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MILC program should be safe with changes on Capital Hill
By Lee Mielke

Big changes are underway on Capitol Hill with Republicans taking a beating in Tuesday’s election. National Milk’s Chris Galen pointed out in his Thursday broadcast that there will be a “go slow approach” to writing the next farm bill. He reported that the next chairman of the House Agriculture Committee will be Collin Peterson of Minnesota, who has endorsed the idea of extending the current farm bill for a year or two, and Senator Tom Harkin of Iowa will become chairman of the Senate Ag Committee and he too would likely support a slower approach.

Galen said that it’s very unlikely that Trade Promotion Authority will be extended and the future of any major free trade agreements is also questionable. Free trade agreements were hard to get passed under a Republican controlled Congress, he said, let alone one controlled by the Democrats.

Supporters of the Milk Income Loss Contract (MILC) program should be encouraged, according to Galen. One of its biggest supporters is Democratic Rep. David Obey of Wisconsin, who will become chairman of the powerful House Appropriations Committee, and the top Senate Appropriations Committee Democrat is Wisconsin’s Herb Kohl, also a strong proponent of the MILC.

Galen added that “Agriculture policy does not tend to be a partisan issue” and it doesn’t seem to matter who controls Congress. That said however, he warned that “It’s likely that there’ll be people in the House who will be less willing to work with the Bush administration and, when you’re talking about writing a farm bill, there has to be a certain level of collaboration between the USDA and the House and the Senate. The question now is how collaborative will they be.”

Butter production up
USDA’s latest Dairy Products report shows September butter production at 102.7 million pounds, up 14.4 million pounds above August, and 2.1 million above a year ago. Nonfat dry milk production totaled 64.9 million pounds, down 11 million pounds from August, and 6.1 million below a year ago.

American-type cheese totaled 324.9 million pounds, up 6 million pounds from August, and 23.1 million above a year ago. Total cheese output, at 784.8 million pounds, was down 4.1 million pounds from August, but 39.3 million pounds above a year ago.

Cheddar cheese production in Wiscon-sin was down 4.8 percent from a year ago, while California’s output was up 7.7 percent, Idaho was up 1.1 percent, and Minnesota was down 5 percent. California butter production was down 1.2 percent from a year ago, while Wisconsin butter output was up 2.8 percent.

The cash dairy market continued its roller coaster performance the week of Nov. 6, this time on the upswing. Block cheese dropped to $1.29 on Monday but then recovered and closed Friday at a year high $1.40 per pound, up 8.25 cents on the week, and 3 cents above that week a year ago. Barrel also closed at $1.40 Friday, up 8.75 cents on the week, and 7.75 cents above a year ago. Seven cars of block traded hands and eight of barrel. The NASS U.S. average block price hit $1.2298, up 1.4 cents. Barrel averaged $1.2597, up 2.7 cents.

Butter closed Friday at $1.33, up 5.5 cents on the week, but 7 cents below a year ago. Fifty-one cars were sold on the week. NASS butter averaged $1.2608, down 4.4 cents. Cash Extra Grade nonfat dry milk closed Friday at $1.20 per pound, up 15 cents on the week. Grade A held all week at $1.65.

The dairy market is “bordering on ridiculous and appears to have little to do with supply and demand,” according to Jim Tillison’s Weekly Update newsletter. Speaking in DairyLine’s monthly “Tillison Report,” he said, “You have people in the market who are actually buying and selling product. Some are buying and selling at the date of sale, some at the day of shipment but when you have the kind of volatility we’re seeing in the marketplace it obviously makes it extremely difficult to operate under those conditions.”

He added that, “There’s little sense to this kind of movement on a daily basis when you see the market go up six cents one day and then drop 5 cents the next.”

The Chicago Mercantile Exchange offers both cash and futures trading, Tillison said, and “we all know that futures contracts don’t change in value unless something happens in the marketplace.”

He said it is “disconcerting that we’re dealing with markets as they currently exist” and he believes that speculators could be part of the reason for the volatility. People at the old National Cheese Exchange only bought and sold cheese, he said, “That was the business that they were in. That’s not the case at the CME.”

The USDA lowered its 2006 and 2007 milk production estimates in its latest World Agricultural Supply and Demand Estimate report. 2006 output is now expected to hit 181.9 billion pounds, down from the 182.1 billion projected a month ago. 2007 production is estimated at 183 billion pounds, down from 183.9 billion projected last month.

The report also increased milk price forecasts and predicted that increased feed costs will likely lead to a more rapid decline in cow numbers in the latter part of 2006 and through 2007. Growth in milk per cow was also reduced slightly.

The butter price forecast was lowered to reflect relatively large supplies, but cheese, nonfat dry milk, and whey price forecasts were raised to reflect relatively strong demand. Prices for 2007 dairy products were raised as “growth in supplies will be slower than last month and demand is expected to remain firm.”

The 2006 Class III milk price was projected to average $11.70-$11.80, up a dime from last month’s report, and compares to $14.05 in 2005. The 2007 average was projected at $12.40-$13.30, up 30 cents from last month’s estimate.

Look for a 2006 Class IV average of $10.95-$11.15, up 15 cents from last month’s estimate, and compares to $12.87 in 2005. The 2007 average is now predicted to range $11.20-$12.20, up 75 cents from last month’s estimate.

This farm news was published in the Nov. 15, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.