DairyBusiness Update: July 11, 2014Print
WASDE: 2015 Milk Output Estimate Raised; 2014 Lowered
USDA’s World Agricultural Supply and Demand Estimates (WASDE) report, released July 11, lowered the milk production forecast for 2014 from last month as slower growth in output per cow more than offsets a more rapid expansion in cow numbers. The forecast for 2015 is raised as higher milk prices and lower feed costs are expected to support more rapid growth in cow numbers and output per cow.
Export forecasts for 2014 are lowered on a fat basis but raised on a skim-solids basis. High domestic butter prices are expected to limit export opportunities, but nonfat dry milk/skim milk powder (NDM/SMP) exports are expected to remain strong. For 2015, no change is forecast to fat-basis exports, but strength in NDM/SMP sales will help support higher skim-solids exports.
Product prices are forecast higher for 2014 with strength in butter prices expected to carry into 2015. Despite increased production, robust domestic demand and stronger NDM/SMP exports will support prices.
Class III and Class IV prices for 2014 are raised on stronger component product prices and the Class IV price forecast for 2015 is raised reflecting strength in butter prices. The all milk price is forecast at $23.25 to $23.55 per cwt for 2014, and $19.75 to $20.75 per cwt for 2015.
• 2014 production and marketings were projected at 205.9 billion lbs. and 204.9 billion lbs., respectively. Both are down 200 million lbs. from last month’s projections. If realized, 2014 production and marketings would be up 2.3% from 2013.
• 2015 production and marketings were projected at 212.4 billion lbs. and 211.4 billion lbs., respectively. Both are up 300 million lbs. from a month ago. If realized, 2015 production and marketings would be up about 3.2% from 2014.
Fat-basis exports are forecast lower on increased competition from traditional exporters, primarily in butterfat markets. Continued strength in nonfat dry milk (NDM) will help limit declines in skim-solids exports. Fat-basis import forecasts are expected to be about the same as 2014 but skim-solids imports will be lower. With higher domestic production, cheese, butter, NDM, and whey prices are forecast lower. Both Class III and Class IV prices are forecast lower. The all milk price is forecast at $19.70 to $20.70 per cwt for 2015.
Fat basis imports are forecast lower while skimsolids imports are higher. Exports are raised on stronger sales of NDM, butterfat and cheese. Butter and whey prices are raised from last month while NDM is lower. Cheese is unchanged but the range is narrowed. The Class III price is raised on higher whey prices. Class IV is up as higher prices for butter more than offset reduced prices for NDM. The all milk price is forecast to average $22.70 to $23.00 per cwt.
Dairy price forecasts
Product 2013 2014 2015
Class III ($/cwt) 17.99 21.00-21.30 16.95-17.95
Class IV ($/cwt) 19.05 21.95-22.35 18.70-19.80
All milk ($/cwt) 20.05 23.25-23.55 19.75-20.75
Cheese ($/lb.) 1.7683 2.0300-2.0600 1.6700-1.7700
Butter ($/lb.) 1.5451 1.9650-2.0250 1.6500-1.7800
NFDM ($/lb.) 1.7066 1.8350-1.8650 1.6050-1.6750
Dry whey (¢/lb.) 0.5902 0.6350-0.6550 0.5500-0.5800
Source: USDA WASDE report, July 11, 2014
WASDE Crop Update
Projected 2014/15 U.S. feed grain supplies in today’s World Agricultural Supply and Demand Estimates report (WASDE) are raised with increases for corn and sorghum beginning stocks and higher expected sorghum production. Corn production is projected 75 million bushels lower based on harvested acres from the June 30 Acreage report. The national average corn yield remains projected at a record 165.3 bushels per acre.
Favorable early July crop conditions and weather support an outlook for record yields across most of the Corn Belt, however, for much of the crop, the critical pollination period will be during middle and late July. At the projected 13,860 million bushels, this year’s crop remains just 65 million bushels below last year’s record.
Corn use changes for 2014/15 are limited to a 50-million-bushel reduction in expected feed and residual use based on the lower production projection and higher projected sorghum feed and residual use. Sorghum food, seed, and industrial use, exports, and ending stocks are also raised for 2014/15 with sorghum production projected up 50 million bushels on the higher area reported in the Acreage report. Corn ending stocks are projected up 75 million bushels with a higher carryin and lower feed and residual use more than offsetting the small acreage-driven decline in production. The projected range for the season-average corn price is lowered 20 cents on each end to $3.65 to $4.35 per bushel.
Lower farm prices are also projected for sorghum, barley, and oats. A number of 2013/14 feed grain supply and use changes are made this month reflecting June 1 stocks estimates from the June 30 Grain Stocks and based on final marketing-year barley and oats trade data from the U.S. Census Bureau. Projected corn feed and residual use is lowered 125 million bushels based on lower-than-expected March-May disappearance as indicated by the June 1 stocks.
Corn used to produce ethanol is projected 25 million bushels higher based on the pace of ethanol production to date and lower projected sorghum food, seed, and industrial use, most of which is for ethanol.
Sorghum exports are projected up 10 million bushels reflecting continued steady export sales and the large 2013/14 outstanding sales balance. Projected 2013/14 farm prices for corn and sorghum are lowered this month as favorable weather for developing 2014 crops reduce summer price prospects.
Global coarse grain supplies for 2014/15 are projected 7.0 million tons higher with larger beginning stocks for the United States, Brazil, and China and larger production for China, the EU, Ukraine, Russia, and Serbia. Lower corn production for the United States and lower corn, barley, and oats production for Canada partly offset this month’s increases in world coarse grain output. World barley production is higher with larger crops expected in Ukraine and Russia.
Foreign corn production for 2014/15 is raised 1.7 million tons. China corn production is up 2.0 million tons on higher expected area. China 2013/14 corn production is also raised, up 0.8 million tons based on the latest government estimates that include higher area. EU 2014/15 corn production is raised 0.4 million with larger crops expected in Germany and France. Serbia corn production is also raised 0.3 million tons. Partly offsetting is a 0.9-million-ton reduction in Canada corn reflecting the lower planted area recently reported by Statistics Canada. Brazil corn production is unchanged for 2014/15, but raised 2.0 million tons for 2013/14 based on higher area indications for second crop corn. Global 2014/15 corn trade is nearly unchanged with a reduction for Canada exports partly offset by an increase for Serbia. For 2013/14, world corn trade is raised with higher imports for the EU and South Korea more than offsetting a reduction for China. Corn exports for 2013/14 are raised for Canada, the EU, and Russia. Global corn consumption is lowered slightly for both 2013/14 and 2014/15 mostly reflecting the lower U.S. feed and residual use projections.
Global 2014/15 corn ending stocks are projected 5.4 million tons higher with increases for China, Brazil, and the United States more than offsetting the Canada reduction.
U.S. oilseed production for 2014/15 is projected at 113.1 million tons, up 5.0 million tons with higher soybean production accounting for most of the change. Soybean production is projected at a record 3,800 million bushels, up 165 million due to increased harvested area. Harvested area, forecast at 84.1 million acres in the June 30 Acreage report, is 3.6 million above the June forecast. The soybean yield is projected at 45.2 bushels per acre, unchanged from last month. Soybean supplies are 180 million bushels above last month’s forecast due to higher beginning stocks and production.
Soybean crush is projected at 1,755 million bushels, up 40 million reflecting increased domestic soybean meal disappearance in line with adjustments for 2013/14 and higher U.S. soybean meal exports that offset lower projected exports for India. Soybean exports for 2014/15 are raised 50 million bushels to 1,675 million reflecting record U.S. supplies and lower prices.
U.S. soybean ending stocks are projected at 415 million bushels, up 90 million. If realized, projected stocks would be the highest since 2006/07.
Prices for soybeans and products for 2014/15 are all reduced. The U.S. season-average soybean price is projected at $9.50 to $11.50 per bushel, down 25 cents on both ends of the range. Soybean meal prices are projected at $350 to $390 per short ton, down 5 dollars on both ends. The soybean oil price range is projected at 36 to 40 cents per pound, down 1 cent on both ends.
Global oilseed production for 2014/15 is projected at a record 521.9 million tons, up 5.8 million from last month with soybeans and rapeseed accounting for most of the change. Global soybean production is projected at 304.8 million tons, up 4.8 million mostly due to higher production in the United States. Higher soybean production is also projected for Russia and Ukraine, both reflecting higher harvested area. Lower soybean production for India resulting from reduced harvested area partly offsets these gains. Harvested area is reduced based on planting delays resulting from the slow development of the monsoon in the main soybean producing states.
Read the complete WASDE at: http://www.usda.gov.oce/commodity/wasde/latest.pdf.
Commercial Demand Still Pretty Good
Jerry Dryer, editor of the Dairy and Food Market Analyst, was back on Friday’s DairyLine to report his commercial disappearance data after factoring in USDA’s latest Dairy Products report last Friday. Dryer prefers to examine the data in three month averages rather than monthly. He reported that demand was still pretty good through May, adding the caveat that it may have since hit the wall in some respects or at least slowed down.
March, April, May American cheese sales were up about 2 percent, according to Dryer, other cheese was up almost 3 percent so the cheese category was holding despite the higher prices at retail.
Butter disappearance was up almost 8 percent, although a lot of that was driven by exports, which have now softened because of the high prices. The other side of that, according to Dryer, is that butter stocks are very low, due to that strong demand.
“Typically at the end of May, we have 51 days worth of butter in the cooler, getting ready for the holiday season,” Dryer warned, “And this year we have 35 and a half days worth of product in the cooler so it’s bullish on the butter side of the business.”
The milk powder business, which includes milk protein concentrate, skim milk powder and nonfat dry milk, has slowed down and is below a year ago, he said, by about 0.3 percent for that three month period, but that’s actually a recovery from early in the year.
The whey business “stays in the dumper,” according to Dryer, down 10 percent in that three month period.
“The key products driving milk prices, cheese and butter have good sales, good disappearance through the end of May,” he concluded, but “They’re slowing some now as the import orders back off a little bit because of prices and retail sales back off because of higher prices.”
Need a New Tool Box?
You’ll find one put together by Dr. Jonathan Coppess, Nick Paulson, and Gary Schnitkey, of the Department of Agricultural and Consumer Economics at the University of Illinois in a recent FarmDoc posting.
Previously, articles on farmdoc Daily have provided details regarding the efforts to inform readers about the 2014 Farm Bill, particularly with regard to farm program decisions that will have to be made (those articles are available here and here). As the next step in that project, today we introduce the Farm Bill Toolbox as the one-stop resource for farm program decisions, information and analysis, as well as providing further information regarding the ongoing efforts for the Farm Bill.
On July 1, 2014, the University of Illinois as the lead university for the National Coalition for Producer Education (NCPE) entered into a cooperative agreement with the Farm Service Agency for development of web-based decision tools to help producers and farm owners with the decisions and programs in the Farm Bill.
This effort will involve the development of three different tools by the Illinois-led NCPE, as well as training, education, outreach and analysis on the tools and programs: (1) a tool for the ARC/PLC program decision, including base acre reallocation, payment yield updating and SCO/STAX; (2) a tool for the new dairy Margin Protection Program and Livestock Gross Margin-Dairy insurance policy; and (3) a tool for the new Noninsured Crop Disaster Assistance Program (NAP) provisions regarding buy-up coverage.
The University of Illinois-NCPE proposal envisioned using the farmdoc platform as a user-friendly, one-stop resource for all aspects of the Farm Bill program decisions. To that end, we introduce the Farm Bill Toolbox (available here) as the dedicated site for producers, landowners and others interested in the programs. It will house the specific web-based tools being developed, as well as training, education, outreach and analysis materials. These materials will include webinars and answers to frequently asked questions. Additionally, general conclusions gleaned from analysis of the programs within the real-world context of prices, yields and risk, coupled with what is learned from developing and running the tools. We also envision providing some basic guidance or "rules of thumb" that producers can use as they need.
Like any good toolbox, the Farm Bill Toolbox will contain a range of items and materials - the tools - to serve the widest variety of producers and situational needs. Not everyone will make use of the specific tools, or the articles analyzing the programs. But the tools will be available for anyone who seeks information, and at levels intended to fit varying degrees of informational needs.
The Farm Bill Toolbox is currently under construction and will remain under construction as the web tools, analysis and other information are being developed. It currently houses a limited amount of material taken from previous articles and work that remain relevant to this effort and the pending producer decisions. It will be updated as the tools and materials are developed and become available for public release. Information and links to the tools will also be available on the FSA website.
Read more at: http://farmdocdaily.illinois.edu/2014/07/introducing-farm-bill-toolbox.html.
Jersey Association Gives Production Awards
Registered Jersey™ cows from Minnesota and Washington were recognized with the American Jersey Cattle Association’s highest production awards during its annual meeting on June 28, 2014 in Alexandria, Va.
Highview TBone Vodka, bred and owned by James L. Oelfke and Family of Hamburg, Minn., won both the President’s Trophy and the Hilmar Cheese Yield Trophy. The President’s Trophy is awarded for the year’s high m.e. protein record, with the Hilmar Cheese Yield Trophy presented to the cow with the highest yield of 38% moisture Cheddar cheese, calculated from actual production of no more than 305 days.
Calving at two years, one month of age, “Vodka” produced 33,600 lbs. milk, 1,651 lbs. fat and 1,312 lbs. protein for a cheese yield equivalent of 4,465 lbs. Her high test day was 145 lbs. The mature equivalent for the lactation was 42,605M, 2,076F and 1,673P. She is scored Excellent-91%.
The AJCA also recognizes lifetime production for cows on official test that were alive on December 31. A total of 43 cows met the minimum nomination requirements of 200,000 lbs. milk, 9,500 lbs. fat and/or 7,500 lbs. protein for the 2013 contest.
Mainstream Jace Shelly, Excellent-91%, owned by Randy and Kana Kortus, Lynden, Wash., received the High Lawn Trophy for fat production and the Edyvean Farm Trophy for protein production. Lifetime totals at the end of 2013 were 14,271 lbs. fat and 10,271 lbs. protein. The cow’s top record to date is 44,590 lbs. milk, 2,352 lbs. fat and 1,627 lbs. protein in 365 days, with average daily lifetime production of 109 lbs. milk, 5.48 lbs. fat and 4.02 lbs. protein.
The Ogston Trophy for milk production was presented to Michael R. Kortus for Lagerweys Hallmark Redrose, Excellent-91%, with a lifetime total of 294,960 lbs. milk. She has now completed nine lactations, seven of them over 30,000 lbs. milk, averaging 81.2 lbs. milk, 3.82 lbs. fat and 2.83 lbs. protein per day.
New records for Jersey production were established in 2013, with 105,913 lactations averaging 19,278 lbs. milk, 932 lbs. fat, and 702 lbs. protein (305-2x-m.e.). Actual 305-day production per cow was 20,392 lbs. energy-corrected milk and 2,098 lbs. cheese. According to the annual report from the Council on Dairy Cattle Breeding, Jersey milk yield increased by 1.9% in 2013, leading all breeds. Fat production per cow was up 26 pounds, and protein yield 11 pounds.
The American Jersey Cattle Association, organized in 1868, compiles and maintains animal identification and performance data on Jersey cattle and provides services that support genetic improvement and greater profitability through increasing the value of and demand for Registered Jersey™ cattle and genetics. For more information on the association’s complete line of services for dairy business owners, visit the website at www.USJersey.com
IDFA Names Two New Directors
The International Dairy Foods Association (IDFA) has announced promotions to its legislative affairs department and the office of the chief executive officer. Ashley Burch was named director of political programs, and Heather Soubra was promoted to director of executive office and special projects.
Ashley Burch was promoted to director of political programs for IDFA. She joined IDFA in 2006 as manager of political programs and was promoted in 2009 to assistant director. She is responsible for all of IDFA’s political involvement efforts, including Ice Cream, Milk & Cheese PAC, the GrassRoots Action Network for Dairy (GRAND) and Get Out The Vote (GOTV) activities. She also oversees activities for Washington Conference, IDFA’s annual legislative fly-in.
Prior to joining IDFA, Burch worked for the American Hotel & Lodging Association, where she managed the daily operations of the lodging industry’s largest political action committee. She also was responsible for federal and state grassroots outreach and coordination of the industry fly-in.
Heather Soubra was promoted to the position of director of executive office and special projects for IDFA. Since joining IDFA in 2008 as executive assistant to Connie Tipton, IDFA president and CEO, Soubra has streamlined many processes for the organization and gained a variety of additional responsibilities.
In 2011, she was promoted to manager of executive office and special projects. In addition to overseeing the day-to-day operations of the executive office, Soubra manages programming efforts for Dairy Forum, IDFA’s premier processor and producer event. She coordinates all speaking engagements for the event and has implemented new guidelines that provide an enhanced experience for both speakers and Dairy Forum attendees. Soubra also serves as a liaison with the food industry trade association community, planning events and special projects throughout the year.
IDFA Welcomes New Chief Ag Negotiator
The International Dairy Foods Association (IDFA) commended members of the U.S. Senate for confirming Darci Vetter to replace Islam Siddiqui as chief agricultural negotiator in the Office of the U.S. Trade Representative. Vetter previously served as the deputy under secretary for Farm and Foreign Agricultural Services in the U.S. Department of Agriculture.
“IDFA welcomes the Senate’s confirmation of Darci Vetter today as the new chief agricultural negotiator in the Office of the U.S. Trade Representative. Her background and expertise make her a perfect fit for this new role, and we’re excited to work with her on issues important to the U.S. dairy industry,” said Clay Hough, IDFA senior group vice president.
The position of chief agricultural negotiator, which holds the rank of ambassador, was created by Congress in 1997 to ensure that U.S. agriculture is fully represented in trade negotiations at the highest level. During her Senate confirmation hearing in May, Vetter mentioned specific areas where USTR and Congress need to work together, including market access for U.S. dairy in Japan and Canada, as well as geographical indications (GIs).
GIs provide producers in a specific region the exclusive right to use a particular product name, and IDFA supports legitimate GIs. However, the European Union has been working to claw back the use of common food names, and protecting the ability of U.S. cheese makers to use common cheese names in the U.S. and foreign markets is a top priority for IDFA.
IDFA also supports comprehensive trade agreements that include significant market access gains for U.S. dairy and lessen or eliminate trade barriers.
Mielke Market Daily / Week’s End Review
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
Cash cheese ends the week on an up note. The 40lb. blocks jumped 2¢ this morning, following a 0.25¢ rise yesterday, and close the day and the week at $1.97/lb. Seven cars traded hands, the first two at $1.9525/lb. and the price kept inching higher. A bid at $1.9650/lb. went unfilled and an offer at $1.97/lb. was left on the board. The 500lb. barrels were up 2.75¢ after gaining 1.5¢ yesterday and close the week at $1.9875/lb. and are back atop the blocks. Six cars traded hands today, the first at $1.9675/lb. and the price kept creeping higher from there. A bid at $1.9875/lb. went unfilled.
Cheese prices reversed direction from last week and the blocks close .025¢ higher than the previous week and 29.5¢ above a year ago. The barrels are also up 0.25¢ on the week, 33.75¢ above a year ago, and 1.75¢ above the blocks. Twenty nine cars of block traded hands on the week and 15 of barrel. The lagging NDPSR-surveyed U.S. average block price hit $2.0412/lb., up 0.3¢ from the previous week while barrel averaged $2.0479/lb., up 3.1¢.
Cash butter, after holding steady for two sessions, dropped to $2.34/lb. on the first two sales this morning however the price rallied in the next 7 sales but fell 1.25¢ short of Tuesday’s close and finished the day and the week at $2.3725/lb.
Butter is down 1.75¢ on the week but is still a whopping 91.25¢ above a year ago. Twenty cars were sold this week in the spot market. NDPSR butter averaged $2.2823/lb., up 7.4¢.
Grade A nonfat dry milk, after dropping 3.75¢ yesterday, was unchanged this morning, holding at $1.7350/lb. One car was sold at that price and a bid at $1.7250/lb. got no takers.
The powder is down 3.75¢ on the week and the lowest price since August 8, 2013. Three cars were sold in the cash market this week. NDPSR powder averaged $1.8585/lb., down 2.1¢, and dry whey averaged 69.42¢/lb., up 1.1¢.
FC Stone risk management consultant Chris Hildebrand wrote in this morning’s Insider Opening Bell that "We continue to hear that there is a lot of product readily available for those that need it, and we set record export numbers for the month of May in the NDM/ SMP categories. That should continue to be a key bearish factor for the market. The GDT will provide more direction for these markets."
Today’s Market Closing Prices
Butter: Down 1.25¢, to $2.3725/lb.
Cheddar blocks: Up 2¢, to $1.97/lb.
Cheddar barrels: Up 2.75¢, to $1.9875/lb.
Grade A nonfat dry milk: Unchanged, at $1.7350/lb.
Class III milk (prelim.): July $21.40/cwt., +1¢; Aug. $20.70, +10¢; & Sept. $19.85, -2¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.65, +3¢ from Thursday. The Fourth Quarter average is now at $19.40, unchanged from Thursday. The First Quarter 2015 average is now at $18.22, -2¢ from Thursday.
There’s not a lot of fodder for the markets to feed from next week. The Agriculture Department issues its weekly Crop Report on Monday. Tuesday is the next Global Dairy Trade auction. USDA issues its monthly Livestock, Dairy, and Poultry Outlook on Thursday and, perhaps the most anticipated report, is the June Milk Production report, out Friday afternoon, after the markets have traded.
Monday on DairyLine:
Dairy farming is in decline in Missouri and Governor Nixon isn’t helping, according to
Larry Purdom, President of the Missouri Dairy Association.
Plus, we continue with our top ten trends that affect the dairy industry with Maureen
Bligh of the Dairy Council of California.