USDA’s lowered corn crop estimate and the EPA’s decision to allow higher ethanol percentages in gasoline for certain motor vehicles has, pardon the pun, fueled higher feed prices for farm livestock. National Milk’s Chris Galen said in Thursday’s broadcast that these developments underscore the need for future dairy policy to consider the cost of production and not just the price of milk.

The dairy price support program and the MILC safety net was based on a milk price level that was set before the upward pressure on feed costs, Galen said, and is why National Milk continues to lobby for its “Foundation for the Future” proposal.

The Federation program is less about the price of milk per se, according to Galen, and more about margins, which NMPF defines as the difference between the feed cost and the milk price.
Most of the other policy proposals being considered concentrate on controlling the supply of milk.

Galen admits that the Foundation proposal includes market management to “make certain that the right signals are sent when they need to be sent regarding supply and demand,” but he quickly added that the Federation’s plan makes provision to “protect producer margins for a situation like now where, as the cost of production increases, focusing just on milk prices isn’t going to cut it in the future.” For more information, log on to www.futurefordairy.com

The November Federal order Class I base milk price was announced Oct. 22 at $17.24 per cwt., up 66 cents from Oct. and $4.38 above Nov. 2009. That put the 2010 Class I base average at $15.21, up from $11.25 in 2009, and compares to $18.23 in 2008. The Class IV advanced pricing factor remained the “higher of” in driving the Class I value.

The NASS-surveyed U.S. average butter price hit $2.1942, up 7.4 cents from October. Nonfat dry milk averaged $1.1755, up 4 cents. Cheese averaged $1.7695, up 9.5 cents, and dry whey averaged 36.34 cents, up fractionally.

There was more encouraging news in the latest dairy trade numbers. Dairy Profit Weekly Editor Dave Natzke reported Friday that August exports were estimated at $347 million, up 9 percent ($30 million) from July and 78 percent ($152 million) more than August 2009.

Monthly imports, at $242 million were up 17 percent from July and 27 percent more than August 2009. Dairy exports have surpassed imports every month this year, yielding a trade surplus of nearly $750 million so far in 2010.

Probably as important as the dollar value to dairy farmers is the volume of products exported, because that reduces the inventory of domestic production. August exports of every major product category were higher, led by nonfat dry milk, skim milk powder and whey protein exports, all up at least 30 percent. Cheese exports were up 95 percent from a year ago, Natzke reported.

22,000 dairy cattle exported in 2010
August dairy product exports were equivalent to 14 percent of U.S. milk solids production during the month bringing the year-to-date percentage to 12.2 percent, while August imports as a percent of milk solids were just 3.4 percent.

U.S. dairy cattle also remain in strong demand, according to Natzke. Another 1,454 female dairy cattle were exported in August, bringing the 2010 total to over 22,000 head, more than four times the number exported during the same period in 2009, and a new record high.

USDA’s smaller crop harvest projection pushed the outlook for dairy feed prices higher. I asked if that would be an incentive for farmers to cull more cows. He answered, “Higher grain prices add stress to milk production costs, increasing the likelihood of culling, as well as keeping a lid on overall beef production. That, combined with an increase in beef exports and a decline in beef imports, should keep cull cow prices strong for the foreseeable future.”

He also reported that, through the first nine months of 2010, U.S. cull cow prices (beef and dairy cows, combined) averaged about $55.70 per cwt., or about $10 per cwt. more than 2009.

Speaking of exports; the CWT program announced that it accepted five requests from Dairy Farmers of America and one request from Land O’ Lakes for assistance in selling 2.7 million pounds of American cheese to customers in the Middle East and Asia. The product will be delivered October through April 2011 and raised CWT cheese exports to 50.5 million pounds since March 18, 2010.

Wal-Mart demand carbon data from dairies
So, what is your carbon footprint? In other words, how much carbon emission are you generating? The dairy industry found out during its Life Cycle Analysis and the results were recently announced.
Some of dairy’s biggest customers like Wal-Mart and McDonald’s are asking for the data, according to Pennsylvania dairy producer Paula Meabon, who also chairs the National Dairy Board. Meabon said dairy did very well in Monday’s “DMI Update,” but quickly added, “Dairy farmers have always been sustainable.”

Some 500 dairy farms and 50 dairy processors were involved in the study and included 210,000 trips to processing plants, according to Meabon.

The study indicated that U.S. dairy accounts for just 2 percent of the carbon footprint, substantially below the United Nation’s Food and Agriculture Organization’s estimate of 18 percent.

“Dairy has a great story,” Meabon said. “We know we do, but it has to be economically, socially, and environmentally responsible and we have to do that and we have as dairy farmers and now that we have our carbon footprint of 2 percent, everyone should be very proud of what we’re doing and tell the story.”

September milk production in the top 23 states totaled 14.5 billion pounds, up 3.6 percent from Sept. 2009, according to the USDA’s preliminary data. The 50 state output totaled15.5 billion, up 3.3 percent. August production in the 23 states, at 15 billion pounds, was revised down 18 million but that’s still 2.7 percent above a year ago.

Milk production is expected to continue to rise in 2011 according to the USDA’s latest Livestock, Dairy, and Poultry Outlook. However, higher expected feed prices will likely limit producer profits. Domestic demand, especially for cheese, remains strong. Although world prices favor U. S. exports, they are expected to decline in 2011, more steeply on a fats basis than on a skims solids basis. Milk prices in 2011 are expected to remain near 2010 levels, according to USDA.

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.