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Industry insider says election critical for dairy producers
By Lee Mielke

The International Dairy Foods Association’s Chip Kunde discussed this week’s election in DairyLine’s monthly “Processors Perspective” program last week. He said that the election was critical for many reasons, and that voters need to “Make sure our representatives in Congress understand what’s important to us, our communities and our families.”

He said that while most people will be thinking of major national and international issues, “The Congress we elect next week will also play an important role in the future of federal dairy programs, as this new Congress will write the next farm bill and put in place the rules that govern most agriculture and dairy programs for the next several years.

“What can the federal government do to help us tackle the real-life challenges we face on the farm and in the plant?” Kunde asked. “How can Congress provide support when it’s needed, but keep the federal government out of the way of our attempts to grow our businesses and consumer demand for milk and dairy products? What can Congress do to enhance opportunities for free market profitability instead of encouraging dependency on government subsidies?”

Current dairy policies and programs need to be overhauled, according to Kunde, because “They haven’t been seriously touched in decades.” “All the while, we are competing with other food and beverage products,” Kunde said, “Other countries are not hamstrung by outdated and unresponsive federal rules.”

He warned that, “If we hope to compete and win in the marketplace of tomorrow, we need to elect a Congress that will work with dairy producers and processors to update federal dairy programs to ensure our prosperity well into the future.”

He admitted the U.S. dairy industry has “done pretty well in spite of these policies but it hasn’t been easy, and there have been many missed opportunities.” He believes that much more could be accomplished “If we actually had federal dairy programs in place that helped us better manage risk and improved access to domestic and foreign markets.” That, he concluded, “Should have been one of our expectations when we step into the voting booth this week.”

Dairy policy was a hot topic this week at National Milk’s annual meeting in Las Vegas. Chris Galen reported that Texas dairy producer and NMPF chairman, Charles Beckendorf, told attendees that the Federation had several accomplishments in the past year, starting with the producer conclaves held earlier this year to gather input from producers on the issues they are most concerned with as work begins on the new farm bill.

One of the main points of consensus among producers is the need for a safety net to be included in the farm bill and the need for immigration reform. Beckendorf said that NMPF has lobbied lawmakers to develop “sane, effective, workable changes in U.S. immigration laws so that we don’t lose workers that are vital to keeping dairy farms going.”

He also discussed NMPF’s role in capping the exemption that large Western producer handlers have enjoyed from Federal milk marketing laws and the Federation’s proposed compromise that would increase make allowances but would adjust Class I and II formulas to reduce the overall impact on farm prices.

Dairy producer attendees are frustrated with the economics of dairy farming right now, according to Galen. Part of it is milk prices, he said, but the other part is the rising energy costs and high input costs. Thankfully energy costs have weakened, he said, and “Hopefully there’s some light at the end of the tunnel with respect to where milk prices are going to go next year.”

One other topic was the environment. NMPF worked to get legislation passed clarifying that manure from livestock operations, including dairies, should not be included in so-called super fund laws. The legislation hasn’t been passed yet, he said, but it was one of NMPF’s legislative efforts this year.

Milk marketing remains a vital part of the dairy checkoff and Wisconsin dairy producer and DMI board member, Rosalie Geiger, discussed the overall strategic business plan for 2007 in Monday’s “DMI Update.” She said the focus is on kids and increasing milk’s availability and value added opportunities, with the goal to “provide kids with a positive early experience with milk.”

The October Federal order Class III benchmark milk price was announced Friday at $12.32 per hundredweight (cwt.), up 3 cents from September, but $2.03 below October 2005. The November Class III futures contract was trading at $12.70 and December was at $13.25 as of late Friday morning, with consecutive monthly gains posted for the most part through September 2007.

The 2006 Class III average now stands at $11.63, down from $14.18 a year ago and $15.37 in 2004. The October 2006 Class IV price is $11.51, up 41 cents from September, but $2.10 below a year ago.

The NASS-surveyed cheese price averaged $1.2721 per pound, down 1.9 cents from September. Butter averaged $1.2941, down fractionally. Nonfat dry milk averaged 90.27 cents, up 4.9 cents, and dry whey averaged 35.57 cents, up 3.7 cents from September.

California’s October 4b cheese milk price is $11.40, down 47 cents from September, $2.32 below a year ago, and 92 cents below the comparable Federal order Class III price. The California 4a butter powder price is $11.02, up 23 cents from September, but $2.21 below a year ago.

Volatility and low prices continue to plague the cash dairy markets despite reports that milk is tight and it’s the time of year that normally sees prices near their peak. Alan Levitt, editor of the CME’s Daily Dairy Report (DDR), reported that demand for fluid milk is strong and is pulling milk away from the cheese vat. Incredible tightness on nonfat dry milk is also pulling milk from cheese and into butter-powder, he said, but prices have been slow to respond.

Cash block cheese closed Friday at $1.3175 per pound, up 7.75 cents on the week, but 5.25 cents below that week a year ago. It climbed to a 2006 high of $1.37 on Thursday but gave back 5.25 cents on Friday. Barrel closed Friday at $1.3125, up 6.5 cents on the week, and just three quarters below a year ago. It also peaked at $1.37 on Thursday but relapsed on Friday. Three cars of block traded hands on the week and one of barrel. The NASS-surveyed U.S. average block price slipped 0.4 cent, hitting $1.2162. Barrel averaged $1.2328, up 0.2 cent.

Butter closed Friday at $1.2750, unchanged on the week, but 20 cents below a year ago when it plunged 10.25 cents. Ten cars were sold this week. NASS butter averaged $1.3031, down 1.1 cents. NASS nonfat dry milk hit 94.23 cents per pound, up 2.4 cents on the week, after gaining 2.5 cents the previous week.

Levitt speculated that inventories hanging over the market fueled the sense that things are not going to be tight. The last milk production report showed output up 2 percent from a year ago so “We’re still waiting for things to turn around.”

He reported in the DDR that the average fat test in October was 3.74 percent, up eight points from September, and three points above a year ago. Fat has been tracking higher all year, he said, and, coupled with increased milk production, cows have produced about 3.7 percent more milk fat this year than a year ago.

Some also suggest that the holiday buy in occurred earlier this year when prices were lower and that may be a factor but Levitt said there are positive signs out there.

This farm news was published in the Nov. 8, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.