DairyProfit Update for June 20, 2012
Senate Farm Bill amendment voting continues
As of 3 p.m. (Central) Wednesday afternoon, the Senate had posted roll call votes on fewer than half of 73 amendments being considered to the 2012 Farm Bill proposal (Agriculture Reform, Food, and Jobs Act of 2012, S. 3240).
Dairy-related amendments considered so far included:
• amendment 2276, from Sen. Jim DeMint, prohibiting mandatory or compulsory checkoff programs, was rejected, 79-20.
• amendment 2238, from Sen. Robert Casey, requiring a study of the feasibility of establishing 2 classes of milk, a fluid class and a manufacturing class, to replace the 4-class federal order system, was approved, 73-26.
• amendment 2190, from Sen. Olympia Snowe, requiring federal milk marketing reforms, including elimination of end-product pricing formulas, was approved, 66-33.
A record of roll call votes taken on each amendment can be found here.
Further appreciation in the value of the U.S. Dollar is a “bigger picture” risk for U.S. dairy prices, according to Stewart-Peterson’s Matt Mattke. As exports of U.S. dairy products have increased dramatically in importance over the last decade, the importance of the direction of the U.S. Dollar has increased dramatically, as well.
One example of the impact a rising or falling U.S. Dollar can have is on the price of U.S. cheddar. Between July 2011 and May 2012, the U.S. Dollar Index increased from 73.89 to 83.04, an increase of 12%, while the price of U.S. cheddar cheese declined 27%.
Going back to 1999 there have been four significant rallies in the value of the U.S. Dollar. These rallies have ranged in magnitude from about 11% to 19%, with the average increase of about 16%. During these same periods, the value of U.S. cheddar declined by 41% to 52% in three of the four instances, and declined by nearly 13% in the other instance.
USDA’s national dairy products sales report for the week ending June 16:
• Grade AA butter prices received for 25-kilogram and 68-lb. boxes averaged $1.39/lb., up 2.0¢ from the previous week.
• 40-lb. cheddar cheese blocks averaged $1.59/lb., up 3.6¢; and 500-lb. cheddar barrels, adjusted to 38% moisture, averaged $1.55/lb., up 1.8¢.
• Extra Grade dry whey averaged 50.8¢/lb., up 0.5¢.
• USDA Extra Grade and Grade A nonfat dry milk averaged $1.10/lb., down 0.2¢.
July Class I base higher
The July 2012 federal order Class I base milk price is $15.51/cwt., up 27¢ from June 2012, but $5.52 less than July 2011. Through the first seven months of 2012, the Class I base average is $16.34/cwt., down $2.21 from $18.55/cwt. for the same period of 2011.
June IOFC improves in Wisconsin
Wisconsin dairy producers’ estimated income over feed costs (IOFC) will reverse a five-month decline, improving slightly in June, according to Ken Bolton, with UW-Extension’s Center for Dairy Profitability.
The estimated June IOFC increased 38¢/cwt., to $7.95/cwt. for a Wisconsin herd with an annual production average of 22,000 lbs. of milk per cow. Despite the improvement, June marks the second month during 2012 with IOFC below $8.00/ cwt., exceeding the total number months (one) it occurred in 2011 and 2010. A total of eight months (of 11 evaluated) had an IOFC below $8.00/cwt. during 2009.
According to Bolton, the June predicted Wisconsin mailbox price is $16.65/cwt., up 34¢ from May. A Milk Income Loss Contract (MILC) payment of $1.00/cwt. was predicted for June milk.
Price increases for soybean meal and hay were marginally offset by lower corn silage and corn prices in use. The total ration forage price fell overall to $110.46/blended ton of corn silage/hay (as fed), down from $113.05/blended ton in May. Feed cost per dollar of milk revenue declined from 54¢ to 52¢. May’s estimated income over total variable costs for the same herd was $5.81/cwt.
Pennsylvania’s May 2012 milk income over feed costs (IOFC) fell by 7¢/cow/day (-1.2%) from April, to $5.87/cow/day, according to Penn State dairy economist Jim Dunn. The May Pennsylvania all-milk price was down 60¢/cwt., to $17.80/cwt. At $5.70, average daily feed costs (at 65 lbs. of milk/cow/day) were down 32¢ from the previous month.
Measured another way, feed costs per hundredweight of milk produced averaged $8.77/cwt., resulting in a milk income margin over feed costs of $9.03/cwt., down 12¢ from April. The milk margin has dropped $4.00/cwt. since December 2011.
MARKETS: Barrels close the gap; Class III mostly higher
Today's market closing prices:
Cheddar barrels: up 3.75¢, to $1.61/lb.
Cheddar blocks: up 0.75¢, to $1.62/lb.
Butter: unchanged, at $1.5450/lb.
Extra Grade nonfat dry milk: unchanged, at $1.16/lb.
Grade A nonfat dry milk: unchanged, at $1.2225/lb.
Class III milk: steady to mostly higher through December 2013. Based on current closing prices, the 2012 average is $16.45/cwt.; 2013 average is $16.33/cwt.
Grain futures slightly higher
Corn: mostly slightly higher through September 2013. The 2012 average is $5.82/bu.; 2013 average is $5.79/bu.
Soybeans: +10¢ to +16¢/bushel through September 2013. The 2012 average is $14.22/bu.; 2013 average is $13.23/bu.
Soybean meal: mostly slightly higher through September 2013. The 2012 average is $419.18/ton; 2013 average is $367.35/ton.