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California producer: Exports are key to U.S. dairy industry
By Lee Mielke

The importance of the export market to U.S. dairy farmers was the topic in Monday’s “DMI Update” on DairyLine. Hilmar, California dairy producer and National Dairy Board Secretary, Kimberly Clauss, pointed out that 95 percent of the world’s population lives outside of the U.S. and that underscores the importance of impacting those markets and is what the U.S. Dairy Export Council is doing with the checkoff’s international export program.

Countries like Mexico, the Middle East, and Russia present great opportunities for U.S. dairy exports, according to Clauss, and that, currently, one out of every three pounds of new milk produced in the U.S. is being exported.

“That’s a key number,” Clauss said, “When we think about the current growth that is happening in U.S. milk production, we just see that (the export market) as a real value for U.S. dairy producers.”

When asked if U.S. producers wouldn’t be better off just supplying the U.S. market, Clauss replied, “Not when 95 percent of the world’s population lives outside of the U.S.”

She added that, “With those numbers and the 600,000 ton shortfall that we’re expecting in these markets in the near future, the U.S. is actually positioned to fill that so we in the U.S., as dairy farmers, need to be thinking ahead and into the future and the future is these markets.”

Furthermore, U.S. markets will not grow fast enough to outpace the growth in U.S. milk production, according to Clauss. U.S. output is growing 1.6-3 percent per year, she said, “So with that kind of increase, we need to find markets for that milk and those dairy products.”

The November Federal order Class III milk price was announced at $12.84 per hundredweight, up 52 cents from October, but 51 cents below November 2005. The 2006 average now stands at $11.74, down from $14.11 a year ago and $15.32 in 2004. The Class IV price is $12.11, up 60 cents from October, but 79 cents below a year ago.

The NASS-surveyed cheese price averaged $1.3123, up 4 cents from October. Butter averaged $1.2693, down 2.48 cents. Nonfat dry milk averaged 98.37 cents, up 8.1 cents, and dry whey averaged 38 cents, up 2.4 cents from October.

California’s 4b cheese milk price was announced at $12.32 per cwt., up 92 cents from October, 37 cents below a year ago, and 52 cents below the comparable Federal order Class III price. California’s 4a butter powder price is $11.32, up 30 cents from October, but $1.19 below a year ago.

Meanwhile, the cash cheese market finished the last week of November with a downturn. The block price closed December 1, at $1.32 per pound, down 6.25 cents on the week, and 9.75 cents below a year ago. Barrel closed at $1.30, down 12.75 cents on the week, and 8.75 cents below a year ago. Sixteen cars of block traded hands and 10 of barrel. The latest NASS-surveyed U.S. average block price hit $1.3467, up 6.1 cents. Barrel averaged $1.3949, up 6.1 cents.

Butter closed at $1.2775, down a quarter cent on the week, and 9.75 cents below a year ago. Eleven cars sold. NASS butter averaged $1.2703, down 1.5 cents.

Analyst Mary Ledman, Principal of Direct Dairy Trading in Chicago, said in Tuesday’s DairyLine that the market is “trying to find some sort of equilibrium.” She said there’s a lot of new block capacity out there with no new barrel capacity, although some plants can turn block into barrel but aren’t able to right now because demand for block is very strong so she doesn’t see a switch at this time. That situation will work itself out at some time, she said, probably after January 1.

Last week’s Livestock Slaughter report showed a continuing trend, with culling running above the previous year, according to Ledman. Dairy farmers are facing choices of feeding marginal animals with corn that’s over three dollars a bushel, she said, so she expects to see that slaughter number increase.

The most significant information from the recent Cold Storage report, according to Ledman, was the seven million pound revision in September’s American type cheese stocks. She said “That’s significant because September American cheese production was up 7.7 percent in September of 2006 versus 2005, and some of us were wondering what we are going to do with all this cheese.” The revision tells us there was less cheese than we earlier anticipated, Ledman said, and the October number actually was less in the prior month than the prior year.

“That’s the first time in several months we’ve actually gone negative versus the prior year in cheese storage,” Ledman said, and “Puts us in good shape going into the first part of next year that I don’t think we’ll have burdensome American cheese inventories despite stronger production in the prior year.”

The November Milk-Feed Price Ratio is 2.34 down 19 points from October’s revised estimate, according to the USDA’s latest “Ag Prices” rport. That compares to 3.45 in November of 2005.

The All Milk Price was estimated at $13.80 per cwt., up 30 cents from last month’s estimate, and compares to $15.10 a year ago. Corn averaged $3.12 per bushel, up 58 cents from October, and $1.35 above November 2005. The soybean price, at $6.15 per bushel, was up 63 cents from October, and 53 cents above a year ago. The alfalfa hay price, at $109 per ton, was down $3 from last month, but $10.70 above November of 2005.

Don’t expect much from Congress in its lame duck session next week, according to National Milk’s Chris Galen. He said that, initially it was hoped that Congress would finish the budget for the current fiscal year and tackle some priority issues like immigration reform and reforming the so-called Comprehensive Environmental Response Compensation and Liability Act (CERCLA), regulations that currently regard cow manure as a toxic waste.

It appears lawmakers will only meet a few days next week to pass a Continuing Resolution, a stopgap funding measure, and then go home for the holidays. When Congress reconvenes next year, with Democrats in control, Galen said “They will have to deal with all those issues,” and he expects immigration reform to be one of them. He said the Republican Party was deeply divided over what approach to take. National Milk supported the Senate compromise version and opposed the House version, according to Galen.

He said the Federation is hopeful that, “With the Democratic majority in the House and Senate plus a White House that sees the need to reform immigration laws, there will be room for compromise and the ability to get some things done.”

Regarding the CERCLA regulations, Galen said he believes, with the Democrats in control, the chances of passing that are “a lot less likely.”

When asked if he was getting any indication regarding the future of the Milk Income Loss Contract program, Galen said he was not. He believes the House and Senate Agriculture Committees will begin work on a new farm bill so “We definitely need to get our ducks in a row and be prepared for that in 2007.”

This farm news was published in the Dec. 6, 2006 issue of Farm World, serving Indiana, Ohio, Illinois, Kentucky, Michigan and Tennessee.