In dairy politics; the House of Representatives Thursday made available its Discussion Draft of the 2012 farm bill. As expected, the dairy title contains provisions of the Dairy Security Act, authored by Rep. Peterson (D-Minn.) and based on National Milk’s “Foundation for the Future program.”

Processors continue to oppose its supply management provisions and, in a press release this week stated that the stabilization program is “designed to limit milk supplies and to periodically raise milk prices. It will reduce dairy farmers’ incomes at the same time that a new subsidized revenue insurance plan enhances their incomes. Taxpayer organizations, consumer groups, dairy food manufacturers, and many dairy producers, including the second largest dairy coop in the country, have all spoken out against supply management programs.”
  

The International Dairy Foods Assoc. urged the committee to “provide revenue or margin insurance for dairy farmers without also mandating that they participate in a program that will impose government control over the supply and demand for milk. National Milk praised the farm bill draft and said “The bill reflects the best-possible outcome for America’s dairy farmer community, which is in great need of a better federal safety net than what we have now.”

The Food and Drug Administration (FDA) approved the growth hormone rBST (bovine somatotrophin) for use in 1994. Six years after adoption, approximately 18.3 percent of the U.S. dairy herd was treated with rBST, according to USDA survey data and reported in the June 29 issue of the Daily Dairy Report. Since then, the percent of U.S. dairy cows treated with rBST has fallen from 15.5 percent in 2005 to 8.8 percent in 2010. USDA tracks rBST use along with milking frequency and organic milk production as part of the periodic Agricultural Resource Management Survey (ARMS).

The 2010 ARMS data provided rBST use by herd size and state. While rBST is used on farms of various sizes, it is not used in every state. For example, 2 percent of the cows in herds with less than 50 cows were treated with rBST. However, it might be more surprising to learn that the greatest use of rBST at 21.9 percent occurred on dairies with 500 to 999 cows, while just 6.8 percent of cows in herds of more than 1,000 received rBST. 

Kansas had the most prevalent use of rBST in 2010 with 31 percent of the state’s herd treated followed by Wisconsin with 21.5 percent. However, Pennsylvania ranked third in rBST use with 20.4 percent of the state’s herd treated. Minnesota was fourth in use and New York was fifth, with 18.6 percent and 13.4 percent of the cows treated, respectively. Iowa rounded-out the states with double-digit rBST use at 13.3 percent.

California, the largest milk-producing state, reported that 5 percent of its herd received rBST in 2010. States that reported no use of rBST include: Florida, Georgia, Indiana, Maine, Michigan, Oregon, Tennessee, Virginia, and Washington. Analyst and Editor Mary Ledman, discusses the study in the “Daily Dairy Discussion audio file at www.dailydairyreport.com

Farm milk prices have bottomed out and reversing gears. The USDA announced the June Federal order Class III price at $15.63 per cwt. up 40 cents from May, $3.48 below June 2011, 98 cents above California’s comparable 4b price, and equates to about $1.34 per gallon. That put the 2012 Class III average at $15.90, down from $17.06 at this time a year ago and compares to $13.58 in 2010 and $10.19 in 2009.

Looking ahead, Class III futures were trading late Friday morning as follows: July $16.71; August, $17.50; September, $17.82; October, $17.80; November, $17.55; and December was at $17.44 per cwt. That would result in a second half average of $17.47 versus $15.90 in the first half.

The June Class IV price is $13.24, down 31 cents from May and $7.81 below a year ago.

The four week AMS-surveyed cheese price averaged $1.5846 per pound, up 6.3 cents from May. Butter averaged $1.3991, up 3.3 cents, nonfat dry milk $1.1023, down 5.3 cents, and dry whey averaged 50.13 cents, down 3.8 cents from May.

California’s comparable June 4b cheese milk price is $14.65 per cwt., up $1.09 from May but $4.14 below a year ago. The 4a butter-powder price is $13.17, down 28 cents from May and $7.62 below a year ago. The 4b price average for 2012 now stands at $13.83, down from $15.67 a year ago and compares to $12.29 in 2010. The 4a price average now stands at $14.73, down from $18.94 a year ago and compares to $13.69 in 2010.

Dairy margins were mixed over the last two weeks of June, holding steady in the third quarter of 2012, but weakening in deferred periods as strength in milk was more focused on nearby contracts and only partially helped to offset surging feed costs, according to the latest Dairy Margin report from Commodity & Ingredient Hedging, LLC and reported by Dairy Profit Weekly (DPW).

Affecting margins, the second half of June featured a blistering corn rally brought on by sharply deteriorating crop conditions due to expanding drought across the Midwest. USDA’s Cold Storage report showed May 31 American cheese stocks totaled 623.2 million pounds, down 9.5 million from April and only slightly above a year ago. 

Given that stocks normally tend to increase between April and May (with 2007 being the only other exception in recent times), the data suggest better demand and supports the firming cheese price trend during June. 

Cash block cheese closed the 4th of July week at $1.64 per pound, down a penny on the holiday-shortened week, 47 cents below a year ago, and 3.5 cents below the barrels. The barrels held all week at $1.6750, 42.75 cents below a year ago. Three carloads of block traded hands on the week and none of barrel. The AMS-surveyed U.S. average block priced hit $1.6346, up 1.2 cents, while the barrels averaged $1.6220, up 4.1 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.