USDA back to work; farm bill on deck

Lee Mielke

The recent government shutdown resulted in several USDA reports being canceled or postponed. The October World Agricultural Supply and Demand Estimates and Crop Production reports were canceled but this month’s Livestock, Dairy, and Poultry Outlook was released Friday as scheduled but after our deadline.

The August Dairy Products report, which was to be released Oct. 3, was planned to be out Oct. 21.

The Oct. 21 September Milk Production report will be issued Nov. 1. The Oct. 22 September Cold Storage report will be released Oct. 31, and the Oct. 24 Livestock Slaughter report will be out Oct. 31, along with the monthly Ag Prices report.

In dairy politics, Dairy Business Update (DBU) reports that Republican and Democratic House members who will serve on the House-Senate Conference Committee, tasked with resolving differences between the House and Senate-passed farm bills, have been named and included 17 Republican conferees and 11 Democratic members. Interestingly, neither Reps. Bob Goodlatte, R‐Va., nor Dave Scott, D‐Ga., architects of the so-called Dairy Freedom Act — the House amendment that strips the Dairy Market Stabilization Program from proposed dairy policy — were named to the committee.

Appointed House members who serve on the Foreign Affairs Committee and Ways and Means Committee negotiate only specific sections of the Farm Bill. On Oct. 11, the House passed a motion to go to conference with the Senate.

The National Milk Producers Federation praised the action, stating in a press release, “We commend the leadership of the House of Representatives for taking the next crucial step towards completing a new farm bill, and creating a new and better safety net for dairy farmers.”

“The Senate’s bipartisan Dairy Security Act is the only program designed to both help farmers when they need it most, while also limiting taxpayers’ liability through its market stabilization mechanism,” NMPF said. “Without the market stabilization program, farmers will continue to suffer prolonged periods of poor margins, while taxpayers will subsidize artificially low milk prices.”

But a proposal by two Ohio State University dairy economists, John Newton and Cam Thraen, called “MILC and Honey,” is getting attention. They say it’s a “retooled dairy farm safety net that works for small- and large-scale dairy farm managers, is fiscally responsible, does not mute market supply-and-demand signals and does not require a market stabilization program.”

The plan allows dairy producers an option to choose annually between Milk Income Loss Contract (MILC) program participation or a stand-alone margin insurance program as their safety net.

The University of Minnesota’s Marin Bozic said the proposal “gives dairy producers a genuine choice.”

“Dairy producers that grow most of their feed can continue to use the MILC program to protect milk revenue and those that have feed risk exposure can choose the new margin insurance,” he said.

The program is more conservative, according to Bozic, and limits margin coverage to $6.50 per hundredweight (cwt.), a level Bozic says “will work very well as a safety net against deep losses, but does not cover shallow losses, as some risk is needed for dairy markets to function properly.”

“The Ohio proposal certainly reduces the need for the stabilization program,” Bozic said, “but I do not think it will end all debates. Proponents of the Dairy Security Act will continue to argue that we need incentives to accelerate margin recovery when margins are low. What I would say is that, if you had to drop the stabilization program for political reasons, the Ohio proposal is the most meaningful alternative to the Dairy Security Act I have seen to date.”

When asked if the proposal is a “Johnny-come-lately,” Bozic answered, “No, the MILC was a Johnny-come-lately, and now it is the foundation of our dairy policy.”

While Bozic is convinced the proposal has strong merit, he stopped short of endorsing it, concluding, “We should consider the Ohio proposal seriously.”

The nation’s largest dairy cooperative will get even bigger. Dairylea Cooperative, Inc.’s Board of Directors has voted to merge with Dairy Farmers of America (DFA). The proposal, presented to members at Dairylea’s annual meeting this week, reflects a desire to “position Dairylea for the future amid rapidly evolving market dynamics,” according to a joint press release. The proposed merger requires approval by Dairylea’s members, who will be asked to vote during a special meeting in February 2014.

Cash Cheddar block closed Friday in Chicago at $1.8575 per pound, up 5 3/4-cents on the week but 14 1/4-cents below a year ago when they plunged a dime, to $2 per pound. The barrels finished at $1.7625, down a quarter-cent on the week, 15 1/2-cents below a year ago, and an atypical 9 1/2-cents below the blocks. Eight cars of block traded hands on the week and four of barrel.

Butter keeps dropping, closing Friday at $1.4825, down 6 cents on the week and 39 3/4-cents below a year ago. Sixteen cars found news homes this week.

Cash Grade A nonfat dry milk finished at $1.86, up 1.5 cents on the week, and Extra Grade closed at $1.82, up 2 cents.

The industry heard some good news this week at the U.S. Dairy Export Council’s (USDEC) annual board and membership meeting in Chicago. USDEC projects that by the end of this year the value of U.S. dairy exports will total $6.5 billion, up more than 25 percent from 2012 and “barring a dramatic change in markets, 2013 will mark a fourth consecutive record year for U.S. dairy exports.”

USDEC president Tom Suber credited U.S. suppliers and traders, who are “showing more ambition, more commitment and more capability to pursue export markets.” He told attendees that U.S. exporters have capitalized on the reduced supply from other countries, steady global dairy demand and favorable pricing and that more than 15 percent of U.S. milk production now goes to exports.

Tim Hunt, global dairy strategist for Rabobank, said a global shortage of dairy products is expected to continue, driving continued growth for U.S. exports in 2014. He stated that “in the next six months, the U.S. is likely to be the region with the most additional supply available to grow exports.”

“In addition, the U.S. looks to be entering a period of enhanced competitiveness,” he said. Key buyers, most notably China, are looking to diversify their supply, according to Hunt, “therefore, the time is right to vigorously pursue export development.”

Cooperatives Working Together (CWT) accepted seven requests for export assistance this week to sell 2.4 million pounds of cheese and 440,925 pounds of butter to customers in Asia, Europe, the Middle East and North Africa.

Prices on Tuesday’s GlobalDairyTrade (GDT) were mostly lower, according to eDairy’s Insider Closing Bell. The weighted average price for all products fell 1.9 percent, and five of the nine prices were lower than the previous auction.

Leading the price declines was buttermilk powder, down 5.2 percent to $2.1228 per pound, followed by butter, off 3.5 percent, to $1.7146 per pound or $1.6728, adjusted for 80 percent fat); whole milk powder, off 2.9 percent, to $2.2943 per pound; cheddar cheese, down 1.7 percent, to $1.9622 per pound; and anhydrous milkfat, off 1.2 percent, to $2.2711 per pound. Lactose prices were unchanged.

The remaining products were higher, led by milk protein concentrate 70, up 1.7 percent, to $3.357 per pound; rennet casein, up 1.5 percent, to $4.4815 per pound; and skim milk powder, up 0.7 percent, to $2.0598 per pound.

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