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House approves farm bill, splits out nutrition title

The House passed its version of the farm bill Thursday, July 11, after splitting out nutrition/feeding programs. The 216-208 vote was along partisan lines, after a rancorous debate on the House floor between Republicans and Democrats, according to Bob Gray, editor of the Northeast Dairy Farmers Cooperatives newsletter. The bill contains 11 of the 12 titles of the original farm bill voted down by the House in late June. House leadership removed the nutrition title, which includes the food stamp program (SNAP) and other programs.

The dairy title however includes the Goodlatte-Scott policy proposal, and not the Dairy Security Act approved by the Senate. Commodity, conservation, research, rural development and other titles from the previously considered farm bill remain, according to DairyBusiness Update (DBU). The bill also repeals “permanent farm bill law” which includes the 1949 and 1938 laws. 

As expected National Milk gave the bill a thumbs down calling it “seriously flawed, in that it contains the Goodlatte-Scott dairy amendment, as well as a repeal of permanent agricultural law.” NMPF president and CEO Jerry Kozak said, “Neither of these measures serves the best long-term interests of dairy farmers. The Senate, by contrast, overwhelmingly passed the Dairy Security Act, which National Milk and nearly all dairy farmers enthusiastically supported.”

Kozak said “There is still hope that a new farm bill can be passed in 2013.” “Without any progress toward a Senate-House conference committee, we were looking at yet another one-year extension of current programs, which is unacceptable. Today’s vote means that agricultural leaders now can work on improving the House bill and developing better dairy policy than what exists now, and what is contained in this House bill.”

Dairy processors praised the passage and a press release from the International Dairy Foods Assoc., stated that the bill “brings us one step closer to historic dairy policy reform and proves that we can help dairy farmers without raising the prices of dairy products for consumers and for government programs.”

“The Goodlatte-Scott amendment soundly rejected a controversial policy that would have periodically imposed limits on the amount of milk that dairy farmers could sell,” the press release stated. “Instead, the amendment replaces current dairy programs with a new, effective and expanded safety net program for dairy farmers in the form of revenue insurance that is similar to government-subsidized programs for other agriculture commodities.” 

USDA raises 2013 milk estimate
The USDA raised its 2013 milk production estimate in this month’s World Agricultural Supply and Demand Estimates report, based on growth in milk production to date. Look for output to hit 202 billion pounds, up 200 million from last month’s estimate. The 2014 forecast was unchanged at 204.5 billion. Despite weaker forecast milk prices, forage supplies and feeding margins will likely continue to support modest gains in milk production.

Cheese and butter prices were forecast lower for 2013 on larger supplies. Prices for 2014 were lowered “as the larger carry-in stocks overhang the market.” The 2013 NDM price forecast was raised from last month on strong export demand, but the forecast for 2014 was unchanged. Whey price forecasts for 2013 and 2014 were unchanged from last month. 

Class III price forecasts were lowered from last month in line with lower product prices. The 2013 average, now pegged at $17.65-$17.95 per cwt., was down from the $17.80-$18.20 anticipated a month ago, and compares to $17.44 in 2012. The 2014 average was put at $16.60-$17.60, down 40 cents from last month’s estimate.

The 2013 Class IV price forecast was unchanged as lower butter prices are largely offset by higher NDM prices. However, the Class IV price was lowered for 2014, reflecting lower butter prices. The 2013 average is now expected to range $18.20-$18.60, compared to $18.15-$18.65 predicted a month ago, and  compares to $16.01 in 2012. The 2014 average is now put at $17.65-$18.75, down a dime from a month ago.

Cash cheese market closes up
Checking the cash markets, cheese was mixed the second week of July. The blocks closed in Chicago at $1.6750 per pound, up a penny on the week but a half-cent below a year ago. The barrels closed at $1.65, down 2 cents on the week and 3 cents below a year ago. Twenty three cars of block found new homes on the week and 20 of barrel. The AMS-surveyed U.S. average block price lost 2.5 cents, slipping to $1.7220. Barrels plunged 7.2 cents, to $1.7110.
Seasonal increased temperatures may be influencing the markets and while “summer” was late in arriving this year, it appears it is here now. FC Stone’s July 11 eDairy Insider Opening Bell (IOB) said “Reports are the grilling season has picked up, boosting demand for barrel cheese. More aggressive buying is also occurring due to heat stress, particularly in the West.”

Cheese manufacturers in the Central region benefited from ample internal milk supplies as well as Eastern milk clearing into Midwestern operations the first week of July, according to USDA’s Dairy Market News (DMN). Western cheese makers noted that recent hot weather there resulted in significant decreases in milk production and lower volumes clearing to manufacturing. 

While recent concerns of cheese market participants centered on quantities in storage, the arrival of hot weather shifted concerns to how milk availability and declining components will impact production throughout the summer. Some manufacturers report cheese sales are on the rise. The other important factor is world cheese supplies are tight but the U.S. has cheese to sell.
Cash butter gave back over half of the previous week’s gain, closing Friday at $1.46, down 6.5 cents on the week and 9 cents below a year ago. Ten cars were sold on the week. AMS butter averaged $1.4648, down 4.6 cents.

The holiday-shortened fourth of July week sent additional cream to butter/powder plants, according to DMN, but frozen dessert manufacturing was also active and readily clearing cream. Domestic butter demand is light however sales to international accounts are steady to higher.

Cash Grade A nonfat dry milk closed the week at $1.75, up a penny. Six cars were sold. Extra Grade finished at $1.7250, up a penny and a half on a bid. AMS powder averaged $1.7060, up 0.9 cents. Dry whey averaged 58.18, up a penny. Demand for whey overseas is solid, according to the IOB, and “with cheese production weaker in the West, whey supplies are being limited somewhat.”

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.