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DairyBusiness Update for 12.20.13


Milk production “reviews” are in

The University of Wisconsin’s Dr. Robert Cropp says the November Milk Production report shows that the growth in milk production is slowing. FC Stone risk management consultant Chris Hildebrand said "The decline in cow numbers is most concerning. No one really expected it given the strong farm margins." 

High Ground Dairy’s Eric Meyer wrote; “Rapidly rising milk prices and less-expensive feed costs are sending a clear signal to the US dairy industry that the world needs more milk. However, U.S. dairy producers have yet to react to this “call-to-action.” He adds that “declining cow numbers and production per cow growth shrinking to near year ago levels, 0.1% production growth is not enough to satisfy the burgeoning global need for milk.” He views the report as “bullish versus expectations” and says “high prices may be here to stay until supply responds to needs of the world market.”


Milk production stronger in Europe and Oceania 

October milk production in New Zealand, at 3.16 million tons, was up 5.4%, according to the Dairy Companies Association of New Zealand, and 9.2% higher than two years ago, reports USDA's Dairy Market News (DMN) and cited in yesterday’s eDairy Insider Closing Bell.  "Weather conditions have held up very well for producers with more than adequate rainfall over recent weeks,” says DMN, “making for very good pasture conditions near the midsummer point. The favorable weather and good margins have encouraged producers to extend or expand production where possible, with some sheep and beef farming conversions to dairy." International dairy prices in both Oceania and Western Europe were higher across the board.

California quarterly milk production costs compared

California 2013 third quarter (Q3) statewide weighted average total milk production costs were down 70¢/cwt. (-3.8%) compared to the same quarter in 2012, according to the Dairy Marketing Branch of the California Department of Food & Agriculture. Including an allowance for return on management and investment, total costs were down 59¢/cwt. (-3.0%). 

Total feed costs averaged $11.61/cwt. in Q3 2013, down 3.9% from a year earlier. Feed costs represented 65.4% of total costs. Average hired labor and replacement costs were down slightly, but operating costs – led by utilities, veterinary/medicine, taxes/insurance and repairs/maintenance – were higher than the year before.

Despite being down from the previous year, near all feed, labor, herd replacement and operating costs were up compared to Q2 2013.

Looking at regional differences, the North Coast remains the most expensive region to produce milk, with total costs and allowances averaging $24.71/cwt. during the third quarter of 2013. Southern California average costs for the quarter were the lowest, at $18.70/cwt.

To see the full report, visit http://cdfa.ca.gov/dairy/uploader/docs/CA_2013_Q3.pdf


Cattle on feed down 5% 

Cattle and calves on feed for slaughter market in U.S. feedlots with capacity of 1,000 or more head totaled 10.7 million head on Dec. 1, 5% less than a year earlier, and the second lowest Dec. 1 inventory since USDA started compiling the estimates in 1996. November placements totaled 1.88 million head (1.81 million net), down 3% from a year earlier. November fed cattle marketings totaled 1.68 million, down 5%. 


Feed industry exempt from FDA’s ‘intentional adulteration’ rule

The U.S. Food and Drug Administration  released the sixth rule pertaining to the Food Safety Modernization Act. The proposed rule, “Focused Mitigation Strategies to Protect Food against Intentional Adulteration,” would require registered domestic and foreign food facilities to address hazards that may be intentionally introduced by acts of terrorism.

Animal food is one of several exemptions listed by FDA in the proposed rule.

“It is our understanding that under FDA’s risk-based approach, animal feed and pet food were given an exemption from this rule because of their significantly reduced risk of causing intentional harm to human health,” said Leah Wilkinson, American Feed Industry Association’s director of ingredients, pet food and state affairs. “AFIA agrees with FDA’s conclusion and will work with our members to provide comments on this proposed rule.”

The intentional adulteration rule is expected to be published in the “Federal Register on Dec. 24, and is currently available here. FDA plans to host a public meeting in regards to the rule in College Park, Md., on Feb. 20, 2014. Comments on the proposed rule are due March 31, 2014. 


Mielke’s Market Daily

(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)

T’was the week before Christmas and cash cheese prices jumped on the day and the week, as traders apparently liked or feared what they saw in yesterday’s November Milk Production report. The block cheese price made it to $2/lb. today on a trade and an unfilled bid. The last time that happened was Nov. 6, 2012 when it hit $2.11/lb. The barrels were up 2¢ on a trade and closed at $1.95/lb., putting the spread at a more typical 5¢. An offer of barrel at $1.97/lb. was left on the board. The blocks are up 7.5¢ on the week and 26¢ above a year ago. The barrels are up 12¢ on the week and 29.5¢ above a year ago. Two cars of each traded hands on the week.

Looks like FC Stone dairy broker Dave Kurzawski was right when he wrote in yesterday’s eDairy Insider Opening Bell that the Milk Production report would give an indication as to whether these higher cheese prices are sustainable. 

It remains to be seen if the rest of his quote become reality, namely that “a CME price near $2/lb. would start to attract product to the exchange."

Cash butter shot up 2.25¢ this morning, following a 1¢ gain yesterday, the first positive movement in 8 sessions, and closed today and the week at $1.5825/lb. Three carloads found new homes today, 2 at $1.57/lb. and 1 at $1.58/lb. One bid at $1.5825/lb. went unfilled and 1 offer at $1.60/lb. was left on the board. Butter is up 1.25¢ on the week and 4.5¢ above a year ago. Six cars found new homes on the week.

Cash Grade A powder held again today at the record high $2.11/lb., with no activity. Extra Grade was also unchanged, holding at $2.09/lb., with 1 bid at that price going unfilled. The Grade A is up 3¢ on the week and Extra Grade is up 4.5¢. One car of Grade A was sold this week in the cash market. The gains in powder came mainly on unfilled bids.

Today’s market closing prices:
Butter: Up 2.25¢, to $1.5825/lb.
Cheddar blocks: Up 1.5¢, to $2.00/lb.
Cheddar barrels: Up 2¢, to $1.95/lb.
Grade A nonfat dry milk: Unchanged, at $2.11/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.


Coming up

The November Cold Storage report is issued by USDA on Monday afternoon. That’s it for the holiday-shortened week. The markets close at noon on Tuesday for the Christmas holiday, and reopen Thursday and Friday. The CME closes at the regular time on Tuesday, Dec. 31, and reopens on Thursday, Jan. 2.


Monday on DairyLine:

• Roberta Osborne, Innovation Center for U.S. Dairy, tells us about the tool Farm Smart.

• Dr. Isis Kanevsky, Virginia Tech, is developing a vaccine against mastitis.


This week in DairyBusiness Update:

TRENDS: FMMO Class I base; California Q3 cost of production; November milk production; Midwest milk-feed price ratios

Page 2: 2014 outlooks; more ethanol and culling numbers

INDUSTRY: Lawsuit updates: What’s in a name?

WASHINGTON: Congress is back Jan. 6. Is there time?


No DBU next week 

DairyBusiness Update takes its annual Christmas break next week. Look for the next issue in your email inbox on Jan. 3, 2014.

Have a Merry Christmas and a Happy New Year!


Other’s headlines  

Chobani's "reaction was very human" regarding yogurt recall, CEO says

Dairy 2013: protein, breakfast and men

Study finds milk serves as protective carrier of bioactive molecules

NZ Dairy industry committed to managing use of antibiotics

Dairy industry say Grade 'A' plants should be exempt from FSMA 

USDA to study dairy animal health practices

San Luis Obispo Octagon Barn listed on National Register

Food industry group wants permission to label GMO foods as ‘natural’

Secretary’s Column: A New Farm Bill to Carry On America’s Record Agricultural Trade


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