By LEE MIELKE

For the Capital Press

Dairy product prices are getting back to levels dairy producers like to see, according to Robert Cropp, professor emeritus at the University of Wisconsin. Cropp said that butter stocks are tight and the market is strong for this time of year. June 30 stocks were down 25 percent, he said, due to the fact that cream supplies are tight, milk fat tests are down, CWT has bonuses in exports of butter and milk production is declining.

"Butter sales have been pretty good, but there is some concern with these kinds of prices," Cropp said. "We'll start getting resistance at the retail level, but that hasn't happened yet." The futures market had butter declining to $1.66 by December, according to Cropp.

"We'll see whether that will occur or not, but it probably will decline towards the end of the year," he said.

Cheese is a little more uncertain in that June stocks were still relatively high, at about 4 percent higher than a year ago. Cheese production was also pretty strong in June, he said, as total cheese production was up 5.2 percent.

"That's quite a bit of cheese with cheddar up 3 1/2 percent," Cropp said. The strong sales show for mozzarella as the frozen pizza business has been good, according to Cropp, and schools will be opening up soon.

"When schools open up, more milk goes to fluid," he said. "I think the cheese market can hold there, maybe increase a little bit more, at least through September."

Prices higher

High temperatures and humidity are driving dairy prices higher. School pipelines are refilling and making less milk available for the churn or the vat.

The block cheese price closed Aug. 13 at $1.62 per pound, up 1 3/4-cents on the week, and 25 3/4-cents above a year ago. The barrels closed at $1.5850, also up 1 3/4-cents on the week, and 24 1/2-cents above a year ago. Two cars of block traded hands on the week and one of barrel. The NASS-surveyed U.S. average block price hit $1.5834, up 3.7 cents. Barrel averaged $1.5779, up 2.3 cents.

Butter closed Friday at $1.9175, up 6 3/4-cents on the week, 69 3/4-cents above a year ago, and the highest in over five years. Only one car was sold on the week. NASS butter averaged $1.8025, up 3.2 cents. NASS powder averaged $1.1766, up 0.2 cent, and dry whey averaged 35.9 cents, up 0.6 cent.

Production forecasts

Meanwhile, the Agriculture Department again raised its 2010 and 20111 milk production forecasts. The latest World Agricultural Supply and Demand Estimates report said producers continue to add cows and milk per cow has increased. Look for 2010 output to reach 192 billion pounds, up 800 million pounds from last month's estimate. The 2011 estimate is now 194.6 billion, up a whopping 1.1 billion pounds. Output in 2009 totaled 189.3 billion.

Exports for 2010 and 2011 were raised sharply as June numbers were strong, global supplies remain relatively tight, and demand in a number of markets is expected to support higher than previously forecast sales. However, sales in 2011 will be dampened by increased competition, according to USDA.

Strong demand for butter and cheese resulted in higher forecast 2010 prices but nonfat dry milk and whey prices were lowered from last month. 2011 cheese, nonfat dry milk and whey price forecasts were reduced, but butter was raised.

The 2010 Class III milk price forecast was raised as the higher cheese price more than offset the lower whey price but the Class IV price estimate was reduced as the lower NDM price more than offset the higher butter price.

Look for the 2010 Class III to range $14.15-$14.35 per hundredweight, up from $13.80-$14.10 projected a month ago. The 2011 average is now projected at $14.15-$15.15, down from last month's estimate of $14.40-$15.40. The 2009 average was $11.36.

The 2010 Class IV price will range $14.50-$14.80, down from $14.65-$15.05 expected last month, and the 2011 average is now predicted at $14.00-$15.10, down from $14.40-$15.59. The 2009 average was $10.89. The all milk price is forecast to average $15.90-$16.10 for 2010 and $15.55-$16.55 for 2011.

The impact of drought and fires in Russia was felt all the way back to U.S. dairy farms this week upon news that Russia will ban all exports of wheat through the end of the year, sending grain prices higher.

Now that the smoke has cleared, pardon the pun, Dairy Profit Weekly editor Dave Natzke reported that the news sent wheat futures to spike early in the week and pulled other grain prices higher, creating fears of skyrocketing feed prices for U.S. dairy and livestock farmers. Thankfully, grain prices moderated somewhat later in the week.

Helping relieve some of the concern, USDA's crop production report, released on Thursday, estimated both 2010 U.S. corn and soybean crops to be the largest on record. The corn crop is forecast at a record 13.4 billion bushels, with yields expected to average a record 165 bushels per acre. Soybean production was forecast at a record 3.43 billion bushels, with yields expected to equal last year's record of 44 bushels per acre.

With the record U.S. crops, USDA projects larger supplies of feed grains, Natzke reported, although strong export demand will eat up much of that supply.

Heavy global demand caused USDA to raise its season-average price forecasts slightly. Farm-level corn prices are now expected in a range of $3.50-$4.10 per bushel, up a nickel on each end. Soybean price projections were raised 40 cents on each end, to a range of $8.50-$10.00 per bushel.

USDA's weekly crop and weather report says U.S. corn and soybean crops are advancing well ahead of schedule. And, despite widespread heavy rains, more than two-thirds of both corn and soybean crops are rated good to excellent.

USDA adds that abundant moisture is helping produce record or near-record high yields of alfalfa and other hay, as well.

Corn and soy complex futures were higher after USDA's Thursday reports, despite the higher-than-expected corn and soybean production estimates. Strong domestic and global use was cited, Natzke concluded.

California prices

California's September Class 1 milk price is $17.15 per hundredweight for the north and $17.43 for the south, down 18 and 17 cents respectively from August, but $3.94 and $3.95 above a year ago. The September Federal order Class I base price is announced August 20th.

Feeding kids

The U.S. Senate approved the Healthy, Hunger-Free Kids Act of 2010 before adjourning for the August recess. The measure aims to provide an additional $4.5 billion over 10 years to federal child nutrition programs. National Milk was involved in crafting the legislation.

Chris Galen said that "this is a high stakes game" because the legislation also reauthorizes the Child Nutrition Act, which governs the type of products served in schools. A significant portion of fluid milk, cheese and yogurt sales happens in schools, he said, so this is a "big deal to dairy farmers" as to how lawmakers decide to fund the program and the types of products they allow.

National Milk was successful in securing a variety of milk types to be offered in school feeding programs, according to Galen, and it will be real cow's milk. National Milk was also able to maintain nutrient standards for substitute beverages, he said.

"Schools can't just offer something like a soy beverage unless it has the same nutrient availability as real milk and prevents schools from watering down nutrition standards," Galen said.

This underscores the importance of National Milk and the beef industry to be involved in the process so the vegetative agenda doesn't rule, Galen said.

"There's going to be continued competition from people who are promoting vegetarian offerings and even though those products often cost a lot more, there is still a strong philosophical push on the part of some organizations to get them into the school lunch lines so we just continue having to fight this battle," he said.

The House of Representatives will likely vote on this when they return in September, Galen concluded, but the Senate has passed it and it has the support of the White House "so in all likelihood we'll get this done before fall."

Cooperatives Working Together announced that it accepted three export assistance bids from Dairy Farmers of America and three from Land O'Lakes on 1.4 million pounds of butter and anhydrous milkfat to Europe, the Caribbean and Central America. The product will be delivered August through December 2010.

Pizza in schools

Jim Montel, executive vice president of strategic initiatives for Dairy Management Inc., focused on a project involving the dairy checkoff, schools and Domino's.

Pizza isn't just sold at Pizza Hut, Domino's and Papa John's, he said. It's also sold in schools. Schools are an important area for the dairy industry to work in, because 10 years ago about 60 percent of the lunches in schools included pizza -- but that's down significantly today.

Research indicates that kids are not satisfied with the taste of the pizza being offered in schools. In reaction, the dairy checkoff partnered with Domino's to introduce the "Smart Slice," which is not only a great-tasting pizza but also features healthier components like less sodium and fat, which meets school nutrition requirements.

This has produced some momentum, according to Montel, for schools to meet the need of consumers and students to enjoy a healthier pizza that they love the taste of. The action also helps fend off the use of imitation cheese.

"It's all about real cheese because that's what delivers the great taste," he said.

Better with beef

One of my favorite exhibits at World dairy Expo is the Wisconsin Beef Council. Don't tell anyone, but they serve beef samples. Angie Horkan, WBC director of marketing, said they love exhibiting at the expo because the dairy industry is an extremely vital part of the WBC.

She reported that about 80 percent of Wisconsin checkoff dollars come directly from the dairy industry, so WBC likes to have a large presence at the expo and they are located in the foyer of the forum building.

Horkan says they use the opportunity to educate farmers on what the Beef Checkoff does, plus make recipes and nutrition information available. The beef samplings are usually new products or new ideas created by the checkoff.

"The dairy industry does heavily invest in the beef industry," Horkan said. "All of our dairy cattle turn into beef, especially ground beef, so when we're there we like to feature what we're doing with ground beef, how we're adding value to it, we're taking ground beef from the chuck and turning it into different cuts like the beef value cuts like the flat iron and the shoulder tender and the Denver cut. These new cuts that are adding value that gets back to dairy producers," she said.