In a political hot potato; the debate wears on over future dairy policy. The Milk Producers Council’s (MPC) Rob Vandenheuvel wrote in their weekly newsletter that National Milk’s “Foundation for the Future” proposal is close to being introduced in the House in the next week or two.

Rep. Colin Peterson, the ranking Democrat on the House Agriculture Committee, stated that “a just-completed Congressional Budget Office scoring shows the proposal would cost taxpayers less than existing dairy policy and therefore would not add to the budget deficit, thus satisfying a key demand of Republicans.

Speaking in Wednesday’s DairyLine, Vandenheuvel said there’s as many opinions on how to change dairy policy as there are dairy farmers but the key question is how to get it through Congress. He said that National Milk “has the infrastructure and the resources to make that kind of a legislative push.”
Other groups, including the MPC, have formed various proposals the past couple years, he admitted, and “may be the best proposal in the world but if they can’t get the votes in the House and the Senate they’re essentially worthless.”

“Producers have very little ability to collectively respond to market conditions,” he argued, and he cited 2009 as a prime example, calling it the worst market condition any dairyman today has ever seen and yet milk production was down less than 1 percent for the year.

“You’re dealing with live animals and bills that have to be paid,” Vandenheuval argued. “You have to keep cash flowing and every dairyman, even when times are bad, has an inherent incentive to continue producing as much as they can.”

He said it seemed like it had to “get so bad for so long to get the supply correction that we need,” but “the Foundation proposal enables that to happen more quickly and unite the 60,000 dairy farmers in the country to pull back production temporarily when we have those market imbalances and that’s very empowering to the dairy farmers and scary for the processors because processors have been enjoying the status quo for quite some time.”
“The status quo has protected them (processors) over the last number of years,” he concluded. “And as the dairy industry has been going through a down turn, it’s been the producers that carry all that risk, not the processors. Under Foundation that would begin to change.”

The fallout is still settling over the Hilmar cheese withhold and the cash cheese market may be viewed with a degree of skepticism, not knowing how much of the $2 plus per pound level was triggered by the unusual situation. The big question is, will prices slip back to “reality,” and what is “reality?” 

You’ll recall that Texas cheese manufacturer, Hilmar, put a hold on about 15 million pounds of cheese due to “plastic contamination.” Kate Sander, editor of Cheese Market News, reports that Hilmar officials told her the plastic was likely from the disintegration of a salt vent filter.

She emphasized that, while the cheese was delivered to customers, it never hit store shelves but there’s no answer as to what was being done with the cheese or exactly how much was involved.

Hilmar’s Denise Skidmore told me that they stand by their original statement last week, which I included in this column, and would not comment on the amount of cheese involved or what would be done with it.

Sander said “It’s anybody’s guess as to whether cheese prices will slip back, but it depends on what they do with that cheese.” One insider told her that perhaps the plastic could be filtered out and the cheese made into processed, which could in turn drive down the barrel market.

Cash block cheese price improves
The CME cash block cheese price closed Friday at $2.12 per pound, up a penny on the week, 71.5 cents above a year ago, and the highest it’s been since June 2008. Barrel, after inching a penny higher earlier in the week, gave it back Friday, the first decline in 24 sessions, and closed at $2.0675, unchanged on the week, and 68.25 cents above a year ago. Only one car of block traded hands on the week and five of barrel.

The NASS-surveyed U.S. average block price hit $1.7901, up 8.4 cents, while the barrels averaged $1.8565, up 9.7 cents. The CME’s Daily Dairy Report points out that the run up in cheese prices put the U.S. price above the Oceania price for the first time since the fall of 2009 and that, prior to that, it had been running about 32 cents below the Oceania price.

A lot of eyes were on this week’s Global Dairy Trade auction where weighted average prices on most contracts were down. Anhydrous milk fat fell 5.9 percent and the adjusted butter price for 80 percent butterfat in New Zealand is now $1.96, 18 cents below the U.S. price. Milk protein concentrate (70) was down 0.3 percent; rennet casein, down 2.4 percent; and skim milk powder, was down 7.1 percent. Only whole milk powder increased, up 2.6 percent.
Cash CME Grade A nonfat dry milk closed the week at $1.6525, up a quarter-cent. Extra Grade held at $1.61. NASS powder averaged $1.6524, up 1.4 cents, and dry whey averaged 52.39 cents, up 0.8 cent.

California’s July Class I milk price was announced at $22.38 per cwt. for the North and $22.65 for the South. Both prices are up 97 cents from June, $5.23 above July 2010, and equate to about $1.92 and $1.95 per gallon respectively. The northern price average is now $19.85, up from $16.24 a year ago. The southern price average is $20.12, up from $16.51 a year ago.

The July Federal order Class I base milk price is $21.03, up 71 cents from June, $5.37 above a year ago, the highest since November 2007, and equates to about $1.81 per gallon. Its 2011 average now stands at $18.55, up from $14.60 a year ago, and compares to $11.08 in 2009.

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.