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DairyBusiness Update: Dec. 11, 2013


No Farm Bill in 2013
Work continues in crafting a new Farm Bill but it’s not going to happen before Congress adjourns. Chairman Frank Lucas (R-OK) issued a statement yesterday after the four principals met to discuss outstanding issues relating to the bill.

"We have made great progress on the farm bill and continue to have productive meetings. There are still some outstanding issues that we are addressing. I am confident we’ll work through them and finish a farm bill in January. Concurrent with our ongoing discussions this week, I will file legislation to extend the current farm bill through January to allow us to finish our work without the threat that permanent law will be implemented. Having this option on the table is the responsible thing to do in light of our tight deadline." It was also pointed out that the 2002 farm bill was extended six times before the 2008 farm bill was enacted.

No Farm Bill in 2013 but “Dairy Cliff” won’t happen
That is the assessment of Dr. Andrew M. Novakovic, E.V. Baker Professor of Agricultural Economics in the Charles H. Dyson School of Applied Economics and Management at Cornell University.

In an information letter issued this week, Novakovic stated that a year ago, as January 1, 2013 was approaching, there was much speculation about what could happen if Congress failed to either enact a new farm bill or extend the old one. In the lingo of the day, this date was referred to as the "dairy cliff." He says there is common agreement that a Farm Bill extension should be avoided but it’s clear that the process won't be completed before December 31.

Dairy price supports won't revert to their 1949 version until January 1, 2014, according to Novakovic, assuming there is no action by Congress to avert it before then. A literal interpretation of reverting to the 1949 Act would be that the Secretary would be obliged to announce a support price for milk of no less than 75% of the parity price for milk on January 1, based on the parity price calculated for December 2013.

Although the 1949 (and 1938) programs literally become the law of the land upon expiration of the current farm bill, nothing actually happens until USDA takes certain actions, a “tricky bit of business for the Secretary,” Novakovic wrote. Read complete details at

Feed outlook

On the feed side of the equation, this week’s World Ag Supply & Demand Estimates report said U.S. corn use for 2013/14 is projected higher, with increases for food, seed and industrial use and for exports. Corn used in ethanol production is projected 50 million bushels higher, reflecting the strong pace of weekly ethanol production since mid-October. Corn used for ethanol production in the 2013-14 marketing year was estimated at 4.95 billion bushels, up from 4.90 billion bushels estimated in November, and up from 4.65 billion bushels used in 2012-13. Exports are also projected 50 million bushels higher based on the pace of sales to date and higher expected global consumption. Projected U.S. ending stocks are lowered 95 million bushels.

Even with lower ending stocks, the projected season-average farm corn price range was lowered 5¢-15¢, to $4.05-$4.75/bushel. Average prices received by farmers, however, are expected to continue to be reported above prevailing cash bids well into early 2014, as some sales will reflect the higher forward prices available before harvesting.

Although U.S. soybean production remained unchanged, 2013/14 supplies were raised 10 million bushels on stronger-than-expected early season soybean imports. Soybean exports were increased 25 million bushels to 1.475 billion, reflecting record commitments (shipments plus outstanding sales) through November.

Soybean crush was raised 5 million bushels to 1.690 billion, as strong foreign demand for soybean meal, led by the European Union and Southeast Asia, more than offsets a reduction in domestic soybean meal use.

The U.S. season-average soybean price range for 2013/14 was projected higher, at $11.50-$13.50/bushel, up 35¢ on both ends. The soybean meal price was projected at $400-$440/ton, up $25 on both ends.

Mielke’s Market Daily                  
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
Cash block cheese tacked on another 1¢ this morning on a sale, following yesterday’s 0.75¢ gain, and is now sitting at $1.89/lb. A bid at $1.88/lb. went unfilled. The barrels held at $1.78/lb. after inching up 0.5¢ yesterday on an unfilled bid, but a bid today at $1.78/lb. went unfilled. The spread has widened to 11¢ so something will have to give and more than likely means the blocks will head down to re-establish the more typical 3-5¢. FC Stone market analyst Ryan Cox wrote in this morning’s eDairy Insider Opening Bell that "The run-up in cheese prices has been due to some tightness in the block market. As prices rallied in the past month or two, buyers stepped back so we had some delayed purchases." Commenting on the dairy futures markets, Cox wrote; "I think the strength we've seen is coming to an end. Some of the strength is due to holiday demand, but we're only two weeks from Christmas. I expect we'll see the market chop along before moving lower seasonally."

Spot butter was unchanged again today, holding at $1.66/lb. There was no activity.

Cash Grade A nonfat dry milk gained 1¢ this morning on an unfilled bid, following a 0.25¢ rise yesterday, and is now trading at $2.07/lb., but the penny increase wasn’t enough to free up some product. Extra Grade was also unchanged, holding at $2.04/lb., following yesterday’s gain of 1.75¢, and a bid at $2.04/lb. went unfilled today as well..

Today’s market closing prices:
Butter: Unchanged, at $1.66/lb.
Cheddar blocks: Up 1¢, to $1.89/lb.
Cheddar barrels: Unchanged, at $1.78/lb.
Grade A nonfat dry milk: Up 1¢, to $2.07/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.04/lb.

California powder keeps climbing
The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $1.9094/lb. for the week ending December 6, on sales of 7.34 million lbs. The price was up from $1.8893/lb. the week before, on sales of 7.31 million lbs.

Looking ahead, the markets will have plenty to feed on next week. The Agriculture Department issues its monthly Livestock, Dairy, and Poultry Outlook Monday afternoon. The January 2014 Federal order Class I base milk price is announced by USDA on Wednesday afternoon. Thursday is the monthly Livestock Slaughter report, along with the November Milk Production report.

Thursday on DairyLine:
• National Milk’s Chris Galen has an update on the Farm Bill and discusses a new video from the RealSeal’s character, “DairyUS.”
• Succession mediator Andy Junkin discusses his new book: “Farming with Family Ain’t Always Easy”