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November milk production inches upward

By LEE MIELKE

For the Capital Press

November milk production hit 15 billion pounds in the top 23 producing states, up just 0.3 perc

Lee Mielke's weekly wrap-up of all things dairy.

Year-to-date cull numbers up


USDA also estimated 249,100 culled dairy cows were slaughtered under federal inspection in November, down 27,700 from October and 19,700 less than November 2012. Total dairy cow slaughter for the January-November period is estimated at 2.868 million head, up 25,500 from the same period in 2012.

After the holiday-shortened week of Thanksgiving saw weekly dairy cull cow slaughter fall to the lowest total of the year, at 48,500 head, slaughter during the week ending Dec. 7 jumped back to a more “normal” level of 63,800. Year-to-date 2013 slaughter totals 2.941 million, up 24,100 from 2012.

T’was the week before Christmas and cheese prices jumped! The 40-pound Cheddar blocks closed that Friday at $2.00 per pound (first time since November 2012), up 7 1/2-cents on the week and 26 cents above that week a year ago. The 500-pound barrels closed at $1.95, up 12 cents on the week and 29 1/2-cents above a year ago. The spread returned to a more normal 5 cents. Two cars of each traded hands on the week. The AMS-surveyed U.S. average block price hit $1.8728, up 3.1 cents, and barrels averaged $1.8521, up 4.2 cents.

Cheese production schedules are varied, according to USDA’s Dairy Market News (DMN). Manufacturing milk supplies are tight. Retail demand was strong for blocks but higher prices have slowed both spot barrel demand and export interest. Cheese exports for January-October 2013 totaled 566.7 million pounds, up 17 percent from the same period a year ago.

The Daily Dairy Report’s Sarina Sharp warned in the Dec. 13 Milk Producers weekly newsletter that “Dairy product prices have appreciated significantly over the past couple months, and the reasons behind the rally include Chinese demand, low global inventories and the lingering impact of weather issues in New Zealand and Europe remain in place. However, bulls must eat every day, and this bull market may be running short of fodder. Producers around the world are responding to astoundingly high milk prices by increasing production, and competition for exports is heating up.”

Cash butter ended the week at $1.5825 per pound, up 1 1/4-cents on the week and 4 1/2-cents above a year ago. Six cars found new homes on the week. AMS butter averaged $1.6318, down 2.4 cents.

Butter prices are mixed across the regions, according to DMN. The market tone was steady to firm throughout the U.S. Many churn operators reduced production due to tight cream supplies and high demand. International interest picked up resulting in additional manufacturers producing 82 percent fat butter.

Cash Grade A nonfat dry milk reached its all time record high of $2.11 per pound this week, up 3 cents on the week. Extra Grade surpassed its record, closing Friday at $2.09, up 4 1/2-cents on the week. AMS powder averaged $1.9472, up 1.1 cents, and dry whey averaged 57.42 cents per pound, up a penny and a half.

The Agriculture Department announced the January, 2014 Federal order Class I base milk price this week at $21.48 per cwt., up $1.11 from December 2013, $2.51 above January 2013, and equates to about $1.85 per gallon.

The two-week AMS-surveyed butter price average used in calculating the Class I value was $1.6406 per pound, up 24.9 cents from December. Nonfat dry milk averaged $1.9423, up 5.7 cents. Cheese averaged $1.8583, down 1.9 cents, and dry whey averaged 56.69 cents per pound, down 0.8 cent.

The 2013 herd contraction is likely over, according to this week’s Livestock, Dairy, and Poultry Outlook, as cow numbers were forecast to rise in 2014. Lower expected feed prices and continuing firm milk prices will improve the producer profit outlook and should cause herd expansion to ensue in 2014, says USDA.

Export forecasts for 2013, on a fats basis, were raised from November. While current year export demand for nonfat dry milk remains strong, exports on a skims-solids basis were lowered this month due to lower lactose exports but were raised for 2014.


Feed stocks to tighten


Based on the World Agricultural Supply and Demand Estimates (WASDE) report, the 2013/14 domestic use and exports of corn were raised this month, tightening stocks. However, the corn season-average price is forecast at $4.05-$4.75 a bushel, a price reduction based on lower year-to-date reported prices.

Soybean production was unchanged in this month’s WASDE; however, soybean meal prices were raised to $400-$440 per ton. The price boost is based on stronger demand from both the European Union (EU), and Southeast Asian countries, which more than offsets an expected decline in domestic use.

The November Agricultural Prices report has this year’s preliminary November alfalfa price slipping below the October price to $188 a ton and is well below last year’s November price. On balance, dairy producers will likely face even lower feed prices next year compared with 2013, according to the Outlook.

The current year’s projected dairy herd size was reduced slightly to 9.22 million cows based on a smaller expected fourth-quarter cow population. Production per cow was unchanged from last month at 21,865 pounds per cow.

The projected 2014 U.S. dairy herd size was increased slightly from last month to 9.25 million cows. The 2014 forecast yield per cow was also increased this month to 22,190 pounds per cow. The higher cow numbers and yields are based on an improved profit outlook for producers, a result of continued firm milk prices and declining feed costs.

Dairy producers are seeing higher cottonseed prices. The 2013 cotton crop is one of the smallest in years, according to Cotton Inc.’s Tom Wedegaertner, down about 1 million tons from a year ago “so the cottonseed supply is going to be rather tight.” Prices dipped some at harvest time, he said, but are now starting to firm up.

“There’s just too much cotton on the planet,” Wedegaertner said, “And that has depressed the price of cotton relative to soybeans or corn so cotton growers will grow something else that’s more profitable.” He quickly added, “There is a silver lining. We do see very good quality across the cotton belt. We dodged the hurricane bullet; we didn’t have any hurricanes or any bad rain in the Southeast like we do sometimes so the quality is very good this year.” The latest details can be found at www.wholecottonseed.com and producers can access the “Cottonseed Marketplace,” to obtain the best buys on cottonseed.

Checking the export picture; after six straight events of higher forecasted volumes on the Global Dairy Trade auction (GDT), Oceania’s largest dairy processor, Fonterra, has pulled back its overall 12 month forecast for all commodities by 1 percent (17.9 million pounds).

High Ground Dairy’s Eric Meyer says, “With price strength in the auction two weeks ago, customers may have increased their 2014 contract volumes which would then reduce the GDT volume forecast. Or perhaps Fonterra is being conservative with their long range forecast as climate conditions have been a bit dry over the past month.” He said, “It was a good run with event-over-event volume increases and the overall Fonterra 12 month GDT volume is still 11 percent (174.2 million pounds) above its low from in early September.”

This week’s GDT auction was termed “neutral to bullish with the exception of whole milk powder” according to FC Stone risk management analyst Brendan Curran. The trade weighted average for all products was up 0.2 percent. Butter was up 7.9 percent, Cheddar cheese up 1 percent, skim milk powder up 1.7 percent, while whole milk powder was down 1.5 percent. The average butter price equated to about $1.8375 per pound ($1.7927 on 80 percent). The Cheddar average was $2.0725 per pound, skim milk powder at $2.2081 per pound, and whole milk powder price averaged $2.2489 per pound.

This week’s DairyBusines Update reports that Rabobank has issued a new report on the global dairy industry, forecasting continued high prices in 2014 due to Chinese demand. Rabobank said international dairy commodity prices strengthened from already high levels in the three months to mid-December and are expected to remain high at least for the first half of 2014.


China increases purchases


The increase of export supply since September, as producers have responded to improved margins, has been largely soaked up by continuing vigorous buying from China, according to Rabobank analyst Tim Hunt.

China’s buying has left the rest of the buy-side of the international market with less supply to go around, keeping the market tight. Rabobank believes many of the buyers in regions, including Southeast Asia, the Middle East and North Africa, have used up all meaningful backup stocks after a period of prolonged belt-tightening. They are now struggling to secure enough supply to sustain sales of key lines. With export supply still in the early stages of recovery, Fourth Quarter prices have had to edge up even further. The global dairy market will enter 2014 with farmgate milk prices at record or near record highs in many export and import regions, according to Rabobank.

In politics; the Milk Producers Council newsletter reported that a bipartisan group of U.S. senators, led by Dianne Feinstein, D-Calif., and Tom Coburn, R-Okla., introduced the “Corn Ethanol Mandate Elimination Act” the week of Dec. 9.

The bill has 10 supporters sponsoring the bill: Sens. Richard Burr, R-N.C., Susan Collins, R-Maine, Bob Corker, R-Tenn., Jeff Flake, R-Ariz., Kay Hagan, D-N.C., Joe Manchin, D-W.Va., James Risch, R-Idaho, and Patrick Toomey, R-Pa., in addition to Feinstein and Coburn.

“While this newly-introduced legislation will obviously not see congressional action in 2013, it helps set the stage for a serious debate on the issue in 2014,” according to the MPC.



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