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Class III milk price begins new year on down note

Mielke Market Report
The January Federal order (FO) Class III milk price begins 2013 on a down note although it’s the highest January price in five years. The USDA announced the benchmark price at $18.14 per cwt., down 52 cents from December, but $1.09 above January 2012, equates to about $1.56 per gallon, and $2.30 above California’s comparable 4b price. The FO Class IV price is $17.63, down 20 cents from December, $1.07 above a year ago, and appears to be the highest January Class IV price ever.

The four-week, AMS-surveyed cheese price used in calculating the FO prices averaged $1.7485 per pound, down 4.4 cents from December. Butter averaged $1.5066, down 9.2 cents. Nonfat dry milk averaged $1.5601, up 2.2 cents, and dry whey averaged 65.03 cents, down 1.1 cents.

California’s 4b price was announced by the California Department of Food and Agriculture at $15.84 per cwt, down 46 cents from December, but $1.61 above a year ago. The 4a butter-powder price is $17.08, down 39 cents from December and 90 cents above a year ago. The prices do not include the state’s temporary increase in milk prices because the increase only runs February through May.
CME cash cheese prices portend further milk price declines ahead although the block price closed Feb. 1 at $1.6450 per pound, unchanged on the week. It has lost 11.5 cents since Jan. 1, but is still 16 cents above a year ago. The barrels lost more ground this week but recovered some of the loss, closing Friday at $1.5425, down 3 cents on the week, 4.75 cents above a year ago, down 16.75 cents on the year, and 10.25 below the blocks. One car of block was sold on the week and 12 of barrel. The AMS-surveyed U.S. average block price slipped to $1.7353, down 0.9 cent, while the barrels averaged $1.7081, down 1.9 cents.

Increased milk supplies push production 
Increased milk supplies in the Midwest and East have pushed cheese plants to raise production schedules, according to Dairy Market News (DMN). But, the increased supplies and lower prices are attracting attention from export buyers.

Spot butter closed the week at $1.5550, up a nickel on the week and 6.25 cents above a year ago.

Twelve cars found new homes on the week and the AMS surveyed butter average gained 2.2 cents, hitting $1.5011. 

Cash Grade A nonfat dry milk closed at $1.52, down a penny on the week, and Extra Grade remained at $1.56. AMS powder averaged $1.5492, down 2.2 cents, and dry whey averaged 65.39 cents, up a penny.

Butter manufacturers indicate cream is still ample, reports DMN. Internally generated cream as well as cream coming from Class II operations is moving through the churns and into bulk butter inventories. Central region churning is especially active as spot loads from the East and the West are clearing through the Midwest. Retail demand is light, says DMN.

The January milk-feed ratio was 153, according to USDA’s monthly Ag Prices report, down 4.4 percent from December, but 5.5 percent higher than January 2012. The January all milk price of $20 per cwt., was down 90 cents from last month but $1 higher than a year ago. The corn price, at $6.98 per bushel, was 11 cents higher than last month and 91 cents above a year ago. The all hay price, at $191 per ton, was down $1 from December, but $19 higher than last January.

Cooperatives Working Together (CWT) accepted 30 requests for export assistance this week to sell 7.6 million pounds of cheese, 1.2 million pounds of butter, and 44,092 pounds of whole milk powder to customers in Asia, Europe, the Middle East, North Africa and Oceania. The product will be delivered through June and put CWT’s year-to-date cheese exports at 14.6 million pounds, 9.8 million pounds of butter, and 88,185 pounds of whole milk powder. 
USDA’s weekly update reports that farm milk production continues along seasonal trends in most areas, with processors noting that fluid demand is mostly level except for intermittent small spikes as customers shop before snow storms. 

Dairy farmers are watching milk futures and noting the trend toward lower prices, warned DMN. “The cost of feed continues to nip at profit margins for dairies using purchased feed and “the prospect of lower milk prices may push dairy farmers to reevaluate herd sizes and other possible changes in operations.”

Looking “back to the futures;” first half 2013 Class III contracts portended an $18.39 per cwt., average on Dec. 28, $18.40 on Jan. 4, $18.02 on Jan. 11, $17.98 on Jan. 18, $17.60 Jan. 25, and was trading around $17.63 late morning Feb. 1, with the announced January Class III price.

Dairy processors attend Dairy Forum
In dairy politics, dairy processors met in Orlando this week for their 28th annual Dairy Forum. Connie Tipton, president and CEO of the International Dairy Foods Assoc., said the dairy industry “stands on the verge of a new era filled with enormous opportunity and unlimited potential.” Saying that future success hinges on all stakeholders taking steps together, Tipton called for industry collaboration on renewed efforts to phase out federal milk pricing regulations and new legislation that would change the federal standards of identity for dairy products. 

She warned that changes in administration policy are unlikely and told attendees to expect more regulations for the food industry, more rules for school meals, more labeling requirements and possibly restrictions on marketing to children. 

Tipton called innovation the industry’s “lifeblood” and warned that, for innovation and growth to continue, the industry needs an abundant supply of farm milk. She warned however that the combination of volatile dairy feed costs, farm milk prices, the U.S. biofuel policy, and a major drought have caused a “quadruple whammy.” “Going forward, one thing is for sure. The conventional thinking that milk will always be there when we want it has to change,” she said.

Another area requiring change, according to Tipton, is government regulations that “continue to hinder industry’s efforts to innovate and grow.” She charged that “Federal milk pricing regulations, food standards and other laws, some of which date back to the 1930s, have not kept pace with the times,” and she proposed “working together as an industry to provide greater product flexibility and innovation and collaborating on ways to remove “the shackles” of milk pricing regulation.” 

Dairy Business Update’s Dave Natzke reported in his Feb. 1 DairyLine report that USDA’s Farm Service Agency (FSA) announced additional details regarding the so-called “start month relief period” for larger dairy producers. 

He said that those producers, as well as any new dairy farmers who wish to enroll in the MILC, should contact their local FSA office before Feb. 28 to do the appropriate paperwork. FSA also announced that retroactive MILC payments for September 2012 milk marketings, at approximately 59 cents per cwt., will be sent to dairy farmers beginning about Feb. 5.
2/7/2013