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Dairyline: Lower base price triggers MILC payment to dairymen
By Lee Mielke
Dairyline

The March Federal order Class I base price was announced Friday by the USDA at $12.49 per hundredweight (cwt.), down 89 cents from February, $2.94 below March 2005, and is below the level set by Congress so it triggers a MILC payment to producers of 40.8 cents.

The NASS-surveyed butter price averaged $1.2623 per pound, down 8.4 cents from February. Cheese averaged $1.2923, down 9.7 cents. Nonfat dry milk averaged 90.53 cents, down from 97.82 cents in February, and dry whey averaged 35.32 cents, up from 33.94 cents in February.

California’s March Class I milk price is $13.19 per cwt. for the North and $13.46 for the South. Both are down $1.28 from February and $2.89 below March 2005.

Cash markets slipping
Meanwhile the cash dairy markets continue to lose ground. Block cheese closed Friday February 17, at $1.1650 per pound, down 6.75 cents on the week, and 27.25 cents below a year ago. That’s only 3.4 cents above the government support price and the lowest block price since June 2003.

Barrel closed Friday at $1.1450, down 5.75 cents on the week, and 24.5 cents below a year ago. Five cars of block were sold on the week and none of barrel. The NASS surveyed U.S. average block price slumped to $1.2763, down 3.9 cents. Barrel averaged $1.2378, down 4.4 cents.

Cash butter dipped to $1.17, down 3 cents on the week, and 41 cents below a year ago. Seven cars were sold. NASS butter averaged $1.2443, down 3.9 cents. NASS powder was down 3.6 cents, averaging 8.65 cents per pound.

Downward pressure continues in the markets. Downes-O’Neill dairy economist Bill Brooks reported Tuesday that a lack of cheese activity, the amount of milk leaving the U.S. through the export of dry milk powders and strong gains in domestic milk production over the last year has kept prices lower.

“You would anticipate that maybe we’re getting close to the bottom in butter,” Brooks said. Butter could go as low as the lower teens, he said, and cheese was expected to move below the $1.20 level. He doesn’t see the block price going below $1.15, and the barrel price going any lower than $1.12.

As far as demand is concerned, Brooks said Easter is in mid-April, and there isn’t anything on the butter side that will push it up before then. The Super Bowl is history, he added, and there isn’t anything to drive cheese prices up in the near future. The market focus now is looking down the road to Memorial Day, he said.

Weather doesn’t seem to be a big factor at the moment in milk production, according to Brooks.

Bigger, fewer dairy herds
To no one’s surprise, U.S. dairy herds continue to become fewer and larger, according to the USDA’s latest data. Dairy Profit Weekly editor, Dave Natzke, reported details in Friday’s DairyLine.

USDA released its annual report on the nation’s dairy herds this month and it showed that dairy operations with 500 or more cows represented just under 4 percent of the nation’s herds in 2005, but they produced about 50 percent of total U.S. milk last year. There are now about 3,070 herds with 500 cows or more in the U.S., according to Natzke, but those herds contain about 45 percent of the nation’s 9 million cows. The number of U.S. herds with 500 or more cows is up about 60 from 2004, he said, and all the increase actually occurred in herds of 1,000 cows or more.

In contrast, dairy operations with 499 cows or fewer fell by a combined 3,900 herds from 2004, with more than half of the decline coming in the very smallest category of 1 to 49 cows. Relatively strong milk prices probably helped slow that decline compared to 2004, he said, but he added that USDA does not differentiate whether the growth of the largest herds is through the creation of new herds, or expansion of existing smaller herds.

“It might be a surprise to many that several Midwestern states actually had the biggest increase in the number of large herds, Natzke said. For example, Ohio increased its number of herds with 500 cows or more by 15 last year. Michigan and Idaho each added 10 herds of 500 cows or more.

Another surprise, according to Natzke, is California didn’t have any increase in the number of herds with 500 cows or more, although that’s a bit deceiving, he said, because there were 29,000 more cows on California dairies in December compared to a year ago, meaning the largest herds just got larger.

Dairy producer conclaves
Nearly 200 dairy producers from across the country attended the three dairy producer conclave meetings held recently in Sacramento, Chicago and Washington. Jerry Kozak, president and CEO of the National Milk Producers Federation (NMPF), said in Thursday’s DairyLine that the input gathered is now being mailed to all who participated.

“Many of the comments were remarkably similar in all three conclaves,” Kozak said, “And that makes our job a little bit easier in trying to put together what were the common themes.” NMPF staff is sorting out the notes to determine what issues are individual versus a consensus. The info will then be passed along to management and cooperative staff. The next step, he said, will be developing a final “principles of agreement” document, and sharing it with local and state organizations, including processors. NMPF will also use the document in its economic policy committee to consider issues for formation of a farm bill policy. “We want to lead Congress in the direction for us, not have Congress lead in direction for them,” Kozak concluded.

Checkoff Top 10
Dairy Management Incorporated’s Joe Bavido completed his look back on the 10 major accomplishments of the dairy checkoff in 2005 in his “DMI Update.”

Number 9, according to Bavido, was the broadening of the industry wide issues and crisis management network. Checkoff staff, along with National Milk, the International Dairy Foods Assoc., and other agricultural industry groups joined to help build and maintain the image of dairy products and dairy producers among the public to diffuse potentially negative issues such as on-farm security, dairy nutrition concerns, and legal challenges from special interest groups.

Rounding out the number 10 position is the marketing plan that Bavido said, “Brings together national and local checkoff resources to strengthen dairy’s marketing position among the public, health professionals, and other key audiences.”

“Unity, which we’ve had since DMI was formed in 1995, among the local and national dairy promotion staff eliminates potential duplication and creates a more effective and efficient use of producer checkoff dollars,” Bavido concluded.

This farm news was published in the February 22, 2006 issue of Farm World.

2/22/2006