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DairyBusiness Update for Feb. 7, 2013

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USDA to issue final rule on Class III, IV price formulas

More than four years after the interim rule comment period closed, USDA issued a final rule amending the Class III and Class IV product price formulas in all federal milk marketing orders. The decision will finalize the interim partial final rule with no changes to the price formulas that USDA announced in August 2008 and implemented two months later, according to the International Dairy Foods Association.

The 2008 decision amended the make allowances for cheese, butter, nonfat dry milk and dry whey powder. Specifically, the decision adopted the following make allowances: cheese – 20.03¢/lb.; butter – 17.15¢/lb., nonfat dry milk – 16.78¢/lb.; and dry whey – 19.91¢/lb.

The decision also increased the butterfat yield factor in the butterfat price formula to 1.211, up from 1.20. USDA will conduct a referendum of dairy producers on the final rule in the coming month to complete the process. 

 

EPA proposes continued focus on CAFOs

Concentrated animal feeding operations (CAFOs) will likely remain the focus of U.S. Environmental Protection Agency (EPA) for the next three years, according to the National Sustainable Agriculture Coalition (NSAC)

Every three years, EPA asks for public comment on its National Enforcement and Compliance Initiatives. EPA selects the initiatives based on (1) the severity of the pollution problem; (2) a determination that noncompliance with an environmental law enforced by EPA is a significant issue; and (3) a determination that federal enforcement can make a difference. Among the initiatives is the prevention of surface and groundwater contamination by animal waste discharges from CAFOs. 

On Jan. 28, EPA issued a notice in the Federal Register asking for public comment on priorities for the FY 2014-2016 time period. Public comments are due by Feb. 27.

 

CBO report provides farm bill snapshot

The National Sustainable Agriculture Coalition (NSAC) analyzed the Congressional Budget Office’s (CBO) first snapshot of the budget projections for 2014 and beyond, including projections for federal farm bill spending. Based on NSAC analysis, dairy program costs drop dramatically after the current one-year extension of the Milk Income Loss Contract (MILC) program — included as part of the short-term farm bill extension enacted at the beginning of January — expires at the end of this year.

Current commodity programs are projected to increase in cost by $1.6 billion over the next 10 years relative to last year’s projection.  The increase is largely due to projected increases in Average Crop Revenue Election (ACRE) payments for corn, soybeans, and wheat and projected increases in counter cyclical payments for cotton.  

A big piece of any farm bill is the Supplemental Nutrition Assistance Program (SNAP), better known as the food stamp program. Costs are projected to decline by almost $8 billion in the next five years and by nearly $12 billion over the coming decade, relative to last year’s projection. These savings, primarily due to an improving economy, are three times greater than what the Senate-passed farm bill from last year proposed cutting from the program, and three-fourths the size of the House Ag Committee-passed SNAP cut.  The projected decline in the food stamp budget is the primary reason why the CBO projection for farm bill spending as a whole goes down, relative to last year’s projection, by 1.4%.

The final version of the projections, to be published in late March, will be used for determining the costs and savings of competing budget resolutions and farm bill proposal debate this year, NSAC said. The estimates assume no changes in current law. Hence, as farm bill proposals are introduced, their costs are measured against the CBO baseline to debated later this year.

 

MARKETS: Barrels higher; 2013 Class III futures mostly slightly lower

Today's market closing prices:

Butter: unchanged at $1.5550/lb.

Cheddar blocks: unchanged, at $1.6475/lb.

Cheddar barrels: up 0.5¢, to $1.5550/lb.

Grade A nonfat dry milk: unchanged at $1.52/lb.

Extra Grade nonfat dry milk: unchanged at $1.56/lb.

Class III milk: -13¢ to +1¢ through December 2013. Based on current CME closing prices, the 2012 average is $17.44/cwt.; the 2013 average is $18.15/cwt.; and the 2014 average is $16.42/cwt.

 

Corn, soybean futures lower, meal mixed

Corn: -12¢ to -14¢ per bushel through December 2013. The 2013 average is $6.56/bu.

Soybeans: -1¢ to -12¢ per bushel through November 2013. The 2013 average is $14.25/bu.

Soybean meal: +$0.90 to -$3.80/ton through December 2013. The 2013 average is $408.50/ton.

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