DairyBusiness Update: August 21, 2014Print
Dairy Culls Up from June, Down from 2013
Commercial red meat production for the United States totaled 3.91 billion pounds in July, down 6 percent from the 4.16 billion pounds produced in July 2013, according to USDA’s latest Livestock Slaughter report issued this afternoon.
Beef production, at 2.09 billion pounds, was 9 percent below the previous year. Cattle slaughter totaled 2.60 million head, down 10 percent from July 2013. The average live weight was up 18 pounds from the previous year, at 1,320 pounds.
Veal production totaled 7.8 million pounds, 19 percent below July a year ago. Calf slaughter totaled 48,500 head, down 31 percent from July 2013. The average live weight was up 41 pounds from last year, at 275 pounds. January to July 2014 commercial red meat production was 27.4 billion pounds, down 3 percent from 2013.
Accumulated beef production was down 6 percent from last year, veal was down 11 percent.
An estimated 232,000 dairy cows were slaughtered under Federal inspection in July, up 33,000 head from June but 19,000 below July 2013.
Looking at the first seven months of 2014, USDA estimates that 1.62 million head made their way to hamburger heaven, 195,000 head less than the same period a year ago.
Butter Demand Still Strong
Butter demand is keeping pace with near-record butter prices as sales continue to be higher than last year for most producers, reports USDA’s Dairy Market News. The market tone is firm. Cream spot load availability tightened with a few butter operators still selling excess supplies. Butter churn rates are steady to slightly lower.
The GDT auction on August 19, averaged $1.3336 for all butter contracts while the Dutch market closed at $1.9275. U.S. prices are not competitive, keeping exports at reduced levels. Domestic retail interest is steady to higher. Some manufacturers noted ready for shipment supplies decreasing, causing a few upcoming orders to be delayed.
Butter production in the West is mostly steady. Some increased cream is available from bottlers supplying newly reopened schools, but butter demand continues to outweigh current inventories. Cream supplies are increasingly being held for butter churning. Butter manufacturers are increasing print butter production in anticipation of fall holiday orders, but are constantly pressured to take advantage of high butter prices. Inventories are tight and buyers who elected to wait to procure stocks are finding it difficult to find available supplies. Bulk demand is very good.
Cheese Demand Solid As Well
Cheese price strength has led some manufacturers to dip more deeply into cheese inventories to complete sales, leaving holdings very tight in some plants, according to Dairy Market News. A typical concern when prices increase quickly is that buyers might pull back, but that is not much reported as a current factor. Cheese sales are strong, both retail and food service/institutional. Manufacturers of cheese are maintaining strong production levels and milk supplies in some parts of the Midwest remain strong enough that there is no interest in taking additional currently offered spot loads of milk. In western reaches of the Midwest, bottling demand related to schools resuming classes has been lower than anticipated, leaving additional milk for cheese making.
Cheese production in the West is mostly steady. Milk volumes are slowing seasonally, but cheese manufacturers are looking to increase yields with milk solids from NDM and condensed skim where available. Lower powder prices have made these options more attractive as cheese prices continue to show strength on the spot market. Most cheese plants are filling previous orders on a timely basis, but additional orders are meeting tighter inventories. Demand is outstripping supply in many cases as buffer supplies of cheese are not as readily available.
USDA Weekly Cold Storage Holdings
Selected storage centers in thousand pounds - including government stocks
BUTTER : CHEESE ------------------- 08/18/14 21,080 : 88,012 08/01/14 21,609 : 87,906 CHANGE -529 : 106 % CHANGE -2 : 0
Do Big Corn Crops Always Get Bigger?
The question is addressed by the University of Illinois’ Scott Irwin, Darrel Good, and John Newton in their latest FarmDoc Daily posting. They point out that USDA's August Crop Production report forecast the 2014 U.S. average corn yield at 167.4 bushels per acre. That exceeds the previous record yield of 164.7 bushels in 2009 and is 7.4 bushels above our calculation of the 2014 (unconditional) trend yield based on actual yields from 1960 through 2013. The forecast was smaller than expected, but this seemingly bullish news was shrugged off by the market. Comments by traders and market analysts indicate there is a widespread expectation that the forecast will increase in subsequent Crop Production reports. This would explain the weak reaction of market prices to the release of the August report.
There is an old market saying that "big crops get bigger" and this appears to be the basis for the expectation that USDA corn yield forecasts will increase in subsequent Crop Production reports. That is, in years when the final yield estimate is well above trend, the USDA forecast of the average yield tends to increase from August forward. Recent research by Isengildina, Irwin and Good documents this tendency in USDA corn and soybean forecasts. However, these same authors argue that the shortcoming of this type of analysis is that it is backward-looking. Specifically, the analysis starts by identifying years when the final yield estimate (typically January) is well above an in-sample calculation of trend and then traces the pattern of yield forecasts from August through the final estimate in January after harvest. That analysis can be more aptly identified as answering the question "did big crops get bigger." Isengildina, Irwin, and Good go on to analyze whether crops that are expected to be big actually get bigger, or "do big crops get bigger."
Specifically, they identify years when the August USDA forecast is large relative to an out-of-sample trend yield estimate and then test whether forecast changes in following USDA Crop Production reports (September, October, November, and January) can be predicted based on the trend-deviation of the August forecast. Very little evidence for either corn or soybeans is found that "big crops get bigger" (or "small crops get smaller") based on this forward-looking analysis and the authors conclude that, "...this bias may appear obvious to market analysts in hindsight but it is difficult to anticipate."
The purpose of this article is to update and extend the analysis of patterns in USDA forecasts of U.S. corn yield in big crop years. We first update the sample used by Isengildina, Irwin, and Good through 2013 and then determine whether the additional data change their results. Next, we extend the analysis by limiting our focus only to years with large expected positive deviations from trend in August. In addition, we compare summer weather in 2014 to previous years identified as having a similarly large expected trend deviation and look for other statistical clues that might be helpful in projecting future changes to USDA corn yield forecasts. The analysis should provide an objective basis for forming expectations about changes in yield forecasts this year based on what is known in August.
Read more at: http://farmdocdaily.illinois.edu/2014/08/do-big-corn-crops-always-get-bigger.html.
USDA Programs Benefit Millions Around the World
The U.S. Department of Agriculture's (USDA) Foreign Agricultural Service announced funding this week for seven international projects through the 2014 Food for Progress Program. In total, more than 1.6 million people will directly benefit from the program this year.
The Food for Progress Program is an important tool in the effort to support sustainable agricultural production in developing nations and promote agricultural trade. The program helps countries increase the value and output of their agricultural economy and build agricultural trade capacity. U.S. agricultural commodities donated to recipient countries through Food for Progress are sold on the local market and the proceeds are used to support agricultural, economic or infrastructure development programs.
Projects funded in fiscal year 2014 will address a wide range of issues, including: the mitigation of crop disease, capacity building to develop national agricultural extension programs and farmer cooperatives, improvement of seed varieties and crop diversification. Commodities USDA is providing this year include dehydrated potato flakes, corn, soybean oil, soybean meal, vegetable oil and wheat.
Examples of this year's Food for Progress efforts include:
USDA will be working with the National Cooperative Business Association to improve El Salvador's coffee sector. Lending to agricultural producers, processors and other actors will be expanded and private-public partnerships will be leveraged to improve marketing and production infrastructure for this important crop. El Salvador's coffee crop has been affected by coffee rust, which threatens to destroy plants, reduce outputs and destabilize coffee prices world-wide.
In Nicaragua, USDA will work with Catholic Relief Services, government ministries and the local university to improve the cacao agroforestry and livestock sectors in the impoverished eastern coast of the country. This project will help small producers not only achieve higher productivity but will also work within the value chain of production, institute processes for quality control and thus expand producers' market reach.
USDA's food aid programs contribute to the goals of President Obama's global hunger and food security initiative, Feed the Future. Feed the Future is part of a multilateral effort launched at the L'Aquila World Summit on Food Security in 2009 to accelerate progress toward the Millennium Development Goal of halving the proportion of people living in extreme poverty and suffering from hunger by 2015. More information on Feed the Future can be found at www.feedthefuture.gov. USDA's Foreign Agricultural Service administers the Food for Progress program.
Food for Progress Funding Allocations - FY2014
Visit www.fas.usda.gov/programs/food-progress for more information.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
All eyes are on the spot market, waiting to see some reaction to the bearish July Milk Production report. Traders were also anticipating the Livestock Slaughter report, which was issued after today’s trading, and tomorrow’s July Cold Storage report. Two unfilled bids kept the 40lb. Cheddar blocks at $2.25/lb. this morning but an unfilled bid inched the 500lb. Cheddar barrels up 0.25¢, to $2.2575/lb., widening the inverted spread to 0.75¢.
"Yesterday's spot session confirmed that product is tight for short term needs," said Nick Buyse, of FCStone, LLC in this morning’s Insider Opening Bell. "There continues to be buying interest, despite inflated prices." Furthermore, USDA reported in Friday’s Dairy Market News that barrel cheese remains tight in the Midwest due to lower than expected production.
Class III futures moved sharply higher: Sept. +49¢, Oct. +75¢, Nov. +56¢, & Dec. +38¢.
Sales again took the butter up another 6¢, to an astounding $2.76/lb., just 5¢ away from the all time record high. Eight cars were sold today; the first three were at yesterday’s close and the price leapfrogged from there.
Buyse says "Butter will be tight through year end as buyers frantically try to secure product for the holiday season. There continues to be heavy volume traded.” He also noted that “NFDM futures have been tracking lower with a spot market that can't seem to find a bottom.”
Cash powder saw its 14th session of loss this morning as a trade took it down another 1.75¢, to $1.33/lb. It has plunged 32¢ in 14 sessions.
Today’s Market Closing Prices
Butter: Up 6¢, to $2.76/lb.
Cheddar blocks: Unchanged, at $2.25/lb.
Cheddar barrels: Up 0.25¢, to $2.2575/lb.
Grade A nonfat dry milk: Down 1.75¢, to $1.33/lb.
Class III milk (prelim.): Aug. $22.23/cwt., +3¢; Sept. $23.63, +49¢, Oct. $22.34, +75¢; Nov. $20.64, +56¢; & Dec. $19.48, +38¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $20.82, +56¢ from Wednesday. The First Quarter 2015 average is now at $1824, +16¢ from Wednesday. The Second Quarter 2015 average today stands at $18.00, +9¢ from Wednesday.
The Agriculture Department releases its preliminary July Cold Storage data tomorrow afternoon. Looking to next week; USDA issues its weekly Crop Progress report Monday afternoon, the weekly National Dairy Products Sales Report (NDPSR) is out Wednesday, and the monthly Ag Prices report is out Thursday, which will include the latest milk feed price ratio.
Friday on DairyLine:
Market analyst, Jerry Dryer, editor of the Dairy and Food Market Analyst, the July Milk
Production report does not mean the sky is falling.
Dr. Mike Hutjens discusses adding silage inoculants in his weekly “Feed Facts.”
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