National Milk’s Board of Directors approved a proposal last week to improve federal milk market orders as part of its Foundation for the Future dairy policy proposal (FFTF). The Federation’s Chris Galen said, “we’ve taken a couple big steps towards finalizing and getting ready to move forward with major dairy policy reform.”

He started with the USDA’s Dairy Industry Advisory Committee’s (DIAC) overwhelming approval of recommendations to USDA Secretary Tom Vilsack, many of which parallel positions taken by National Milk.
They include the replacement of current safety nets for dairy farmers with a program that helps protect farm margins. That includes terminating the dairy price support program, which NMPF agrees with, he said.

Another provision is a growth management program, which is also included in the FFTF, according to Galen, and how to reform Federal milk marketing orders.
NMPF’s Board also approved a plan to help reform and improve the order system.

Galen said, “not throwing out every aspect of it, but helping to streamline it and do some things that will make it more workable - such as getting rid of end product pricing formulas and the dreaded make allowance. I think between what we have done within our own membership - and then what this outside body has done advising USDA - both those things portend well for making some positive changes to dairy policy.”

An 11-minute video was made available this week to help explain the FFTF proposal to industry people, lawmakers, and others, he said, as to what’s at stake, why the changes are needed, and what is specifically being proposed. To view it, log on to www.futurefordairy.com or log on to Youtube under National Milk, Foundation for the Future.

Dairy policy in farm bill

Dairy Profit Weekly editor Dave Natzke examined positions taken by other dairy organizations.

“As dairy policy planks making up dairy’s platform in the 2012 Farm Bill begin to be nailed into place, we’re getting a better idea of what that platform might look like,” Natzke said. “National Milk’s Foundation for the Future proposal has a number of similarities with the recommendations advanced by the Dairy Industry Advisory Committee.”

Several other organizations have weighed in, according to Natzke.
The Dairy Policy Action Coalition (DPAC), a grassroots organization of dairy farmers in about 10 states, introduced its own plan, called the Cornerstones of Change, because it said many of National Milk’s proposals were continuations of outdated federal policies.

Included in DPAC’s proposal were provisions to increase information and frequency in mandatory dairy product price reporting and auditing systems, enhance a voluntary, not mandatory, margin insurance program already in place called the Livestock Gross Margin, and adopt policies that encourage more processor innovation to create products for global dairy markets.
The Kentucky Dairy Development Council board voted to support most of National Milk’s proposals, except for the Dairy Market Stabilization Program for supply management, saying it failed to address the needs of milk-deficit regions of the country.

Natzke added that leaders of more than 30 company-members of the International Dairy Foods Assoc. urged Vilsack to implement nearly all of the reforms recommended by the DIAC except the growth management program.
“There will be lots of discussion regarding dairy policy in the weeks and months ahead,” he concluded.

Cash cheese prices weaker

Cash cheese prices are showing signs of weakness. The blocks slipped three quarters of a cent Tuesday but recovered a quarter-cent Friday, to close at $2.015 per pound, down a half-cent on the week, but 74.75 cents above a year ago. Barrel closed at $1.9650, down 1.5 cents on the week, but 70.25 cents above a year ago.

Only two cars of block traded hands on the week and four of barrel. The NASS-surveyed U.S. block price averaged $2.0038, up 6.2 cents. Barrel averaged $1.9388, up 5.1 cents.

Butter remains king, closing the week at $2.12, up a quarter-cent, and 66.5 cents above a year ago. Twenty-two cars were sold on the week. NASS butter averaged $2.0115, down 2.4 cents.

Cash Grade A nonfat dry milk closed Friday at $1.79, down 2.5 cents on the week, and Extra Grade held all week at $1.80. NASS powder averaged $1.4730, up 7 cents, and dry whey averaged 45.99 cents, up 3.1 cents.
Alan Levitt, editor of the CME’s Daily Dairy Report, (DDR) said the butter market is “still fundamentally short,” domestically and internationally, something that’s gone on since last year.

He reported that butterfat exports the last 10 months of 2010 averaged 11.2 million pounds per month, equivalent to more than 9 percent of U.S. butter production.

The tightness also stems from CME trading rules which dictate that, as of March 1, all butter sold there must have been produced after Nov. 30.
“That creates a bit of a shortage of current butter,” Levitt said. “But, fundamentally, things are still pretty tight and the global market is still very strong.”

Levitt pointed out that the supply is increasing seasonally, milk production is moving up, component levels are very strong this year, and weak fluid milk sales are making makes more milk available to the cheese vat. Class I prices jumped in March, so he doesn’t expect a strong rebound in fluid sales.
He wasn’t sure if “the drop” in cheese prices would happen this week, but warned that cheese exports may be slowing because U.S. prices have converged with world prices. “We used to have a nice discount there,” he concluded, “Some of that has eroded.”

2011 milk forecast lowered

USDA lowered its milk production forecast for 2011 from last month in its latest World Agricultural Supply and Demand Estimates report. It now projects output at 196 billion pounds, down 100 million pounds from last month’s estimate, and compares to 192.8 billion in 2010 and 189.3 billion in 2009.

Relatively high milk prices and increased supplies of replacement heifers are expected to encourage further increases in the cow herd through much of the year, according to the report, but the rate of increase in milk per cow is forecast slower than last month.

Exports are forecast higher as global nonfat dry milk and cheese demand remains strong with tight supplies in competitor markets expected through the first half of 2011.

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.