DairyProfit Update for Nov. 20, 2012

USDA: Farm worker wages follow crop, livestock operation income trends

Strong crop prices translated into higher U.S. farm worker wages this fall, but tight margins in livestock-related operations kept the lid on wage increases for workers employed in those areas, based on the November quarterly USDA National Ag Statistics Service Farm Labor report.

U.S. farm operators paid their hired workers an average wage of $11.76/hour during the October 7-13, 2012 reference week, up more than 5% from the year before.

• Field workers received an average of $11.22/hour in October 2012, up nearly 5% from July and more than 6% more than October 2011.

• Livestock workers earned $10.83/hour, down 6¢ from July (0.5%), and up just 1.5% from October 2011.

• The October 2012 field and livestock worker combined wage rate, at $11.13/hour, was up 3.5% from July and more than 5% more than October 2011.

To find regional wage averages, visit http://usda01.library.cornell.edu/usda/current/FarmLabo/FarmLabo-11-19-2012.pdf.

Agriculture faces estate tax

hike at ‘fiscal cliff’

As Congress continues to debate the quickly approaching "fiscal cliff," many U.S. farmers and ranchers face the threat of increased estate taxes.

Tax packages passed during the George W. Bush administration, and extended in 2010, set the current estate tax exemption at $5 million per person with a tax rate of 35%. If the "fiscal cliff" situation is left unsolved on Jan. 1, 2013, the estate tax exemptions will drop to only $1 million per person, with no spousal transfers allowed, and tax rates will rise to 55%. Many agriculture groups worry the increased tax rate could dramatically impact a family's ability to maintain a farm or ranching operation following the death of a family member.

Legislation was introduced last year in the House (H.R. 1259) and Senate (S.2242) to address this issue. Both pieces of legislation would set the estate tax rate and exemption permanently at 35% and $5 million respectively.

The House bill has garnered the bipartisan sponsorship of 222 members of Congress, but has not moved beyond the House Committee on Ways and Means.

The companion legislation introduced in the Senate has been cosponsored by all Republican members of the Senate Ag Committee, but has not moved beyond the Senate Committee on Finance.

Source: National Association of State Departments of Agriculture

2011 California butter, NFDM manufacturing costs lower, but cheese costs up

California’s Department of Food and Agriculture (CDFA) released its annual report on dairy product manufacturing costs, noting 2011 weighted average costs to produce butter and nonfat dry milk were down from a year earlier, but the cost to produce cheese was up.

• The 2011 average cost to produce cheddar cheese was 20.29¢/lb., up 5.62% from 19.21¢/lb. in 2010 and the highest cost per pound since 2008. It compared to 19.66¢ in 2009; 20.99¢/lb. in 2008; 20.03¢/lb. in 2007; 19.88¢/lb. in 2006; and 19.14¢/lb. in 2005.

• The average all cheese yield decreased to 12.21 lbs. per hundredweight of milk in 2011, compared to 13.70 lbs./cwt. in 2010; 13.28 lbs./cwt in 2009; 13.58 lbs./cwt. in 2008; 13.71 lbs./cwt. in 2007; and 12.24 lbs./lb. in 2006.

• The 2011 average cost of manufacturing butter was 17.75¢/lb., down 0.34% from 17.81¢/lb. in 2010 and the lowest since 2008. Among eight plants, 2011 costs ranged from 17.28¢/lb. for the low-cost group to 18.62¢/lb. for the high-cost group (four plants each).

• The cost to produce nonfat dry milk was 19.42¢/lb., down 6.18% from 20.20¢/lb. in 2010 and the lowest since 2008. Among nine plants, the 2011 range was 17.46¢/lb. for the low-cost group; 20.41¢/lb. for the medium-cost group; and 24.56¢/lb. for the high-cost group (three plants in each group).

The full report is is available on the CDFA Dairy Marketing Branch website.

Visit http://www.cdfa.ca.gov/dairy/uploader/postings/manufacturingcost/.

Dairy promotion boards elect 2013 officers

Leaders of Dairy Management Inc. (DMI), National Dairy Promotion and Research Board (NDB) and United Dairy Industry Association (UDIA) elected board officers during the 2012 annual meeting of NDB, UDIA and the National Milk Producers Federation (NMPF).

Chairs of each organization include:

• DMI – Paul Rovey, Glendale, Ariz.

• UDIA – William Siebenborn, Trenton, Mo.

• American Dairy Association – Tom Woods, Gage, Okla.

• National Dairy Council – Jerry Messer, Richardton, N.D.

• NDB – Stephen Maddox, Riverdale, Calif.

For a complete list of officers, click here.

DMI annual report available

The 2011 Dairy Management Inc.™ annual report – featuring highlights of how the dairy checkoff helped impact sales of billions of additional pounds of milk – can be viewed in the “about us” section at www.dairycheckoff.com.

The annual report – available in electronic viewing – provides an update of various dairy checkoff programs, including strategic partnerships with globally recognized companies such as McDonald’s® and Domino’s® Pizza.

The report also includes examples of industry collaboration through the checkoff-led Innovation Center for U.S. Dairy™, which works to protect and grow sales by working through the industry.

U.S. role in corn export empire shrinking

The United States remains the world's corn export king, although its empire is shrinking, according to a Purdue University agricultural economist Philip Abbott. He predicted the trend will continue even if market conditions improve and U.S. corn production increases.

USDA statistics bear that out. In the 2007-08 marketing year, the U.S. exported 2.4 billion bushels of corn. USDA estimates just 1.1 billion bushels of U.S. corn will be exported in the 2012-13 marketing year.

What has happened? First, ethanol. The federal Renewable Fuel Standard mandates that gasoline sold in the U.S. be blended with ethanol, and corn is the primary feedstock of ethanol, and 5.5 billion bushels of U.S. corn were used for that purpose in 2011-12. Secondly, the U.S. has not kept up with many other nations that have significantly increased their corn acreage. Although U.S. farmers have shifted acreage away from other crops and into corn, competing nations and customers have significantly increased their area planted. Since the late 1990s, South America has boosted crop acreage 53%. The nations that make up the former Soviet Union are growing crops on 24% more acres, with acreage up 13.4% in sub-Saharan Africa and Oceania. By contrast, crop acreage in the European Union is off 4%.

MARKETS: Butter lower; Class III futures mixed

Today's market closing prices:

Butter: down 2.0¢, to $1.70/lb.

Cheddar blocks: unchanged, at $1.8250/lb.

Cheddar barrels: up 0.25¢, to $1.7250/lb.

Grade A nonfat dry milk: unchanged, at $1.5625/lb.

Extra Grade nonfat dry milk: unchanged, at $1.56/lb.

Class III milk: -9¢ to +16¢ through December 2013. Based on current CME closing prices, the average for November-December 2012 is $20.06/cwt.; the full year 2012 average is $17.50/cwt.; and the 2013 average is $18.47/cwt.

Corn, soybeans and meal futures all higher

Corn: 4¢ to 5¢/bushel higher through September 2013. The 2013 average is $6.98/bu.

Soybeans: 13¢ to 18¢ higher through September 2013. The 2013 average is $13.60/bu.

Soybean meal: $3.70 to $5.00/ton higher through September 2013. The 2013 average is $394.45/ton.