Mielke: Groups demand Congress save dairies

Lee Mielke

By LEE MIELKE

For the Capital Press

The International Dairy Foods Association reports that the largest 1,750 dairy farms now supply more than 50 percent of the U.S. milk supply, according to a new USDA report. One third of the farms, about 19,400 that have fewer than 30 cows, produce only 1 percent of the milk supply.

"Farms, Land in Farms and Livestock Operations 2011" shows that dairy farms with fewer than 100 cows have declined in number and that larger farms with more than 1,000 cows are increasing in size, numbers and percentage of milk production.

"No one should be surprised by these numbers as the decline of small farms and the trend to larger dairy farms has been going on for decades," IDFA's Jerry Slominski said. "What will surprise most people is that the bill endorsed by the House and Senate agriculture leadership, Democrats and Republicans, will actually increase the rate at which small farms are going out of business.

"It's pretty easy to see how the small farms will get squeezed out of business faster by this new government program," he said. "The solution is to offer dairy farmers the same opportunity for catastrophic and revenue insurance that is being offered to other farmers. Congress expects to spend $90 billion over the next 10 years on such insurance programs for other commodities but refuses to budget any of this for dairy farmers."

Meanwhile, 26 local, state, and national organizations sent a letter in early February to members of Congress, calling on them to take immediate action in response to the crisis affecting dairy farmers.

Paul Rozwadowski, Wisconsin dairy farmer and chair of the National Family Farm Coalition NFFC Dairy Subcommittee, stated, "We are asking Congress to administer a temporary floor price of $20.00 because it is so badly needed to keep the remaining 49,000 dairy farmers in business."

He called on Congress, as it writes the new farm bill, to "take into consideration the farmers' costs of producing raw milk and establish a pricing system that will reflect it, along with a supply management system based on the proposals in S. 1640, the Federal Milk Marketing Improvement Act of 2011." For more details, log on to www.nffc.net .

Settlement and trials

Dairy farmers in 14 southeastern states have until May 1 to file claims for a portion of the $145 million settlement agreement with Dean Foods and the Southern Marketing Agency. DPW editor Dave Natzke reported in Friday's DairyLine that "the settlement, approved in a federal class-action antitrust lawsuit over fluid milk marketing practices, means more than 7,000 dairy farmers may be eligible for a financial award, prorated based on their milk production total."

Attorneys' fees are expected to take about a third of the settlement, according to Natzke. Procedures are posted at www.southeastdairyclass.com.

The trial date for remaining defendants -- Dairy Farmers of America, National Dairy Holdings, LP (NDH), Dairy Marketing Services LLC, Mid-Am Capital LLC, and former DFA CEO Gary Hanman -- is July 10.

Disparity claims

Natzke also addressed the disparity between milk prices in California, which has its own state market order, and prices paid in federal market orders covering most of the rest the country. The California Department of Food and Agriculture, which denied recent petitions to consider changes to milk pricing formulas, has now scheduled meetings in March and April between processors and farmers to discuss those and other issues, Natzke reported. All meetings will be held in Sacramento. For more information, visit www.cdfa.ca.gov/dairy/meetings.html

Production trends

Milk production continues to trend higher across most of the U.S., according to USDA. Class I interest is mainly flat with accounts taking planned volumes of fluid milk. Processors and handlers are seeing unusually heavy milk supplies in the Northeast and Mid-Atlantic states. The Southeast is also seeing milk output build and the seasonal balancing plants are active.

Milk supplies in the Midwest are building on a week-to-week basis. Surplus offerings are available and continue to trade at a discount to class price. Milk output continues to build in the Southwest and stretch plant capacity in Arizona and California. Northwest and Mountain States production is building higher with better than normal weather a contributing factor.

Profits

Dairy Profit Weekly says dairy profitability took a hit in February based USDA's latest Ag Prices report, which indicated some stark contrasts between the earning power of milk cows and the cash value of cull cows.

Higher corn, soybean and high prices, combined with lower U.S. average milk prices, sent the February 2012 milk-feed price ratio to its lowest level since July 2009, according to DPW. The index, at just 1.58, was down from January revised estimate of 1.72, and February 2011's 2.01. The index is based on the current milk price in relationship to feed prices for a ration of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. At $17.90 per hundredweight, the average milk price is the lowest in 13 months.

Compared to July 2009, the February 2012 index got this low in a slightly different manner, according to DPW, markedly higher feed costs. In 2009, the 1.57 index came about from a milk price of just $11.30 per hundredweight.

Rising feed costs and declining milk prices are expected to result in Milk Income Loss Contract payments in 2012 according to the CME's Daily Dairy Report. It quoted estimates from the University of Wisconsin's Brian Gould, who says MILC payments could range from 44 cents in March to almost $1 per hundredweight in June based upon estimated milk and feed costs.

February 2012 cull cow (beef and dairy combined) prices rose above $80 per hundredweight, likely the highest on record, according to USDA's preliminary estimates. February prices averaged $80.10 per hundredweight, up $5.50 from January 2012's revised estimate of $74.60, and $7.60 per hundredweight higher than February 2011. The February 2012 average puts the beef value of a 1,200-pound cull cow at $961 per head. USDA also said replacement cows averaged $1,420 per head in 2011, up about $90 from 2010.

Dairy prices

Farm milk prices dropped for the second month in a row. The Agriculture Department announced the February federal order benchmark Class III price at $16.06 per hundredweight, down 99 cents from January, 94 cents below February 2011, $2.64 above California's comparable 4b cheese milk price, and equates to about $1.38 per gallon. Class III futures show additional slippage ahead and were trading late Friday morning with the March contract at $15.27; April, $14.97; May, $15.02; June, $15.46; with a peak of $16.40 in October. The February Class IV price is $15.92, down 64 cents from January and $2.48 below a year ago.

The four-week NASS-surveyed cheese price averaged $1.5410 per pound, down 6.9 cents from January. Butter averaged $1.4712, down 11.9 cents. Nonfat dry milk averaged $1.3792, down a penny and a half, and dry whey averaged 64 cents per pound, down 4.8 cents.

California's corresponding 4b cheese milk price is $13.42, down 81 cents from January, and $3.50 below a year ago The 4a butter-powder price is $15.51, down 67 cents from January and $2.37 below a year ago.

Cheese news

There weren't a lot of government reports for the cash dairy markets to chew on this week as the markets awaited Friday afternoon's January Dairy Products report. The cheese closed the first Friday of March on a down note but up on the week, with the blocks at $1.48 per pound, up 1 1/4-cents on the week but 54 cents below a year ago. The barrels also closed at $1.48, up a penny on the week and 50 cents below a year ago. Twenty-one cars of block traded hands on the week (13 on Friday) and eight of barrel. The NASS U.S. average block price fell to $1.4940, down 1.1 cent. The barrels averaged $1.5143 also down 1.1 cent.

Cheese production continues to be active as increased milk supplies are arriving at manufacturing facilities, according to USDA's weekly update.

"Higher than anticipated milk supplies and favorable yields are adding to current cheese production," it said, but retailers are featuring increased cheese ads in many parts of the country.

"This is helping to clear inventories," according to USDA, and increased pizza sales and retail features have combined to support mozzarella sales. Buyers looking to build stocks for aging programs are also showing better interest. Excess production is being offered to the export market.

Cooperatives Working Together accepted 20 requests for export assistance this week to sell a total of 2.489 million pounds of cheddar, Gouda and Monterey Jack cheese and 3.053 million pounds of butter to customers in Asia, Central America, the Middle East and North Africa. The product will be delivered through June and raised 2012 cheese exports to 26.9 million pounds and butter to 23 million to 16 countries. That's a pretty good amount of cheese to remove from the domestic market.

Butter and dry milk

Cash butter saw some ups and downs, gaining almost 7 cents on Thursday after dropping 2 1/4 on Monday, but gave some back Friday to close at $1.45, up 3 1/4 on the week but 66 3/4-cents below a year ago when butter jumped almost a dime on the week and hit $2.1175. It peaked May 26 at $2.18. Eighteen cars found new homes on the week. NASS butter averaged $1.4192, down 2.2 cents.

Butter made before Dec. 1, 2011, is no longer eligible to trade on the CME. Easter/Passover demand is likely strengthening the price however butter production is heavy across the country as cream supplies remain plentiful and building, according to USDA. Demand for both bulk and print butter is fair to good. There have been some increases in cream usage in Class II manufacturing for ice cream, sour cream, cream cheese, and dips, ahead of the upcoming holiday needs. This is taking additional cream supplies and is a welcome reprieve for butter makers says USDA's Dairy Market News.

Cash Grade A nonfat dry milk inched a half-cent lower, slipping to $1.2875. Extra Grade closed at $1.2775, down 2 cents. NASS powder averaged $1.3681, up a half-cent, and dry whey averaged 61.13 cents, down 2.9 cents.

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