The dust is settling over the government shutdown due to political differences in Washington but while most government workers are unaffected, many were furloughed and the impact on the dairy industry boils down to this: the National Agricultural Statistics Service, the Economic Research Service and the Agricultural Marketing Service were furloughed. Data reported by these agencies will be on hold. USDA’s Dairy Market News is also shuttered and with it, the daily and weekly reports.
Unless the administration and Congress come to an agreement, several others will be suspended, including the October Milk Production report, which would have resumed milk cow numbers and output per cow data, stopped because of the sequester. Other casualties are the Cold Storage, Livestock, Dairy & Poultry, World Ag/Supply/Demand Estimates and Ag Prices reports.
USDA will not publish the weekly National Dairy Products Sales Report, what I refer to as the “lagging” Ag Market Services (AMS-surveyed) dairy product prices used to calculate federal order class milk prices as well as settlements for Chicago Mercantile Exchange futures.
High Ground Dairy’s Eric Meyer reports that sources at USDA informed him that it would be invoking a special rule taken from the Code of Federal Regulations titled “Equivalent Price” in calculating this week’s Class prices. Remaining on the job are USDA dairy graders, inspectors as well as federal milk marketing administrators as their funding is provided by the industry.
Incoming National Milk CEO Jim Mulhern called it a “pathetic mess” and said nothing is really happening on immigration reform or the farm bill and referenced the recent first ever vote-down of a farm bill in the House but praised the Senate’s passage.
Mulhern is still hopeful that following resolving the shutdown, House and Senate conferees will fashion a farm bill before the end of the year, adding that an extension of the current bill would be “very unfortunate” for dairy farmers as there would be no real safety net so the NMPF will work to include its Dairy Security Act in any extension.
Twenty-eight dairy manufacturers, all members of the International Dairy Foods Association (IDFA), have sent letters to the Senate conferees for the 2013 Farm Bill, calling on them to accept the House-passed dairy title that does not include the Dairy Market Stabilization Program.
Meanwhile, Dairy Business Update (DBU) reports that two dairy economists, John Newton and Cam Thraen, have proposed a compromise they label as “MILC and Honey,” allowing dairy producers an option to choose annually between Milk Income Loss Contract program participation or a stand-alone margin insurance program as their elected safety net. Specifically, the proposal for a combined program is called MILC-Insurance.
Newton and Thraen say the program offers a retooled dairy farm safety net that works for small and large-scale dairy farm managers, is fiscally responsible, does not mute market supply and demand signals, and does not require a market stabilization program.
The economists say the MILC-Insurance program saves money relative to the stand-alone margin insurance program by capping insurance at $6.00-$6.50 per cwt. With the savings, the revenue can be redirected to an expansion of the MILC program, effectively offering the best of both programs (counter-cyclical revenue support or catastrophic margin insurance).
Farms would no longer have an incentive to opt out of the margin insurance and would instead opt for the no-cost MILC program when anticipated margins are favorable. This would allow all farms, regardless of size or management style, to participate in a government sponsored safety net program. Such a program, which offers continuous support, may prevent ad-hoc disaster payments in the future, according to DBU.
Benchmark price increases
The September Federal order Class III benchmark milk price is $18.14 per hundredweight (cwt.), up 23 cents from August, 86 cents below September 2012, $1.49 above California’s comparable 4b cheese milk price, and equates to about $1.56 per gallon. The 2013 Class III average now stands at $17.76, up from $16.54 at this time a year ago, and compares to $18.28 in 2011, $14.07 in 2010, and $10.49 in 2009. The October Class III futures price was trading late Friday morning at $18.16; November, $18.00; and December at $17.25 per cwt.
The FO Class IV price is $19.43, up 36 cents from August, $2.02 above a year ago, and the highest it’s been since September 2011. The 2013 Class IV average now stands at $18.49, up from $15.23 a year ago and compares to $19.48 in 2011, $14.70 in 2010, and $10.06 in 2009.
The four-week, AMS-surveyed cheese price used in calculating the September milk prices was $1.7961 per pound, up 2.3 cents from August. Butter averaged $1.4263, up almost a penny. Nonfat dry milk averaged $1.8085, up 3.8 cents, and dry whey averaged 57.91 cents, up 1.3 cents.
California’s comparable 4b cheese milk price is $16.65 per cwt., up 33 cents from August but 85 cents below September 2012. The 2013 4b average now stands at $16.10, up from $14.69 at this time a year ago and compares to $16.48 in 2011.
The 4a butter-powder milk price is $19.47, up 77 cents from August and $2.85 above a year ago. The 4a average now stands at $18.27, up from $14.88 a year ago and compares to $19.24 in 2011.
Meanwhile, the cash dairy markets start October without much change. Block Cheddar cheese closed Friday at $1.7650 per pound, up a penny and a half on the week but 33 1/2-cents below that week a year ago when they were trading at $2.10. The barrels finished at $1.75, up 3 cents on the week and 31 cents below a year ago. Fifteen cars of block traded hands on the week and nine of barrel. The AMS-surveyed prices were not available due to the government shutdown.
Cheese demand up
USDA’s Dairy Market News (DMN) reports that demand for cheese is good with increased seasonal buying interest. Export demand is also good and clearing additional inventories. But, cheese plants are having difficulties sourcing additional spot loads of milk to fill the demand. Tight milk supplies are restricting cheese production schedules. Plants are directing available milk to highest efficiencies and to the making of high demand products. Cheese cold storage numbers are above year ago levels. However, cheese makers are being cautious not to over sell to be sure of filling future contract commitments.
Cash butter saw a fourth week of gain, closing Friday at $1.6150, up a half-cent on the week but 241/2-cents below a year ago when it lost 9 cents. Thirty-eight cars were sold on the week.
Butter production is still lagging due to good cream demand and milk production not quite back to levels of a few weeks ago, according to DMN. Higher International butter prices have been fueling the export demand. Some plants are focusing on 82 percent fat production to meet the steady export demand.
Global prices strong
This week’s Global Dairy Trade auction shows prices are still strong, with the weighted average price for all products up 2.4 percent, and six of the nine product categories registering gains, according to eDairy’s Insider Closing Bell.
Skim milk powder prices led the gainers, up 3.9 percent, to $2.0049 per pound. Anhydrous milkfat was up 2.9 percent to $2.3174 per pound. Adjusted to 80 percent butterfat, the price was $1.8576 per pound. Cheddar cheese rose 2.3 percent, to $1.9309 per pound. Whole milk powder also increased 2.3 percent, to $2.2943 per pound, and butter rose 0.1 percent, to $1.6828 per pound or $1.6418 adjusted to 80 percent fat.
Cooperatives Working Together (CWT) accepted 14 requests for export assistance this week to sell 1.036 million pounds of cheese and 716,502 pounds of butter to customers in Asia, the Middle East and North Africa. The product will be delivered through December and raised CWT’s 2013 cheese exports to 102 million pounds plus 72.3 million pounds of butter, 44,092 pounds of anhydrous milk fat and 218,258 pounds of whole milk powder to 37 countries.
Cash Grade A nonfat dry milk finished Friday at $1.8450, up 11/2-cents on the week, while Extra Grade remained at $1.78, where it’s been since August 22.
DBU reports that USDA estimated 65,900 culled dairy cows were slaughtered under federal inspection during the week ending September 27, the highest weekly total since early March. It brought the 2013 year-to-date total to 2.215 million head, about 53,600 more than a year ago.
Slightly higher monthly average milk prices combined with lower feed prices pushed the preliminary September 2013 milk-feed price ratio higher, according to USDA’s latest Ag Prices report. At 1.86, the index is up from 1.68 in August 2013 and 1.59 in September 2012, and is the highest since November 2011.
The U.S. average all-milk price was $19.80 per cwt., compared to $19.50 in August and $19.70 in September 2012.
Feed prices down
September corn, at $5.28 per bushel, was down 93 cents from August, $1.70 less than September 2012, and the lowest U.S. average corn price since January 2011. September 2013 soybeans averaged $13.80 per bushel, down 30 cents from August, 50 cents below September 2012, and the lowest U.S. average soybean price since April 2012.
Alfalfa hay averaged $194 per ton, down $6 from August, $12 less than September 2012, and the lowest U.S. average hay price since January 2012.
Estimated U.S. September 2013 cull cow prices (beef and dairy combined) averaged $84.00 per cwt. The average is up $1.20 from August’s revised estimate, $4.80 more than September 2012, and the third consecutive monthly increase. It’s also the highest since June 2012, according to DBU. The year-to-date average is $81.41 per cwt., compared to $82.22 a year ago.
USDA’s Crop Progress report shows 63 percent of U.S. corn is mature compared to a 70 percent five-year average and 12 percent is harvested compared with an average of 23 percent. Eleven percent of the nation’s soybeans were also harvested, compared with an average of 20 percent for this time of year.
Looking back to the futures, the Fourth Quarter 2013 pack average was at $17.35 per cwt. on Sept. 6, down 24 cents from the previous week. It averaged $17.67 on September 13, $17.62 on Sept. 20, $17.62 on Sept. 27, and was averaging around $17.80 late morning Oct. 4.
World Dairy Expo
Finally, hats off to World Dairy Expo, which I attended for the 24th or 25th time, but who’s keeping track. This wonderful show brings exhibitors and farmers from around the world, more than 850 exhibitors from 27 countries, and again featured an all breed dairy cattle show featuring some 2,500 head with the popular accompanying sales, plus seminars and tours.