonfat dry milk because it has a longer shelf life and allows us to store it until the market turns around.” He speculates that will likely be later this summer depending on the weather.

He doesn’t see cheese prices dropping much ahead but cautioned that summer school closings are coming up, along with the Memorial Day holiday, and that always means more milk going to manufacturing plants.

“Once we get into June,” Brooks said, “We could start seeing that (block) price move up, as production seasonally starts to decline and buyers start trying to get ready for the latter stages of their sales for 2006.”

The butter price has also been steady. I asked if cream was beginning to head to ice cream and he said production was down in March. The largest category, hard ice cream, was down about 1.1 percent. Part of the reason, he said, is “the somewhat cooler weather that we experienced in April and now in May.”

Once the weather turns around, that will hopefully pull more cream out of the butter churn, according to Brooks as he anticipates relatively normal summer temperatures so “That should take pressure off of the butter price.”

Block cheese closed Friday May 12 at $1.17 per pound, up a penny on the week, but 30.5 cents below a year ago. Barrel closed at $1.18, up 5.5 cents on the week, but 26 cents below a year ago.

Four cars of block traded hands and five of barrel. Barrel hasn’t topped the blocks since August 2005. The NASS U.S. average block price hit $1.1502, down a penny. Barrel averaged $1.1387, up 0.4 cent.

Butter closed at $1.1775, up a quarter-cent on the week, but 23.5 cents below a year ago. Only one car was sold. NASS butter averaged $1.1621, up 1.2 cents.

Price support purchases for the week totaled 5.9 million pounds of nonfat dry milk. That raised the market year’s cumulative total to 33.2 million pounds, compared to 31.8 million a year ago. Also, 198,000 pounds of cheese was purchased, the first price support purchase of cheese since July 2003.

California’s June Class I milk price was announced at $12.35 per hundredweight (cwt.) for the North, up 2 cents from May, but $2.40 below a year ago.

The USDA’s latest World Agricultural Supply and Demand Estimate predicts that 2007 milk production will increase gradually as weaker milk prices and higher feed costs lead to a reduction in dairy cow inventory. Milk per cow is expected to continue increasing but at a slower rate than in 2006.

Domestic disappearance of fat and skim solids is expected to remain relatively robust, helping draw down commercial stocks and boost butter and cheese prices. Commercial exports are expected to help absorb much of the anticipated supplies of nonfat dry milk but 2007 prices are forecast to be slightly lower.

Class III milk prices are projected to be about $1 per cwt. higher than in 2006, ranging $11.95-$12.95 per cwt. but Class IV prices may only average about 25 cents higher, at $10.45-$11.55.

The 2006 milk production forecast was lowered from last month’s estimate, due to slightly lower output per cow than expected. However, both fat and skim-solids basis commercial use in the first quarter may be weaker than previously forecast. In the face of weaker demand, product price forecasts were reduced and CCC net removals of nonfat dry milk were increased slightly.

With lower cheese and whey prices, the 2006 Class III milk price forecast was reduced. The range is now put at $11.25-$11.75, down from last month’s $11.45-$11.95. Likewise, lower forecast butter and nonfat dry milk prices result in a lower Class IV price. The 2006 all milk price was lowered to $12.35-$12.85.

The CWT accepted bids this week from Dairy Farmers of America to export 41,800 pounds of Cheddar, Colby, and Monterey Jack cheese to Japan and 88,000 pounds of anhydrous milk fat to Canada. A bid from Massachusetts-based Agri-Mark was for 330,000 pounds of butter to Canada.

Another bid was from Land O’ Lakes on 242,000 pounds of butter to Honduras, 257,400 pounds of butter to Hong Kong, and 550,000 pounds of whole milk powder to the Dominican Republic. A bid was also accepted from New Mexico’s Select Milk Producers on 1.3 million pounds of Mozzarella cheese to Mexico, and from California Dairies, of Artesia, on 55,000 pounds of butter to Saudi Arabia.

This farm news was published in the May 17, 2006 issue of Farm World.