|
|
|
|
|
|
| Dairy Month puts smiles on consumer faces, worries for farmers |
|
|
|
Happy June Dairy Month! At least it’s happy for consumers! Wholesale dairy product prices remain depressed but are showing a little strength and, while retail dairy product prices are down from a year ago to the delight of consumers, dairy farm milk prices remain far below the cost of production and reports of depression and even suicide among dairy farmers is the order of the day.
The Memorial Day holiday-shortened week saw block cheese close at $1.1525 per pound, up a penny and a quarter on the week, but $1.07 and three quarters below that week a year ago. Barrel closed that Friday at $1.10, up 2 cents on the week, but $1.10 below a year ago. Thirty seven cars of block traded hands on the week and 24 of barrel. The NASS-surveyed U.S. average block price fell to $1.1485, down 1.7 cents.
Barrel averaged $1.0994, down 0.7 cent. Butter closed at $1.2650, unchanged on the week, but 21.5 cents below a year ago. Fourteen cars were sold on the week. NASS-surveyed butter averaged $1.2374, up 2.1 cents. Cash Grade A nonfat dry milk closed Friday at 90 cents per pound, up a penny on the week, and Extra Grade closed at 87.50, up a half-cent. NASS-surveyed nonfat dry milk averaged 83.13 cents, down 0.4 cent, and dry whey averaged 23.90 cents, up 0.4 cent.
Price support purchases for the week totaled 1.5 million pounds of nonfat dry milk, raising the cumulative total to 239.8 million, compared to none a year ago.
The University of Wisconsin’s, Dr. Robert Cropp, said in Tuesday’s DairyLine that he expects strength in the block price as we move into June and, while it was at $1.29 per pound in March, he pointed to the small decrease in April milk production.
If milk output continues to slip, he believes block cheese could be trading at $1.30 by the end of June.
“It’s the softness in the demand side,” explained Cropp, “both on the export front and the domestic front, so we have to get milk production trending below a year ago and, hopefully with the CWT program I think things will tighten as we move into the summer.”
He said it was “a little peculiar” that the barrel price is so far below the block price in that this is the grilling season and barrels normally get a little tighter so, “with the blocks strengthening, maybe the barrels will follow.”
Cropp also praised USDA reopening the Dairy Export Incentive program.
The powder market is tightening, he said, and government support purchases are slipping, so if the product is not overhanging the market is a positive factor.
Butter stocks total 242 million pounds in April
Meanwhile; April butter stocks totaled 242.7 million pounds, up 30.2 million or 14 percent from March but down 8.8 million or 3 percent below April 2008, according to preliminary data in the Agriculture Department’s latest Cold Storage report.
The American cheese inventory, at 586.1 million pounds, was up 24.5 million or 4 percent from March and 43 million pounds or 8 percent above that of a year ago.
Total cheese stocks amounted to 914.1 million pounds, up 19.5 million or 2 percent from March, and 58.2 million or 7 percent above those a year ago.
What will it take for a recovery in the milk price?
“That’s the $64,000 question,” according to Downes O’Neill Dairy Broker Dave Kurzawski. “No one knows the answer,” he said. “But I think even the most bullish of folks think it will be sometime in the fourth quarter or sometime next year.”
Kurzawski believes the market could rebound sooner. The cheese price could rise to the $1.30 mark, he said, and Class III futures could rise to a level of some profitability, depending on feed grain prices, in the next two months.
He understands it’s a desperate situation for the dairy industry, but May export prices have been on the rise. “I think it’s going to bode well for U.S. prices,” he said. “With the weakness of the U.S. dollar, our goods are going to be very competitive in the world market moving forward.”
Export Incentive Program full speed ahead
Speaking of exports; as I alluded to earlier, the Dairy Export Incentive Program is up and running following a five year hiatus.
National Milk’s, Chris Galen, said in his Thursday broadcast that “Beating on USDA’s doors paid off,” because “Now more than ever we really need the Dairy Export Incentive Program to help remove surplus dairy products from this market,” and compete with products coming from Oceania and Europe.”
He said “This will, hopefully, be another tailwind for dairy prices at a time when obviously things aren’t looking too good.”
The Federation estimates that, if all of the allotted allocation under international trade law is exported, it would equate to about 1.5 billion pounds of milk. Earlier in the week, USDA issued invitations for the full permitted amounts of nonfat dry milk (150.4 million pounds), cheese (6.7 million pounds), but only about half of the permitted amount of butterfat (23.2 million pounds).
The program ends June 30, but Galen is optimistic that “we can have two bites of the apple,” by exporting this product, and then export a similar quantity when the new fiscal year begins July 1, 2009.
The bottom line, according to Galen; “This will help U.S. dairy producing companies compete at a time when world prices are very low.”
In other export news; legislation that would ease restrictions on U.S. agricultural exports to Cuba has gained the support of the U.S. dairy industry.
Dairy Profit Weekly Editor Dave Natzke, reported Friday that National Milk and U.S. Dairy Export Council (USDEC) say the legislation introduced in both the Senate and House this spring would facilitate increased dairy trade to the island nation.
Both bills seek to remove administrative barriers that have arisen from a law passed in 2000, called the Trade Sanctions Reform and Export Enhancement Act, according to Natzke. Specifically, the new bills clarify a “cash-in-advance” requirement and authorize direct transfers of money between Cuban and U.S. banks. The bills would also ease travel restrictions for trade delegations between the two countries, and establish an ag export promotion program with Cuba.
National Milk and the USDEC believe Cuba holds promise as a market for U.S. dairy exports, Natzke said. The U.S. Census Bureau reports that U.S. dairy exports to Cuba peaked at about $30 million in 2004-05, but fell to about half of that in 2006 and 2008. That compares with New Zealand, which the Ministry of Foreign Affairs said sold about $97 million in dairy products to Cuba in 2008.
Turning attention to the farm specifically, Natzke reported that USDA has expanded a program designed to protect dairy farm income margins. The Livestock Gross Margin insurance program, launched a year ago in 29 states, was expanded to Kentucky, New Mexico, Tennessee and Washington.
Under the program, dairy farmers can tailor insurance policies to their specific herd size, setting ceilings on feed prices and floors on milk prices, to lock in a gross margin. |
| 6/3/2009 |
|
|
