By Lee Mielke
National Milk has called on the USDA to adjust Price Support Program price’s thresholds.
In the few recent times that dairy product prices have sunk to or below price support levels, there has been reluctance by manufacturers to sell product to the Commodity Credit Corp. (CCC). That reluctance has made the program impotent or at least lessened its effectiveness, according to NMPF’s Chris Galen.
Galen said that was the case three years ago when Class milk prices dropped below the $9.90 support level, and dairy producers are facing a similar situation again, although prices have crept up above support levels again. He blamed what he called a “hassle factor or transactional cost” that comes when selling cheese and butter - in particular - to the CCC.
NMPF sent a letter to the USDA reminding them that, in order for the Price Support Program to support milk prices at $9.90, they need to raise the support levels by about 5.5 cents. That would put the support price on block cheese at $1.19 per pound and barrel to $1.16.
NMPF asked that the support price on butter and nonfat dry milk to be raised a couple cents. That way, when prices fall to support levels, it would cover the increased costs of selling to the CCC and return the statutory minimum $9.90 to dairy producers.
Government packaging requirements are more costly, manufacturers claim, and government cheese graders need to be brought into plants; and there are costs involved for that.
NMPF’s CWT committee accepted bids this week from California Dairies Inc. of Artesia on 550,000 pounds of butter to Turkey and from Dairy Farmers of America on 169,400 pounds of cheese to Japan.
Mad Cow and animal ID
The USDA this week confirmed the third case of Mad Cow disease in the United States. The disease was found in a 10-year-old beef cow in Alabama. The animal was euthanized and buried on the farm, so it did not enter the food supply.
The age of the cow suggests it was born before USDA implemented a ban on including ruminant byproducts in cattle feed in 1997. Contaminated feed has been linked to the spread of the disease, first discovered in the U.S. in 2003.
Dairy Profit Weekly Editor Dave Natzke reported last week that the Alabama cow had spent less than a year at the farm where it died and investigators are now working to determine where it was born and raised and locate previous herdmates.
That effort to trace the cow’s origin has renewed attention on a national livestock identification and tracking program, according to Natzke.
USDA’s Animal and Plant Health Inspection Service announced new details regarding animal ID numbers and tags. Tag manufacturers must follow USDA guidelines regarding the manufacture, distribution and recordkeeping of the animal ID tags in the next step in identifying and tracking individual animals.
Cash butter market higher
The cash butter market continued to inch higher this week, likely due to Easter-Passover demand, but no one is getting too excited, and it ended the week on a down note.
Block cheese, following the previous week’s 5.75-cent rally, closed Friday at $1.1825, up a quarter-cent on the week, but 29.75 below a year ago.
Barrel closed at $1.1350, up a half-cent on the week, but 31 cents below a year ago. One car of barrel was traded on the week. The NASS U.S. average block price hit $1.1491, down 3.2 cents. Barrel averaged $1.1331, down 1.7 cents.
Butter closed Friday at $1.17, up a half-cent on the week, but 41.25 cents below a year ago. Seven cars were sold. NASS butter averaged $1.1695, down 0.9 cent. Uncle Sam bought 1.3 million pounds of nonfat dry milk under the dairy price support program this week. That’s the first such sale since November 2004.
“It’s going to be tough to have any bullish news for the dairy industry until mid-year,” said market analyst Mary Ledman, principal of Dairy Direct in Chicago.
She said a lot depends on the gains in milk production, and whether those gains continue in first quarter, as expected.
“What’s really going to be important for the markets for the second half of the year,” Ledman said, “is where we sit on May 15 or June 15 when we start comparing increases above the 4 percent gain of the prior year.”
She sees the market playing “give and take” in the next couple months until “we get a clear indication of how much milk we think we’ll have during the second half.”
Ledman doesn’t believe last week’s jump in cheese prices was triggered by the CWT committee’s announcement that it was doubling its 5-cent producer assessment.
“No, the increase last week was in the current market,” she said. “The CWT is not doing a lot for the current market,” although she did point out the recent CWT export assistance activity.
“The importance of the dime announcement is really for the second half of the year and not for the current market. The market went up because people were bidding it up, and were willing to pay higher prices for it, not because of some market exploitation.”
Ledman believes cheese and butter prices will fall and rise in the next couple months but anticipates stronger demand going into the Easter-Passover period and then may fall again. She doesn’t see prices dipping to $1.10 or below.
“(Butter) will likely trade within this nickel- to seven-cent range for some time,” Ledman said.
Base below MILC trigger
The USDA announced the April Federal order Class I base milk price Friday at $11.22 per cwt., down $1.27 from March and $2.91 below a year ago.
The NASS-surveyed butter price average was $1.1746, down 8.8 cents from March. Cheese averaged $1.1686, down 12.4 cents. Nonfat dry milk averaged 87.89 cents per pound, down from 90.53 cents, and dry whey averaged 34.78 cents, down from 35.32 cents in March.
The base is below the MILC trigger so producers are eligible to receive an 83.98-cent per cwt. payment but they need to sign up at their local Farm Service Agency office. Those producing less than 2.4 million pounds of milk per year have until May 17 to sign up to be eligible for retroactive payments dating back to milk produced in December of 2005.
Producers can sign up after May 17, but they will be ineligible for the back payments. Dairies producing more than 2.4 million pounds of milk per year must also designate which months they wish to begin receiving payments.
This farm news was published in the March 22, 2006 issue of Farm World.