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DairyBusiness Update for 12.19.13


November milk production up just 0.3%

November milk production totaled 14.98 billion lbs. in the 23 major dairy states, up just 0.3% from November 2012, according to preliminary data in today’s USDA Milk Production report. 

November cow numbers in those states totaled 8.5 million head, down 4,000 from October, but 22,000 more than a year ago. Output per cow averaged 1,762 lbs., up just 1 lb. from November 2012.

Revisions added 27 million lbs. to the original October estimate in the major dairy states, now put at 15.4 billion lbs., up 1.4% from a year ago.

Nationally, November 2013 milk production was estimated at 16.03 billion lbs., up 0.1% from November 2012. Cow numbers were estimated at 9.198 million head, down 5,000 from October 2013, and 3,000 less than November 2012. Output per cow for the month was 1,742 lbs., up 2 lbs. from a year ago.

Among the major states, California production was up 0.6% from a year ago, despite a 30-lb. drop in output per cow; cow numbers were up 5,000 head. Wisconsin was down 0.6% on a loss of 10 lbs. per cow; cow numbers were unchanged. New York was up 2.1%, thanks to a 35-lb. per cow increase; cow numbers were unchanged. Idaho was down 1.8%, on a 10-lb. drop per cow and 8,000 fewer cows. Pennsylvania was off 0.2%, on 3,000 fewer cows, but output per cow was up 5 lbs. Minnesota was off 1.9%, due to a 30-lb. drop per cow; cow numbers were unchanged.

The biggest gain was in Kansas, up 7.5%, followed by Utah, up 5.8%. The biggest decline, and there were several, was in Missouri, down 5.5%, followed by Illinois, down 2.5%.

Other states of interest: Michigan was up 0.5%, despite a 20-lb. loss per cow, but cow numbers were up 6,000 head. New Mexico was down 0.8%, due to a 10-lb. loss per cow and 1,000 fewer cows. Texas keeps climbing, up 2.4%, thanks to 10,000 more cows, although output per cow was unchanged. Washington was up 1.8% on a 15-lb. per cow increase and 3,000 more cows.


Rabobank: China will drive 2014 dairy prices

Rabobank has issued a new report on the global dairy industry, forecasting continued high prices in 2014 due to Chinese demand.

In its new report, Rabobank said international dairy commodity prices strengthened from already high levels in the three months to mid-December and are expected to remain high at least for the first half of 2014.  The increase of export supply since September, as producers have responded to improved margins, has been largely soaked up by continuing vigorous buying from China, according to Rabobank analyst Tim Hunt. 

China’s buying has left the rest of the buy-side of the international market with less supply to go round, keeping the market tight. Rabobank believes many of the buyers in regions, including South East Asia, the Middle East and North Africa, have used up all meaningful backup stocks after a period of prolonged belt-tightening. They are now struggling to secure enough supply to sustain sales of key lines. With export supply still in the early stages of recovery, Q4 prices have had to edge up even further.

The global dairy market will enter 2014 with farmgate milk prices at record or near record highs in many export and import regions. Read more ... 


November dairy cull cow slaughter down

USDA estimated 249,100 culled dairy cows were slaughtered under federal inspection in November 2013, down 27,700 from October 2013 and 19,700 less than November 2012. Total dairy cow slaughter for the January-November 2013 period is estimated at 2.868 million head, up 25,500 from the same period in 2012.

After the holiday-shortened week of Thanksgiving saw weekly dairy cull cow slaughter fall to the lowest total of the year, at 48,500 head, slaughter during the week ending Dec. 7 jumped back to a more “normal” level of 63,800. Year-to-date 2013 slaughter totals 2.941 million, up 24,100 from the same period in 2012.


Next LGM-Dairy policy sale is Dec. 27

The next Livestock Gross Margin-Dairy (LGM-Dairy) sales period begins Friday afternoon, Dec. 27, according to Alan Zepp, Risk Management Program coordinator with Pennsylvania’s Center for Dairy Excellence. LGM-Dairy will be offered for sale by crop insurance agents, with producers eligible to purchase margin insurance for a 10-month period (February-November 2014), or any combination of months during that period.

The January-November 2014 average of expected margins is $14.52/cwt., above the 3-year actual average for the same period of $13.46/cwt.; the 5-year average actual margin of $12.24/cwt.; and the 10-year actual average of $12.73/cwt. 

The premium for a $0 deductible policy to insure a $14.52/cwt. margin is estimated at 53¢/cwt. (13¢/cwt. to insure a $13.52/cwt. margin for a $1 deductible policy).

“Protecting Your Profits” information and a recorded podcast will be posted at http://centerfordairyexcellence.org/protecting-your-profits/. The website also adjusts LGM-Dairy estimated margins weekly, based on updated futures prices. For further information, producers can contact Zepp at azepp@centerfordairyexcellence.org or phone 717-346-0849.


November Iowa-Nebraska dairy budgets improve a little

November Iowa and Nebraska dairy producer income margins improved somewhat, with a slightly lower average corn price combining with a higher average milk price compared to October, according to Robert Tigner, Extension Educator. The decline in corn prices was partially offset by higher soybean meal and cottonseed prices; alfalfa hay was steady compared to a month earlier. 

Tigner's analysis provides budgets for tie-stall and freestall operations at two production levels. November total costs (excluding labor and management) for a freestall dairy with a 24,000-lb. herd average declined to $17.10/cwt. The average milk price was $21.49/cwt. The budgeted break-even price for the freestall dairy with a 24,000-lb. rolling herd average (RHA) was $19.03/cwt.

Contact Tigner at robert.tigner@unl.edu.


The Dairy Safety Net Debate of 2013: Part 2

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 included: 

  • 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 (click here), they 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?

EPA: Darigold agrees to settlement in 2012 gas release

Darigold Inc. agreed to a $42,000 settlement following a 2012 incident in which hazardous chlorine gas was released. According to the U.S. Environmental Protection Agency (EPA), Darigold failed to immediately notify federal and state emergency authorities of the chlorine gas release  at a milk facility in Portland, Ore. Eight Darigold employees, a truck driver, two contractors and a person who was driving by at the time of the incident were sent to the hospital.

On the morning of May 30, 2012, a truck driver arrived to off-load a nitric acid and phosphoric acid-based chemical solution that is used for sanitizing at the facility. The driver improperly connected the hose from the truck containing the chemical solution to a tank containing sodium hydroxide and sodium hypochlorite, resulting in a violent chemical reaction and the chlorine gas release. Read more …


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 saw solid strength again this morning as traders awaited this afternoon’s November Milk Production report. One unfilled bid took the Cheddar blocks up another 1.25¢, following 2.25¢ yesterday and Tuesday, and 0.25¢ on Monday and are flirting with $2. Today’s block price stands at a year high $1.9850/lb., highest level since early November 2012. The barrels, still playing catch up, jumped 4¢ this morning on a single bid, following a  5¢ jump yesterday and 1.75¢ on Tuesday. The barrels are now at $1.93/lb., thinning the spread to 5.5¢.

FC Stone dairy broker Dave Kurzawski wrote in this morning’s eDairy Insider Opening Bell: "The (Milk Production) report should give an indication as to whether these higher cheese prices are sustainable. Cheese is readily available in the country, and a CME price near $2/lb. should start to attract product to the exchange." Dairy Market News (DMN) adds that “Export demand is meeting some resistance at the higher prices.”

Cash butter was up 1¢ on an unfilled bid this morning and hit $1.56/lb., the first advance in 8 sessions. One offer at $1.58/lb. got no response.

Western butter production remains lighter than hoped for as milk production is at seasonally light volumes, reports DMN. Export demand remains good as U.S. butter prices are lower than much of the international market. Butter stocks are “tighter than anticipated  in many cases and manufacturers are hoping to see increased cream supplies over the upcoming holidays.”

Cash powder was unchanged again today as things may be softening but no one is bringing product to the CME. Grade A remains at the record high $2.11/lb., with 1 bid at that price going unfilled. Extra Grade was also unchanged, holding at $2.09/lb., with no activity.

Today’s market closing prices:
Butter: Up 1¢, to $1.56/lb.
Cheddar blocks: Up 1.25¢, to $1.9850/lb.
Cheddar barrels: Up 4¢, to $1.93/lb.
Grade A nonfat dry milk: Unchanged, at $2.11/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.


Whey rally?
The lagging National Dairy Products Sales report (NDPSR) this week showed whey up 1.5¢, to 57.42¢/lb. The previous week’s whey average plunged 3.4¢. Block cheese was up 3.1¢ this week, to $1.8728/lb. Barrel was up 4.2¢, averaging $1.8521. Butter dropped 2.4¢, to $1.6318, and nonfat dry milk continues to climb, up 1.1¢, to $1.9472/lb. The NDPSR prices are significant because they are used in determining Class milk prices in Federal milk market orders.

From the vat to the dryer

Dairy Market News says a number of cheese plants report that milk production is increasing  in the region, but are not anticipating volumes of extra milk for cheese making over the next two holiday weeks as has been the case in the past.

“A limiting factor mentioned is that Wednesday holidays will lead to less time off for many people than in past  years when holidays were closer to either the beginning or end of the weeks,” warned DMN, and increased regional drying capacity coupled with strong nonfat dry milk prices.” Distressed milk over year-end holidays in recent years came from surrounding states into Wisconsin, DMN said, leading to extra milk being available to cheese makers. “Most extra holiday milk this year, if there is extra milk, is expected to move more steadily to dryers than cheese plants.”


Coming up

USDA issues its Cattle on Feed report tomorrow. The November Cold Storage numbers are out Monday afternoon, Dec. 23. That is the only USDA report that we regularly monitor for the week. The Chicago Mercantile Exchange closes at noon on Tuesday for the Christmas holiday and reopens Thursday and Friday. CME closes at the regular time on Tuesday, Dec. 31, and reopens on Thursday, Jan. 2.


Friday is last day to 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 kjentz@dairybusiness.com by Friday, Dec. 20. 

Rules: One entry per contestant. Photos entered in previous contests are not eligible. High resolution photos are preferred. 


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