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| National Milk outlines new plan to establish industry stabilization |
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Calls for major changes in U.S. dairy policy were made this week by key players in the industry. National Milk announced that its board of directors has adopted a multi-faceted proposal outlined in a press conference Friday at our deadline. Details are posted at www.dairyline.com and I’ll have more here next week.
The plan would transition existing safety nets into a Dairy Producer Margin Protection Program to guard against periods of severe financial pressures, establish a Dairy Market Stabilization Program to help address periodic imbalances in production and demand and reform the market order program.
Dairy Farmers of America CEO Rick Smith offered a ringing endorsement of the proposal in a June 10 conference call, explaining that, as dairy prices are now determined by global factors, the resulting extreme price volatility never allows dairy farmers to succeed.
He called the current down cycle “unparalleled” in severity and length, causing many farmers to lose a generation of wealth. He charged that “We really need to take the risk of new dairy policy, and we can’t wait for the 2012 Farm Bill.”
National Milk’s plan also drew praise from dairy processors. The International Dairy Foods Assoc. (IDFA) commended the margin insurance program, but warned that the Dairy Market Stabilization Program would have “dire consequences for our industry and consumers.” IDFA said “Supply management will decrease demand for dairy products and dairy ingredients,” and “will drive low-cost non-dairy substitutions in foods and restaurants across the country.”
Cheese prices gain a penny in cash market
Meanwhile, the bleeding continued in the cash cheese market although prices reversed gears and regained a penny on Friday. The blocks closed June 11 at $1.37 per pound, down 2.75 cents on the week, but still 22 cents above a year ago. The block price has lost 13 cents in three weeks. Barrel closed Friday at $1.33, also down 2.75 cents on the week, and 23.75 cents above a year ago. Thirty one cars of block traded hands on the week and 32 of barrel. The NASS-surveyed U.S. block price average gained 3.6 cents, hitting $1.4680. Barrel averaged $1.4795, up 2.5 cents.
On a brighter note; cash butter gained 3.5 cents on the week, closing Friday at $1.61, 38.25 cents above a year ago. Nothing was sold all week, the gains all came on unfilled bids. NASS butter averaged $1.5425, up 4.3 cents.
Cash Grade A nonfat dry milk closed Friday at $1.25, unchanged on the week, and Extra Grade closed at $1.25, down a penny. NASS powder averaged $1.3034, up 1.5 cents, and dry whey averaged 37.16 cents, up 0.2 cent.
How low will cheese prices go? Downes-O’Neill Dairy Economist Bill Brooks said in Tuesday’s DairyLine, “You would anticipate that our level of support would be $1.3650, which we hit on April 20th. He pointed out that cheese has been trading between $1.30 and $1.50 for the most part but, “Whenever we have had pullbacks in our price, we’ve established higher lows on the downturns so that would indicate that maybe we’ll stay above the $1.3650.” The low $1.30s would be the next point of support, he said.
Milk struggles to keep up with cheese demand
Midwest weather is a little warm, but not too bad, according to Brooks, but a lot of that milk is going into cheese and demand is not keeping up with production.
The U.S. block price is well below the world price, meaning Australia and New Zealand via Dairy Market News reports. Two weeks ago, it was at $1.8144 down slightly from the previous level, and this week’s price was $1.7917.
“The problem we run into in exporting cheese,” Brooks warned, “Is getting geared up for it and making the Cheddar the international market wants and that is a white Cheddar that is much whiter than what the world market is used to.” That makes it difficult to get into that market, he said, even with the lower price.
Butter continues to move higher. The gains haven’t been outlandish, Brooks said, but good and steady and those who have butter are holding on to it with confidence, but a lot of butterfat is moving out of the churn into Class II products; ice cream, frozen desserts, sour creams, and dips and that’s keeping things tight.
Anticipation of the tight world market for butterfat is spilling into the U.S., although Brooks is not sure U.S. butter makers will be able to take advantage of it because of the difference in product and the color issue that sometimes pops up but “it’s helping and is kinda the only bright point right now for dairy prices.”
California’s July Class I milk price is $17.14 per cwt. for the North and $17.42 for the South, up $1.46 and $1.47 respectively from June, and $5.26 and $5.27 above July 2009. The Federal order Class I base price is announced June 18.
USDA releases recent World Ag Supply, Demand Estimate
The U.S. Department of Agriculture’s latest World Agricultural Supply and Demand Estimate report raised the 2010 milk production forecast again, to 190.4 billion pounds, up 200 million pounds from last month’s estimate, reflecting a slower decline in cow numbers and stronger expected growth in milk per cow. Milk production for 2011 was unchanged at 193 billion.
The Class III price forecast for 2010 was reduced slightly on a lower whey price forecast as international whey prices are weaker. Look for a 2010 average of $13.95-$14.35 per cwt., down a dime on the high end from what was projected a month ago, and compares to $11.36 in 2009. The 2011 average should range $14.35-$15.35, up a dime from last month’s estimate.
The Class IV price forecast for 2010 is raised on higher butter and nonfat dry milk (NDM) price forecasts, to a range of $14.45-$14.95, up from the $14.15-$14.75 projected last month, and compares to $10.89 in 2009. The 2011 average is expected to range $14.35-$15.45, up 20 cents from last month’s estimate.
Improving domestic and export demand is expected to support NDM prices. The cheese price forecast was raised as higher butter/powder values are expected to divert milk from cheese production. Coupled with higher forecast exports and lower imports, tighter supplies are expected to support prices.
Cooperatives Working Together announced the acceptance of one bid from Dairy Farmers of America and two from Darigold to export 1.7 million pounds of Cheddar cheese to the Middle East, delivered June through December 2010. |
| 6/16/2010 |
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