The cheese price roller coaster took a dip the second week of October, closing that Friday with the blocks at $1.43 per pound, down 7 1/4-cents on the week, and 36 cents below that week a year ago when they lost 9 cents. The barrels, after gaining 2 3/4 cents on Monday, gave it back Friday, to also close at $1.43, unchanged on the week, but 47 cents below a year ago. Twenty four cars of block were sold on the week and two of barrel. The NASS U.S. average block price jumped 5.6 cents, to $1.3661. Barrel averaged $1.3893, up 4.7 cents.
Butter closed at $1.2425, up a half-cent on the week but 49 3/4-cents below a year ago. Six cars were sold. NASS butter averaged $1.2310, up 2.5 cents.
Cash Grade A nonfat dry milk tacked on another 3 1/2-cents this week, closing Friday at $1.3150. Extra Grade closed at $1.26, up 4 cents. NASS powder averaged $1.0162, up a half-cent. Dry whey averaged 31.74 cents, up 1.6 cents.
Dairy Export Incentive Program bid acceptances included 145,504 pounds of mozzarella cheese, 165,345 pounds of butter.
Downes-O'Neill dairy economist Bill Brooks said the barrel cheese market was getting pulled up with the block market to narrow the spread because "seasonally we're at a time when there's not a lot of demand for barrels but buyers are anticipating yearend holidays, a good demand time for products that come out of block cheese." But he warned that "we're starting to see price resistance in cheese."
When asked why cash nonfat dry milk has been bid up so much when the government has product in storage that's a lot cheaper, Brooks replied that the government is not letting go of it and is using it to trade for other food products. A big factor is the lack of production in California, where over 30 percent of the butter and over 50 percent of the powder is produced. Their production has been down almost 4 percent from a year ago through August, he said.
The domestic market is tight and the world market has tightened, according to Brooks. Australia's and especially New Zealand's milk production at the beginning of their season wasn't at the level they expected. That has since caught up, and "they'll be producing more milk down there."
August U.S. dairy exports were the highest of the year, according to the CME's Daily Dairy Report, but still 44 percent below a year ago. Skim milk powder exports were off 21.4 percent, indicative of global economics, according to Brooks, plus there's been a rebound in production of nonfat powder throughout the world so, even though things are improving economically, jobs are still a concern in Brook's estimation.
That drew traders back into the market, he said, as prices bottomed out.
"We're still below last year's levels, our milk production hasn't dropped very much, and we got used to moving that product offshore," Brooks said. "A lot of it got backed up into the U.S. and sold to the government through the price support program or the DEIP."
That, plus the excess in the world market, produced a small uptick in dairy product imports, Brooks said.
Speaking of milk prices
California's November Class I milk price is $15.04 per hundredweight for the north and $15.31 for the south. Both are up $1.29 from October but are $3.68 and $3.69 respectively below a year ago. The federal order Class I base price is announced Oct. 23.
The Agriculture Department's latest Livestock, Dairy, and Poultry Outlook said the number of cows in the national herd has shown a month-over-month decline since January, and the year-over-year decline in cow numbers more than offset the incrementally rising output per cow in the second half of the year. The prospects for the rest of 2009 and 2010 are for cow numbers to continue to decline and for production per animal to continue increasing. In 2010, the U.S. dairy herd is expected to average below 9 million for the year.
The production increase per cow per day is expected to be about 1 percent in 2009, well below the five-year-average rise. In 2010, production per cow is expected to rise by 1.8 percent during the year, above the five-year average.
The recovery in production per cow next year is predicated on forecast lower corn and soybean meal prices in 2010, according to USDA, and in a special extra report, it was pointed out that the present dairy crisis may rank as at least a close second, as the worst dairy crisis in more than 35 years. The report goes on to say that it shares one characteristic with the crisis of 1972-1977 and has one important difference.
The similarity is that both crises were at least partially precipitated by sharp increases in dairy feed costs. Feed costs had been relatively stable from January 1970 through the fall of 1972. However, as news of sudden and significant feed and food grain purchases by the former Soviet Union as a result of several years of poor harvests emerged in late 1972, feed prices began to sharply increase.
The major difference between the current dairy crisis and the 1972-1977crisis is that this year's collapse in the all milk price was brought about partially by the collapse in world demand and partly by decreased domestic demand as a result of the U.S. recession. See Dairyline.com for compete details.
Financially struggling dairy farmers await President Barack Obama's signature on legislation passed by Congress to help, but debate continues as to how to distribute the $290 million in discretionary emergency aid contained in the fiscal year 2010 agriculture appropriations bill.
You'll recall that Congress approved $350 million but designated $60 million to purchase cheese for food banks and feeding programs, leaving distribution of the remaining funds to the discretion of U.S. Agriculture Secretary Tom Vilsack.
Suggestions include everything from purchasing additional dairy products to raising product price support levels, or adding supplemental payments to existing programs, such as the Milk Income Loss Contract program, according to Dairy Profit Weekly editor Dave Natzke.
The National Family Farm Coalition held a press conference Tuesday, Oct. 13, urging Vilsack to make direct payments to farmers. The coalition warned that, unless the government changes the milk pricing system and enforces dairy processor antitrust measures, the emergency aid would do little to help farmers survive. The organization also called for legislation to establish a supply management program and a minimum milk price that covered farmers' cost of production.
Western United Dairymen said distribution of emergency aid that does not consider production levels would be unfair to California farmers, who tend to have larger herds and produce more milk. Under various scenarios outlined by Western United, distribution to California dairy farmers could range from about 3 to 21 percent of the $290 million, or a range of $4,000 to $35,000 per producer.
Dairy farmer members of Dairylea, the largest dairy co-op in the Northeast, received better news at their annual meeting this week in New York. CEO Greg Wickham forecast milk prices should increase steadily, hitting a blend price of about $16 per hundredweight by December, and $20 in the latter half of 2010.
"That's good news, indeed, for dairy farmers suffering through this long stretch of low milk prices," Natzke said.
Thursday, Oct. 15, was the deadline for Cooperatives Working Together members to submit a bid to participate in the current herd removal. National Milk's Chris Galen said that they will soon know how many farms participated. CWT staff will work with accountants to arrange the bids from the lowest to the maximum $5.25 per hundredweight and keep accepting bids until they run out of bids or money.
Galen also previewed next month's annual meeting under the theme, "Building Partnerships, Building Opportunities Now More Than Ever." He admitted it will be a challenging meeting because it comes at a time when farmers have had a horrible 2009 financially, but there is light at the end of the tunnel. There'll be a lot of discussion about long-term ideas for the industry.
Partnerships will be a topic. Dave Brandon, CEO of Domino's Pizza, will be one of the featured speakers along with some political figures, including a senior USDA official or senior members of the House or Senate. There'll be a presentation of the Federation's "Foundation for the Future," National Milk's long term planning process, which Galen said, "seeks to use the current dairy crisis to make necessary changes in the economic structure of the dairy industry."
Dairy producers can find extra income from a program provided by the Beef Checkoff's Beef Quality Assurance program. One such producer is Phoebe Bitler, a Pennsylvania dairy producer and Pennsylvania Beef Council member.
Referred to as a Market Cow and Bull Audit, Bitler said that the program looks at what the animals are going through. The team examines what kind of issues need to be addressed on each farm. The survey is conducted about every four years, she said.
"They have a track record to look at the animals that were coming in four years ago and see what we as producers have improved on and or we what need to continue to address," Bitler said.
Injection location is one of the issues looked at, she said. The last audit showed Bitler's dairy was experiencing some issues with lameness and body condition, so that was addressed.
A check received on a cow with really good body condition, termed a "white cow," resulted in considerably more money, Bitler said. That prompted them to "recondition" a number of their animals by removing them from the milking string and the daily stress that entails. She said that, if it's done a number of days before sending the cows to slaughter, they receive a higher price and that adds to the bottom line -- 5, 10, or 15 cents more per pound.
Dairy Management Inc. CEO Tom Gallagher discussed the dairy checkoff partnership with McDonald's and pointed out that, a year ago, he and his team realized dairy farmers were moving into an extremely difficult period regarding their bottom line. They sought partnerships that would increase dairy sales in both the short term and long term.
McDonald's was introducing their "McCafe" and invested $100,000 per store.
"If we could enter into an agreement with them in developing products," Gallagher said, "they would put into the McCafe and make sure they were dairy based and only dairy based, and use as much dairy as possible."
The checkoff entered into an agreement with McDonald's to help in their menu development, not just for beverages but also some cheese items that will be introduced over the next three years. McDonald's will put $1 billion over the next three years into marketing the McCafe concept and the milk-based beverages the checkoff helped develop, he said.
Lee Mielke is a syndicated columnist and farm broadcaster based in Lynden, Wash. For more Dairyline go to www.capitalpress.com and click on "Dairy."