California dairy producers protested on the steps of the state capitol this week, prompting a “statement on milk pricing by the California Department of Food and Agriculture (CDFA).

Milk Producers Council General Manager Rob Vandenheuvel called Agriculture Secretary Karen Ross’s statement “extremely disappointing.” He pointed out that “Over the past several years, California dairy farmers have expressed growing frustration over how CDFA establishes monthly prices for milk sold in the State. However, what was once just a frustration has now culminated into financial devastation, with scores of California dairies reportedly already in bankruptcy, and the rest in dire financial straits.”

He charged that “Dairy farms are being squeezed between record high feed costs and milk prices that have failed to cover those costs month-after-month, leaving the dairies swimming in losses.
 However, adding insult to injury in California, our Department of Food and Agriculture, which is tasked with establishing on-the-farm milk prices that are in a ‘reasonable and sound economic relationship’ with what comparable milk is being sold for around the country, has overseen more than two years of a steep discount in what a large portion of our milk is sold for in California.” Complete details are posted at the MPC website at www.milkproducerscouncil.org

Stronger fluid milk demand would help all dairy farmers. USDA estimates that 4.5 billion pounds of packaged fluid milk products were sold in August in the U.S., down a half-percent from August 2011, and after adjusting for calendar composition, sales were off a half percent. Conventional fluid products decreased 0.9 percent while total organic fluid products increased 9.8 percent.

The USDA announced the November Federal order Class I base milk price this afternoon at $20.70 per hundredweight, up $1.82 from October, $2.25 above November 2011, is the highest since September 2011, and equates to about $1.78 per gallon. That put the 2012 Class I average at $17.10, down from $19.19 at this time a year ago and compares to $15.21 in 2010 and $11.25 in 2009. The AMS-surveyed butter price averaged $1.9197 per pound, up 9.6 cents from October. Nonfat dry milk, at $1.4503, was up 8 cents. Cheese averaged $2.0186, up 16.4 cents, and dry whey averaged 61.3 cents per pound, up 3 cents.

Cash cheese took a hit the third week of October as the markets awaited Friday afternoon’s September Milk Production report, which I’ll detail next week. The blocks tumbled  to $2 per pound, down 10 cents on the week but still 28 cents above that week a year ago. The barrels rolled 14.25 cents lower, to $1.9175, 22.75 cents above a year ago. Fifteen cars of block found new homes and two of barrel. The ever lagging AMS-surveyed U.S. average block price jumped 7.4 cents to $2.0324, while the barrels averaged $2.0354, up 3.8 cents.

The downward pressure came in part from Fonterra’s biweekly Global Dairy Trade (gDT) last Tuesday where Cheddar prices fell 9.9 percent to about $1.36 per pound, the lowest level since mid-July and a stark contrast to Monday’s U.S. block price of $2.10.

The Oct. 16 Daily Dairy Report (DDR) pointed out however that despite the declines in Cheddar cheese, the trade weighted average for all products at Tuesday’s auction increased 1.8 percent from the previous event, with whole milk powder posting the largest gain at 9.2 percent. 

Tighter milk supplies in the West during August slowed cheese production, according to USDA’s Dairy Market News (DMN). Manufacturers report that current inventories are adequate for contracted needs with regular customers willing to take additional production when offered. Buyers are filling holiday orders with specialty cheeses in addition to traditional needs. 

The higher prices have slowed export demand, though the CWT program continues to move product offshore. Seven requests for export assistance were granted this week to sell 2.8 million pounds of cheese and 302,033 pounds of butter to customers in Asia, Central America and the Middle East. 

The product will be delivered through March and raised 2012 cheese exports to 99.7 million pounds, butter totaling 58.4 million pounds (adjusted for reductions) and anhydrous milk fat totaling 127,868 pounds to 34 countries.

Speaking of exports, Dairy Profit Weekly (DPW), citing U.S. Dairy Export Council data, reported that the value of August U.S. dairy exports rebounded, surpassing $400 million for the 18th consecutive month. At $433 million, exports were up 8 percent from July, and equaled the total for August 2011. The fiscal year (FY) 2012 total is $4.868 billion, up 16 percent from the same period in FY ’11.

At $258 million, the value of August imports was down 6 percent from July, but 6 percent more than August 2011. FY ’12 imports, at $2.888 billion, were up 9 percent from the same period a year earlier. August cheese imports totaled $87 million, unchanged from July and August 2011. Y-T-D cheese imports were estimated at $963 million, down about 1 percent from a year ago.

August exports were equivalent to 14.2 percent of U.S. milk solids production, bringing the year-to-date percentage to 13.6 percent. August imports were just 3.2 percent as a percent of milk solids production, according to DPW.

Dairy exports have played an ever increasing role in supporting U.S. milk prices and the Oct. 12 Daily Dairy Report (DDR) pointed out that year-over-year U.S. cheese and nonfat dry milk/skim milk powder (NDM/SMP) exports for January through August were up 21 percent and 9 percent respectively. 

Increased cheese and NDM/SMP exports account for about 1.2 billion pounds of milk, and are equal to one-third of the 3.65 billion pound year-to-date increase in U.S. milk production, according to the DDR, which adds that the bulk of the gains in cheese and NDM/SMP exports is due to increased buying from Mexico. 

“Mexico’s role as a customer for U.S. dairy products cannot be underestimated,” the DDR said. Through August, Mexico accounted for the largest share of U.S. cheese and NDM/SMP exports and the greatest growth in volume. Approximately 42 percent of the United States’ 697 million pounds of NDM were exported to Mexico this year. Through August, Mexico imported 291.4 million pounds of NDM/SMP, up 48 million pounds from last year. 

Likewise, almost a quarter of U.S. cheese exports are destined for Mexico. Through August, Mexico imported nearly 96 million pounds, up 27.7 million pounds versus last year.

Editor Mary Ledman adds in the Daily Dairy Discussion on the DDR website that through August, the U.S. has exported over 90 million pounds of Cheddar cheese, 10 percent of which went to Mexico, but cautioned; “Had that 90 million pounds been traded at the CME, it would have been equivalent to almost 2300 loads which surely would have had price depressing impacts so these exports definitely buoy out domestic prices.”

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.