DairyProfit Update for Nov. 7, 2012

2012 election results: What's next for policy?

While votes remain to be counted and races to be determined, the U.S. has chosen to stay with its current split-party alignment of a Democratic President, a Democratic Senate and a Republican House of Representatives. 

The debate over the 2012 Farm Bill involves many aspects of  broader policy discussion, according to Carl Zulauf, Department of Agricultural, Environmental and Development Economics at Ohio State University. The debate is occurring over both the form and cost of the farm safety net, as well as whether the safety net should be delivered through private agents, i.e., crop insurance, or via government agencies, i.e., the Farm Service Agency.

While entirely speculative, it is possible that history may reveal that the 2012 Farm Bill ultimately served to guide the resolution of the policy issues surrounding the broader U.S. safety net for the 21st Century. In short, it may be fortuitous that during the forthcoming lame duck session of Congress, the debate over the so-called fiscal cliff of automatic budget cuts and tax increases coincides with the debate over the farm bill.

 

Did Sandy rain on cheese market?   

The effects of Hurricane Sandy on consumer demand for cheese and other dairy products are still being felt, according to weekly regional updates from USDA’s Dairy Market News. Some areas have yet to see a return of electrical power, and in those areas demand for refrigerated dairy products has all but been eliminated.  

The area severely damaged by the storm is geographically small, but the area is densely populated. Because last week's storm disrupted food sales in general over a large portion of the Eastern region, good domestic cheese demand was tenuous. 

Cheese and butter being exported may be delayed, as the port of New York is still recovering from the storm, allowing only limited departures.  

Strong Class I demand has tightened milk supplies going to cheese plants, with cheese production slightly below week-ago levels. Most cheese makers are attempting to match production with orders, not wanting to expand inventories at the current cheese price levels on the CME Group.

Demand for butter remains good as holiday orders continue to be strong with most inventories being worked lower. The amount of butter lost due to damaged warehouses has yet to be fully assessed.  

 

Pennsylvania IOFC improves for second straight month

Pennsylvania’s October 2012 milk income over feed costs (IOFC) rose 14%, on the heels of a 33% increase in September, according to Penn State dairy economist Jim Dunn.

The October Pennsylvania all-milk price was up 50¢/cwt. (7%), to $22.30/cwt. Lower hay and soybean meal prices offset a rise in corn prices, pulling down feed costs by 2%.  At $5.89, average daily feed costs (at 65 lbs. of milk/cow/day) were down 12¢ from the previous month. IOFC for a cow producing 65 lbs. of milk per day was $8.60.

Measured another way, feed costs per hundredweight of milk produced averaged $9.07/cwt., resulting in a milk income margin over feed costs of $13.23/cwt., up $1.68 from September and the highest since November 2011.

Dairy futures are lower than October’s levels for the next five months, and the feed situation has passed weather issues, so IOFC will probably drift down in coming months, Dunn said. 

To read Dunn’s November Dairy Outlook, visit http://www.personal.psu.edu/faculty/j/w/jwd6/DairyOutlooknov12.pdf

 

USDA releases Dairy Heifer Raiser study

Heifer growers face an array of challenges including heifer health, client relations, payments from producers and feed cost/availability. Released in October by USDA National Animal Health Monitoring System (NAHMS), the Dairy Heifer Raiser 2011 study surveyed more than 200 heifer growers about the current management practices used on heifer-raising facilities.

This study brings to light several areas of importance for growers. A few noteworthy points included:

• • The varying age in which heifer calves are transported to heifer-raising operations. The findings revealed that calves were transported within a day or so of birth and others after weaning.
• • Transmission of diseases with repeated use of needles from one animal to another.
• • The study indicated that 70% of operations recorded individual treatments administered to sick dairy heifers.
• • Vehicles used to transport preweaned heifers must be clean. Vehicles that are used to transport multiple shipments without being washed could pose a disease risk to heifers.

The study was a cooperative effort between the Animal and Plant Health Inspection Service (APHIS), participating states and the Dairy Calf & Heifer Association. Click here for study details.

 

MARKETS: Cheese crashes; Class III futures along for the ride 

Today's market closing prices:

Butter: down 1.0¢, to $1.8700/lb.

Cheddar blocks: down 12.0¢, to $1.99/lb.

Cheddar barrels: down 16.5¢, to $1.91/lb.

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

Extra Grade nonfat dry milk: unchanged, at $1.57/lb.

Class III milk: 23¢ to 65¢ lower, November 2012 through February 2013; 4¢ to 18¢ lower, March-December 2013. Based on current CME closing prices, the average for November-December 2012 is $20.29/cwt.; the full year 2012 average is $17.54/cwt.; and the 2013 average is $18.52/cwt.

 

Corn futures higher, but soybeans, meal decline

Corn: 2¢ to 3¢/bushel higher through September 2013. The 2013 average is $7.05/bu.

Soybeans: 1¢ to 8¢/bushel lower through September 2013. The 2013 average is $14.34/bu.

Soybean meal: $0.30 to $3.20/ton lower through September 2013. The 2013 average is $423.18/ton.