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Mielke: Political wrangling over milk continues

Published on May 4, 2013 3:01AM

Last changed on May 4, 2013 7:50AM

Lee Mielke

Lee Mielke


For the Capital Press

Legislation recently introduced in the House by Reps. Bob Goodlatte, R-Va., and David Scott, D-Ga., got another thumbs ups, this time from dairy producers in Pennsylvania, New York, and Ohio, members of the Dairy Policy Action Coalition.

A DPAC press release said the bill would "offer dairy farmers a new milk insurance package almost identical to the Dairy Security Act included in failed farm bill attempts but without a controversial milk supply management program.

Called the Dairy Market Stabilization program, the proposal would have tied margin insurance protection, desperately needed by dairy farmers, to government-mandated limits on milk production through new regulations."

"Dairy farmers are in full support of much needed dairy policy reform in the next farm bill, said George Mueller, a Clifton Springs, N.Y., dairy farmer, "but we do not want to be told how to run our businesses. The Dairy Market Stabilization Program makes supply management mandatory if you want to participate in a margin insurance program. This alternative proposal will allow US dairy farmers access to margin insurance to grow their business in a free market and to be a reliable supplier to the growing global population."

Three national consumer organizations also expressed opposition to "dairy programs that propose to assist dairy farmers by imposing limits on milk production" in letters to House and Senate Agriculture Committee members. The comments charged that the DMSP is "designed to raise milk prices and would ultimately increase the prices that consumers pay for milk and dairy products."

Milk prices

Farm milk prices are heading back up. The Agriculture Department announced the April federal order Class III benchmark price at $17.59 per hundredweight, up 66 cents from March, $1.87 above April 2012, and the highest April Class III price since 2004. It equates to about $1.51 per gallon and lifts the 2013 Class III average to $17.48, up from $16.14 at this time a year ago, $16.69 in 2011, and $13.62 in 2010.

The May Class III futures contract was trading late Friday morning at $18.72. June was at $18.98; July, $19.19; with a peak in August of $19.27.

The April Class IV price is $18.10, up 35 cents from March and $3.30 above a year ago. Its 2013 average now stands at $17.81, up from $15.66 a year ago, and compares to $18.50 in 2011 and $13.35 in 2010.


The AMS-surveyed cheese price averaged $1.7310 per pound, up 8.4 cents from March. Butter averaged $1.6766, up 6.2 cents. Nonfat dry milk averaged $1.5312, up a penny, and dry whey averaged 57.41 cents, down 3.1cents.

California's 4b cheese milk price is $16.92, up $1.90 from March, $3.49 above a year ago and 67 cents below the comparable federal order Class III price but that is the smallest difference between the two since June 2011. The 2013 4b average now stands at $15.80, up from $13.69 a year ago and $15.13 in 2011.

The state's 4a butter-powder milk price is $18.02, up 15 cents from March and $3.30 above a year ago. Its average now stands at $17.75, up from $15.44 a year ago, and compares to $18.22 in 2011.

Cash cheese in Chicago strengthened despite some softening in the global dairy markets due to an easing of the situation in Oceania. The blocks closed the first Friday in May at $1.91 per pound, up a nickel on the week and 37 1/2-cents above a year ago. Barrel closed at $1.73, up 4 1/2-cents on the week, 26 cents above a year ago, but 18 cents below the blocks. FC Stone's April 30 eDairy Insider Opening Bell reported that a spread of 32 cents occurred in July 2008.

Seven carloads of block traded hands this week and 26 of barrel. The lagging AMS-surveyed U.S. average block price hit $1.8154, up 5.4 cents. Barrels averaged $1.7764, up 5 1/2-cents.

Increased milk production in the Midwest continues to translate into increased cheese inventories, according to USDA's April 26 Dairy Market News. Cheese production across the rest of the country was also active with manufacturers sending milk to cheese plants in light of good sales. DMN adds that block cheese supplies were not felt to be burdensome, but some heavier supplies of barrels are weighing on the market. The effects of the spring flush appear to have buyers waiting to see where the market settles.

American-type cheese production, at 384 million pounds, was up 10.6 percent from February and just 1.4 percent above a year ago. Italian output, at 416 million, was up 15.2 percent from February and 1.3 percent above a year ago. Total cheese production hit 954 million pounds, up 11.5 percent from February and just 0.2 percent above a year ago.

Butter and cream

Cash butter closed at $1.65, down 4 cents on the week but 34 cents above a year ago when butter dropped a nickel, hitting the low point for the year at $1.31. Fourteen cars were sold this week. AMS butter averaged $1.7226, up 2.8 cents.

Cream is readily available in the West, according to DMN, so butter churns continue to operate heavy schedules. Increased demand from ice cream manufacturers for cream is not slowing butter production significantly. Cream supplies in the Northeast are more plentiful because milk production is increasing with the spring flush. Butter production has increased as manufacturers deal with expanding volumes of cream.

West and Northeast churns are content to build inventories for later in the year, according to DMN. Several Central churns were actively churning to meet export contracts even though domestic interest is slower, but several operators indicate they are unwilling to compete for spot cream at this time. Northeast bulk butter prices continue to be supported by export sales.

Cash Grade A nonfat dry milk slipped a penny and a quarter on Friday to close the week at $1.7475. Extra Grade held all week at $1.70. AMS powder averaged $1.6015, up 5.4 cents, and dry whey averaged 56.50 cents, down 1.2 cents.

March butter production hit 184 million pounds, according to USDA's latest Dairy Products report, up 5.6 percent from February and 4.2 percent above March 2012. Nonfat dry milk output, at 146 million pounds, was up 6.1 percent from February but down 22.8 percent from a year ago.

FC Stone's May 3 eDairy Insider Opening Bell adds that whey stocks rose 11.8 percent from February. "The outlook for whey is bearish," the Bell said, "neutral for butter and nonfat dry milk, and slightly bearish for cheese."

Fluid milk

Fluid milk supplies in the U.S. are mostly steady overall, according to USDA's weekly update. The Southern tier of states is at or moving past spring flush volumes. Hot weather in Florida is credited with slowing milk production seasonally. Arizona levels are holding at peak production. The spring flush has arrived in the Northeast and mid-Atlantic. Midwest milk supplies are mostly steady with recent volumes and still building for their flush. Increased production in the region is sending increased volumes of milk to cheese plants.

California milk production remains below year ago levels. Year to date pool receipts (adjusted) for California are 5.3 percent below year ago levels while milk supplies in the Pacific Northwest are slowly building as warmer days arrive. Manufacturers across the Northern states are preparing for spring flush volumes.

"What a difference a year makes," says Sara Dorland, managing partner at Ceres Dairy Risk Management LLC in Seattle and an analyst for the Daily Dairy Report in the April 26 "Daily Dairy Discussion" on the DDR website. She was talking about global milk supplies and pointed out that, first quarter last year, milk production in the five major dairy exporting regions was up 3 percent from the same period in 2011.

This year, the DDR estimates that milk production in those regions has decreased by nearly 1.5 billion pounds, or 1 percent, versus 2012's record levels. This reversal of milk supply has sent milk and dairy product prices higher, leaving both buyers and sellers to ask what will the remainder of 2013 bring? Listen to Dorland's complete report on the DDR website.

Over there

Cooperatives Working Together accepted eight requests for export assistance this week to sell 925,942 pounds of cheese and 1.1 million pounds of butter to customers in Asia and North Africa. The product will be delivered through October and raised CWT's 2013 cheese exports to 51 million pounds, 51.7 million pounds of butter, and 44,092 pounds of anhydrous milk fat and 218,258 pounds of whole milk powder to 31 countries.

Prices retreated from near-record highs at this week's Global Dairy Trade auction. However, after steadily increasing for months, auction prices remain very strong says the DDR. The weighted-average price of all traded products fell 7.3 percent, the first decline since December 4, 2012. Only cheddar prices moved higher, advancing 3.4 percent to $2.18 per pound.

Whole milk powder prices posted the largest decline, falling 10.2 percent to an average $2.14 per pound. Skim milk powder dropped 9.5 percent to $1.94. Prices for all products excluding cheddar were lower in every contract month, according to the DDR, and "contracts for August and September delivery were particularly weak, suggesting that, for the time being, concerns about availability of dairy products this fall have lessened."

Ratios and milk

DairyBusiness Update reports that higher milk prices combined with lower feed prices to raise the preliminary April 2013 milk-feed price ratio. At 1.56, the index is up from 1.48 in March 2013 and 1.41 in April 2012.

The April U.S. average milk price is estimated at $19.30 per hundredweight, up 20 cents from March. Corn prices averaged $6.67 per bushel, down 46 cents; soybeans averaged $14.20 per bushel, down 40 cents; and dry alfalfa hay averaged $210 per ton, down $9 and the lowest since September 2012. DBU adds that April marked the 25th consecutive month the milk-feed price ratio is below 2.0.

With the April 30 Ag Prices report providing the final feed cost adjuster, USDA announced the March Milk Income Loss Contract payment at 75.456 cents per hundredweight. MILC payments were about 52 cents per hundredweight in February and about 12 cents in January.

World Dairy Expo

World Dairy Expo has named Scott Bentley as its new general manager effective June 3. Bentley was the global supply manager at ABS Global, DeForest, Wis., and previously held positions as global dairy product manager, district sales manager and in dairy sire acquisition. Prior to that, Bentley was field service manager at the American Jersey Cattle Association. This year's expo will be held Oct. 1-5 in Madison.


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