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There’s no worry of running out of milk any time soon
By Lee Mielke

March milk production in the top 23 states hit a whopping 14.6 billion pounds, according to the USDA’s preliminary data, up 5.5 percent from March 2005. Cow numbers totaled 8.22 million head, up 17,000 from February. Production per cow averaged 1,773 pounds, up 66 pounds from a year ago.

California output was up 6.2 percent and Wisconsin was up 4.5 percent. New York was up 4 percent, thanks to a 60-pound gain per cow. The biggest increase occurred in New Mexico, up 15.1 percent. Texas was next, up 14.9 percent. Three states posted losses. Florida was down 6.6 percent. Washington was down 2.5 percent and Oregon was down 1.5 percent.

Friday’s Livestock Slaughter report shows 207,000 dairy cows culled in March, up from 171,000 in February.

Mary Ledman, Principal of Dairy Direct in Chicago, warned in Tuesday’s broadcast that the erosion in the Class III price is likely to continue to come out of the whey price and producers need to watch that. Will we see a 30-cent whey market or something closer to 25 cents, she asked? A penny on whey equates to 6 cents on the Class III price, she said.

The cash market had little reaction to the production report and had anticipated its news. Block cheese closed the week at $1.16 per pound, unchanged on the week, but 30 cents below a year ago when blocks plunged a dime to $1.46.

Barrel closed Friday at $1.1325, up a penny on the week, but 26.75 cents below a year ago, when barrel lost 8 cents and closed at $1.40. One car of block traded hands this week and none of barrel. The NASS-surveyed U.S. average block price hit $1.1684, up 0.4 cent. Barrel averaged $1.1454, up 0.6 cent.

Butter closed Friday at $1.17, up 2.25 cents on the week, but 28.75 cents below a year ago. Three cars were sold. NASS butter averaged $1.1384.

Uncle Sam purchased 8.6 million pounds of nonfat dry milk under the dairy price support program this week. Sales came from all three regions and raised the cumulative total to 9.9 million pounds, compared to 31.8 million a year ago.

The May Federal order Class I base milk price was announced Friday at $10.97 per hundredweight, down 25 cents from April, and is below the Congressionally-mandated trigger thus generating a 92.48 cent MILC payment to producers. It is the lowest Class I base since August 2003.

Economic growth, particularly in China, robust global demand for dairy protein, a tight supply, and U.S. supplier commitment, spurred U.S. dairy exports, according to the U.S. Dairy Export Council (USDEC). Exports reached a record 1.8 billion pounds milk solids in 2005, a 52 percent increase in the last two years.

USDEC’s, Marc Beck, said in Monday’s “DMI Update” that 2005 dairy exports represented 8.3 percent of U.S. milk production, double that of a decade ago, and “a significant part of the U.S. dairy business.”

The CWT program accepted bids this week from Minnesota-based Land O’ Lakes to export 495,000 pounds of butter to Honduras, 528,000 pounds to Mexico, and 44,000 pounds of whole milk powder to Guatemala. A fourth bid from Dairy Farmers of America was for 561,000 pounds of anhydrous milk fat to Mexico.

Meanwhile, National Milk and the USDEC have joined with the Global Dairy Alliance in sending a letter to the World Trade Organization calling for an end to subsidies. NMPF’s Chris Galen reported in his Thursday program that they want to keep pressure on negotiators to end subsidies but the other countries that use them more heavily like Europe would be more impacted. He added that they are also lobbying for more market access and reforming domestic supports.

The problem, he said, is the WTO’s self-imposed deadline of having a framework in place by April 30 and “It does not look like that deadline will be met.” Add to that the news that the top U.S. trade negotiator, Rob Portman, will move to the Office of Management and Budget, replaced by his deputy, Susan Schwab and “that’s not necessarily good news for keeping the momentum going,” Galen said.

When asked if the U.S. was being disingenuous by calling for an end to export subsidies when it also uses them and we have the CWT’s export assistance program, Galen responded by pointing out that the CWT program does not count under proposed export subsidy limitations because they only apply to government run, taxpayer funded programs. Privately run programs, like the CWT, the only such program in existence right now, are exempt, he said.

“If the WTO would successfully eliminate government export subsidy programs, you would see a proliferation of other countries trying to do the same thing within their producer communities,” Galen concluded. In fact European farmers have commented on the futuristic thinking of such a program, he said.

USDA’s February dairy trade report had good news, according to Dairy Profit Weekly’s Dave Natzke. Natzke reported in Friday’s broadcast that, after suffering one of the largest U.S. dairy trade deficits in January, dairy imports fell sharply in February at the same time U.S. dairy exports posted some strong gains.

Imports plunged 37 percent from January, to about $174 million, according to Natzke, and were about 11 percent below February 2005. February dairy exports rose to $146 million, 23 percent more than January and the highest monthly export total since last August. The result is a $28 million dairy trade deficit, one of the smallest margins seen in years, he said.

“Hopefully this is a trend that continues,” Natzke said, “Because through the first five months of fiscal year 2006, U.S. dairy trade had been going in the opposite direction.” He reported that, so far in fiscal year 2006, dairy imports were running about 10 percent more than the same period last year while dairy exports were down about 12 percent.

Meanwhile, planting season is in full swing across the U.S. and fuel prices are surely on farmer’s minds. Natzke reported that, between March 27 and April 17, the U.S. average retail price for regular gasoline jumped more than 28 cents per gallon, and is now about 55 cents a gallon higher than a year ago. The story is similar for diesel, which is up more than 20 cents per gallon in the past three weeks, and is more than 60 cents a gallon higher than last year.

“The news won’t be getting any better, soon,” Natzke said. U.S. crude oil jumped more than 20 percent since February and is now more than $72 per barrel, a new record, even surpassing highs seen 8 months ago after Hurricane Katrina. Those high energy costs are going to put a big bite in farmer margins, Natzke said.

This farm news was published in the April 26, 2006 issue of Farm World.