Mielke: 'Significant budget uncertainty' feared by dairy group
By LEE MIELKE
For the Capital Press
National Milk Producers Federation has joined more than 230 other farm, agriculture and food groups in urging Congress to pass a new, five-year farm bill in the upcoming lame duck session. A letter was directed to Republican and Democratic leaders of the House, noting that there is still ample time for the House to complete its work on a new farm bill, and reconcile any differences with the already-adopted farm bill approved last summer by the Senate.
Failure to pass a new bill before Dec. 31 "will create significant budget uncertainty for the entire agricultural sector, including the rural businesses and lenders whose livelihoods are dependent upon farmers' and livestock producers' economic viability," the letter said.
While some have suggested Congress pass an extension of current programs, "any temporary extension would be a short-sighted, inadequate solution that would leave our constituencies crippled by uncertainty."
"Both the Senate and the House Committee on Agriculture passed versions of a five-year farm bill with strong bipartisan support. We urge you to lead your colleagues in passing a new 2012 Farm Bill this year," the coalition letter said.
The Daily Dairy Report's Sarina Sharp, talked about the latest World Agricultural Supply and Demand Estimates report in the November 9 Daily Dairy Discussion. She pointed out that USDA reduced its estimate of U.S. dairy exports, reasoning that U.S. prices are not competitive with New Zealand and September exports were therefore down from a year ago. She warned that will contribute to an increase of U.S. dairy product stocks and weigh on U.S. markets.
The report also showed a notable increase in soybean production, according to Sharp, now put at 39.3 bushels per acre, up from 37.8 forecast a month ago. She credited late season rains and a resilient crop to this summer's draught.
Soybean output was put at nearly 3 billion bushels, but doesn't leave much for ending stocks, according to Sharp, as most of the increase output went to increased demand. She said this was good news for dairy producers however export estimates were also raised, good news for global end users because the South American crop is just now going into the ground.
There's not a lot of room in the balance sheet for corn, according to Sharp. Prices have proven pretty resilient despite a collapsing financial market, a very strong dollar, and lots of concern over global demand. Corn has held in the $7.40 per bushel area. USDA estimates the corn yield at 122.3 bushel per acre, up just .3 bushels from their October estimate. They added little to the demand projection as exports have been slow and ethanol has been on a pace to meet USDA's forecasted demand.
"Everyone wants to use more corn than they have," Sharp said. "And I think that the food and industrial industries are much stronger financially than the livestock industry, so they're going to be able to take any increase in production, they will buy that up and use it and livestock producers will be left facing high corn prices and trying to get their hands on enough supplies to feed all the animals." Listen to the Daily Dairy Discussion each week at www.dailydairyreport.com
Checking the latest salvo in the war out west, Dairy Profit Weekly reports that things "remain cloudy." In a faxed letter on Nov. 13, the California Department of Food and Agriculture informed three dairy producer organization their petition for an emergency hearing to consider changes to the state's Class 4b milk pricing formula apparently can't be considered due to "language technicalities."
In the letter, Kevin Masuhara, director of CDFA's Division of Marketing Services, told leaders of petitioning organizations, California Dairies Inc., Dairy Farmers of America Western Area and Land O'Lakes Inc., "as submitted, the petition fails to set forth the Secretary's authority to take the action requested. In the absence of such a statement, it cannot determine if the petitioners are proceeding under the discretionary hearing procedure or the mandatory one set forth" (in the California Code of regulations).
"The department will evaluate any future resubmissions of the petition in accordance with the provisions of the applicable regulatory procedures."
CDI, DFA and LOL submitted the petition on Nov. 2, requesting a temporary modification to the sliding scale for dry whey prices used to determine California's Class 4b price.
Supporting the call for a hearing were Western United Dairymen, Alfred Soares Dairy, California Dairy Women, Lorinda Dairy, and the California Dairy Campaign. The state's largest processor organization, Dairy Institute of California, Hilmar Cheese Co. and Los Altos Food Products, Incorporated called on CDFA to deny the hearing request. Details are posted at www.cdfa.ca.gov/dairy/uploader/postings/petitions
The market was not unprepared for the price change the week of Nov. 5, according to USDA's Dairy Market News, but buyers were hesitant to purchase above immediate needs. Weather issues on the East Coast from Hurricane Sandy and the nor'easter snow storm complicated deliveries and orders from that region.
Retail sales across the rest of the country remain good, DMN says, while manufacturing sales had slowed at the existing price levels. Cheese production is uneven to mostly steady with plants watching inventory levels to remain current. Export demand is light as domestic prices are above international prices.
Cash block cheese, while posting a short-lived rally Wednesday, saw more slippage the second week of November. They inched up a half-cent Friday to close at $1.8250 per pound, but that's down 9 1/2-cents on the week, follows the previous week's 19-cent plunge, and are three-quarter-cents below a year ago when they tumbled almost 12 cents to $1.8325.
The barrels rolled 11 1/4-cents lower, following the previous week's 24 1/2-cent loss, and are now trading at $1.7225, 14 3/4-cents below a year ago and 10 1/4 below the blocks. Twenty one cars of block traded hands on the week before Thanksgiving and just one of barrel. The AMS-surveyed U.S. average block price hit $2.0783, up 1.4 cents, while the barrels averaged $2.0614,up 1.6 cents.
Spot butter closed Friday at $1.7950, down 9 1/2-cents on the week but 14 3/4- cents above a year ago when it melted 9 1/4 cents, to $1.6475. Five cars found new homes on the week. AMS butter averaged $1.8923, down a penny.
Churning schedules are quite active across the country, according to DMN, as cream is available for butter production. In many instances, butter producers report that cream volumes are often heavier than they are willing to take on. Butter demand was very good going into Thanksgiving and buyers are looking beyond Thanksgiving as good orders are on the books. Producers and handlers are speculating that orders will continue for the foreseeable future.
Cash Grade A nonfat dry milk lost a penny on the week and slipped to $1.5650. Extra Grade remained at $1.56. AMS powder averaged $1.5057, up 1.2 cents, and dry whey averaged 64.15 cents, up 0.3 cent.
Feed prices are expected to moderate next year, easing profit pressure on producers, but not enough to engender an expansion in cow numbers according to USDA's Livestock, Dairy and Poultry Outlook issued Friday morning. The moderate contraction in herd size is expected to continue in 2013. Export demand for powders remains strong but weaker for butterfat. Prices for Class III, Class IV and all milk will trail 2011 prices both this year and next.
Feed price forecasts continue to decline. The forecast corn price for 2012-13 was lowered to $6.95-$8.25 a bushel in November from October. Slightly higher expected production and an increase in imports support the lower price forecast.
Soybean meal was lowered to $455-$485 a ton. Soybean production forecasts were raised in October based on higher yield expectations. Late-season rains helped to boost yields. On balance, corn and soybean meal prices will be higher in 2013 than in 2012 despite the small downward revisions in November forecasts from October.
The October Agricultural Prices report pegs the preliminary October price for alfalfa at $212 a ton, up slightly from September's estimate and the October 2011 price. Assuming more normal weather in 2013, alfalfa prices could reflect improved yields. Dairy feed ration prices will likely be lower in 2013 than this year, but will remain high by historic standards, according to the Outlook.
Herd size projections were unchanged this month from October. The U.S. dairy herd is expected to average 9.225 million head in 2012 and slip to 9.125 million next year as a result of the profit squeeze experienced by producers this year.
"Profitability could improve next year," USDA concludes. "But is unlikely to support herd expansion during the year." Current-year yield per cow was increased to 21,640 pounds based on a higher than forecast third-quarter yield reported in the October Milk Production report.
The milk production season is holding at high seasonal levels in both New Zealand and Australia, according to DMN. New Zealand milk producers and handlers indicate that the peak probably occurred two weeks ago. Weather on both the North and South Islands are conducive to positive milk output trends, but many producers continue to be concerned about a potential El Nino weather pattern later this season which could greatly impact current positive trends. Milk handlers anticipate a 3 to 4 percent growth pattern over 2 years ago.
The Australian production season is basically at peak levels with some Victoria regions recording very positive growth while others continue to struggle with excessive moisture. Milk volumes are running 2 percent stronger than last year.
Cooperatives Working Together accepted 12 requests for export assistance this week to sell 2.1 million pounds of cheese and 5.5 million pounds of butter to customers in Asia, the Middle East, and North Africa. The product will be delivered through May 2013 and put CWT's 2012 cheese exports at 108.4 million pounds plus 66.7 million of butter, 127,868 pounds of anhydrous milk fat, and 85,980 pounds of whole milk powder.
USDA estimates that 4.3 billion pounds of packaged fluid milk products was sold in September in the U.S., down 5.2 percent from September 2011. After adjusting for calendar composition, sales were off 1.5 percent. Conventional fluid products were down 5.2 percent while organic fluid milk products were down 4.5 percent from a year earlier.
Region by region
California's December Class I milk prices have slipped but are still above December 2011. The California Department of Food and Agriculture announced the Northern price at $23.08 per hundredweight and the Southern price at $23.35. Both are down 9 cents from November but are $2.41 above a year ago.
The 2012 Class I average for the North is $19.06, down from $20.68 in 2011 and compares to $16.97 in 2010. The Southern average is $19.33, down from $20.95 a year ago and compares to $17.24 in 2010. The Federal order Class I base price is announced by USDA on November 21.
Back to the futures
The last half 2012 federal order Class III milk prices were averaging $17.49 on July 6 and $18.80 on Aug. 3. Looking at the announced Class IIIs plus the remaining months of 2012, it averaged $19.15 on Sept. 28, $19.31 on Oct. 26, $19.34 on Nov. 2, $19.12 on Nov. 9, and was trading around $19.07 late morning Nov. 16.