By LEE MIELKE

For the Capital Press

The CME's Daily Dairy Report warns that Americans continue to drink less milk. Estimated milk use in the May to July period was off 2.4 percent from last year and down 4.3 percent from two years ago, according to federal order and California data. Sales were down 1.8 percent in the first seven months of the year and July was the worst month in at least 15 years, according to the DDR. USDA says sales were down 4.5 percent from a year ago however estimated sales of total organic fluid milk products increased 10.7 percent from 2010.

In politics

With the issue of supply management threatening the future of National Milk Producers Federation's Foundation for the Future dairy policy reform proposal, the federation announced it would modify its plan. Dairy Profit Weekly editor Dave Natzke reported in his Friday DairyLine program that the revisions would make participation in the supply management portion voluntary. However, participation in the supply management program, called the Dairy Management Stabilization Program, would be a prerequisite for farmer eligibility for income insurance payments under the Dairy Producer Margin Protection Program.

"By making the program voluntary instead of mandatory, it also eliminates another controversial area," Natzke said. "Under the previous plan, half of all money collected under the Dairy Management Stabilization Program would have gone to the U.S. Treasury. Now, all funds could go to purchase dairy products to be used for feeding programs."

Instead of specifying comprehensive changes to the federal milk marketing order system, the revised plan mandates USDA to replace current end-product pricing formulas and make allowances with a competitive pay price formula, but leaves the method up to a dairy farmer vote.

The plan still calls for elimination of the Dairy Price Support and Milk Income Loss Contract programs and the revisions were rolled into legislation drafted by Rep. Collin Peterson, Ranking Member on the House Ag Committee, and Rep. Mike Simpson, Idaho Republican.

In a Friday morning conference call, Peterson reported that he would introduce the Dairy Security Act of 2011 that afternoon in the House with the federation's modifications. He said support is growing for the plan but, because of delays in getting the original bill scored by the Congressional Budget Office, it will now likely be part of the new farm bill.

The International Dairy Foods Association said the changes to the FFTF still "miss the mark."

Natzke also reported that a second dairy policy reform plan was outlined this week, this one from U.S. Sen. Kirsten Gillibrand, D-N.Y., a member of the Senate Ag Committee. Gillibrand's plan addresses the supply management issue by limiting it to regional supply and demand conditions, instead of a national balancing plan. She would also incorporate income insurance into the existing MILC program, using production limits to determine insurance payment eligibility, and asks USDA to evaluate changes to federal milk marketing orders.

Dairy Profit Weekly reports that several dairy organizations sent a letter to House Agriculture Committee leaders, opposing supply management provisions contained in impending dairy policy reform legislation. The organizations urged lawmakers to reject the Dairy Market Stabilization Program, proposed in the federation's program and included in the legislation authored by Peterson.

Co-signing the letter were the Dairy Business Association, a Wisconsin-based producer organization, along with its marketing co-op, Dairy Business Milk Marketing Cooperative; the board of directors of Bongards' Creameries, Minnesota Milk Producers Association, First District Association, all of Minnesota; Alliance Dairies, Florida; Dairy Policy Action Coalition, Pennsylvania; High Desert Milk, Idaho; National All-Jersey, Inc., headquartered in Ohio; and the Northeast Dairy Producers Association.

On the other hand, the Holstein Association USA's board of directors confirmed their support of discussion draft legislation containing major components of the Foundation for the Future program.

"The Dairy Market Stabilization part of the program is key, and a major reason for the Association's support of the program," according to Holstein Association president Chuck Worden.

Free trade ain't

The National Family Farm Coalition and 56 allied organizations representing family farmers, ranchers, fishermen and advocates signed a letter to Congress condemning the pending free trade agreements with South Korea, Colombia and Panama.

As the letter states, more FTAs will only accelerate the economic disasters in agriculture: industrial farms dependent on massive amounts of petroleum-based inputs, low-paying exploitative jobs in processing and packing plants, and increased consolidation throughout the agricultural supply chain. For complete details, go to http://nffc.net/Pressroom/Press%20Releases/2011/finalsignon.tradeltr.Sept2011.pdf.

Weather woes

Milk production patterns in Northeast were once again impacted by weather activity with the latest tropical storm creating the expected issues from the farm level to consumer buying patterns, according to USDA's latest update on Sept. 16. Several processing plants were shut down due to water and utility problems. The farm level milk production impact was still being assessed. Milk was being shipped to other manufacturing plants for processing help.

Midwestern milk production is mostly steady with recent weeks and processing plants are taking expected volumes. Milk production conditions in the Southwest are improving and reflect cooler weather conditions. Milk volumes are steady to slightly higher. In the Pacific Northwest, Utah and Idaho, milk output is down marginally while component levels are increasing.

Production data

August milk production in the top 23 states totaled 15.3 billion pounds, up 2.2 percent from August 2010, according to the Agriculture Department's preliminary data. Output in the 50 states amounted to 16.4 billion pounds, up 2.1 percent. The increase was more than expected. July output in the 23 states was revised 45 million pounds lower, to 15.4 billion, up a half percent from a year ago.

August cow numbers in the 23 states totaled 8.47 million head, up 3,000 head from July, and 102,000 more than a year ago. Output per cow averaged 1,810 pounds, up 18 from a year ago.

California milk output was up 2.9 percent from a year ago, thanks to 24,000 more cows and a 30 pound gain per cow while Wisconsin was up 1.2 percent on a 20 pound gain per cow. Cow numbers were up 1,000 head.

Third place Idaho was up 3.9 percent on 11,000 more cows and a 40 pound gain per cow. New York was down a half percent on a 5 pound loss per cow and 1,000 fewer cows. Pennsylvania was down 2.1 percent on a 30 pound loss per cow and 2,000 fewer cows, and Minnesota saw a 4.5 percent drop due to a 75 pound loss per cow. Cow numbers were up 1,000 head.

The biggest gain was 11.1 percent in Texas where output per cow jumped a whopping 100 pounds and cow numbers were up 20,000. Next was Florida, up 9.9 percent on a 65 pound gain per cow and 5,000 more cows, followed by Washington, up 6.7 percent on a 30 pound gain per cow and 13,000 more cows.

The biggest drop occurred in Missouri, down 7.9 percent, due to a 60 pound drop per cow and 3,000 fewer cows. Minnesota was next, followed by Ohio, down 2.8 percent, on a 20 pound drop per cow and 4,000 fewer cows.

Weather had varying effects on output per cow; up in Michigan, Iowa, Kansas, Wisconsin, and Indiana as temperatures and humidity moderated from July while Western output showed consistent gains per cow and cow numbers. eDairy economist Bill Brooks wrote in the September 20 Insider Opening Bell that the August gain was "above average and compared to strong growth a year-ago."

Weather had varying effects on output per cow; up in Michigan, Iowa, Kansas, Wisconsin, and Indiana as temperatures and humidity moderated from July while Western output showed consistent gains per cow and cow numbers. eDairy economist Bill Brooks wrote in the September 20 Insider Opening Bell that the August gain was "above average and compared to strong growth a year-ago."

USDA's Livestock Slaughter report shows an estimated 244,600 culled dairy cows were slaughtered under federal inspection in August, up 37,500 from July and 13,700 more than August 2010. January to August 2011 dairy cow slaughter was estimated at 1.909 million head, up 83,400 from the same period in 2010.

Checking the cupboard

August butter stocks totaled 165.6 million pounds, down 22.2 million pounds or 12 percent from July, but 10.4 million pounds or 7 percent above August 2010, according to USDA's latest Cold Storage report.

American cheese totaled 641.8 million, down 1 percent from July and 7 percent above a year ago. Total cheese stocks, at 1.06 billion pounds, were down 2 percent from July and virtually unchanged from a year ago.

The cash cheese market dropped following the milk production report but inched up following the Cold Storage data. The 40-pound cheese blocks closed the fourth Friday in September at $1.7275 per pound, down a nickel on the week, and 2 1/4-cents below a year ago. The 500-pound barrels closed at $1.7075, down a penny and a quarter on the week, and 2 3/4-cents below a year ago. Twenty-five cars of block traded hands on the week and 22 of barrel. The NASS-surveyed U.S. average block price fell to $1.8159, down 5.9 cents, and the barrels averaged $1.7815, down 2.2 cents.

Spot butter closed Friday at $1.77, down another 13 1/4-cents on the week, and 46 cents below a year ago. It has lost 23 1/2-cents in four weeks. Three cars found new homes this week. NASS butter averaged $1.9393, down 9.6 cents.

Cash Grade A nonfat dry milk held all week at $1.49 while the Extra Grade lost 3 cents, slipping to $1.58. NASS powder averaged $1.5364, down 2.1 cents, and dry whey averaged 59.08 cents, up 0.2 cent.

The October Federal order Class I base milk price was announced by USDA at $19.56 per hundredweight, down $2.22 from September, but still $2.98 above October 2010. It equates to about $1.68 per gallon and pulled the 2011 average down to $19.26, still $4.26 above a year ago at this time, and $8.17 above 2009.

No MILC payment to producers is expected for October but is possible for November and/or December, according to our sources. There have been no MILC payments since October 2009.

International markets

The Global Dairy Trade (Fonterra) auction index dropped to its lowest level in more than a year with large declines in anhydrous milk fat and skim milk powder, according to the CME's Daily Dairy Report. The weighted average price for AMF was $1.74 per pound, down 11.2 percent from the September 6 auction and the lowest price since AMF came on the auction in November 2009. SMP was $1.47 per pound, down 6.2 percent from the previous event. Whole milk powder and cheese were slightly higher. The WMP price was $1.52, up 1.1 percent.

The Global Dairy Trade (Fonterra) auction index dropped to its lowest level in more than a year with large declines in anhydrous milk fat and skim milk powder, according to the CME's Daily Dairy Report. The weighted average price for AMF was $1.74 per pound, down 11.2 percent from the September 6 auction and the lowest price since AMF came on the auction in November 2009. SMP was $1.47 per pound, down 6.2 percent from the previous event. Whole milk powder and cheese were slightly higher. The WMP price was $1.52, up 1.1 percent.

Cheddar cheese for industrial use received an average winning bid of $1.84 per pound, up 0.6 percent from the prior auction. The trade-weighted average price for all products was down 2.1 percent from the previous event, the seventh straight decline, according to the DDR.

Weather is playing a role in contracting milk supplies across many countries in Western Europe. Hot and dry weather in recent weeks has lowered milk production and the rate of increase has narrowed. Season ending volumes are now closer to year ago levels. Currency declines have affected export potential, making products more likely to be exported at lower relative value.