Dairyline: Butter stocks weigh on market

Lee Mielke

By LEE MIELKE

For the Capital Press

December butter stocks totaled 133.7 million pounds, down 9 million pounds or 6 percent from November but 14.7 million pounds or 12 percent above December 2008, according to the Agriculture Department's latest Cold Storage report.

American cheese, at 586.8 million pounds, was up 3.7 million pounds or 1 percent from November and 48.7 million or 9 percent above a year ago.

Total cheese stocks amounted to 966.9 million pounds, up 5.2 million pounds or 1 percent from November, and 114.9 million or 13 percent above a year ago.

The cash market saw block cheese move higher for the third week in a row while butter and nonfat dry milk plunged the final week of January. Cash block closed Friday at $1.5150 per pound, up 3 1/2-cents on the week and 36 1/2-cents above a year ago. Barrel closed at $1.5050, unchanged on the week, and 39 cents above a year ago. Ten carloads of each traded hands on the week. The NASS-surveyed block price averaged $1.4644 across the U.S., down 8.4 cents. Barrel averaged $1.4769, down 0.3 cent.

Butter closed the week at $1.33, 13 3/4-cents below the previous week, but 22 3/4-cents above a year ago. Thirteen cars were sold on the week. NASS butter averaged $1.3854, up 4.6 cents.

Cash Grade A nonfat dry milk closed Friday at $1.19, down 11 cents, and Extra Grade closed at $1.24, down 6 cents. NASS powder averaged $1.0917, down a whopping 19.6 cents, and dry whey averaged 38.66 cents, down 0.3 cent.

Uneven recovery

Alan Levitt, editor of the CME's Daily Dairy Report, said we're seeing "an uneven recovery in the markets."

"They're still unsettled," he said, and he expects ups and downs for the next couple months.

He didn't see a big influence in Monday's trading from Friday's Cold Storage report. Cheese and butter stocks are well above a year ago and hang over the market, he reasoned, and may be the reason the recovery is uneven.

He didn't see a big influence in Monday's trading from Friday's Cold Storage report. Cheese and butter stocks are well above a year ago and hang over the market, he reasoned, and may be the reason the recovery is uneven.

Another issue, according to Levitt, is that, even though milk production nationally was down more than a half percent in the second half of 2009, output in Wisconsin and Minnesota was actually up about 4 percent where most of the milk goes to cheese and is skewed toward American type.

"We may not see those cheese stocks go down as quickly as we otherwise might, given where milk production is trending," he said.

Commenting on the drop in powder prices, Levitt said much of that is based on what's going on globally and the global markets have softened since December. In the last six weeks, cheese, butter, and powder prices are down 15 to 20 cents per pound, he said.

"It seems like, once we got through the holidays buyers got into a pause mode, waiting to see what happens to the spring flush in the U.S. and Europe before buying too far ahead," he said.

Lending some more insight, the DDR reported that November commercial disappearance of American cheese was down 7.7 percent from a year ago, the first negative percent change versus the prior year on a rolling three month average in 15 months. Butter disappearance was down 12 percent, nonfat dry milk and skim powder was off 7.4 percent, while dry whey was up 3.3 percent.

In politics

A coalition of 138 agricultural organizations, including National Milk, have sent a letter to Sen. Lisa Murkowski, R-Alaska, supporting her introduction of a resolution of disapproval under the Congressional Review Act regarding the decision of the Environmental Protection Agency to move ahead on regulating carbon dioxide and other greenhouse gases under the Clean Air Act.

National Milk's Chris Galen said this is the next step in a process that began late last year when the EPA concluded that greenhouse gases are a danger to public health and moved forward with a process to regulate gas emissions like carbon dioxide and methane under the Clean Air Act.

The letter supports the prevention of EPA from doing this because the agricultural organizations believe the Clean Air Act is not the appropriate way to establish greenhouse gas policy and could lead to a variety of costly unintended consequences. He added that others, not involved in farming, also share this concern and do not favor creation of a carbon tax or anything similar.

The letter points out that the Clean Air Act was never really intended to deal with global warming or to mitigate greenhouse gases, so there is no precedent for this, Galen argued, other than a few years ago the U.S. Supreme Court handed down a ruling stating that the EPA had the power to regulate greenhouse gases.

Galen said they are trying to prevent that from happening and are concerned that another approach to this would be a "cap and trade" system, but it doesn't appear that Congress will move aggressively on that in 2010. The main concern is "making certain the EPA doesn't unilaterally move down a path of unintended consequences by regulating greenhouse gases using the Clean Air Act."

Dean Foods

The U.S. Department of Justice and three states have filed an antitrust lawsuit against Dean Foods, challenging its 2009 acquisition of two milk processing plants in Wisconsin.

Dairy Profit Weekly editor Dave Natzke said the Justice Department has been joined by attorneys general in Wisconsin, Illinois, and Michigan in filing the lawsuit against Dean, the largest fluid milk bottler in the United States. The suit challenges Dean's 2009 purchase of two fluid milk plants from Foremost Farms, a Wisconsin-based dairy cooperative.

The complaint, filed in federal court in the Eastern District of Wisconsin, alleges the transaction will lessen competition in the region's fluid and school milk markets. Court documents say the addition of the two plants has given Deans a 57 percent share of the fluid milk market in the region.

The suit requests Dean's divest assets and interests it acquired when purchasing plants in Waukesha and DePere, Wis. It also asked that Deans be required to give a 30-day notice when making future acquisitions.

Foremost Farms is not named in the suit, Natzke said, and has declined comment, saying it followed all laws and regulations related to the sale. Foremost, with 2,300 dairy farmer members in seven states, continues to provide milk to Dean Foods through a supply contract, according to Natzke.

Dean said it will defend itself vigorously against the complaint, saying the transaction benefitted Wisconsin dairy farmers by providing a stable and growing outlet for their milk, and produced cost savings for its milk customers.

The lawsuit is an outgrowth of antitrust policy changes since the Obama administration took office, according to Natzke. The Department of Justice and USDA have scheduled several public "workshops" beginning this spring to explore competition and regulatory issues in the agriculture industry and kick off with a general workshop in Iowa, in March, followed by a dairy industry workshop set for June in Wisconsin. The workshops will analyze agricultural markets nationally, and look at the discrepancies between the prices received by farmers and the prices paid by consumers, Natzke concluded.

Beef Checkoff

The Beef Checkoff got high marks from another member of the dairy industry this week. Richard Silacci, manager of the dairy farm at Cal Poly, discussed on the air the emphasis on quality and how it applies to farmers. He said the checkoff provides education to the public regarding dairy cows and how they are managed.

"A lot of the news that consumers are seeing is usually negative and that winds up on television and radio," Silacci said. "And with the checkoff dollars we see positive publicity."

Information as to what really goes on, on the farm is made known, he said, "and the good things we do that insure beef quality."

The checkoff also educates farmers and that's what is taught to students at Cal Poly, according to Silacci.

The farm milks about 170 cows of two breeds, he said, and they teach students that, when giving vaccinations or injections, certain sites on the cow are better than others. This improves the quality of the beef when the cow goes to the slaughter house and, in turn, is sold to consumers.

Students are also taught the opportune time to cull a cow, he said, so they don't let a cow get to the point where she is "unhealthy looking and skinny."

Dairy checkoff

About 60 percent of U.S. schools are now enrolled in the "Fuel Up to Play 60" campaign, said Paula Meabon, Pennsylvania dairy producer and vice chair of the National Dairy Board.

The campaign got some extra press at a Jan. 15 news conference which announced the partnership of the USDA, National Dairy Council and the National Football League.

The NFL brings "star power" to the program, Meabon said, and all 32 teams are engaged.

"USDA's stamp of approval makes it a great program to help the youth fight against obesity," Meabon said, "And that's what this program is all about. It's for our kids."

Students can choose from various activities such as a basketball club or a running club, which is a fitness program for 60 minutes a day. Nutrition guidance is also part of the program, she said, and dairy is a big part of that, along with fruits, vegetables, and whole grains. She called it a "win-win for our children."

Lee Mielke is a syndicated columnist and farm broadcaster based in Lynden, Wash. Learn more at www.dairyline.com

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