Dairyline
By Lee Mielke

The impact of drought and fires in Russia was felt all the way back to U.S. dairy farms this week upon news that Russia will ban all exports of wheat through the end of the year, sending grain prices higher.

Now that the smoke has cleared – pardon the pun – Dairy Profit Weekly editor Dave Natzke reported Friday that the news sent wheat futures to spike early in the week and pulled other grain prices higher, creating fears of skyrocketing feed prices for U.S. dairy and livestock farmers. Thankfully, grain prices moderated somewhat later in the week.

Helping relieve some of the concern, USDA’s crop production report, released on Thursday, estimated both 2010 U.S. corn and soybean crops to be the largest on record. The corn crop is forecast at a record 13.4 billion bushels, with yields expected to average a record 165 bushels per acre.

Soybean production was forecast at a record 3.43 billion bushels, with yields expected to equal last year’s record of 44 bushels per acre. So, with record U.S. crops, the USDA projects larger supplies of feed grains, Natzke reported, although strong export demand will eat up much of that supply.

Heavy global demand caused USDA to raise its season-average price forecasts slightly. Farm-level corn prices are now expected in a range of $3.50-$4.10 per bushel, up a nickel on each end; and soybean price projections were raised 40 cents on each end, to a range of $8.50-$10 per bushel.

USDA’s weekly crop/weather report says corn and soybean crops are advancing well ahead of schedule. And, despite widespread heavy rains, more than two-thirds of both corn and soybean crops are rated good to excellent.

USDA adds that abundant moisture is helping produce record or near-record high yields of alfalfa and other hay, as well.

Corn and soy complex futures were higher after USDA’s Thursday reports, despite the higher-than-expected corn and soybean production estimates. Strong domestic and global use was cited, Natzke concluded.

School’s back
High temperatures and humidity are driving dairy prices higher. School pipelines are refilling and making less milk available for the churn or the vat.

The block cheese price closed Friday the 13th at $1.62 per pound, up 1.75 cents on the week and 25.75 cents above a year ago. The barrels closed at $1.585, also up 1.75 cents on the week and 24.5 cents above a year ago.

Two cars of block traded hands on the week and one of barrel. The NASS-surveyed U.S. average block price hit $1.5834, up 3.7 cents. Barrel averaged $1.5779, up 2.3 cents.

Butter closed Friday at $1.9175, up 6.75 cents on the week, 69.75 cents above a year ago and the highest in more than five years. Only one car was sold on the week. NASS butter averaged $1.8025, up 3.2 cents. NASS powder averaged $1.1766, up 0.2 cent, and dry whey averaged 35.9 cents, up 0.6 cent.

Dairy product prices are getting back to levels dairy producers like to see, according to Dr. Robert Cropp, professor emeritus at the University of Wisconsin. Reporting in Tuesday’s “DairyLine,” Cropp said butter stocks are tight and the market is strong for this time of year.

June 30 stocks were down 25 percent, he said, because cream supplies are tight, milk fat tests are down, CWT has bonuses in exports of butter and milk production is declining. “Butter sales have been pretty good, but there is some concern with these kinds of prices,” Cropp said. “We’ll start getting resistance at the retail level, but that hasn’t happened yet.”

The futures market had butter declining to $1.66 by December, according to Cropp, who added, “We’ll see whether that will occur or not, but it probably will decline towards the end of the year.”

Cheese is a little more uncertain in that June stocks were still relatively high, at about 4 percent more than a year ago. Cheese production was also pretty strong in June, he said, as total cheese production was up 5.2 percent.

“That’s quite a bit of cheese,” Cropp said, “with cheddar up 3.5 percent.” The strong sales are on mozzarella, as the frozen pizza business has been good, according to Cropp, and schools will be opening soon.

“When schools open up, more milk goes to fluid,” he concluded. “I think the cheese market can hold there, maybe increase a little bit more, at least through September.”

Jim Montel, executive vice president of strategic initiatives for Dairy Management, Inc., continued our discussion on pizza in Monday’s “DMI Update.” We focused on a project among the dairy checkoff, schools and Domino’s.

Pizza isn’t just sold at Pizza Hut, Domino’s and Papa John’s, he said. It’s also sold in schools, and schools are an important area for the dairy industry to work in because 10 years ago, about 60 percent of the lunches in schools included pizza – but that’s down significantly today.

Research indicates that kids are not satisfied with the taste of the pizza being offered in schools, so the dairy checkoff partnered with Domino’s to introduce the “Smart Slice,” which is not only a great-tasting pizza but also features healthier components such as less sodium and fat to meet school nutrition requirements.

This has produced some momentum, according to Montel, for schools to meet the need of consumers and students to enjoy a healthier pizza whose taste they also love. The action also helps fend off the use of imitation cheese.

“It’s all about real cheese because that’s what delivers the great taste,” he concluded.

(Please refer to the newspaper for the remaining portion.)