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Mielke: Experts trade barbs on fixing milk industry


By LEE MIELKE


For the Capital Press


Lori Fischer, executive director of the Dairy Business Association, discussed the importance of getting a farm bill passed this year in Wednesday's DairyLine. Speaking from this week's World Dairy Expo, where they held a press conference on Thursday, Fischer said Wisconsin dairy farmers have even been asked by their governor to increase milk production to meet the demands of the specialty cheese market and she cited New York Governor Andrew Cuomo's support of "the booming Greek yogurt industry" by "loosening regulations and increasing incentives for his dairy farmers to grow."


That desire to grow the industry runs contrary, however, to the proposed dairy title of the new farm bill, according to Fischer, by giving farmers a disincentive in its supply management scheme.


"Dairy farmers want to have insurance for risk management purposes very similar to crop growers," she said. "But in the dairy side of things if you want to have the insurance, you also have to participate in a program that forces dairy farmers to periodically limit milk production or be penalized.


"Dairy farming isn't that nimble, you just can't tell a cow today you're going to need to produce less milk tomorrow," she said. "When the program shuts off, they're going to want the milk production and cows just don't jump back on."


Penalties to some of her members would have been as much as $18,000 per month, she said, and while the program would increase milk prices, it would increase consumer dairy product prices and foreign markets will look to other countries.


She said her members support an alternative by Rep. Bob Goodlatte, R-Va., and David Scott, D-Ga., which would remove the supply management provision but still "provide dairy farmers with the margin insurance that they're looking for."


National Milk Producers Federation took its message to World Dairy Expo as well. Dairy Profit Weekly reported that NMPF's Jerry Kozak and Jim Tillison said dairy policy debate in the 2012 Farm Bill is essentially over, with both the full Senate and House Ag Committee proposals embracing the major pieces of the Dairy Security Act, which was built on NMPF's Foundation for the Future program.


They noted that the Goodlatte alternative had been already soundly defeated in the House Ag Committee by a 29-17 vote, and that the committee had approved a 2012 Farm Bill on a 35-11 vote.


"Due to higher costs which could limit availability of margin insurance to all dairy producers, the NMPF leaders contend the Goodlatte amendment would actually impose greater supply management controls," DPW reported.


Plight


The financial plight of California's dairy farmers received some national attention in an Associated Press column in the Sept. 29 Washington Post. A recent rally on the issue in Sacramento drew several hundred people, according to the Sept. 28 Milk Producers Council newsletter.


Participants called on Gov. Jerry Brown and California Department of Food and Agriculture Secretary Karen Ross to, as the MPC stated, "Utilize their authority and legal responsibility to bring our milk prices in better alignment with the prices being paid for milk throughout the country."


MPC reported that organizers continue to strategize and are planning another rally in Sacramento on Oct. 18 and a prerally prep session on Oct. 4 in Tulare. Details are posted at www.rallyforcaliforniadairyrelief.com.


By the numbers


Farm gate milk prices continue to rise. The Agriculture Department announced the September federal order Class III price at $19 per hundredweight, up $1.27 from August, 7 cents below September 2011, $1.50 above California's comparable 4b cheese milk price, and equates to about $1.63 per gallon. The September Class IV price is $17.41, up $1.65 from August but $2.12 below a year ago.


The 2012 Class III average now stands at $16.54, down from $18.28 at this time a year ago and compares to $14.07 in 2010 and a painful $10.49 in 2009.


Looking ahead, the October Class III Futures contract was trading late Friday morning at $21.03; November at $21.13, and December at $20.45.


The AMS-surveyed cheese price averaged $1.8647 per pound, up 9.7 cents from August. Butter averaged $1.8269, up 14.1 cents. Nonfat dry milk averaged $1.3768, up 12.3 cents, and dry whey averaged 58.46 cents, up 4.9 cents.


California's comparable 4b cheese milk price is $17.50 per cwt., up 93 cents from August and $1.17 above a year ago. Its 2012 average now stands at $14.69, down from $16.48 a year ago and $13.00 in 2010.


The 4a butter-powder price is $16.62, up $1.22 from August and $2.67 below a year ago. Its average now stands at $14.88, down from $19.24 a year ago and $14.45 in 2010.


Looking at what's driving milk prices, CME cash cheese saw a fifth week of gain the week of Oct. 1, with the blocks closing at $2.10 per pound, up another 2 1/2-cents on the week, 33 1/2-cents above a year ago, but 18 1/2-cents shy of the record $2.2850 on May 23, 2008. The barrels closed at $2.06, also up 2 1/2-cents on the week and 27 1/2-cents above a year ago when they rolled 14 1/2-cents lower. Seventeen carloads of block traded hands this week and two of barrel. The AMS-surveyed block price averaged $1.8907, across the U.S., up 4.2 cents, and the barrels averaged $1.9051, up 7.7 cents on the week.


Cheese


Cheese production is mostly steady with recent weeks as manufacturers look to secure more milk for cheese vats, according to USDA's Dairy Market News. Demand for mozzarella is good as new pizza promotions are surfacing. Export sales are slower with the recent price increases, but the Cooperatives Working Together program continues to aggressively promote sales with their assistance.


Ten CWT requests for export assistance were accepted this week to sell 4.25 million pounds of cheese and 200,621 pounds of butter to customers in Asia, Central America, the Middle East and North Africa.


Trade


Tuesday's Global Dairy Trade auction saw the weighted average price for all contracts fall 0.9 percent from the previous event, according to FC Stone's eDairy Insider Closing Bell. Whole milk powder and buttermilk powder were the exceptions, but all global prices are well below U.S. prices. The average price for anhydrous milk fat of $1.3526 per pound was down 6.4 percent (adjusted for 80 percent fat the price was $1.0843); the cheddar cheese price fell 7.4 percent to $1.4969 per pound. Buttermilk powder at $1.4261 per pound rose 4 percent; but whole milk powder at $1.4365 climbed 2.8 percent.


The CME cash butter price had a meltdown the first Friday of October, dropping 9 1/4-cents to $1.86, down 9 cents on the week but 9 cents above a year ago. Fourteen cars were sold on the week, 13 on Friday. The AMS butter price averaged $1.8791, up 3.6 cents.


Churning schedules across the country are increasing as butter producers take advantage of available cream supplies and are generating butter for fourth quarter, according to DMN. Producers indicate it will not be long before cream is absorbed into Class II cream based holiday items and limit cream for churning.


Cash Grade A and Extra Grade nonfat dry milk held at $1.66 and $1.6350 respectively on the week. AMS powder averaged $1.4395, up 4 1/2-cents, and dry whey averaged 60.61 cents, up 1.3 cents.


Consumption


Where's the milk going? The latest Dairy Products report showed August butter production at 129 million pounds, down 3.1 percent from July and 3.5 percent below August 2011. Nonfat dry milk output, at 106 million pounds, was down a whopping 30 percent from July and 7.8 percent below a year ago.


American-type cheese, at 354 million pounds, was down 0.7 percent from July but 4.5 percent above a year ago. The increasingly growing importance of Italian-type cheese, at 370 million pounds, was up a half-percent from July and 1.9 percent above a year ago. Total cheese output amounted to 884 million pounds, up a half-percent from July and 2.6 percent above a year ago.


Dairy product commercial disappearance in the first seven months of 2012 totaled 117.1 billion pounds, up 2.6 percent from 2011. Butter was up 4.2 percent; American cheese, up 1.1 percent; other cheese, up 2.2 percent; Nonfat dry milk, up 42.7 percent; but fluid milk products were down 2.1 percent.


Milk production across the country varies from declines in the northern tier of states to slight increases in southern regions, according to USDA and milk production in the Oceania region continues to seasonally build.


Most milk producers and handlers project milk output in Australia to be in the 1 to 2 percent growth range over recent years. New Zealand projections are for a 3 to 4 percent increase from the last two years.


Checking the bottom line


The Daily Dairy Report's Sara Dorland pointed out in the Sept. 28 Daily Dairy Discussion on the DDR website that higher U.S. milk prices haven't been realized yet in farm milk checks while higher feed prices arrived almost immediately, thus culling rates remain high. She warned that we'll likely see a continued reduction in the milking herd which could lead to further contraction in milk production, possibly evidenced in the September data.


On a brighter note, the Oct. 1 DDR reports that the National Restaurant Association, restaurant performance index for August was 100.6, up 0.4 percent from July and the first month since March 2012 that it increased. More than 61 percent of restaurants surveyed reported that same-store sales were higher in August versus last year; an improvement over July's 53 percent, which was the lowest level in 2012, according to the DDR.


The DDR points out that "Continued strength in the restaurant industry provides support for U.S. dairy products. A substantial portion of cheese consumption occurs outside the home in fast-food, pizza, and sit-down restaurants."




Ethanol woes


The Alliance's Bill VanDam continued his focus on U.S. ethanol mandates in his last newsletter and reports that "dairymen, pork producers, beef producers and poultry operations are under huge stress."


"The only thing that does not change is the ethanol mandates which are nothing but an arbitrary number put into a bill by Congress," he wrote. "Congress by definition has the power to change the mandates. Can it really be true that we are not smart enough to stop converting our corn into ethanol when it is needed to feed America?"


IDFA's SmartBrief, citing a story from the Huffington Post, reports that Americans' favorite ice cream chain is Ben & Jerry's, followed by Cold Stone Creamery and Culver's, according to a new survey by Market Force Information.


Ben & Jerry's took top place in the Midwest, Baskin-Robbins was the favorite in the Northeast, and Culver's was top ice cream chain in the South and West.



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