DairyProfit Update for April 28, 2012

Bill seeks to halt EPA efforts to expand CWA regulation

Legislation designed to halt the U.S. Environmental Protection Agency (EPA) and the Army Corps of Engineers attempts to expand federal power under the Clean Water Act (CWA) was introduced on April 27. H.R. 4965 would require a formal rulemaking for any attempt to change the definition of “waters of the United States” and increase the federal government’s power under the CWA. This legislation is almost identical to a Senate bill, the Preserve the Waters of the United States Act, introduced in late March 2012. 

The document triggering the legislation was draft CWA jurisdictional guidance, proposed by EPA and the Corps in April 2011 and expected to be finalized soon. In February, EPA and the Corps sent a final guidance document, titled “Guidance on Identifying Waters Protected by the Clean Water Act” to the Office of Management and Budget for regulatory review.  

Critics say the guidance essentially attempts to give EPA and the Corps jurisdiction over all types of waters, including occasionally wet areas and land use decisions not previously subject to federal regulation. 

 

Northeast dairies regained footing in 2011

Northeast dairy farmers were able to regain some financial footing in 2011, according to Farm Credit East, the region’s largest agricultural lending cooperative. The information comes from Farm Credit’s 2011 Northeast Dairy Farm Summary report, which reviewed financial information from 532 participating dairy farms from New York, New England and New Jersey.

The Dairy Farm Summary results show net earnings per cow for dairy farms participating increased $401/cow, to $797/cow in 2011, up from $396/cow in 2010. For the second year in a row, cash flow on participating dairy farms was adequate to meet financial commitments including operating expenses, debt repayment, family living, and income taxes.

Farm Credit East will host a webinar for dairy farmers and others on April 30, noon-1 p.m., to discuss the results of this year’s report. The webinar is free to participants. Visit FarmCreditEast.com/webinars for registration information. 

For further highlights on the 2011 Northeast Dairy Farm Summary, or to purchase a copy, interested parties can check FarmCreditEast.com. 

 

April IOFC declines in Wisconsin

Wisconsin dairy producers’ estimated income over feed costs (IOFC) declined in April, according to Ken Bolton, with UW-Extension’s Center for Dairy Profitability.

The April IOFC declined 41¢/cwt., to $8.25/cwt. for a Wisconsin herd with an annual production average of 22,000 lbs. of milk per cow. The decline continues a four-month trend since peaking at $12.56/cwt. in December 2011. April’s estimated income over total variable costs for the same herd was $6.11/cwt.

Leading to the April decline was a drop in the estimated milk price, combined with higher costs for soybean meal and hay. Corn prices also declined.

According to Bolton, the April predicted Wisconsin mailbox price is $16.79/cwt., down 35¢ from March. As of April 19, a Milk Income Loss Contract (MILC) payment of 80.08¢/cwt was predicted for April milk.

The April total ration forage price (corn silage/hay, as fed) is $108.80/blended ton, up from $106.68/blended ton in March. Feed cost per dollar of milk revenue increased 2¢, from 49¢ in March to 51¢ in April.

For further information, contact Ken Bolton via e-mail, kenneth.bolton@ces.uwex.edu.

 

Study looks at factors impacting global dairy processor margins in volatile times

Which dairy processors managed to maintain or increase margins in times of extreme price volatility? A recent study by Rabobank Netherlands provides some interesting results, according to Case Dorresteyn, Dairy and Relocation Consultant with the 

Wisconsin Dairy Business Innovation Center.

Covering the time period of 2006-2010, the study compared five groups of dairy processors around the globe. Companies were the least affected if price increases could be quickly implemented, if they sold value-added products, or if operational costs could be reduced. The study concluded companies with the strongest brands easily weathered the storm. 

Cheese producers struggled in 2008, unable to increase cheese prices despite of increased cost of milk. They also battled strongly reduced sales and large inventories. However, they are in better shape as a result of more efficient production techniques and improved logistics, and better market strategies for whey. 

Large fluid bottlers, cooperatives and Chinese/Southeast Asia companies are also analyzed.

The bank predicts processors with the fast moving consumer goods will continue to be the ones to realize better margins. Furthermore they claim that the gap with cheese producers, milk bottlers and cooperatives will widen unless these companies regroup and make smart business decisions.

 

MARKETS: Cheese up; powder down; Class III lower

Friday's market closing prices:

Cheddar barrels: up 1.5¢, to $1.4350/lb.

Cheddar blocks: up 0.75¢, to $1.5350/lb.

Butter: unchanged, at $1.36/lb.

Extra Grade nonfat dry milk: down 1.0¢, to $1.1075/lb.

Grade A nonfat dry milk: down 1.0¢, to $1.1475/lb.

Class III milk: slightly lower, July 2012-January 2013. Based on current closing prices, the 2012 average is $15.61/cwt.; 2013 average is $15.85/cwt. 

 

Corn, soy futures higher

Corn: +4¢ to +29¢/bushel through December 2012. The 2012 average is $5.92/bu.; 2013 average is $5.52/bu.

Soybeans: +3¢ to +15¢ through November 2012. The 2012 average is $14.46/bu.; 2013 average is $13.03/bu.

Soybean meal: +$2.10 to +$7.80 through December 2012. The 2012 average is $402.78/ton; 2013 average is $340.03/ton.