Lee Mielke

Opinion 

The National Milk Producers Federation (NMPF) charged that the U.S. Food and Drug Administration’s (FDA) recent enforcement action against a Massachusetts granola maker for listing “love” as an ingredient in its product “is a clear indication that the agency has time and resources to enforce regulations against the use of the term ‘milk’ on the labels of plant-derived dairy imitators.”

In a letter to the FDA, NMPF pointed out that many of the same criticisms leveled by the agency against Nashoba Brook Bakery’s granola and bread products apply to the manufacturers of plant beverages that are in violation of FDA standards of identity defining milk as the product of a dairy animal.

NMPF’s Jim Mulhern said, “While we have no doubt that the folks at Nashoba do indeed put love into the manufacture of their product, we hate to see misleading food labels that don’t comply with legal standards that other companies follow.”

USDA raises production forecast

The USDA raised its 2017 and 2018 milk production forecasts in its latest World Agricultural Supply and Demand Estimates report, due to “a slightly more rapid pace of growth in milk per cow.” Forecast cow numbers for late 2017 and 2018 were lowered slightly however.

Production and marketing for 2017 were projected at 216.2 and 215.2 billion pounds; respectively, up 200 million pounds from last month. If realized, 2017 production would still be up 3.8 billion pounds or 1.8 percent from 2016.

Production and marketing for 2018 were projected at 220.4 and 219.4 billion pounds; respectively, up 300 million pounds from last month. If realized, 2018 production would be up 4.2 billion pounds or 1.9 percent from 2017.

Fat basis imports for 2017 and 2018 were raised on strength in butter imports, but skim solids imports were lowered for 2017 and unchanged for 2018. Exports on a fat basis were raised for 2017 on stronger butter and cheese exports, and increased sales of butter and anhydrous milkfat are expected to support higher fat basis exports in 2018. Skim-solids exports for 2017 and 2018 were raised, primarily on stronger expected shipments of whey products.

Butter and nonfat dry milk (NDM) prices were lowered for 2017 due to large supplies, but the whey price was unchanged at the midpoint and the cheese price forecast was raised on current demand strength.

Continued demand strength for cheese is reflected in a higher 2018 price forecast, while butter, NDM and whey prices were lowered on larger supplies and pressure from international prices.

The Class III milk price forecast was raised for 2017 on stronger cheese prices, but for 2018, lower whey prices are expected to more than offset increases in cheese prices, and the price forecast was lowered. Look for the 2017 Class III to average around $16.20 per cwt., up a nickel from last month’s projection and compares to $14.87 in 2016 and $15.80 in 2015. The 2018 average is expected to range $16-$16.90, down a nickel from last month’s estimate.

The Class IV price was lowered for both years due to lower forecast butter and NDM prices. The 2017 average is now put at $15.35 per cwt., down from $15.55 expected a month ago and compares to $13.77 in 2016 and $14.35 in 2015.

USDA’s Crop Production report

The USDA’s latest Crop Production report forecasts U.S. corn production at 14.3 billion bushels, down 6 percent from last year but up 1 percent from the September forecast. Based on Oct. 1 conditions, yields are expected to average 171.8 bushels per acre, up 1.9 bushels from the September forecast but down 2.8 bushels from 2016. If realized, this will be the second highest yield and production on record for the United States. Area harvested for grain is forecast at 83.1 million acres, down less than 1 percent from the previous estimate and down 4 percent from 2016.

Acreage updates were made in several states.

Soybean production is forecast at a record 4.43 billion bushels, down slightly from September but up 3 percent from last year. Based on Oct. 1 conditions, yields are expected to average 49.5 bushels per acre, down 2.5 bushels from last year.

Area for harvest in the United States is forecast at a record high 89.5 million acres, up 1 percent from September and up 8 percent from 2016. Acreage updates were also made in several States based on a thorough review of available data.

Cotton production is forecast at 21.1 million 480-pound bales, down 3 percent from September but up 23 percent from last year. Yield is expected to average 889 pounds per harvested acre, down 19 pounds from last month but up 22 pounds from last year. If realized, the U.S. cotton yield forecast will be the second highest yield on record.

The USDA’s latest Crop Progress report shows 22 percent of U.S. corn has been harvested, as of the week ending Oct. 8, up from 17 percent the previous week but 11 percent behind a year ago and 15 percent behind the five-year average. Sixty-four percent is rated good to excellent, down 1 percent from the previous week, and 9 percent behind 2016.

The report shows 36 percent of the soybean crop is harvested, up from 22 percent the previous week, 5 percent behind a year ago and 7 percent behind the five-year average, with 61 percent of the crop rated good to excellent, down 1 percent from the previous week and 13 percent behind a year ago.

Cash cheese prices lose ground

Cash cheese prices lost ground the second week of October, ending three weeks of gains. The Cheddar blocks closed “Friday the 13th” at $1.70 per pound, down 6 cents on the week but 15 cents above a year ago. The barrels finished at $1.6775, down 6.75 cents on the week and 21.75 cents above a year ago. Nine cars of block traded hands on the week at the CME and 42 of barrel.

Midwest cheese producers continue to report decreasing milk availabilities, according to Dairy Market News. Spot milk prices into Class III production ranged from flat market to $2 over Class, with some cheesemakers expecting prices to increase in the near term. Cheese demand is steady to increasing, as market prices have been fairly consistent in October.

Buyers who were holding back on purchasing while expecting price declines have re-entered the market. “The cheese market tone remains fairly positive, as both block and barrel prices have remained above $1.70 for over a week,” said DMN.

Western cheese makers report plenty of milk is heading into cheese vats and production is running close to full but contacts suggest that production is in good balance with current demand. “Buyers are providing support to block prices and there is a tendentious view that market prices may be further supported by increasing seasonal demand,” said DMN.

Perspectives are mixed on cheese inventories, however. “While most agree stocks for both blocks and barrels have been drawn down somewhat, some contacts say there is a lot of cheese in storage and others report cheese has become less available. In some cases, manufacturers are offering discounted or older Cheddar blocks to help clear inventories and fulfill purchaser demands.”

Butter started the week losing 2 cents, reversed direction, then reversed again, but rebounded 4.25 cents on Oct. 12 to close at $2.3750 per pound, up 3.5 cents on the week and 59 cents above a year ago, with 38 loads sold on the week.

Central butter producers report that cream is still available but beginning to tighten. Retail sales are “bustling,” said DMN. “Undoubtedly, increasing seasonal weekly advertisements are giving already consistent retail sales numbers a boost. Export interests are reportedly growing, as well. Some butter makers report that healthy demand is expected to remain healthy into early 2018.”

But DMN said the butter market tone is “mixed.” Prices never reached levels many were expecting, but “strong demand and relatively affordable cream supplies have Central region butter contacts viewing the market tone bullishly.”

Western cream supplies are also meeting butter processing needs and output is steady. “Current butter stocks are stable to slightly higher. Butter sales are fairly strong in the domestic and international markets. However, some buyers and end-users are putting off buying butter as they hope for prices to go down,” said DMN. “Processors expect demand to increase close to the holiday season.”

U.S. butter consumption continues to grow, thanks to increasing research which demonstrates that butter is not the demon it was made out to be for many years. The USDA projects 2017 U.S. butter consumption to top 2 billion pounds, up about 10 percent from 2016 and equates to about 6 pounds per person.

Cash Grade A nonfat dry milk

Cash Grade A nonfat dry milk ended on Oct. 13 at 77.25 cents per pound, down 5.25 cents on the week, 9.75 cents below a year ago, first time it’s been below 80 cents per pound in seven months, with 23 cars trading hands on the week.

HighGround Dairy’s Monday Morning Huddle pointed out that skim milk powder volumes entered into Public Intervention increased by 5,512MT for the week ending Sept. 24 and sources indicate another 11,000MT was entered in the final week for a total of 30,647MT in 2017, most of it in these final weeks. The program has officially ended for the year and will re-open next March.

August U.S. dairy exports were up from July and most were up from August 2016, according to Daily Dairy Report’s (DDR) Mary Ledman. Writing in the Oct. 6 Milk Producers Council newsletter, Ledman reported that cheese exports totaled 67 million pounds, up 11 percent versus July and 35 percent more than last year.

“August cheese exports outpaced the five-year average at 53 million pounds,” the DDR stated, and “U.S. exporters made progress in August, with higher year-over-year sales volume to Mexico, up 29 percent, and to Japan, up 96 percent.

“Butter exports expanded to 6.2 million pounds, up 187 percent versus the prior year and 21 percent more than in July. NDM exports improved to 108.1 million pounds, up 16 percent versus July but still 6.4 percent lower than the prior year due to stiff global competition. Nevertheless, NDM export volumes exceeded the five-year average of 100 million pounds for August.”

She concluded with a warning, “Going forward, it is critical that U.S. dairy product exports continue to grow to absorb greater year-over-year milk production and correspondingly higher dairy product output.”

Matt Gould, editor and analyst with Dairy and Food Market Analyst newsletter, echoed Ledman’s remarks on the strength of August exports in the Oct. 16 Dairy Radio Now interview, but he warned of clouds moving in. He cited the ongoing discussions over the NAFTA by the Trump Administration and what that might mean for U.S. dairy exports, particularly to Mexico, one of our NAFTA partners and our No. 1 dairy customer.

The other threat is falling powder prices now that the EU’s Intervention program has been closed. That has resulted in Europe going head to head with U.S. suppliers, Gould said, and even more powder being dumped onto the world market, just as Canada is having to rid itself of extra skim milk powder resulting from its latest pricing scheme to encourage butter production in that country.

One more interesting piece of news came in the Oct. 11 DDR, which said, “Reports out of Europe surfaced that there are internal discussions within the European Union to consider sweeping changes to its Intervention program as early as next year rather than wait until Common Agricultural Policy negotiations in 2020. One suggestion would effectively reduce the program’s volume allocation from 109,000 metric tons to zero for the March 1, 2018, to Sept. 30, 2018, period.”

“Instead, the commission would have the authority to establish the purchase price at levels deemed appropriate based on market conditions.” “The proposal is far from a done deal,” according to the DDR, but one to be closely watched.

Export assistance requests

Cooperatives Working Together (CWT) accepted five requests for export assistance the week of Oct. 9 from Dairy Farmers of America, Northwest Dairy Assoc. (Darigold) and Tillamook County Creamery Assoc. that have contracts to sell 740,753 pounds of Cheddar, Gouda and Monterey Jack cheese as well as 220,462 pounds of butter to customers in the Asia, the Middle East and North Africa.

The product has been contracted for delivery through January 2018 and raised CWT’s 2017 exports to 55.56 million pounds of American-type cheeses and 4.56 million pounds of butter (82 percent milkfat) to 21 countries on five continents.

California’s November Class I milk price was announced by the California Department of Food and Agriculture at $18.49 per cwt. for the North and $18.76 for the South, up 47 cents and 46 cents respectively from October and $2.36 above November 2016.

That put the nine-month average at $17.99 for the North, up from $16 a year ago and $17.63 in 2015. The Southern average, at $18.26, is up from $16.27 a year ago and $17.90 in 2015. The November Federal order Class I base price will be announced by USDA on Oct. 18.

The sign-up period for the 2018 Margin Protection Program (MPP) coverage is open through Dec. 15. Producers who want coverage, even at the $4 per cwt. margin level, must enroll at their FSA office and pay the $100 administrative fee. Unlike past years, those who do not enroll by Dec, 15 will not be granted 2018 coverage.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.