Will farm bill's dairy title help dairy farmers?
By LEE MIELKE
For the Capital Press
The farm bill took center stage on Capitol Hill this week and resulted in a war of words.
The Senate Agriculture Committee marked up its version on Tuesday and included the controversial Dairy Security Act. The action drew praise from the National Milk Producers Federation, author of much of DSA's contents.
"We commend the members of the Senate Agriculture Committee for approving a farm bill to transform dairy policy, while making necessary improvements in other farm and nutrition programs," NMPF CEO and president Jerry Kozak, said. The DSA provides "the best combination of effective risk management for dairy farmers, while minimizing program costs to the taxpayer."
The DSA is opposed by dairy processors who supported the Goodlatte-Scott amendment (GSA), considered by the House Ag Committee. A press release from the International Dairy Foods Association stated that "IDFA is disappointed that the Senate Committee on Agriculture continues to recommend a milk supply management program that will raise dairy prices on consumers and will hurt the dairy industry and dairy export growth.
"The Dairy Market Stabilization Program (DMSP) is a controversial and divisive approach to dairy policy, one that has threatened and continues to threaten the completion of a five-year farm bill," IDFA said.
It cited a national survey which they say shows "81 percent of Americans agree that individual farmers should have the freedom to decide how much milk they produce and not have a limit set by government policy."
This view, says IDFA, is "reinforced by a broad coalition of nearly 150 national and regional food manufacturers, restaurant groups, conservative and anti-tax groups, consumer protection and watchdog groups, and many, many dairy producer groups all opposed to imposing the DMSP and supply management on the dairy industry."
The House Agriculture Committee again rejected the GSA as it did a year ago. Rep. Bob Goodlatte, R-Va., and Scott, D-Ga., offered the amendment, which would have stripped the market stabilization provision from the DSA.
NMPF praised the action while processors stated that they expect the GSA to resurface when the farm bill proposal comes to the floor of the full House, possibly in June. The Senate is expected to begin farm bill debate on May 20.
IDFA's Jerry Slominski said they are "very encouraged by the growing support for the bipartisan, compromise Goodlatte-Scott approach to dairy policy, particularly from important dairy states like Wisconsin, New York and Pennsylvania."
"The House vote was much closer than last year and the amendment is clearly gaining momentum as it heads to the House floor," he said.
He expects the amendment to be brought to a floor vote and that the House will "ultimately take a strong position against a supply management policy that would restrict job growth, hurt middle-income families and add additional costs to nutrition programs that are losing funding in the Farm Bill."
The Dairy Business Association (DBA), another proponent of the GSA, said DBA was "not surprised that supply management passed both committees because of the large push from cooperatives, and believes that when all of the members of the House have a chance read the bill and vote on whether the government should control the amount of milk a dairy farmer can produce, they will vote no; and supply management will be removed."
NMPF released details of a new analysis of the DSA which claimed that the DSA is "better for farmers, as well as taxpayers, compared to the GSA." The report, prepared by University of Missouri agricultural economists Scott Brown and Daniel Madison, assessed how the DSA would have affected farm-level economics during 2009 through 2012 compared with the impact of the GSA.
The DSA program "offers dairy farmers margin insurance, coupled with a market stabilization mechanism that improves farm prices during low periods while also controlling the program's cost. The GSA lacks the market stabilization feature."
According to Brown and Madison's economic modeling, the DSA would have increased net farm revenues by 55 cents per hundredweight over the period, while the GSA would have raised farm revenue by 48 cents. The study stated that, from a budgetary standpoint, the GSA would have hiked government expenditures by $1 billion over the 2009 to 2012 period compared to the DSA, because the GSA would encourage more milk production, even at lower margins.
A previous study by other university dairy economists also compared the short-term impacts of the DSA and the GSA and the DBA countered that this study "shows margin insurance by itself has higher net benefits than margin insurance tied to supply management and subjects farmers' milk checks to payment reduction."
They said the report "shows smaller farms, based on a hypothetical 150-cow farm, can be better off with less out-of-pocket premiums and fees and higher projected net revenue."DBA advises farmers to "reject the promise that supply management will bring about bigger returns and higher dairy prices."
Speaking of milk prices; California's June Class I price was announced by the California Department of Food and Agriculture at $20.84 per hundredweight for the north and $21.12 for the south, up $1.45 and $1.46 respectively from May and $4.03 and $4.04 respectively above June 2012.
That put the 2013 Class I average at $19.85 for the north, up from $17.83 at this time a year ago. The southern average is now $20.13, up from $18.10 a year ago. USDA announces the June Federal order Class I base price on May 22.
Looking "back to the futures;" first half Federal order 2013 Class III contracts portended a $17.82 average on March 29, $17.92 on April 5, $18.02 on April 12, $18.09 on April 19, $17.98 on April 26, $17.92 on May 3, $17.79 on May 10, and was trading around $17.80 late morning May 17, including the announced January, February, March, and April Class III prices.
Cash block cheese lost more ground the second week of May but did rally toward week's end and re-established a more typical block-barrel spread. The blocks closed Friday at $1.77 per pound, down 7 1/2-cents from the previous week but still 27 cents above a year ago. Barrel closed at $1.76, up 3 3/4-cents on the week and 30 cents a year ago. Twenty three cars of block traded hands on the week and 27 of barrel. The AMS-surveyed U.S. average block price gained 3.1 cents, hitting $1.8882. The barrels lost 2.1 cents, dipping to $1.7419.
Cheese inventories are increasing, according to USDA's May 10 Dairy Market News (DMN), but were not considered to be heavy. Domestic demand for block cheese is reportedly good with export demand helping to clear inventory. Barrel demand was uneven with stocks in a longer position, however, as block prices moved higher, export sales slowed, reflecting the increased cost. Export sales for January-March 2013 were up 8 percent from the same period a year ago and accounted for 5.6 percent of total U.S. cheese production, according to DMN.
FC Stone's May 16 eDairy Insider Opening Bell put it this way: "Bullish fundamentals could continue to underpin dairy markets for the next several months."
"Strong demand from Asia, a late-season drop in milk production in New Zealand, and basically flat output in Europe and the United States point to future price strength," it explained. "The move lower was a nice correction, but the situation will be dicey once hot temperatures set in. The United States could continue to be the balancing plant for the world over the next several months."
Cash butter also rallied, inching a half-cent higher to $1.6150, 26 cents above a year ago. Seven cars were sold. AMS butter averaged $1.6782, down 3.8 cents.
Northeast butterfat levels remain good, reports DMN, and cream supplies continue to increase, adding to cream volumes going to churns. Butter production continues to expand with increased bulk butter production adding to inventories.
USDA's Foreign Agricultural Service reports that exports of butter and milkfat for January-March 2013 totaled 33.6 million pounds, up 20 percent or 5.6 million pounds from the same period a year ago. The butter and milkfat exports accounted for 6.2 percent of butter production in the U.S. for the year.
Cooperatives Working Together (CWT) accepted four requests for export assistance this week to sell 932,556 pounds of Cheddar cheese to customers in Asia and North Africa.
This week's GlobalDairyTrade (GDT) auction saw prices mostly lower, with the trade-weighted average down 2.1 percent, according to FC Stone. The biggest drop for all contracts occurred in butter, down 12.4 percent to about $1.7445 per pound or $1.70, adjusted for 80 percent butterfat. Cheddar cheese, lactose, and whey protein concentrate 70 were not offered. Skim milk powder was off 2.8 percent to $1.9287 per pound; whole milk powder, down 1.7 percent to $2.1419, and anhydrous milkfat was off 0.2 percent to $2.0856 per pound.
Cash Grade A nonfat dry milk closed at $1.68 in Chicago, down 2 cents on the week, while Extra Grade remained at $1.70. AMS powder averaged $1.6396, up 3 1/2-cents, and dry whey averaged 57.76 cents, down 0.2 cent.
USDA reports that commercial disappearance of dairy products from December 2012 through February 2013 totaled 47.4 billion pounds, down 0.6 percent from the same period a year ago. Butter was up 3.1 percent; American cheese, down 1.3 percent; other cheese, off 0.1 percent; nonfat dry milk was down 20 percent, and fluid milk products were down 2.3 percent.
Corn prices for 2012/13 were forecast at $6.70-$7.10 per bushel, according to the latest Livestock, Dairy, and Poultry Outlook. The price range was narrowed, but the mid-point was unchanged from April. Initial forecasts for the 2013/14 year call for corn prices to decline to $4.30-$5.10 per bushel.
Higher expected yields and higher expected global supplies countered the slow start to this season's planting and underpin the 2013/14 forecast. Current-year soybean price estimates were unchanged from April's forecast; similarly, soybean meal price forecasts were unchanged from April at $425 a ton. 2013/14 soybean meal prices were forecast at $280-$320 per ton. Soybean production is forecast up based on higher yields and slightly higher harvested acreage.
Production, weather report
Milk production and weather was the topic in the May 10 Daily Dairy Report (DDR) and its "Daily Dairy Discussion." Analyst Sara Dorland also a managing partner at Ceres Dairy Risk Management LLC in Seattle discussed approaching summer temperatures and their impact on the milk supply.
She talked about the thermal heat index (THI), a calculation of environmental factors that contribute to heat stress, according to a Cornell University study. She said that, while temperature is a key factor in cow comfort, dew point, which measures humidity, also plays a role. High humidity makes it more difficult for cows to maintain normal body temperature and diverts energy away from milk production.
THI explains why a summer day at 95 degrees with a 45 degree dew point west of the Rockies can feel more comfortable than 85 degrees with a 77 degree dew point in the Midwest. Listen to the Dorland's report at www.dailydairyreport.com.