By LEE MIELKE
For the Capital Press
The International Dairy Foods Association praised USDA's latest effort to "encourage students to consume the daily recommended requirements of milk and dairy as part of its 'Smart Snacks in Schools' proposed rule." The rule will regulate the food and beverages offered in schools through a la carte lunch lines or in vending machines, according to IDFA.
"We applaud USDA for highlighting the importance of dairy in children's diets and taking the necessary steps to help kids meet the dietary recommendations for milk and dairy products," said Connie Tipton, IDFA president and CEO. "The proposed rule would make low-fat and fat-free milk available in a variety of locations, not just the school lunch line."
The proposed rule aligns with the most recent Dietary Guidelines for Americans. According to USDA, the proposed rule draws on recommendations from the Institute of Medicine, existing voluntary standards already implemented by thousands of schools around the country, and healthy food and beverage offerings already available in the marketplace.
"The dairy industry has worked diligently to reformulate the foods and snacks that kids enjoy, including flavored milk, yogurt, cheese and ice cream, to provide more options in schools," said Tipton, and she gave as an example industry formulated reduced-fat and reduced-sodium cheese for use in schools.
She added that innovative packaging for many products "helps students with portion control," and said that "milk processors have made strides in reducing added sugar in flavored milks, while other popular foods in schools, including yogurt, ice cream and frozen desserts, have been reformulated to reduce sugars and fats."
Statistics and trends
The Agriculture Department raised its 2013 milk production estimate again in this month's World Agricultural Supply and Demand Estimates report. USDA projects output to hit 201 billion pounds, up 1.1 billion pounds from last month's estimate.
The estimate for 2012 was also raised to 200.3 billion pounds, up 300 million from a month ago and compares to 196.2 billion in 2011.
USDA's Cattle report indicated that the number of cows on Jan. 1 was about unchanged from 2012. Milk per cow forecasts were raised as last quarter-2012 estimates were higher than expected and lower forecast feed costs supported higher milk yields in 2013.
Cheese price estimates were unchanged from last month, but the price range was narrowed. Nonfat dry milk and whey prices were raised reflecting stronger demand, but the butter price was lowered.
The Class III milk price forecast was unchanged despite a higher whey price although the range was tightened. The Class III is now predicted to range $17.70-$18.40 per hundredweight. That compares to $17.65-$18.45 projected a month ago and to a $17.44 average in 2012 and $18.37 in 2011.
Lower forecast butter prices were more than offset by higher nonfat prices resulting in a slightly higher forecast Class IV price. The Class IV average is now put at $17-$17.80, up from the $16.90-$17.80 expected last month.
Meanwhile, in December American-type cheese production hit 378 million pounds, up 4.2 percent from November and 2.6 percent above December 2011, according to USDA's latest Dairy Products report. Italian-type cheese totaled 409 million pounds, up 6.4 percent from November but 0.1 percent below a year ago. Total cheese output, at 949 million pounds, was up 3.8 percent from November and 2 percent above a year ago.
U.S. churns produced 173 million pounds of butter, up 20.9 percent from November and 4.4 percent above a year ago. Dryers spun out 157 million pounds of nonfat dry milk, up 35.8 percent from November and 4.7 percent above a year ago.
The markets had little reaction to the reports although cash block cheese saw the first gain since Jan. 1, closing the second Friday of February at $1.65 per pound, up a half-cent on the week and 17 1/2-cents above a year ago. Barrel closed at $1.56, up 1 3/4-cents on the week, 7 1/2-cents above a year ago, but a larger than usual 9 cents below the blocks.
Two cars of block were sold on the week and seven of barrel. The AMS-surveyed U.S. average block price slipped 3 1/2-cents, to $1.7007, while the barrels averaged $1.6563, down 5.2 cents.
USDA's Dairy Market News says milk volumes to cheese plants remain strong, especially in the Midwest where milk output is up 4.8 percent from last December compared to a national increase of 1.7 percent.
Eastern milk supplies are strong with cheese manufacturers working busier than anticipated, according to DMN. Increased cheese inventories are affecting sales as buyers wait to find a market bottom. Lower prices have buyers looking to find cheese for aging programs, but slow to make commitments. Export buyers are in much the same position, although sales through the Cooperatives Working Together program remain active.
CWT accepted 13 requests for export assistance this week to sell 4.7 million pounds of cheese to customers in Asia, the Middle East, North Africa and South America. The product will be delivered through July and brings CWT's 2013 cheese sales to 19.3 million pounds, plus 9.8 million pounds of butter and 88,185 pounds of whole milk powder to 23 countries.
Price changes in this week's Global Dairy Trade were mostly positive, led by a 7.2 percent increase on anhydrous milk fat, according to FC Stone's Feb. 5 eDairy Insider Closing Bell. The trade-weighted average for all products gained 2.4 percent compared with the mid-January event. Whole milk powder was up 5.4 percent; butter milk powder, up 3.7 percent; rennet casein, 3.3 percent; milk protein concentrate, up 1.2 percent; and skim milk powder, up a half percent. The average cheddar price slipped 0.1percent.
Cash butter closed Friday at $1.5550, unchanged on the week but 12 1/4-cents above a year ago. Sales totaled four loads and the AMS butter average inched up 1.4 cents, to $1.5117. AMS nonfat dry milk averaged $1.5378, down 1.1 cents, and dry whey averaged 64.76 cents, down 0.6 cent.
Cream remains plentiful and available at discounts to churns in the West and Midwest, reports DMN. Spot cream loads from the East and the West were moving to a few Central Class II plants as well as butter making operations. Northeast cream going to churns remain heavy, with most churns in the region operating at near capacity. Manufacturers and some buyers are building butter inventories, with increasing stocks not being considered problematic.
The Jan. 11 cow slaughter total of 72.5 million head is the highest since 1997, according to USDA, and contacts continue to report flat milk production in California. Most do not expect much change through the winter because of the ongoing financial stress at the producer level.
A panel discussion on the issue of a Federal Milk Marketing Order in California is scheduled for Wednesday, Feb. 13 at the World Ag Expo in Tulare. The discussion will feature economists from the three major cooperatives in California. The issue has been gaining interest as Golden State dairy producers continue to see their 4b milk price lag the Federal order Class III price.
The milk flow in New Mexico is generally steady with the eastern part of the state experiencing more stress from feed prices than the west. It is also indicated that fat and protein levels are very good and have been that way all fall and winter.
USDA also says milk receipts in the Pacific Northwest are at expected levels. Weather is reported to be favorable in Utah and Idaho for milk production. Manufacturing capacity in the region is adequate to handle current supplies of milk. Central farm milk intakes continue to outpace expectations in the Central region. In some places, milk intakes have outstripped capacity at local processing facilities. A few spot milk loads cleared into Class III operations at $1.50 to $3 under class, but interest is very light. Market participants note flat to slightly lower interest in bottled milk the last week of January.
Class I demand has increased in the Mid-Atlantic and Northeast as a number of storm fronts prompted increased fluid sales. The Northeast was bracing for a blizzard as I write this. Manufacturing milk supplies have marginally declined as a result of the increase in fluid milk demand. Milk production in the Southeast region has improved with most of the increases being noted in Georgia and the Gulf Coast states, according to DMN.
The December Consumer Price Index for all food is 235.4, up 1.8 percent from December 2011. The dairy products index is 219.4, up a half percent from a year ago. Fresh whole milk was up 2.9 percent; cheese, up 0.1 percent; and butter was down 2.6 percent.
Dairy product commercial disappearance in the first eleven months of 2012 totaled 185.8 billion pounds, up 2.1 percent from 2011. Butter was unchanged. American cheese was up 2.2 percent; other cheese, up 1.9 percent; nonfat dry milk, up 21.6 percent; while fluid milk products were down 1.7 percent.
Back to the futures
First half 2013 Class III contracts portended an $18.40 on Jan. 4, $18.02 on Jan. 11, $17.98 on Jan. 18, $17.60 Jan. 25, $17.69 on February, including the announced January Class price, and was trading around $17.84 late morning Feb. 8.
Dairy producers will receive Milk Income Loss Contract payments again. The USDA Farm Service Agency issued additional details, according to the DairyBusiness Update, reporting that the "relief period" for dairy producers with annual production above the payment cap of 2.985 million pounds and wishing to change their "start month" in fiscal 2013 is Feb. 1-28.
The enrollment period for new dairy operations started before Feb. 1, 2013 is Feb. 1-28. The retroactive payment rate for September 2012 milk marketings is approximately 59 cents per hundredweight on eligible milk. FSA began making payments on Feb. 5. The retroactive payment rate for October 2012 milk marketings is approximately 2 cents per hundredweight on eligible milk. But, before the October MILC payment can be issued, dairy farmers must complete a new form. See your local FSA office for details.
Speaking of the MILC, the University of Wisconsin's Brian Gould has posted his MILC payment projections, based on milk and feed futures prices at the close of trading on Jan. 31. He projects 11.41 cents per hundredweight for January; February, 52.63 cents; March, 73.60 cents; April, 57.2 cents; May, 46.29 cents; June, 36.91 cents; and July, 26.85 cents. Updates are posted at "Understanding Dairy Markets:" future.aae.wisc.edu/collection/software/current_MILC_est.xls