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Views and opinions: National Milk says budget agreement enhances MPP

Federal lawmakers passed a budget bill in the wee hours of Feb. 9 to fund and keep the government “open.”


Among its many provisions, the package includes what the National Milk Producers Federation called “enhancements to the Margin Protection Program (MPP), coupled with expansion of additional risk management options.”

NMPF stated in a press release that the legislation is “coming at a crucial time for our producers. Farmers need insurance options that are both effective and affordable, and the disaster package helps deliver on that promise.”

Effective for calendar year 2018, the changes would direct the Secretary of Agriculture to reopen the signup period for the MPP and offer farmers another chance to select levels of risk protection at more affordable rates. For some, protection costs could drop 70 percent or more,” according to a press release from Sen. Patrick Leahy (D-Vt.).

NMPF praised Leahy along with Sen. Debbie Stabenow (D-Mich.) as well as Senators Thad Cochran (R-Miss.) and Pat Roberts (R-Kan.) for their support and praised Reps. Mike Conaway (R-Texas) and Collin Peterson (D-Minn.) for “crafting important language to remove the existing cap on livestock insurance products, including the Livestock Gross Margin-Dairy program,” but said “more work lies ahead in the next farm bill.”

International Dairy Foods Assoc. CEO and DVM Michael Dykes also praised the package, particularly the elimination of the $20 million cap on livestock insurance, “allowing new policies tailored to dairy farmers to be developed and bolster the Margin Protection Program.”

Global Dairy Trade increase

Hope got a lift in the Feb. 6 Global Dairy Trade (GDT) auction where the weighted average of all products offered shot up 5.9 percent, biggest rise since Nov. 1, 2016, up from the 4.9 percent gain on Jan. 16 and 2.2 percent on Jan. 2. The quantity sold slipped to 48.9 million pounds, down from 51.4 million in the last event and the lowest quantity since June 2017.

Buttermilk powder led the gains with an 8.4 percent rise. Butter followed, up 7.9 percent, after leading the gains last time with an 8.8 percent advance. Whole milk powder was up 7.6 percent, following a 5.1 percent boost, skim milk powder and Cheddar cheese were both up 7.2 percent, following gains of 6.5 percent and 5.2 percent respectively. Rennet casein was up 5 percent and anhydrous milkfat was up 0.5 percent after climbing 2.2 percent last time.

FC Stone equated the GDT 80 percent butterfat butter price to $2.3351 per pound. CME butter closed on Feb. 9 at $2.0275. GDT Cheddar equated to $1.6960 and compares to Friday’s CME block Cheddar at $1.51. GDT skim milk powder averaged 87.62 cents per pound and whole milk powder was at $1.4634. CME Grade A nonfat dry milk closed on Feb. 9 at 73.5 cents per pound.

The USDA lowered its 2018 milk production forecast for the fourth consecutive month in its latest World Agricultural Supply and Demand Estimates report (WASDE), based on expected slower growth in milk per cow.

Production and marketing for 2017 were projected at 215.4 and 214.4 billion pounds respectively, down 100 million pounds from last month. If realized, 2017 production would still be up 3 billion pounds or 1.4 percent from 2016.

Production and marketing for 2018 was projected at 218.7 and 217.7 billion pounds respectively, down 100 million pounds from last month. If realized, 2018 production would be up 3.3 billion pounds or just 1.5 percent from 2017.

The 2018 fat basis export and import forecasts were unchanged from January. The skim-solids import forecast was raised slightly while the export forecast was raised on strong global demand for skim milk powder, lactose and whey.

The 2017 production, trade, and stock estimates were adjusted to reflect December data. Annual product price forecasts for cheese and butter were lowered from the previous month as demand remains relatively weak. No changes were made to the annual prices for NDM and whey.

The Class III milk price forecast was lowered, based on the cheese price projection while the Class IV price was down on a lower butter price forecast.

The 2018 Class III price forecast is projected to range $14.20-$14.90 per cwt., down a nickel on the low end from last month’s estimate and 15 cents lower on the high end. The Class III averaged $16.17 in 2017 and $14.87 in 2016.

The 2018 Class IV price is expected to range $13.35-$14.15 per cwt., down 20 cents on the low end and 30 cents lower on the high end, and compares to $15.16 in 2017 and $13.77 in 2016.

More U.S. corn exports

The WASDE’s monthly 2017-18 U.S. corn outlook is for increased exports and reduced stocks. Exports were raised 125 million bushels, reflecting U.S. price competitiveness and reduced exports for Argentina and Ukraine.

With no other use changes, U.S. corn ending stocks were lowered 125 million bushels from last month. The season-average corn price received by producers is projected at $3.30 per bushel, up 5 cents at the midpoint.

The U.S. soybean outlook is for reduced exports and increased ending stocks. Soybean exports for 2017-18 were projected at 2.1 million bushels, down 60 million from last month, reflecting shipments and sales through January and increased export competition on larger supplies in Brazil. With soybean crush unchanged, soybean ending stocks were raised 60 million bushels to 530 million.

The U.S. season-average soybean price range for 2017-18 is projected at $8.90 to $9.70 per bushel, unchanged at the midpoint. Soybean oil prices are forecast at 31 to 34 cents per pound, down 1 cent at the midpoint. Soybean meal prices are projected at $305 to $335 per short ton, up $5 at the midpoint.

The 2017-18 U.S. cotton supply and demand forecasts show slightly lower exports and higher ending stocks relative to last month. Production and domestic mill use were unchanged. The export forecast was lowered 300,000 bales to 14.5 million based on a lagging pace of shipments to date. Ending stocks are now estimated at 6.0 million bales, equivalent to 34 percent of total disappearance.

The marketing year average price received by producers is projected to average between 67 and 71 cents per pound, unchanged from January’s range.

Cash cheese strengthened

Cash cheese strengthened the week of Feb. 5. The blocks closed at $1.51 per pound, up 4.75 cents, but 10 cents below a year ago. Barrels hit $1.36, up 3.5 cents on the week, 29 cents below a year ago, and 15 cents below the blocks. Nine cars of block traded hands on the week at the CME and 29 of barrel.

Spot and contract milk offers are abundant for cheesemakers in the Midwest, reports Dairy Market News, and milk prices are nearing holiday level discounts, from $1 over to $4 under Class III. Some plants have reined in production to manage growing stocks but plan to add a half day to full workday closer to the spring holidays. Others plan seven day workweeks for the foreseeable future.

Cheese demand varies. Some pizza cheese producers report seasonally slow sales now that Super Bowl is history, but expect buyers to replenish stocks. The block to barrel price gap “remains a reminder of potential instability,” said DMN.

Western cheese output is ongoing with “bounteous supplies of milk available” although a number of Class II processors are clearing more milk, releasing some of the pressure on cheese producers. Overall, stocks of cheese in the West are balanced to down slightly but cheese is more than sufficient to meet end user needs. Some suggest that interest from international and domestic markets is trending up, possibly due to lower prices, others report sales have slowed.

Butter closes down on week

Butter closed on Feb.9 at $2.0275 per pound, down 8.75 cents on the week, lowest price since Nov. 21, 2016, and 7.5 cents below a year ago. Sixteen cars traded hands on the week at the CME.

DMN said butter demand, in certain cases, has increased from last month. Other producers suggest sales continue to meet seasonally downplayed expectations. Unsalted butter inventories are light, although buyer’s interests are solid. Cream suppliers from every region are making offers to Central butter producers.

Western butter is at or near full capacity and ample cream is finding its way to the churn. Some participants say ice cream makers are starting to get in on the action, competing for the cream earlier in the season than usual. Butter demand is picking up ahead of the spring holidays. Some contacts report rapid inventory turnover and promotions at retailers but inventories are growing.

Cash Grade A nonfat dry milk moved 1.25 cents higher on the week, closing at 73.5 cents per pound, 18.5 cents below a year ago, on 23 sales reported.

The Daily Dairy Report’s Sarina Sharp wrote on the Feb. 2 Milk Producers Council newsletter that “The quiet recovery in the spot milk powder market comes as a bit of a surprise. Prices are low enough to incentivize demand, and U.S. product is inexpensive relative to offers from Oceania. However, European milk powder remains cheap and plentiful. The European Commission officially confirmed that it will not be setting a guaranteed minimum price when it bids for skim milk powder (SMP) for its Intervention purchase program beginning in March, which likely means that European merchants will be looking to export more SMP this year.”

Dairy margins weakened the second half of January following a combination of slightly lower milk prices and higher projected feed costs, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

“Margins remain negative and well below average from a historical perspective in both First and Second Quarters, while above breakeven, but still below average in Third and Fourth Quarters,” the MW stated, and “Milk prices continue to struggle with bearish market sentiment.”

Milk production costs down

The USDA’s latest National Milk Cost of Production report shows December’s total milk production costs were down from November but up from a year ago. The report shows total feed costs averaged $10.66 per cwt., down 18 cents from October, 6 cents below the revised November figure, but 32 cents above December 2016. Purchased feed costs, at $5.84 per cwt., were down 3 cents from October, dead even with November, but 2 cents above December 2016.

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $22.73 per cwt., were down 33 cents from October, down 21 cents from November but 56 cents above a year ago. Feed costs made up 46.9 percent of total costs in December, up from 46.7 percent in November and 46.6 percent a year ago.

The California Department of Food and Agriculture (CDFA) has turned down a request from Western United Dairymen and California Dairy Campaign for a hearing to consider changes to the state’s class pricing formulas for a 12-month period in response to low milk prices. CDFA said, “The Department is acutely aware of the impact to dairy families of sustained low milk prices” but “also aware that dairy producer-owned and proprietary manufacturers of California dairy products are also under financial pressure as evidenced by the Department’s recently released manufacturing cost study.”

CDFA also argued, “It is inappropriate to hold a hearing while California dairy producers are exercising self-determination with regards to implementing a Federal Milk Marketing Order (FMMO) in California.”

The USDA announced a delay in the rulemaking proceedings to await a decision by the U.S. Supreme Court regarding “a related legal matter.”

At issue is the use of an Administrative Law Judge presiding over the Sept. 22, 2015 hearing. The challenge questions the Constitutional requirements of the practice in general and not specific to the FMMO.

Most U.S. dairy exports up

Most U.S. dairy exports were up in December, according to the USDA’s Foreign Agricultural Service data. Cheese exports totaled 60.2 million pounds, down 9.7 percent from November and 4.4 percent below December 2016 however for the year, they were up 19.3 percent from 2016.

HighGround Dairy reports that cheese shipments fell below the prior year for the first time in 15 months due to “aggressive losses” to South Korea and Japan and that volumes to Mexico have been down for three consecutive months.

December butter exports totaled 5 million pounds, down 12.9 percent from November but 6.7 percent above a year ago and up 34.9 percent for the year.

NFDM and SMP exports totaled 133.4 million pounds, up 6.7 percent from November, 29.1 percent above a year ago but just 0.9 percent higher on the year. We also exported 45 million pounds of dry whey, down 4.1 percent from November but 9.3 percent above a year ago and up 11.8 percent from 2016.

U.S. cheese imports totaled 36.4 million pounds, down 13.1 percent from November and 22.7 percent below a year ago, with year to date imports down 10.2 percent. We imported 3.5 million pounds of butter, 33.7 percent less than in November and 50.5 percent less than a year ago but, for the year, they were up 8.9 percent from 2016. Anhydrous milkfat imports totaled 8.4 million pounds in December, up a whopping 508 percent from November and 449.6 percent above a year ago, but plunged 31 percent for the year from 2016.

Cooperatives Working Together accepted 17 requests for export assistance the week of Feb. 5 from members to sell 2.97 million pounds of cheese and 859,803 pounds of butter to customers in Asia, the Middle East and North Africa.