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Cash dairy prices mixed for week

Published on January 19, 2013 3:01AM

Last changed on February 16, 2013 9:50AM

Lee Mielke

Lee Mielke


For the Capital Press

Cash dairy product prices were mixed the third week of the New Year.

The block cheese price closed Friday in Chicago at $1.6875 per pound, down 3 1/4-cents on the week but 18 1/4-cents above a year ago.

The barrels closed at $1.6375, down 3 1/2-cents on the week and 13 1/2-cents above a year ago.

Nine cars of block traded hands on the week and 18 of barrel. The AMS-surveyed U.S. average block price inched up 0.7 cent, to $1.7542, while the barrels averaged $1.7384, up 2 1/2-cents.

Cumulative cheese production for the first 11 months of 2012 was up 2.5 percent from 2011, according to USDA's Dairy Market News (DMN). Retail print advertising featuring cheese was reduced after the holidays, according to the National Dairy Retail report.

FC Stone dairy economist Bill Brooks noted in the eDairy Insider Opening Bell that "beginning this month, dairy producers will start to see the recent declines in dairy product prices in their milk checks. They know the lower milk prices are coming and will probably start to cull their lower-producing cows, but I'm not sure culling will be strong enough to offset the number of heifers coming into the milk herd."

USDA's Livestock, Dairy, and Poultry Outlook reported, "Until the end of December, weekly dairy cow slaughter has been above year-earlier levels and the 3-year average since early in 2012, yet dairy cow numbers for much of 2012 remained above 2011. Along with steady replacement heifer prices, this high slaughter rate suggests some herd freshening among producers. Expectations of moderating feed prices, down from last summer's drought-induced highs, led to slightly higher 2013 forecast dairy cow numbers in January."

The dairy herd is expected to average 9.14 million head for 2013, according to the Outlook. Yield per cow was forecast at 21,880 pounds per cow, unchanged from December. Production for 2013 was projected at 199.9 billion pounds, up slightly from last month based on the higher expected cow numbers.

Butter up slightly

Cash butter continued the previous week's small rally, closing Friday at $1.5050 per pound, up a nickel on the week but 6 1/2-cents below a year ago. Six cars were sold on the week. AMS butter averaged $1.5229, down 1.2 cents.

Butter churning is "active," "increased" or "above demand" across the country, according to DMN. Cream offerings remain heavy and butter is going into inventory, sometimes manufacturer's inventory and sometimes buyer's inventory. Export interest has improved.

Cash Grade A nonfat dry milk slipped a half-cent, to $1.53, while Extra Grade remained at $1.56. AMS powder averaged $1.5482, down 3 cents, and dry whey averaged 65.66 cents, up 0.8 cent.

USDA's weekly update says milk production across the U.S. ranges from steady to increasing with the exception of Florida, which has experienced higher temperatures and humidity, thus lowering cow comfort levels and production.

Manufacturing milk supplies are heaviest in the Northeast, but more manageable compared to the holiday period. Processing plants in the rest of the country are working on reduced schedules as year-end milk supplies are worked through and other fluid handlers and smaller processors have resumed normal intakes.

Class I base price $18.21

The February federal order Class I base milk price was announced by USDA at $18.21 per hundredweight, down 76 cents from January but $1.18 above February 2012, and equates to about $1.57 per gallon. That put the two-month average at $18.59, up from $17.92 a year ago and $15.55 in 2011.

The two-week, AMS-surveyed butter price averaged $1.5280 per pound, down 8 1/2-cents from January. Nonfat dry milk averaged $1.5603, up 1.6 cents. Cheese averaged $1.7535, down 7.2 cents, and dry whey averaged 65.36 cents, down a half-cent from January.

Looking "back to the futures;" first half 2013 Class III contracts portended an $18.26 per cwt. average on Dec. 7, down from $18.74 the week before, $18.47 on Dec. 14, $18.33 on Dec. 21, $18.39 on Dec. 28, $18.40 on Jan. 4, $18.02 on Jan. 11, and was trading around $17.84 late morning Jan. 18.

Hay, forage crops suffer

Checking the feed front, corn and soybeans grabbed nearly all the attention in USDA's latest Crop Production reports, but the updates also provided information about crops near and dear to dairy farmers like hay and other forages.

"Like their counterparts growing corn and soybeans, many of the nation's hay and forage growers also suffered from the drought," DairyBusiness Updates Dave Natzke said. "USDA estimated 2012 production of alfalfa and alfalfa mixture dry hay at about 52 million tons, down 20 percent from 2011 and the lowest production level since before I was born in the mid-1950s."

Along with the drought, competition for acreage from high-priced corn and soybeans pushed the area harvested for alfalfa hay down to about 17 million acres, the smallest harvested area since 1948, according to Natzke.

With lower production, U.S. farmers entered this year with smaller hay inventories. As of December, all hay stored on farms totaled about 77 million tons, the smallest hay stocks for this date in 55 years.

Production of other forages, including haylage and greenchop, were also lower, he said, although that decline was offset somewhat by increased production of corn and sorghum silage. Corn silage production was the highest since 1982.

There was a bit of good news regarding future alfalfa hay production, according to Natzke. Growers planted 2.4 million new acres of alfalfa and alfalfa mixtures during 2012, the largest increase in seven years and that acreage will come into production this year, he said.

"While growers suffered from smaller hay and forage crops, dairy farmers who purchased feed may have suffered even more," Natzke said. "According to USDA, November 2012 U.S. dry alfalfa hay prices averaged a record-high $217 per ton, and some dairy farmers I'm hearing from are paying up to $300 per ton for dairy quality hay."

CWT accepts export bids

Cooperatives Working Together accepted 20 requests for export assistance this week to sell 1.864 million pounds of Cheddar, Gouda and Swiss cheese and 3.657 million pounds of butter to customers in Asia, the Middle East, North Africa, Central and South America. The product will be delivered through June 2013 and will be going to 14 countries.

Speaking of exports, FC Stone's e-Dairy Insider Opening Bell reported that this week's Global Dairy Trade auction (GDT) price for anhydrous milkfat (AMF) rose 2.4 percent to about $1.4755 per pound, or $1.1828 per pound when adjusted for 80 percent butterfat.

While AMF is not an exact equivalent for butter, the price gives clear indication that butterfat in Oceania is still priced well below U.S. or EU levels, according to FC Stone dairy economist Bill Brooks. The most recent EU AMF price, released two weeks ago, was 90 cents higher than this week's GDT price, he said. GDT prices on skim milk powder dropped 0.3 percent to $1.6112 per pound.

The Jan. 11 Daily Dairy Report (DDR) says U.S. dairy product exports were down sharply across all products, according to November trade data.

For the first time in 2012, cheese exports of 40.6 million pounds were lower than the prior month and year by a half percent and 7.6 percent, respectively, on a daily average basis. DDR analyst Sarina Sharp pointed out that "as has been the case throughout 2012, when the U.S. cheese price exceeds the world price, U.S. exports slow and more cheese becomes available in the domestic spot market and November was no exception."

And, for the first time in five years, cheese imports climbed above 40 million pounds resulting in a staggering 24 percent increase in U.S. cheese imports, compared with November 2011, and nearly 60 percent more than in October 2012.

Sharp warned that "the reversal in U.S. cheese trade could be a contributing factor to recent spot price declines. With strong domestic cheese prices in October and November, U.S. cheese was far less competitive in the world market."

She also reported that, presented with an opportunity, New Zealand made quick work of capturing world market share of cheese at the expense of U.S. exports and, in November 2012, New Zealand set a single-month record for cheese exports of nearly 81 million pounds, according to Statistics New Zealand. The second closest month was May 2003 at about 75.8 million pounds.

"New Zealand's increased cheese production likely resulted in additional whey products which could explain the recent softening in U.S. whey prices," Sharp said.

Labor in spotlight

With dairy policy reform on hold, the National Milk Producers Federation is ramping up attention on an issue affecting the day-to-day operations of many dairies -- immigrant labor availability.

"There's continued pressure from the business community, including agriculture that our current 'don't ask, don't tell' employment system is broken," NMPF CEO Jerry Kozak said. "All of these things are aligning to create a more favorable political climate. There is light at the end of this tunnel."

NMPF hosted a conference call Jan. 16 to discuss recent developments on the issue, including the formation of the Agriculture Workforce Coalition (AWC), an organization "seeking to ensure America's farms, ranches and other agricultural operations have access to a stable and skilled workforce."

NMPF is one of 11 founding members of AWC.

Mike McCloskey, chair of the NMPF's immigration task force, said solving the issue is critical to the future of the U.S. dairy industry and to food supply and safety issues impacting consumers.

Dairy goes to Super Bowl

Dairy will be represented at Super Bowl this year. The International Dairy Foods Association's SmartBrief reported that the Milk Processor Education Program, which is responsible for a number of the well-known "Got Milk?" advertisements, is buying a 30-second commercial to be aired in the second quarter of Super Bowl XLVII.

Dwayne Johnson, known as "the Rock," will appear in the commercial, which intends to show a father going to great lengths to procure milk for his children's cereal.


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