DairyBusiness Update for April 17, 2013Print
A bipartisan Senate proposal for comprehensive immigration reform addresses the crucial needs of dairy producers, according to National Milk Producers Federation (NMPF) president & CEO Jerry Kozak. NMPF is a member of the Agriculture Workforce Coalition (AWC), representing many major agricultural organizations.
Kozak identified four key items essential to dairy farmers that any eventual deal on immigration reform must contain. These include:
1. Establishing a blue card for experienced agricultural workers. This provides a means for farmers to keep their existing workforce, including those who may not be legally documented. Dairy farmers should not lose experienced, loyal employees as part of this effort.
2. Creating a new visa system for future workers that is easy to use and affordable. Current efforts won’t be worth it if the resulting product is too cumbersome, costly, and confusing for farmers to use.
3. Assuring the future flow of new workers so that as the economy and jobs shift and evolve. Dairy farmers must have a means to recruit and hire new dairy workers for a long period of time.
4. Eliminating the seasonality element of any ag visa program such as H-2A, which prevented U.S. dairy farmers from using it. Dairy farmers need relief from having to demonstrate the seasonal or temporary nature of employment.
To learn more about the AWC, visit www.agworkforcecoalition.com.
The federal order May Class I base milk price is $17.76/cwt., up 10¢ from April, and $1.91 more than May 2012. Through the first five months of 2013, the Class I base average stands at $18.08/cwt., $1.35 more than the $16.73/cwt. average for the same period in 2012.
Current trend: The small increase in the May Class I base stops a four-month decline since peaking at $21.39/cwt. in December 2012.
A new study, “Goodlatte-Scott vs. the Dairy Security Act: Shared Potential, Shared Concerns and Open Questions,” shows consumers and taxpayers will bear the brunt of “bad” dairy policy, according to the International Dairy Foods Association (IDFA).
The study compares the short-term impacts for dairy farmers of two major dairy safety-net programs currently being considered by Congress: the Dairy Security Act (DSA), and an alternative “Goodlatte-Scott” proposal supported by IDFA.
The study concludes both approaches are “effective in providing catastrophic risk insurance” for stable and growing dairy farms. However, IDFA said the report confirms DSA will raise consumer milk prices.
“Goodlatte-Scott is a more responsible approach to a government-funded Farm Bill,” said Jerry Slominski, IDFA senior vice president of economic and legislative affairs. “It provides an effective safety net, according to the Congressional Budget Office, without also imposing an anti-consumer ‘growth management’ program on the dairy industry. The reality is that farmers can have effective risk management tools without the government getting involved in limiting production and forcing consumers to pay more for dairy products, a key provision of the Peterson plan.”
The Dairy Policy Action Coalition (DPAC), a Pennsylvania-based grassroots dairy producer organization, said it will continue to support the Goodlatte-Scott Amendment after a recent side-by-side study of two proposed dairy safety net programs was released by major university dairy economists this week.
The new study, titled “Goodlatte-Scott vs. the Dairy Security Act: Shared Potential, Shared Concerns and Open Questions” stated that both programs would be effective as risk management tools for dairy producers.
The Goodlatte-Scott Amendment offers a stand-alone margin insurance program while the Dairy Security Act requires farmers to participate in supply management, which limits their milk production during certain market conditions, in order to participate in their margin insurance program.
As a result of the findings, DPAC continues to reject the supply management provision in the DSA and continues to endorse the stand-alone margin insurance program proposed in Goodlatte-Scott. DPAC’s concern is that any supply management program would cause long-term damage to the relationships it has developed with dairy customers at home and around the world.
Despite neutral supply and demand in dairy markets, the outlook is bullish, said an economist at the University of Missouri (MU) Extension Spring Ag Marketing Outlook Conference.
“As we look at futures margins, they are the best available in years, with falling feed prices and rising milk prices,” said MU agricultural economist Joe Horner. “2013 profitability will depend a little bit on the growing season, as we are particularly short of quality forages right now.”
Horner said the outlook for milk prices in the second quarter will be slightly higher than the first quarter, with the price of milk for all of 2013 at about $20/cwt., which is a couple of dollars higher than last year.
“All things considered, it is probably going to be the best margin year since 2008,” Horner said. “That’s if we can grow our crop, if we can grow forages and if our exports keep milk prices where they’re at.”
Dairy margins continued to improve since the end of March, with milk prices remaining very firm while feed costs appear to have stabilized following a significant selloff late last month.
From a historical perspective, forward margins are still above the 90th percentile of the previous 10 years through the first quarter of 2014, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. That offers opportunities for dairies to protect strong levels of profitability, the CIH report said.
Milk prices appear to be drawing support from a delayed spring flush due to the colder weather across the Northern Hemisphere that has affected not only the U.S., but Europe as well. Meanwhile, the market is still adjusting to declining production in New Zealand, with Fonterra reporting a 16.3% drop in milk collections during March relative to last year, following a 2.3% year-over-year decline in February.
Iowa-Nebraska March dairy budgets worsen
March 2013 dairy budgets got a little worse compared to February in Iowa and Nebraska, even though total costs declined for a fourth consecutive month, according to Robert Tigner, Extension Educator.
Total costs declined 31¢/cwt. from February, to $19.60/cwt. Feed costs were slightly higher, with higher corn prices offsetting lower soybean meal and cottonseed prices. Hay prices were unchanged.
The budgeted break-even price for a freestall dairy with a 24,000-lb. rolling herd average (RHA) rose about 4¢/cwt., to $23.53/cwt. However, the March 2013 milk price of $19.15/cwt. was down 26¢ from February. With a Milk Income Loss Contract (MILC) payment, milk receipts totaled $19.92/cwt. in February, up 8¢ from February.
The March total variable and fixed costs per hundredweight for the 24,000-lb. RHA freestall herd are the lowest since August 2012, but so is the actual milk price. Contact Tigner at email@example.com.
MARKETS: Butter/cheese up; Class III futures higher, too
Today's market closing prices:
Butter: up 1.0¢, to $1.78/lb.
Cheddar blocks: up 1.5¢/ to $1.8850/lb.
Cheddar barrels: up 0.25¢, to $1.76/lb.
Grade A nonfat dry milk: unchanged at $1.7850/lb.
Extra Grade nonfat dry milk: unchanged at $1.70/lb.
Class III milk: +2¢ to +28¢ through December 2013. Based on current CME closing prices, the 2013 average is $18.64/cwt.; and the 2014 average is $16.91/cwt.
Corn, soy, meal futures mostly slightly higher
Corn: -3¢ to +8¢ per bushel through December 2013. The 2013 average is $6.06/bu.
Soybeans: steady to +11¢ per bushel through December 2013. The 2013 average is $13.23/bu.
Soybean meal: -$0.40 to +$6.00/ton through December 2013. The 2013 average is $369.70/ton.
Wednesday in DairyBusiness Weekly:
• Bigger and better: Expanded National Dairy Challenge draws more students, programs
• Is $4 corn possible? That and more from National Dairy Producers Conference
• Headed abroad: 2013 starting strong for dairy-related exports
• DSA producer impact analyzed, NMPF’s Chris Galen discusses
• Successful Convention Sale and Spring Show held in Ontario
• Northeast Youth Show Calf Summit held at Cowtown Holsteins
• Check out our industry briefs, view our product spotlight, see what’s happening on social media, listen to our podcasts and more!
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