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Views and opinions: USDA wants flavored low-fat milk back in schools

 

The USDA drew praise from the National Milk Producers Federation and the International Dairy Foods Assoc. this week over a proposed rule returning low-fat flavored milk in schools.

A joint press release stated that, “In 2012, USDA eliminated low-fat flavored milk as an option in the school meal and a la carte programs, which resulted in students consuming 288 million fewer half-pints of milk from 2012-2015.”

“Removing low-fat flavored milk causes schools to fail the test of how best to provide optimal nutrition for students,” said Dr. Beth Briczinski, Vice President of Dairy Foods and Nutrition for NMPF. “Fortunately, USDA recognizes the need to be more flexible in providing schools a range of milk options to enhance the dietary intake of the nine essential nutrients milk offers.”

Also, the Northeast Dairy Farmers Cooperative’s Bob Gray reports that the U.S. Appeals Court has granted a stay on the CERCLA/EPCRA Air Emissions Reporting Requirements and the Stay will remain in place until May 1.

Benchmark milk prices lower

The first benchmark milk price of 2018 is not good news for dairy producers and, hopefully, not a Punxsutawney Phil-type prediction of “six more weeks of winter.”

The Class III fell to $14 per cwt., down $1.44 from December 2017 and $2.77 below January 2017, lowest Class III price since June 2016, but is 63 cents above California’s comparable 4b price. The Class III price equates to $1.20 per gallon, down from $1.33 in December and $1.44 a year ago.

Late morning on Feb. 2, Class III futures portended a February price at $13.58; March, $13.61; and April at $13.81; with a peak at only $15.78 in October.

The January Class IV milk price is $13.13 per cwt., down 38 cents from December, $3.06 below a year ago, and the lowest Class IV since May 2016.

California’s comparable January 4b cheese milk price is $13.37, down 15 cents from December, $2.62 below a year ago, and the lowest 4b price since June 2016. The January 4a butter-powder price is $12.93, down 43 cents from December, $2.74 below a year ago, and the lowest 4a price since May 2016.

You’ll recall that preliminary USDA data reported December’s 50-State milk production at 18.0 billion pounds, up 1.1 percent from December 2016. USDA’s latest Dairy Products report shows where that milk went.

December cheese output totaled 1.09 billion pounds, up 3.0 percent from November and 2.6 percent above December 2016. Total cheese output for 2017 hit 12.48 billion pounds, up 2.6 percent from 2016.

California produced 217.4 million pounds of December’s cheese, up 3.0 percent from November and just 0.1 percent above a year ago. Wisconsin, at 288.7 million pounds, was up 3.9 percent from November and 2.6 percent above a year ago. Idaho produced 84.7 million pounds, up 10.2 percent from November and 3.7 percent above a year ago. Minnesota was up 7.7 percent from November and 9.0 percent above a year ago. New York was down 1.9 percent from November but 8.3 percent above a year ago.

Italian cheese output totaled 466.6 million pounds, up 2.4 percent from November and 0.9 percent above a year ago, with YTD output at 5.38 billion pounds, up 1.7 percent. Mozzarella, at 363.4 million pounds, was up 1.4 percent, with YTD at 4.16 billion pounds, up 1.2 percent.

American type cheese production totaled 432.9 million pounds, up 7.5 percent from November and 2.9 percent above a year ago. YTD totaled 4.91 billion pounds, up 3.2 percent. Cheddar, the cheese traded at the CME, totaled 317.1 million pounds, up 1.1 percent from November and 3.2 percent above a year ago, with YTD at 3.56 billion pounds, up 4.1 percent.

U.S. producing more butter

U.S. churns produced 170.3 million pounds of butter, up 15.5 percent from November and 4.2 percent above a year ago. YTD butter totaled 1.84 billion pounds, up 0.2 percent. Yogurt output amounted to 353.9 million pounds, down 1.5 percent from a year ago, with YTD at 4.4 billion pounds, down 1.4 percent.

Dry whey totaled 83.1 million pounds, up 6.1 percent, with YTD hitting 1.03 billion pounds, up 8.3 percent. Stocks were down 1.6 percent from November but a hefty 51.7 percent above those a year ago.

Nonfat dry milk totaled 163.3 million pounds, up 14.7 percent from November and 5.4 percent above a year ago, with YTD at 1.8 billion pounds, up 4.1 percent. The report also showed nonfat dry milk stocks at 330.4 million pounds, up 13.3 million pounds or 4.2 percent from November and a whopping 104.9 million pounds or 46.5 percent above those a year ago.

Skim milk powder production totaled 49.9 million pounds, up 19.1 percent from November but 8.8 percent below a year ago. YTD output is at 534.0 million pounds, down 4.5 percent.

A drop in the U.S. All Milk price average, plus higher corn and soybean prices, served to pull the December milk feed price ratio sharply lower. The USDA’s Ag Prices report shows the December ratio at 2.38 down from 2.54 in November and 2.73 in December 2016.

The U.S. All-Milk price averaged $17.20 per cwt., down 90 cents from November and $1.70 below December 2016. California showed the bottom price, at $15.73 per cwt., down $1.22 from November and $1.82 below a year ago. Michigan and Arizona didn’t fare much better, at $16. Wisconsin averaged $17.80, down $1.20 from November and $1.90 below a year ago.

December corn prices increase

December corn averaged $3.23 per bushel, up 8 cents from November but 9 cents below December 2016. Soybeans averaged $9.30 per bushel, up 8 cents from November but 34 cents per bushel below a year ago. Alfalfa hay averaged $148 per ton, unchanged from November, but $21 per ton above a year ago.

The December cull price for beef and dairy combined averaged $62 per cwt., down $1.40 from November, after dropping $2 the previous month. That’s also 90 cents above December 2016 and $9.60 below the 2011 base average of $71.60.

The January price received for milk cows averaged $1,520 per head, down $90 from October 2017 and $100 per head below January 2017. Wisconsin cows averaged $1,470 per head, down $140 from October and $260 below January 2017. California averaged $1,500 per head, down $100 from October and $100 below January 2016.

National Milk’s and Dairy Management Inc.’s January Dairy Market Report stated that the USDA estimates the U.S. all-milk price averaged $17.65 per cwt in 2017, $4.85 higher than the 2009 average but $6.35 below 2014. It was also the third year in a row to average less than $18 per cwt, first time that’s happened since 2006 when feed costs began to rise, according to the report.

“Taking into account the effects of such costs, the current Margin Protection Program (MPP) margin calculation should average about $9.70 in 2017, which would be the second-highest annual MPP margin over the past 10 years,” the report said. “It would be $3.60 below the highest, during 2014, and $5.12 above the lowest, during 2009. Monthly milk prices and margins both improved fairly steadily since last April, but federal order prices took a sharp drop at the end of the year, presaging a likely more difficult year ahead in 2018.”

Cash dairy prices saw little change the week of Jan. 29 as traders absorbed the Dairy Products report. Block Cheddar closed Feb. 2 at $1.4625 per pound, down a penny on the week and 27.75 cents below a year ago. The barrels finished a half-cent higher at $1.3250, 38.25 cents below a year ago and 13.75 cents below the blocks. Three cars of block traded hands and 25 of barrel.

Dairy Market News reports that cheese production in the Midwest varies by plant but cheese sales are “generally meeting expectations.” Process cheesemakers, in particular, suggest that sales have increased from a very slow start in 2018. Pizza cheese suppliers also report a demand uptick. But, milk into cheese, for the most part, is discounted, with prices ranging $3 under to $1 over Class.

It added that, “There is some positivity regarding market tones among contacts. Although the path to some steadiness has not been cogent, there is currently a bullish sentiment as prices are appealing to buyers who have, until recently, been very hesitant to purchase more than absolutely necessary.”

Western cheese makers continue to push milk through cheese vats. With ample milk supplies, cheese production is active and many facilities are running at or near capacity. Some Class II manufacturers have pulled a little more milk into their facilities, helping ease the pressure. Contacts report an increase in demand from both export and domestic markets, possibly due to lower prices.

“Whether due to more favorable prices or the Super Bowl surge, manufacturers note an increase in buyer activity,” said DMN. “Inventories are still heavy but the uptick has drawn total stocks down slightly.”

Butter sales are seasonally quiet

Cash butter closed Feb. 2 at $2.1150 per pound, down 1.5 cents on the week and 4.25 cents below a year ago, with 9 cars exchanging hands on the week.

Butter sales are seasonally quiet, according to DMN, but demand is “generally meeting seasonal expectations.”

Butter makers suggest production activity is steady, as cream remains available from within and outside the Midwest and contacts suggest that the uptick in butter stocks in the latest Cold Storage report is “less concerning for butter than other commodities. As butter's public perception has shown marked improvements in recent years, contacts suggest a need for increased supplies.”

That said, others “question whether the butter market tones can remain resilient, as all other dairy commodities bear the brunt of low prices and/or instability.”

Western butter output is heavier due to “above needs supplies of cream.” Processors are selling some of their cream but supplies are so abundant they have to churn more butter and processing capacities seem to be limited in some areas. Butter inventories are also growing. Current demand is “alive but seems to not be enough to keep up with the speed of production.”

Cash Grade A nonfat dry milk closed the week at 72.25 cents per pound, up 1.25 cents but 21.75 cents below a year ago, with 21 cars sold on the week.

The EU Commission announced that, as expected, it has temporarily changed its public intervention program for skim milk powder (SMP). FC Stone points out that the scheme ran from March to September, with a limit of 109,000 tons at a buy-in price of $1,698 per ton, moving to a tender process for additional volume.

In 2015 and 2016, the scheme was extended a number of times and effectively remained open continuously with volume limits increased in order to cope with the high volumes being sold into the scheme. The scheme ultimately closed at the end of September 2017, with SMP stocks at 378 kilotons.

“Under the revised system, the Commission will forego the automatic buying-in of SMP, instead setting the fixed-price buy-in volume limit for 2018 at zero. The Intervention programme will still open on the first of March and function as a safety net with the Commission able to buy into the scheme via a tendering process affording them more discretion over the volumes bought into the scheme and the price paid for said product,” according to FC Stone, an action it says “will likely prove to be bearish for powder prices in Europe.

U.S. dairy exports keep moving

U.S. dairy exports keep moving under the farmer-funded Cooperatives Working Together program (CWT). Export assistance was granted to 25 requests from member cooperatives this week. A reported 4.365 million pounds of cheese will move to customers in Asia, the Middle East and North Africa through April and raised 2018 CWT exports to 9.714 million pounds of American-type cheeses and 729,730 pounds of butter (82 percent milkfat) to 10 countries on three continents.

The 2018 International Dairy Foods Assoc. Dairy Forum is history. I talked about it in the Jan. 29 Dairy Radio Now broadcast with Jerry Dryer, analyst and editor of the Dairy and Food Market Analyst newsletter.

Dryer said he heard good news and bad at the conference but a series of presenters from inside and outside the dairy industry were optimistic about the long term future for dairy, based on a continued growing middle class in the United States and world. He said “as consumers generate more income, they consume more protein and dairy happens to be high on the list of preferred proteins.”

When asked about reports, particularly out of Europe, that dairy is antiquated and will be replaced by plant based beverages, Dryer responded, “Not in our life time, if ever,” as “dairy is highly desirable on most people’s minds.”

“When a dog bites a man, that’s not news,” he said. “When a man bites a dog, that’s news. Most everyone drinks milk. That’s not news. But, when people start drinking oat milk, that’s news and the media coverage you see and the interest that you hear about is greatly exaggerated because it’s news; it’s different.”

He admitted 2018 milk prices are bleak but he ran some possible bullish scenarios by some of the attendees who “looked at me like I was from another planet.” They remain bearish, at least the first half of the year, he said, but he will soon issue his long range forecasts and says he “may be a little more bullish.”

 

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.

2/8/2018