DairyBusiness Update for 12.17.13Print
While stability is not a word associated with agricultural markets over the past decade, 2014 is shaping up to be a relatively balanced year for most commodities, according to Rabobank’s Agri Commodity Markets Outlook 2014 report.
Record prices and extreme volatility, which have been typical of many markets since the early 2000s, look to be replaced by more balanced fundamentals, and consequently narrower trading ranges in some, if not most, markets in 2014. Global inventory levels have been rebuilding throughout 2013, and the rapid demand growth of recent seasons has slowed. Key variables to watch in 2014 include slowing biofuel demand, commodity currency weakness and uncertain Chinese demand growth.
Rabobank’s report provides three scenarios: factors keeping prices in line with current projections; factors driving prices higher; and factors driving prices lower.
To read a summary of scenarios for corn and soybeans, click here.
Earlier this fall, John Newton and Cam Thraen, with the Department of Agricultural, Environmental and Development Economics at Ohio State University, suggested a compromise solution to the ongoing U.S. House and Senate debate over a new dairy safety net program (see here).
They suggested a compromise solution was a combination of the current Milk Income Loss Contract (MILC) program, augmented to be inclusive of more medium- and small-scale dairy farms, and a slightly modified income-over-feed-cost (IOFC) margin program, offering support for larger-scale dairy farms.
In a two-part series this week, the ag economists provide more information as to why they think this is a better way forward, discussing what they believe are the overlooked and missing details to those safety net programs originally authored by the House and Senate.
In Part 1, the big questions include:
- Will margin insurance work as a safety net for U.S. dairy farmers?
- Is margin insurance really an insurance product?
- Would dairy market stabilization affect all farms equitably?
In Part 2 (coming Thursday), they will conclude by addressing the following questions:
- Who benefits with an all-inclusive safety net program?
- How much of a safety net for dairy farms should society provide?
- Is there a better way forward?
- Read more …
Dairy CPI: Not much change
Consumers didn't see a lot of change in retail dairy product prices, according to unadjusted monthly Consumer Price Index (CPI) data released by the Bureau of Labor Statistics.
Overall November 2013 retail dairy product prices were +0.4% compared to October 2013, but -0.7% compared to November 2012. The trend bucked that of retail prices for all food eaten at home, which was -0.3% compared to October, but +0.6% compared to the year before.
Checking out individual products (November 2013 vs. October 2013 and November 2012, respectively): fluid milk: +1.0%; -0.5% [whole milk: +2.0%; -0.6%; other milk: +0.3%; -0.8%]; cheese: +0.4%; -0.9%; butter: -1.7%; -2.1%; ice cream: -0.1%; -0.3%; and “other” dairy products: +0.3%; -0.9%.
It’s all about milk marketing on Wednesday’s DairyLine, with:
• Scott Stewart, Stewart Peterson, Inc
• Carl Babler, Atten Babler Commodities
Tomorrow in DairyBusiness Weekly:
(Our digital-only magazine)
• Up on the rooftop: DairyUS delivering ‘REAL’ dairy message
• Livestock, dairy embrace FDA antibiotic guidance
• Tell your stories
• More milk anticipated in 2014
• One youth’s generosity launches ‘100-Cow-Countdown’
• Breeder spotlight: Quad-R Holsteins
• Volunteers shine bright at World Dairy Expo dinner
• Registration now open for National Genetics Workshop
• Youth spotlight: Steven Nelson
• Check out our industry briefs and show and sale calendar, view our product spotlight, listen to our podcasts and more!
Enter the holiday dairy photo contest
We want to see your best farm-related holiday photos. Maybe your Holstein is acting as Rudolph, or perhaps you’re dressed like elves by the farm sign. Either way, we hope you’ll share! A grand prize winner will be selected and will receive a new digital camera in addition to a possible future cover on DairyBusiness Weekly. To enter, send your best photo with caption to email@example.com by Friday, Dec. 20.
Rules: One entry per contestant. Photos entered in previous contests are not eligible. High resolution photos are preferred.
For a sample copy of DairyBusiness Update, or subscription information, visit http://dairybusiness.com/Update.php or phone: 800-334-1904, ext. 222.
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Mielke’s Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
Cash cheese prices jumped in tandem this morning as traders weighed today’s Global Dairy Trade auction. An unfilled bid took the blocks up 0.25¢ yesterday and a single bid today took them up another 2.25¢, to $1.95/lb., the highest price so far for 2013. Barrels got caught in the updraft, jumping 1.75¢. A trade actually took them down from yesterday’s close, to $1.82/lb., but an unfilled bid jumped them back up to $1.84/lb. Nevertheless, the spread widened back to 11¢.
FC Stone market analyst Ryan Cox warned in this morning’s eDairy Insider Opening Bell: "Given the time of year, it's more likely that blocks eventually will move lower to correct the spread than barrels increasing. The decline in barrel cheese yesterday is likely a foreshadow of what's to come."
Cash butter held this morning at $1.55/lb., following yesterday’s 2¢ decline, and was the first day the price hasn’t fallen in 4 sessions. Three offers at $1.56/lb. went uncovered.
Cash Grade A nonfat dry milk hit the 2007 record high of $2.11/lb. on a trade but a bid at $2.1050 didn’t draw a seller. Today was the sixth consecutive session of gain. Extra Grade was up 3¢ on a bid after jumping 1.5¢ yesterday on a bid and hit $2.09/lb., surpassing its record high of $1.93/lb.
Today’s market closing prices:
Butter: Unchanged, at $1.55/lb.
Cheddar blocks: Up 2.25¢, to $1.95/lb.
Cheddar barrels: Up 1.75¢, to $1.84/lb.
Grade A nonfat dry milk: Up 2¢, to $2.11/lb.
Extra Grade nonfat dry milk: Up 3¢, to $2.09/lb.
Class III milk: +1¢ to +45¢ through April 2015, including +19¢ to +45% January-May 2014. Based on current CME closing prices, the Q4 2013 average is $18.69/cwt.; with an overall 2013 average of $18.00/cwt.; and a 2014 average of $17.80/cwt.
Conditions changing down under
After six straight events of higher forecasted volumes on the Global Dairy Trade auction (GDT), Oceania’s largest dairy processor, Fonterra, has pulled back its overall 12 month forecast for all commodities by 1% (17.9 million lbs.). High Ground Dairy’s Eric Meyer says, “With price strength in the auction two weeks ago, customers may have increased their 2014 contract volumes which would then reduce the GDT volume forecast. Or perhaps Fonterra is being conservative with their long-range forecast as climate conditions have been a bit dry over the past month.” Meyer says “It was a good run with event-over-event volume increases and the overall Fonterra 12 month GDT volume is still 11% (174.2 million lbs.) above its low from in early September.”
GDT ‘bulls’ are being fed
Yesterday’s Global Dairy Trade auction was termed “neutral to bullish with the exception of whole milk powder” according to FC Stone risk management analyst Brendan Curran. The trade weighted average for all products was up 0.2%. Anhydrous milk fat was up 4.4%, butter up 7.9%, cheddar cheese up 1%, skim milk powder up 1.7%, while whole milk powder was down 1.5%. The average butter price equated to about $1.8375/lb. ($1.7927/lb. on 80%). The cheddar average was $2.0725/lb, skim milk powder at $2.2081/lb., and whole milk powder price averaged $2.2489/lb.
The January 2014 federal order Class I base milk price is announced tomorrow afternoon by USDA. The Livestock Slaughter report is out Thursday, as well as the much-anticipated November Milk Production report. The Cattle on Feed report is issued on Friday.