DairyProfit Update for June 25, 2012
Higher feed costs and slightly higher overhead costs raised average milk production costs in May 2012, according to USDA’s monthly Milk Cost of Production estimates. Cost estimates are based on total costs per hundredweight of milk sold.
Higher purchased and homegrown feed costs led to an overall feed cost of $13.83/cwt., increasing 81¢/cwt. from April and $1.94/cwt. from May 2011. Only fuel and energy costs were down slightly from both a month and year earlier. Overall operating costs (including feed) were up 90¢/cwt. from April and $1.90/cwt. from May 2011.
The preliminary May 2012 average total cost was $24.80/cwt., up 88¢ from April 2012, and $2.17/cwt. more than May 2011.
Milk: May COP
Costs May ’12 April ’12 May ’11
All feed $13.83 $13.02 $11.89
Operating1 $16.90 $16.10 $15.00
Allocated overhead2 $7.90 $7.82 $7.63
Total costs $24.80 $23.92 $22.63
1/ includes feed
2/ includes labor
Source: USDA Economic Research Service
Jerry Kozak, president and CEO of National Milk Producers Federation (NMPF), issued the following statement regarding the U.S. Supreme Court’s mixed decision on Arizona’s immigration law:
“The mixed high court ruling, along with the recent executive order by the Obama administration to stop the deportation of some younger, undocumented individuals, fully illustrates how that, regardless of which path is chosen, the few options for immigration reform remain controversial and divisive. At the same time, these developments also show how critically necessary it is to resolve the immigration policy conundrum, especially for farmers and other employers concerned with maintain and recruiting a workforce.
“The court upheld the law's directive that state and local police may check the immigration status of people they stop when they suspect them of lacking legal authorization to be in the United States. The justices unanimously stated that federal law already requires immigration officials to respond to status checks from local authorities, and therefore federal immigration law does not preempt this section of the Arizona law.
“However, much of SB1070 was overturned as interfering in the federal government’s role as the sole arbiter of immigration law. In a 5-3 ruling, the court said Arizona in effect had tried to set up a parallel enforcement system that punished illegal immigrants more harshly and interfered with congressional authority over the nation's borders. The court rejected parts of the state law that made it a state crime for illegal immigrants to seek work, to fail to carry immigration papers, and that authorized warrantless arrests of people suspected by state and local police of committing deportable offenses.
“This decision highlights the need for continued efforts to reform federal immigration laws, and NMPF will continue to work with regulators and lawmakers to create workable solutions for dairy farmers and their workers.”
Retail dairy prices were down 0.4% in May compared to April, according to USDA analysis of the Consumer Price Index (CPI). The April-May decline follows a 1% decrease from March to April. May 2012 dairy prices remain 2.3% above the May 2011 level.
Within the dairy category, prices changed as follows in May:
• Fluid milk prices were unchanged from April and 0.4% less than last May.
• Cheese prices were down 0.7% from April, but were 2.4% more than May 2011.
• Butter prices increased 1.7% from April, but were 9.9% less than last May.
• Ice cream and related product prices were down 1.1% from the previous month, but up 6.1% compared to a year ago.
Fluid milk prices are expected to remain below the 2011 average 2011, restricting overall dairy retail price inflation for the year.
The May CPI for all food eaten at home was down 0.1% compared to April, but up 2.7% from May 2011. The year-over-year increase in the food-at-home CPI has fallen each month in 2012, indicating that food price inflation has slowed down.
With soybean prices moving higher, market fundamentals have been strong for an extended period of time, according to Darrel Good, University of Illinois ag economist. The strong fundamental factors have included higher exports and domestic consumption, lower U.S. acreage and a smaller South American harvest.
The estimate of June 1 stocks, providing some confirmation about the pace of consumption and likely year-ending stocks, as well as an estimate of U.S. 2012 planted and harvested acreage, will be available from USDA on June 29.
MARKETS: Cheese, Class III futures prices higher
Today's market closing prices:
Butter: unchanged, at $1.52/lb.
Cheddar blocks: up 0.5¢, to $1.63/lb.
Cheddar barrels: up 0.5¢, to $1.64/lb.
Grade A nonfat dry milk: unchanged, at $1.2275/lb.
Extra Grade nonfat dry milk: unchanged, at $1.1900/lb.
Class III milk: 6¢ to 32¢ higher, July 2012 through June 2013. Based on current closing prices, the 2012 average is $16.57/cwt.; 2013 average is $16.39/cwt.
Grain futures sharply higher
Corn: +24¢ to +40¢/bushel through September 2013. The remaining 2012 average is $5.92/bu.; 2013 average is $5.96/bu.
Soybeans: +31¢ to +50¢/bushel through September 2013. The remaining 2012 average is $14.54/bu.; 2013 average is $13.41/bu.
Soybean meal: +$7.60 to +$15.00/ton through September 2013. The remaining 2012 average is $425.50/ton; 2013 average is $371.19/ton.