Mielke: Corn prices drop
By LEE MIELKE
For the Capital Press
Market watchers got a surprise Thursday in USDA's latest Grain Stocks report. Corn demand was lower than expected and prices came under fire, down the 40-cent limit, "providing dairy producers an opportunity to buy feed at lower prices," said the Daily Dairy Report's Sarina Sharp in the week's "Daily Dairy Discussion."
March 1 corn stocks totaled 5.4 billion bushels, down 10 percent from March 1, 2012, and the lowest inventory since 2004, according to Sharp. Soybean and wheat inventories of 1 billion bushels and 1.23 billion bushels, respectively, were slightly larger than expected. Wheat and soybean futures also moved lower.
Meanwhile, USDA's Prospective Plantings report showed only slight adjustments in the amount of acreage farmers intend to plant to corn, soybeans, and wheat. Corn area is expected to increase 127,000 acres to 97.28 million acres. At 77.13 million acres, soybean acreage would be 72,000 acres lower than last year. Wheat planting is expected to increase to 56.44 million acres, up 704,000 acres from 2012.
The DDR said, "With this kind of acreage, 2013-14 U.S. corn production could be record large given normal yields. After nearly three years of very high corn prices, demand has fallen dramatically."
Butter stocks up
February butter stocks climbed to 240.3 million pounds, up 16 percent from January and 17 percent above those in February 2012, according to USDA's latest preliminary Cold Storage data.
American cheese, at 666.7 million pounds, was up 4 percent from January and 5 percent above a year ago. The total cheese inventory stood at 1.1 billion pounds, up 4 percent from January and a year ago.
The basic message is that there's plenty of product available and the cash dairy markets slipped some in the shortened Easter/Passover holiday week. The 40-pound block cheese price ended the four days of trading at $1.6925 per pound, down three-quarter cents but 20 1/4-cents above a year ago.
The 500-pound barrels rolled 6 3/4-cents lower, to $1.5975, 13 3/4-cents above a year ago but 9 1/2-cents below the blocks. Five cars of block traded hands on the week and six of barrel. The lagging AMS-surveyed U.S. average block price lost 1.6 cents, slipping to $1.6109, while the barrels were up 1.4 cents, to $1.6182.
FC Stone's March 28 eDairy Insider Opening Bell stated that "ample U.S. cheese stocks continue to weigh on CME spot prices as international prices inch higher." It warned that, "With USDA's Milk Production report now suspended until at least October, the spot markets will take on an even bigger role in market forecasting." FC Stone dairy economist Bill Brooks said "We'll also be looking at information from the federal order market administrators and from the California Department of Food and Agriculture."
Higher than anticipated volumes of milk continue to be directed to cheese plants across the nation, according to USDA's Dairy Market News. Despite increased inventories, manufacturers report good sales and are mostly comfortable with the added production and increased interest from export markets which is helping to clear inventories. U.S. prices are favorable against international prices and the CWT program continues to assist with export sales.
CWT accepts 28 requests
The CWT accepted 28 requests for export assistance this week to sell 7.1 million pounds of cheese, 3.9 million pounds of butter and 44,092 pounds of anhydrous milk fat to customers in Asia, Europe, the Middle East, North Africa and North America. The product will be delivered April through September and brought CWT's year-to-date cheese exports to 41.156 million pounds, 44.849 million pounds of butter, 44,092 pounds of AMF, and 218,258 pounds of whole milk powder to 28 countries.
The Foreign Agricultural Service reports that imports of cheese for January-February 2013 totaled 22.9 million pounds, up 3.1 percent from a year ago.
Cash butter closed Thursday at $1.63, down 6 1/2-cents on the Easter Week but 16 3/4-cents above a year ago when butter lost 6 cents and eventually bottomed out at $1.31 the last week of April. Two cars found new homes on the week. AMS butter averaged $1.6295, up 2.6 cents.
Bulk and retail butter sales are seasonally strong, according to DMN, with the current strength coming from export interest as well as domestic butter features at many grocery outlets.
Cash Grade A nonfat dry milk closed at $1.56, up 2 cents on the week, while Extra Grade remained at $1.56. AMS powder averaged $1.51, down 0.6 cent, and dry whey averaged 59.16 cents, down 1.9 cents.
Spring snowstorms across the Central and Eastern regions of the country caused some minor interruptions in milk handling the third week of March. Florida's milk production is beginning to level off as warmer weather is slowing production. Arizona is close to peak production. Milk production in the West is generally lower, while the Midwest and East are seeing some increased production. National production is close to year ago levels, according to USDA.
In dairy politics, DairyBusiness Update reports that U.S. Sen. Kirsten Gillibrand, D-N.Y., has introduced a new bill, the "Dairy Income Fairness Act," that would modify the terms of the margin insurance and the supply/growth management programs proposed in National Milk's Dairy Security Act.
According to the International Dairy Foods Association, the bill, S605, would replace current dairy programs with a version of the Dairy Producer Margin Protection Program and the Dairy Market Stabilization Program found in the Dairy Security Act.
The Milk Income Loss Contract program payment trigger would be raised from $16.94 per cwt. to $18.85 and phased out nine months after enactment of the bill.
Unlike the DSA, which offers producers free margin insurance at $4.00 per cwt., S605 would offer free margin protection at $6.50 per cwt. for all production up to 4 million pounds, and would exempt the first 4 million from the base quota calculation under the DMSP. According to the latest USDA statistics, approximately 88 percent of dairy farmers produce less than four million pounds annually.
S605 has been referred to the Senate Agriculture Committee. It is unlikely the bill will be taken up until the farm bill process begins again in April, according to DBU.
Updating a story from last week, DBU reported that Dairy Farmers of America formally announced it has reached a $46 million settlement agreement in a portion of the class-action lawsuit regarding DFA's trading activity on the Chicago Mercantile Exchange in 2004. Under the terms of the settlement with the class of direct purchasers of dairy products, filed this week, DFA made no admission of wrongdoing and will pay $46 million to the plaintiff class.
The lawsuit stemmed from activities by former DFA officials in 2004, alleging a conspiracy to fix cheese prices on the CME. Those prices are used to establish federal order Class I & III milk prices paid to dairy farmers.
The March 22 Daily Dairy Report says there were 10.9 million beef cattle in feedlots on March 1, according to USDA's Cattle on Feed report. The beef cattle inventory is 7 percent lower than a year ago. But current beef supplies are only slightly smaller than a year ago as cattle are going to slaughter at very heavy weights. DDR analyst, Sarina Sharp also talked about it in the March 22 Daily Dairy Discussion.
Beef stocks in cold storage increased 20 million pounds, but beef producers placed only 1.48 million cattle in feedlots in February, according to Sharp, the lowest February placement figure since USDA began reporting the series in 1996. She adds that beef cattle placements were down 14 percent from February 2012 and "this suggests that there will be considerably fewer beef cattle ready for slaughter this summer and fall, and beef prices should move higher."
"Higher beef prices will allow dairy producers to cull large, less efficient cows and replace them with springers at a historically low net cost," Sharp concluded. "The high beef price could encourage dairy producers to continue to cull aggressively, which could reduce milk cow numbers and support dairy product prices in the long run."
Last week you'll recall I reported on the drought in New Zealand and its implications for dairy trade here and abroad. The March 27 DDR adds fuel to the shortage fire, reporting that February milk production in Australia plunged 6 percent, to 1.35 billion pounds, compared to last year and after adjusting for leap year. The DDR adds that, from July 2012 to February 2013, Australian milk output was 0.8 percent behind the 2011-12 season on a daily average basis, according to Dairy Australia.
Australia and the U.S. are the only major exporting regions that have released February milk production data, and Australia's decline "more than offset the gain in the United States," according to the DDR.
'See it? Stop it'
The National Milk Producers Federation has joined the Center for Food Integrity and the U.S. pork sector to jointly launch what they term a "proactive demonstration of agriculture's commitment to farm animal care."
The initiative demands that if signs of animal abuse, neglect, mishandling or harm are witnessed, anyone working on a farm or in a farm setting has an obligation to report it immediately.
The program provides several options to enable employees to speak up to stop animal abuse, according to an NMPF press release, which adds, "Ultimately, empowering animal caretakers and giving them responsibility to report animal abuse immediately will help assure the best care for animals."
Betsy Flores, NMPF's Senior Director of Animal Health and Welfare, stated, "Care of animals could not be more important to farmers. Having a system in place to contact any of several authorities is imperative, and 'See it? Stop it!' provides that resource. The initiative demonstrates to the public that farmers are committed to good animal care and calls on anyone who witnesses abuse to stop it immediately."