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Dairy insiders reflect on 2006, list their top industry news picks
By Lee Mielke

National Milk’s Chris Galen reflected on the year 2006 in Thursday’s broadcast. He said it was a challenging environment on Capitol Hill but a few bills were passed that NMPF supported, like the Milk Regulatory Equity Act, which limited milk marketing of producer handlers to 3 million pounds per month. Previously they were exempt from federal order pooling requirements.

Fair trade efforts were expanded, Galen reported, by getting Peru and Panama into a free trade agreement with the U.S. Both are dairy importing countries, he said, and represent a net growth opportunity for the U.S. dairy industry.

One bill that NMPF worked on but did not become law was immigration reform. The House passed a “very punitive law-and-order approach,” which NMPF opposed, he said, while the Senate passed a bill that contained a guest worker provision which NMPF supported.

“In the end, Congress decided to punt,” Galen said, “And we’re hoping we can pick up the ball again in 2007 and pass something workable for dairy farms.”

Another important bill that NMPF and several other animal agriculture groups worked on but did not become law was legislation to clarify that animal manure not be considered toxic waste and thereby regulated by so-called super fund laws. Farm groups raised widespread support in the House and Senate for the legislation, he said, but it was not passed so efforts will begin again in 2007.

Turning our attention to the CWT program, Galen said the highlight was the expanded use of the export assistance provision. Some 600 million pounds of milk equivalent was exported via the program, according to Galen, and at a very economical rate, due to the narrow gap between U.S. and world product prices.

The CWT budget was doubled in 2006 by raising the membership assessment from a nickel to 10 cents, Galen said, and “Represents a strong commitment from CWT’s members to keep the program going and even to expand it.”

Fluid milk sales are reversing a long time downward plunge, according to Arkansas dairy producer and Chairman of the National Dairy Board, Woody Bryant. Speaking in Monday’s “DMI Update,” Bryant pointed to the great inroads the industry has made in making milk more available in restaurants, especially large chain fast food outlets, which now number some 35,000 across the country.

It started with McDonald’s a few years ago, he said, and then moved to Wendy’s, and the latest addition was the Sonic chain. Kids are foremost, according to Bryant, and the checkoff program is working to make milk more available to kids, the way they want it and in the flavors and packaging that they want.

Most of the sales increase in milk sales at restaurants is from kids, Bryant said, “Because moms know that it’s good for them and we’ve done the health research to prove to the moms that milk is a good product so they’re excited about getting milk into their kids instead of the sodas that are available.”

The cash cheese market was on pause for the most part, the last week of 2006. Block closed the week and the year at $1.33 per pound, up a half-cent on the week, but 3.75 cents below that week a year ago when it lost 6.25 cents.

Barrel closed 2006 at $1.29, unchanged on the week, but a nickel below a year ago when it dropped 6 cents. Only two cars of block and two of barrel traded hands on the week. The latest NASS-surveyed U.S. average block price fell to $1.3132, down 2.5 cents. Barrel averaged $1.2956, down 2.9 cents.

Butter closed Friday and the year at $1.20, down 3 cents on the week, and 14.5 cents below a year ago. Four cars were sold on the week. NASS butter averaged $1.2397, down 0.2 cent. NASS nonfat dry milk averaged $1.04 per pound, up 2.4 cents, and dry whey averaged 41.42 cents, up 0.4 cent.

Market analyst, Mary Ledman, Principal of Dairy Direct in Chicago, said in Tuesday’s DairyLine she’s not concerned that the Cold Storage report showed that the November draw down in American cheese was not as great as in the past. The inventory is still a percent below a year ago, she said, and that’s good, given the 3-3.5 percent increase this year in American cheese production.

She was surprised at the drop in butter, considering the Cold Storage data showed a strong November draw down of 50 million pounds or about 36 percent of the inventory.

She believes butter stocks are positioned to be less than 50 million pounds by yearend and “That puts the butter market in a more favorable light than what we’re perhaps seeing today.”

The Livestock Slaughter report showing that culled dairy cows were up 11,000 head from a year ago in November is an indicator of what’s been going on the last six months, according to Ledman. The slaughter rate was up 3.8 percent from October and 8.8 percent above a year ago, she said, and, since June, it’s almost 10 percent above a year ago.

She believes that will continue to increase, largely due to higher feed costs, and she said it will be interesting to see how many replacements there are in the dairy herd to take the place of these increased slaughter numbers.

There was good news in the USDA’s latest commercial disappearance data, up 4.9 percent in October after dropping 4.6 percent in September. The CME’s Daily Dairy Report says the October jump was the largest percentage gain this year.

This farm news was published in the Jan. 3, 2007 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.