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| National Milk tours country to share dairy policy plans |
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In politics, draft legislation incorporating key elements of National Milk’s Foundation for the Future dairy policy proposal was announced July 13. The text was made available by the House Agriculture Committee’s ranking member, Collin Peterson (D-Minn.) at http://democrats.agriculture.house.gov/ The action provides lawmakers, farmers, and others to view the language prior to an official introduction as a bill.
The action drew criticism from dairy processors. IDFA CEO Connie Tipton said “We are disappointed that Rep. Collin Peterson is circulating draft legislation that clearly would take the dairy industry in the wrong direction. Instead of encouraging job growth and reducing regulation on an already overregulated industry, the discussion draft would impose new and intrusive government mandates on dairy markets at the cost of a growing dairy export business and the jobs that have come with it.”
More details are posted at www.idfa.org/news—views/newsreleases/details6175//
Meanwhile; CEO Jerry Kozak and staff are on a 12-stop tour across the U.S. meeting with producers to answer questions about their plan.
Locations and times and NMPF’s response to IDFA’s criticism can be found at www.nmpf.org
USDA raises milk forecast
The U.S. Department of Agriculture again raised its 2011 and 2012 milk production forecasts in its latest World Agricultural Supply and Demand Estimates report. Cow number estimates were also raised as higher milk prices and lower forecast feed prices support further herd expansion, but milk per cow was unchanged from last month’s report. Commercial exports on a fat basis were forecast higher for 2011.
Ending stock forecasts were raised as cheese stocks are larger than expected. Dairy product price forecasts for 2011 were raised from last month as were Class III and Class IV milk price forecasts, in line with the increased product prices. Look for 2011 milk output to hit 195.7 billion pounds, up 200 million pounds from the June estimate. The 2012 total is now projected at 198.8 billion pounds, up 300 million from a month ago. These projections compare to 192.8 billion pounds in 2010 and 189.3 billion in 2009.
USDA expects the 2011 Class III milk price to average $18-$18.30 per cwt., up from the $17.40-$17.80 projected a month ago. The 2012 range estimate was unchanged, at $16-$17. The 2010 average was $14.41 and $11.36 in 2009.
The 2011 Class IV price is projected to average $19.15-$19.55, up from $18.95-$19.45 last month. The 2012 range is projected at $16.50-$17.60, unchanged from a month ago, and compares to $15.09 in 2010 and $10.89 in 2009. U.S. feed grain supplies for 2011/12 were projected higher this month mostly with higher expected beginning stocks and production for corn. Corn beginning stocks were raised 150 million bushels reflecting changes to 2010/11 usage projections.
Corn production for 2011/12 was projected 270 million bushels higher based on planted and harvested area as reported in the Acreage report. Corn use for ethanol was raised 100 million bushels with larger supplies and an improved outlook for ethanol producer margins. Exports were raised 100 million bushels mostly reflecting increased demand from China. Ending stocks for 2011/12 were projected 175 million bushels higher at 870 million. Soybean ending stocks of 175 million bushels were slightly higher than expected.
The 2011/12 season-average farm price for corn is projected at a record $5.50-$6.50 per bushel, down 50 cents on both ends of the range.
Total U.S. corn use for 2010/11 was projected 145 million bushels lower mostly reflecting the larger-than expected June 1 stocks estimate. Partly offsetting is a 20-million-bushel reduction in use for sweeteners reflecting slower demand from Mexico. Corn exports were lowered 25 million bushels based on the slower-than-expected pace of shipments in recent weeks.
Cash cheese holds above $2
Cash block cheese saw its third week of decline, but is still holding above $2 and has been there since early June. It closed Friday July 15 with a surprise 5.5 cent rebound on the day, at $2.0575 per pound, still 5.25 cents below the previous week, but 48.25 cents above that week a year ago.
The barrels were steady all week until Friday when they were bid up three quarters to $2.11, 58.5 cents above a year ago, and 5.25 cents above the blocks. Volume was heavy as a whopping 43 cars of block traded hands on the week and none of barrel. The NASS-surveyed U.S. average block price hit $2.1107, up 2.2 cents. Barrel averaged $2.0991, up 2.6 cents.
Jerry Dryer, editor of the Dairy and Food Market Analyst, attributes the strength in cheese to strong food service demand and exports. “The demand is there,” he said. “The cheese isn’t.”
FC Stone dairy economist Bill Brooks says the supply demand situation in cheese has shifted a bit. Speaking in Tuesday’s DairyLine, he suggested that the block supply has loosened some, pointing to the 17 loads of block that traded in the fourth of July holiday-shortened week. The last time trading approached that level was the week of May 16 when 16 loads traded hands.
The profitability of cheese plants seems to have recovered as we went through May and into June, according to Brooks, but he warned of the high temperatures and humidity in the Midwest and how Minnesota and Wisconsin milk production lagged year ago levels in May. A fair amount of barrel cheese is produced there and lagging milk production may be tightening the barrel market. Demand for barrels is probably good, he said, because more people are staying home and eating out less and firing up the barbecue.
Brooks also discussed why the block price is typically 2 or 3 cents above the barrels. Production and packaging costs are a little higher for block cheese, he explained, whereas barrel cheese these days is packaged in a fiber board barrel and is easy to extract for use in further manufacturing “so there’s not as much packaging, not as much cost there.” Whenever the price spread is inverted (barrels over the blocks) the higher costs “squeeze plant margins” he said, especially when you’re paying higher prices for the milk.
He expected more cheese to make its way to the CME looking for a home and warned that people will step away from the market once the price starts slipping and that will pull the barrel lower as well. Cash butter held all week at $2.03, 25.5 cents above a year ago. Only one car was traded. NASS butter averaged $2.0348, down 5.4 cents.
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. |
| 7/20/2011 |
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