The American Farm Bureau (AFB) has proposed an area-based insurance concept as a safety net for dairy producers. Speaking in a Dairy Radio Now interview, AFB’s Dr. John Newton, said they sought ways to improve the existing safety net because it has not worked effectively.
AFB’s proposed program, Dairy-Revenue Protection (Dairy-RP), would allow producers to purchase protection on revenue and would have the option to determine how the value of milk is determined in their policy. The first option would allow a farmer to choose a milk value based on a mix of Class III and Class IV milk futures prices.
The second option would allow a farmer to choose a milk value based on their desired butterfat and protein tests. The farmer would then choose how much milk to cover during a quarter and how much protection to buy, from 70 to 95 percent.
Newton said it’s not a new concept but a new concept for dairy and likened it to crop insurance. He asked listeners to participate in an online survey on the program by logging on to www.farmbureausellscropinsurance.com Congress returns in September and faces two immediate legislative challenges, according to Bob Gray’s Northeast Dairy Farmers Cooperatives newsletter.
“One will be the debt ceiling which has to be dealt with if the U.S. Treasury Department is going to be able to borrow money to keep the government operating.
This issue always creates a huge political battle among Congressional budget hawks who are highly concerned with the $1 trillion federal debt, which they should be, and other Members of Congress who say we cannot default on our ability to pay our expenses and keep the federal government operating.
“And speaking of keeping the federal government operating, Congress will need to pass an Omnibus Budget Bill by Sept. 30th or the federal government will shut down. More than likely they will kick the can down the road by passing a short term ‘Continuing Resolution’ to keep the government running. However, this time maybe President Trump may force their hand and not sign a short-term CR. It is going to be a very interesting September,” Gray added.
July milk output bearish
Preliminary USDA data shows July milk output in the top 23 producing states at 17.2 billion pounds, up a bearish 1.9 percent from June 2016.
Revisions added 5 million pounds to the original June estimate, now put at 16.9 billion pounds, up 1.7 percent.
The 50-state July total is 18.2 billion pounds, up 1.8 percent. Milk cow numbers averaged 9.4 million head, up 74,000 from 2016.
July milk cow numbers in the 23 states totaled 8.73 million, down 1,000 head from June but 72,000 more than a year ago.
Output per cow averaged 1,969 pounds, up 21 pounds from a year ago.
California output, while still below a year ago for the sixth consecutive month, strengthened some. The nation’s No. 1 milk producer was down just 0.2 percent, due to 13,000 fewer cows but output per cow was up 10 pounds.
Wisconsin was up 0.7 percent, on a 15 pound gain per cow, while cow numbers were unchanged.
Texas continued to put milk in the tank, up a whopping 14.8 percent, driven by 35,000 more cows and a 130 pound gain per cow. New Mexico, was up 8.4 percent, on 19,000 more cows and a 45 pound gain per cow from a year ago.
Idaho slipped 0.2 percent, on a 10 pound loss per cow, though cow numbers were up 2,000 head. New York was down 0.1percent, on a 15 pound loss per cow, but milked 4,000 more cows than a year ago.
Michigan was up 2.9 percent on 7,000 more cows and a 25 pound gain per cow.
Minnesota was up 3.1 percent, thanks to 70 pounds more per cow offsetting a loss of 4,000 cows.
Pennsylvania was off 0.4 percent, on a loss of 5,000 cows, but output per cow was up 10 pounds.
Heat took a toll on Washington State, down 1.2 percent on a 30 pound loss per cow and 2,000 fewer cows.
July culling on decrease
USDA’s latest Livestock Slaughter report shows July culling was down from June but above a year ago.
An estimated 225,800 head were slaughtered under Federal inspection, down 10,900 head from June but 12,500 head above July 2016.
Culling in the first seven months of 2017 totaled 1.72 million head, up 58,600 head from a year ago or 3.5 percent.
The latest milk production data for the EU 28 nations is for June and was up 1.7 percent from a year ago, according to HighGround Dairy’s Eric Myer, speaking in the Aug. 21 Dairy Radio Now broadcast.
That’s the strongest it has been in over a year, he said, as milk output there had been lagging.
The other big story, according to Meyer, is the high butterfat market, which is at record highs. The last reported price was equivalent to $3.50 per pound, he said, as butter and milkfat and butterfat is tight around the world.
Milk production in Oceania is on the rise, according to Meyer. June output, which is early in its winter season, was up almost 20 percent and, while that therefore doesn’t have a lot of relevance, Meyer said, this season is going to be highly anticipated once they start ramping up milk production.
Calving season is underway and producers were told by Fonterra they can expect a $6.80 per kilogram milk solids price, highest in four years. Meyer expects increases in milk output approaching 3 to 4 percent for the season.
$3 per pound butter in U.S.?
Meyer also expects $3 per pound butter in the U.S., as there is a pretty wide spread between U.S. and European prices.
The last Global Dairy Trade auction’s butter price was disappointing, he said, but while the price may be “choppy” for a while, he believes we will see that $3 print before the end of the year.
As to milk prices, Meyer says we have seasonal gains coming and a $1.80 per pound cheese price is possible for a little while, but he voiced concern regarding our large cheese stocks, once Third and Fourth Quarter cheese buying ends.
Growing U.S. milk output has been focused in the cheese producing regions, he said, so he’s not as bullish on the first half of next year on cheese.
He looks for prices in the $1.50s, “not too profitable for dairy farmers around the country but I expect those prices to normalize as the weight of the stocks during a higher production and lower demand period sets in.”
There’s still plenty of product in the cooler, though butter stocks are down. The USDA’s latest Cold Storage report shows July 31 butter holdings at 307.7 million pounds, down a somewhat bullish 2.4 million pounds or 1 percent from June and 25.1 million pounds or 8 percent below July 2016.
American cheese stocks, at 837.6 million pounds, are up a bearish 27.4 million pounds or 3 percent from June and 67.9 million or 9 percent above a year ago.
The total cheese inventory stood at a record 1.38 billion pounds, up 58.4 million pounds or 4 percent from June and 99.6 million or 8 percent above a year ago.
Cash dairy prices suffer Traders must not have liked what they saw in the July Cold Storage report and cash dairy prices suffered the consequences.
The Cheddar blocks closed on Aug. 25 at $1.65 per pound, down 10.5 cents on the week and 9 cents below a year ago when they dropped 12.5 cents to $1.74.
The barrels started the week moving atop the blocks, first inversion since March 15, and hit $1.76, highest barrel price since November 2016. But, they rolled to an Aug. 25 close of $1.5575, down 19.25 cents on the week, 12.25 cents below a year ago when they plunged 18.5 cents to $1.68, and are 9.25 cents below the blocks.
Eleven cars of block and 37 of barrel sold on the week, 23 on Aug. 22 alone. FC Stone’s Dave Kurzawski wrote in his Aug. 24 Early Morning Update; “It makes sense that the market would have responded negatively to the (Cold Storage) report. But prices had also just pushed to a six month high for blocks and established a new 2017 high for barrel cheese, which can stir a good deal of selling interest anyway (and did so ahead of the report this week).
Also, we’ve said that for mid-late August, we thought that cheese prices could hang in around the $1.70 level with barrels a little lower, so the $1.75 level of Monday seemed a bit rich. Ultimately our guess is that the price shot higher over the past week inspired sellers to step back in a more meaningful way, and not necessarily the inventory report from July.”
The important takeaway, he concludes, is that the $1.70 price level “seems to be reasonable heading into holiday buying this year. We shall see.”
Discounted milk for cheese
Dairy Market News (DMN) reported that discounted milk for cheese production remains available in some Central areas.
Spot milk prices ranged from $1 under to $1 over Class III. With schools opening, some of the previously available spot milk is being diverted to states outside the region.
“Curd producers are experiencing a record setting season in demand,” said DMN. “Both curd and pizza cheese producers have started to limit orders, as production capabilities cannot keep up.
“Traditional cheese manufacturers have slowed production, as demand is in a seasonal slowdown. Although the Cold Storage report pointed to generally higher cheese stocks, recent shifts in production/demand have some contacts relaying that long barrel inventories are not as troubling as they were earlier in the summer. Contacts are cautiously optimistic about the current market tones.”
Western cheese production is active. Although parts of the region are seeing seasonal declines in milk production, available milk supplies often fill cheese vats first. “Overall, cheese inventories have grown somewhat. However, solid domestic cheese demand and slightly improved export opportunities have allowed manufacturers to ship cheese and keep stocks in check.”
Spot butter fell to $2.57 per pound on Aug. 22 but closed Aug. 25 at $2.6275, down 1.75 cents on the week but 57 cents above a year ago, when it lost 13.25 cents and dipped to $2.0575. Even at its current level U.S. butter is likely the cheapest butter in the world. Only five cars were sold on the week at the CME.
FC Stone’s Dave Kurzawski said “There seems to be less of a concern going into the fall on a shortage of fat worldwide with New Zealand production expected to show modest growth, decreasing the need for U.S. product to be exported.”
He pointed out, while New Zealand Milk collections for July were up 7.4 percent, July only accounts for 1.1 percent of total NZ production, so the milk has yet to make its way into fat production but it’s the anticipation that it will or might pressure U.S. butter prices.”
MN says overall demand for butter continues to compare to previous years’ figures. Butter churning is active as producers prepare for Fourth Quarter demand.
The Cold Storage report showed butter stocks were down from June and a year ago but contacts tell DMN that “last month’s Cold Storage report did not spur on the market as expected, so forecasts are mixed regarding the outcome of bullish movements from this month’s report.”
Western butter output is generally steady. “Cream is readily available, but current multiples curb processors’ enthusiasm for putting higher cost milkfat into storage,” said DMN.
“A few manufacturers continue to slow their churns, opting to sell off cream as opposed to making butter. Strong domestic demand and reduced imports have helped draw down butter inventories. With an eye toward the fall holiday season, manufacturers have been able to keep inventories in good balance with current needs.”
Cash Grade A nonfat dry milk closed the week at 84.5 cents per pound, up 1.25 cents but a half-cent below a year ago. Two cars were sold on the week. |
