Western United Dairymen reported this item, which serves as a word to the rest of us; “The U.S. Environmental Protection Agency (EPA) has a requirement that businesses that emit more than a threshold level of certain emissions into the air must report those emissions to the National Response Center (NRC) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).”
Most emissions from agriculture do not fit the reasons for which reporting was required under the Act and could overwhelm the NRC with calls where no response is expected or will occur anyway. Therefore, EPA adopted regulations in 2008 exempting most of agriculture from reporting under CERCLA, but environmental activists groups sued EPA challenging that exemption and won.
The original date for farmers to begin reporting was Nov. 15; however, the EPA asked for a stay of that ruling so that agriculture does not have to report.
The U.S. Court of Appeals has not ruled on EPA’s request to continue the stay. If the court does not grant EPA’s request, some dairy farms may need to report air emissions from manure under CERCLA if emissions for ammonia and hydrogen sulfide exceed the threshold quantity of 100 pounds in a 24-hour timeframe.
EPA has made a strong case in favor of granting the stay; but at this point, the National Milk Producers Federation urges dairy producers not to file air emission reports and besides that, the reporting process is changing, according to WUD.
Cheese, butter prices retreat
Cash cheese and butter retreated the week before Thanksgiving. CME block Cheddar closed Nov. 17 at $1.62 per pound, down 9 cents on the week and 29 cents below a year ago when it peaked for the year at $1.91. The barrels finished at $1.6275, down 12.5 cents, 12.25 cents below a year ago, and three-quarters above the blocks. Two cars of block sold on the week but 39 of barrel.
Midwest cheese sales were fairly consistent with those of the previous week, reports Dairy Market News. Traditional cheese makers reported steady to balanced demand while pizza cheese makers continue to see seasonally healthy sales.
Milk is becoming more available for cheese production, and spot loads ranged $1.50 under to $1 over Class. The previous week’s uptick of the CME block price had some contacts “breathing a sigh of relief,” said DMN, as “There was some concern that barrel prices would drop to meet block prices, but the recently plucky cheese market tone remains resilient.”
Cheese production in the West is higher as milk production is mostly increasing. The majority of plants are running at or close to full capability. Contacts report strong retail sales for the Thanksgiving holiday and are hoping for further sales as the holidays get closer. Overall, demand in the domestic market is stronger; however, inventories remain plentiful, said DMN.
Cash butter crept up to $2.28 per pound Nov. 14 but retreated from there and closed Friday at $2.2150, down 4 cents on the week but 18.5 cents above a year ago, with 22 carloads fining new homes on the week.
Western United Dairymen’s (WUD) Nov. 10 newsletter reports that September butterfat exports were down 17 percent year-over-year and were at the lowest level since August 2016. It said 65 percent of exported U.S. butter went to Canada, Mexico and the Middle East/North Africa and the largest volume loss was from the Canadian market, with exports down 57 percent from August.
“September Imports were fortunately down from last year, but only by 2 percent. The largest butterfat exporter to the U.S. was Ireland, representing 71 percent of U.S. import volumes. The second largest import volume came from Finland and this was the first time since May where Mexico did not occupy the second rank. Imports from Mexico were down 80 percent year-over-year in September.”
DMN said interest in both unsalted and salted butter continues to maintain strength for Central region butter makers. Butter exports are characteristically 82 percent fat and unsalted where as domestic butter is 80 percent fat and salted. Producers point out that unsalted demand is stronger, but the availability of unsalted loads is limited compared to its salted counterpart.
Western butter makers say there is plenty of cream available. Butter production is generally active as manufacturers work to fulfill holiday demand. However, in some cases, butter makers are “slowing the churns to reevaluate stocks and seasonal butter needs. As expected, butter inventories are diminishing with typical autumnal requests, but manufacturers are cautious to keep supply and demand in balance.”
Demand for bulk butter used in further food processing remains strong, said DMN, but “retailers’ willingness to promote butter heavily, and therefore retail orders, vacillate in accordance with market prices. The proximity of the fall and winter holidays is creating an urgency to prompt consumers to make everything better with butter.”
American-style cheese popular
Grade A nonfat dry milk closed on Nov. 17 at 72.5 cents per pound, up a quarter-cent on the week but 17.5 cents below a year ago, on 15 sales for the week.
HighGround Dairy (HGD) reports that USDA’s latest commercial disappearance data shows that natural American-style cheese had “exceptional domestic and export demand in September from 2016, up 10 percent year-on-year, and total demand growth was the second largest of the year, (up 11.5 percent in May) with year-to-date figures 3.3 percent higher than last year and the highest it has been this late in the year since 2014.”
HGD warned that Other-than-American cheese “continues to find stronger demand in the export sector rather than in domestic use suggesting that U.S. cheese movement will become highly subject to movements in the U.S. dollar or availability from other major exporters (New Zealand, European Union). Other-than-American style cheese exports were 22.9 percent above 2016 year-to-date through September.”
U.S. butter demand continued to draw down U.S. ending stocks, according to HGD; however, September’s disappearance was “lackluster at best.” “September domestic disappearance, at 162 million pounds, was slightly above the 5-year average of 155.9 million, but still 12.7 percent below last year.” “Year-to-date domestic disappearance is just 0.6 percent above last year,” reported HGD. “Butter exports YTD are up 69.8 percent, though volumes are very low, up just 13 million from last year through September. September export business versus last year was down 15.4 percent, the first YoY decline since August 2016.
“September NDM/SMP disappearance felt the effects of Mexico sourcing from other world players as export business was down 15.89 million pounds from the previous month (calculated on a 30 day month) and nearly 37 million pounds from the prior year,” HGD stated. “While domestic Fourth Quarter baking demand helped cushion the blow, ending stocks still jumped to a record 61.8 days of use remaining, the highest it has been since 2002.”
U.S. fluid milk sales down
U.S. fluid milk sales were down. USDA’s latest data shows September packaged fluid sales totaled 4.01 billion pounds, down 2.8 percent from September 2016.
Conventional product sales totaled 3.8 billion pounds, down 2.7 percent from a year ago; organic products, at 208 million pounds, were even down, off 4.2 percent. Organic represented about 5.2 percent of total sales for the month.
Interestingly, whole milk sales totaled 1.2 billion pounds, up 3.1 percent from a year ago, up 2.4 percent year to date, and made up 30.9 percent of total fluid sales in the month. Skim milk sales, at 338 million pounds, were down 10.8 percent from a year ago and down 12.2 percent, year to date.
Total packaged fluid milk sales in the nine month period totaled 35.7 billion pounds, down 2.2 percent from the same period a year ago.
Year-to-date sales of conventional products, at 33.7 billion pounds, were down 2.4 percent; organic products, at 1.9 billion pounds, were up 0.2 percent. Organic represented about 5.4 percent of total fluid milk sales so far in 2017.
The California Department of Food and Agriculture announced the Golden State’s December Class I prices at $17.95 per cwt. for the North and $18.23 for the South, down 54 cents and 53 cents respectively from November and $1.27 and $1.26 respectively below December 2016.
They are the lowest Class I prices since June 2017.
That puts the year’s average at $17.98 for the north, up from $16.24 in 2016 and $17.69 in 2015. The southern average, at $18.26, compares to $16.53 in 2016 and $17.96 in 2015. The December Federal order Class I base price is announced by the USDA on Nov. 22.
Most of U.S. corn harvested
The USDA’s latest Crop Progress report shows 83 percent of U.S. corn has been harvested, as of the week ending Nov. 12, up from 70 percent the previous week but 9 percent behind a year ago and 8 percent behind the five-year average.
The report shows 93 percent of the soybean crop is harvested, up from 90 percent the previous week, 3 percent behind a year ago, and 2 percent behind the five-year average. Cotton is 64 percent harvested, up from 54 percent the previous week, 4 percent ahead of a year ago and mirrors the five-year average.
Cooperatives Working Together (CWT) accepted 16 requests for export assistance this week from members to sell 1.94 million pounds of cheese to customers in the Asia, Central America the Middle East and North Africa.
The product has been contracted for delivery through February 2018 and puts CWT’s 2016 export sales at 59.88 million pounds of American-type cheeses, and 4.7 million pounds of butter (82 percent milkfat) to 21 countries on five continents.
U.S. dairy exports help support prices more and more but the global outlook is not promising due to rising milk output. I talked about it with Matt Gould, editor and analyst with the Dairy and Food Market Analyst (DFMA) newsletter in the Nov. 20 Dairy Radio Now broadcast.
His Nov. 10 issue reports that Canadian milk output was up 6.2 percent in August and has risen 5.9 percent in the first eight months of 2017. It added that “Between January and September, (Canadian) skim milk powder exports hit a new record, up 253 percent to 124 million pounds. Canadian whey exports were also up 52 percent to 110 million pounds due to the implementation of the Class 7 pricing system.”
The DFMA also pointed to Europe where milk production is “booming.” It stated that “Preliminary monthly data show output grew by 4.4 percent year-on-year in September (with 45 percent of production states reporting). The most recent weekly data indicate production is running up 3.4 percent year-on-year in Germany, 6.4 percent in France, and 3.8 percent in the United Kingdom. These top-three milk production states represent 46 percent of the EU-28’s production.”
The United States is tracking around 2 percent growth, according to Gould, and New Zealand’s latest data shows output is up 2.7 percent, “so it’s fair to say that the world is awash in milk.”
How low will prices go?
Conversations in the industry ask how low prices will go and for how long and Gould says that is “dominating sentiment,” but “to put it all in perspective, globally the world’s population is consuming something on the order of 1.5 and 2 percent more milk every year. When you have output growing globally at 3.5 percent, you obviously have more supply than you have demand.”
Supply will have to ratchet back in order to bring those two in balance, he warned, and he doesn’t see that happening until second or third quarter next year. He added that it’s not low prices in the United States that are needed to balance the market; it’s low prices in Europe.
“The European dairy farmer has had a very profitable year in 2017,” Gould concluded, “and 2018 isn’t going to be nearly as good but it will have to be low enough that they slow production, farms exit, and supply contracts or grows at a slower rate.”
As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued Nov. 16, echoed dairy projections contained in the Nov. 9 World Agricultural Supply and Demand Estimates report.
Looking specifically at milk output, the Outlook stated, “With slower than expected growth in cow numbers in the third quarter of 2017, the fourth quarter estimate for milk cows has been lowered to 9.405 million head, 5,000 less than last month’s forecast. The milk per cow forecast for the fourth quarter is 5,685 pounds per head, 15 pounds lower than last month’s forecast. The milk production forecast for the fourth quarter is 53.5 billion pounds, 100 million pounds less than last month’s forecast. With lower than expected third-quarter milk production and a lower forecast for the fourth quarter, 2017 milk production is projected at 215.8 billion pounds, 400 million less than last month’s forecast.”
The 2018 projection for milk cow numbers has been lowered by 5,000 head to 9.440 million, as growth is still expected but from a lower base. Milk per cow for the year has been lowered 55 pounds to 23,280 pounds, in line with lower estimates for the fourth quarter of 2017 and lower expected milk prices.
Milk production in 2018 is now forecast at 219.7 billion pounds, 700 million pounds lower than last month’s projection.
The 2017-18 price forecast for corn is $2.80-$3.60 per pound, unchanged from last month’s forecast. The soybean meal price forecast for 2017-18 is $295-$335 per short ton, a $5 increase from last month’s forecast at the midpoint of the range. The alfalfa hay price in September was $149 per short ton, $2 more than August and $13 more than September 2016.
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.