DairyBusiness Update: July 24, 2014Print
High Milk Prices Still Keeping Dairy Cows in the Herd
Commercial red meat production for the United States totaled 3.82 billion pounds in June, down 1 percent from the 3.85 billion pounds produced in June 2013, according to USDA’s latest Livestock Slaughter report issued Thursday.
Beef production, at 2.07 billion pounds, was 4 percent below the previous year. Cattle slaughter totaled 2.61 million head, down 5 percent from June 2013. The average live weight was up 7 pounds from the previous year, at 1,307 pounds.
Veal production totaled 7.6 million pounds, 10 percent below June a year ago. Calf slaughter totaled 45,300 head, down 21 percent from June 2013. The average live weight was up 35 pounds from last year, at 285 pounds.
An estimated 199,000 dairy cows were slaughtered under Federal inspection in June, down 11,000 head from May and 21,000 head below June 2013.
Looking at the first six months of 2014, USDA estimates that 1.391million head were “retired” from the dairy business, 176,000 less than the same period a year ago.
Butter Inventory Low. Risky to Build at These Prices
Northeast butter production is reflective of the tight, high priced cream market, according to USDA’s Dairy Market News. Some butter makers are filling contracted orders and then selling available cream supplies on the spot market. The higher multiples have limited spot purchases of cream for butter production. Inventories are adequate for near term needs, but there are growing concerns if butter supplies will be adequate for the yearend holidays. Demand for butter is mixed with most buyers only covering their immediate needs.
The market tone is firm with a growing concern about the price continuing higher. Central butter manufacturers are reported to be fulfilling current obligations while building for Fourth Quarter needs is minimal. Cream availability improved slightly compared to last week as some ice cream accounts stepped away as a result of high milk fat prices. Some additional butter churn operators took profitable cream prices, which reduced production rates. Milk production and components are generally declining in the Upper Midwest, lowering a few production rates. Retail orders are ongoing. Some butter manufacturers noted increased 50/50 butter blend sales. Food service interest is steady. Industrial demand is strong with slightly improved bulk butter spot load availability. Butter stocks are being maintained at light inventories.
Western butter production is lower as milk supplies move seasonally lower. Cream supplies remain tight with good demand from ice cream and cream cheese manufacturers. Some butter plants continue to sell cream rather than building butter stocks. Current inventories are tight. Retail demand for print butter is steady. Demand for bulk butter remains good as end users look to acquire butter for holidays in the fall. Export sales have slowed dramatically as U.S. prices move higher.
Cheese is Tight
Northeast cheese production is very active as milk flows to cheese plants remain strong, says Dairy Market News. The good milk volumes have reduced purchases of condensed skim at some plants. Butterfat and protein levels of milk intakes are down, compared to year ago levels, with some cheese operations fortifying with nonfat dry milk. Demand for cheese is steady to increasing as retail sales are fairly good and USDA purchased mozzarella have increased in preparation to the start of the school year.
Cheese supplies are tight in the Midwest. Some manufacturers now receiving domestic orders for August deliveries are telling customers they will have to reduce what they have ordered because supplies won't be up to the level of orders. Many cheese manufacturers are commenting on cheese supply tightness for customer delivery, as well as blocks and barrels in general.
There is no consensus reason that manufacturers cite, some note heavier demand or less than expected cheese volumes manufactured. Milk supplies are mixed, with some cheese plants reporting milk intakes as flat, some reporting reduced milk, and a few noting a slight increase due to pleasant weather further north in the region. A number of cheese manufacturers have not been able to find any surplus milk even after contacting numerous potential sources. Some manufacturers are supplementing vats with condensed skim and nonfat dry milk. Cheese inventory levels are tight for some manufacturers. A cheese plant in Wisconsin is in the process of being closed by a multi-plant manufacturer.
Western cheese production is lower as hot weather and typical seasonal declines reduce available milk for manufacturing. Cheese demand remains good from retail accounts, but buyers are price sensitive and reluctant to increase orders at higher levels. The market has a softer undertone, but is trading in a range around the $2.00 mark. Most buyers are in good shape for immediate needs. Export demand has slowed.
Is The 2014 U.S. Average Soybean Yield Headed for a New Record?
Dr. Scott Irwin and Dr. Darrel Good of the Department of Agricultural and Consumer Economics at the University of Illinois, address the question in their latest FarmDocDaily posting.
As we highlighted in an article two weeks ago (farmdoc daily, July 9, 2014), there has been much discussion this summer about the prospects for what can only be described as spectacularly high U.S. corn yields. We examined summer weather conditions in the six years from 1960 through 2013 that had the largest positive U.S. average corn yield deviation from trend. The objective was to determine if summer weather conditions are on track to produce another such high yield in 2014.
Our conclusion was "... that very high U.S. corn yields have been associated with summer precipitation that was near to slightly above average and summer temperatures that were well-below average in Illinois, Indiana, and Iowa." With regard to 2014 we found that "...June weather conditions in Illinois, Indiana, and Iowa were not entirely consistent with those experienced in the previous six highest yielding years relative to trend. This was particularly true for Iowa, which received over twice its long-term average precipitation in June."
While not receiving quite as much attention, the USDA is currently forecasting a new record yield (45.2 bushels) of soybeans in 2014, exceeding the 2009 record of 44 bushels by a large margin. Like corn, high soybean yield expectations this year are based on generally favorable growing conditions to date and on the high percentage of the crop rated in good or excellent condition.
The USDA's Crop Progress report of July 21 estimated that 73 percent of the crop in the 18 major producing states was in either good or excellent condition as of July 20. That is the largest percentage in those two categories for that week since 1994, when 83 percent of the crop was rated in good or excellent condition, the third largest since the report was initiated in 1986, and 14 points above the average for 1986 through 2013.
The purpose of the today's article is to specifically identify the summer weather conditions that contribute to high U.S. soybean yields and compare weather conditions to date in 2014 with those previous very favorable conditions. We follow the same procedures that we used in our previous analysis of corn yield prospects.
Read more at http://farmdocdaily.illinois.edu/2014/07/2014-us-average-soybean-yield.html.
Canadian Dairy Coop Purchases U.S.-based Davisco Foods
Agropur, Canada’s largest dairy cooperative, and Davisco Foods International, a US-based cheese and dairy ingredients company, announced they have entered into an agreement for Agropur to acquire the dairy processing assets of Davisco.
The acquisition is targeted to close August 1, 2014, subject to satisfaction of customary closing conditions. This transaction will double Agropur’s US processing operations and will increase its global milk intake by 50%. It will also strengthen its position in the North American and international dairy industries.
“With over US$1 billion in annual sales, this acquisition is by far the largest transaction in Agropur 76 year history,” said Serge Riendeau, president of Agropur. “This transaction, combined with the most recent ones in Canada, will increase our sales to over CDN$5.8 billion (US$5.4 billion) on an annualized basis, and we should reach 5.3 billion liters (12.1 billion pounds) of milk processed each year in 41 plants across North America. As a result of this acquisition, the US operations of Agropur should reach the top five cheese and ingredients processors in the United States to even better serve its clients.”
“The world dairy industry is consolidating at an accelerated pace and our acquisition of Davisco supports our objective of increasing our global presence,” said Robert Coallier, CEO, Agropur. “One of our key business objectives is to pursue strategic acquisitions to diversify our geographic markets and product portfolios. This acquisition, like our other recent ones, will help solidify the development and sustainability of our cooperative by securing a favorable strategic positioning at all national, North American and global levels. To remain a leader in our field, we must pursue and continue development efforts that aim directly at profitable growth,” Coallier added.
Read more at http://www.agropur.com/en/media/press20140722.html.
T-TIP Negotiations Continue, but Challenges Remain
That according to a posted story on the International Dairy Foods Association’s (IDFA) website. The story states that Trans-Pacific Partnership (TPP) ministers met in Ottawa, Canada, July 3-12. No progress was made with Japan on dairy or other sensitive agriculture products, and Canada still is unwilling to negotiate on market access. The next round of bilateral talks between the United States and Japan on market access will take place in Washington, August 4-5.
November may be the new deadline for completing TPP. A recent Reuters article quoted President Barack Obama as saying, "Our hope is by the time we see each other again in November, when I travel to Asia, we should have something that we have consulted with Congress about, that the public can take a look at, and we can make a forceful argument to go ahead and close the deal."
However, several U.S. legislators have stated they will not support TPP if it comes to Congress without Trade Promotion Authority being enacted first.
The latest round of talks between the United States and the European Union were held July 14-18 in Brussels, Belgium. Although initial tariff offers were exchanged in February, neither side has made a second offer.
The United States is seeking full tariff elimination, but the EU has signaled that it is seeking protection for sensitive agriculture products such as poultry, beef and pork. Regulatory cooperation efforts have also hit a snag, with media reports suggesting that the idea of moving regulatory negotiations outside of T-TIP negotiations is gaining support.
At the close of the round, U.S. Trade Representative Michael Froman said, “The sixth round of Transatlantic Trade and Investment Partnership (T-TIP) negotiations ended earlier today in Brussels. U.S. and EU negotiators worked productively this week to identify paths forward across the negotiations. Opportunities for a major upgrade of one’s biggest economic relationship do not come along often, and we cannot afford to squander this one. I applaud the efforts of the teams for exploring creative ways to open markets to support job creation, growth and competitiveness, including by bridging divergences in our regulatory regimes, without compromising the level of health, safety and other regulations our people have come to expect.”
The next round of negotiations will likely take place in September in the United States.
The Republican members of the House Ways and Means Committee sent a letter to Ambassador Froman last week, urging the administration to enact Trade Promotion Authority before completing the Trans-Pacific Partnership deal. In the letter, members say they “will not support TPP if the agreement, even an agreement in principle, is completed before TPA is enacted.”
IDFA supports TPA and the legislation introduced by former Senate Finance Committee Chairman Max Baucus (D-MT), Finance Ranking Member Orrin Hatch (R-UT) and House Ways and Means Committee Chairman Dave Camp (R-MI) in January. The bill includes several key negotiating objectives, such as the reduction or elimination of tariffs, robust rules on sanitary and phytosanitary measures, and preventing the improper use of geographical indications, all of which make it easier and less costly for U.S. dairy companies to compete globally.
IDFA is a member of the Trade Benefits America Coalition, which is advocating for passage of TPA.
IDFA and other members of the Coalition for Sugar Reform sent a letter to key federal officials last week, urging the administration not to enter into negotiations with Mexico on a managed trade agreement. In the letter, coalition members said, “Such an agreement would be particularly inappropriate in the case of sugar, a U.S. industry that already receives tremendous government protection from market forces at the expense of U.S consumers and U.S. taxpayers.”
On March 28, a group of domestic sugar producers filed antidumping and countervailing duty (AD/CVD) petitions with the U.S. Department of Commerce and the U.S. International Trade Commission (ITC) against Mexican sugar exports to the United States. These proceedings have statutory timetables, and a final decision regarding duties will likely be rendered by May 2015.
Earlier this month, the U.S. Senate confirmed 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.
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).
For more information, contact Beth Hughes, IDFA director of international affairs, at firstname.lastname@example.org.
Dairy Cares Donates $126,000 to Children’s Hospital
The evening of July 19th marked the fourth annual Dairy Cares garden party and the group's largest donation yet to the Children's Hospital of Wisconsin. A check for $126,000 was presented to the hospital on behalf of Dairy Cares' supporters which include both corporate and individual sponsors. Combined with the previous three years, Dairy Cares has raised a total of over $300,000 for the state-of-the-art medical center that is centered in Milwaukee and serves 40 locations throughout Wisconsin.
"At the core of Dairy Cares are Wisconsin dairy farm families and the businesses that support our way of life," explains Jim Ostrom, dairyman and co-founder of the non-profit organization. "We could not be more proud to give back on behalf of the dairy community in such a generous way to the Children's Hospital." The garden party, hosted at the Ostrom home near De Pere drew more than 300 guests.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
That loud thud you heard this morning was cheese dropping below $2/lb. again. The 40lb. Cheddar blocks dropped 5.25¢, to $1.9875/lb., the first decline since July 9. Three carloads traded hands, the first at $2.0050/lb. and the next two at today’s close. The 500lb. barrels dropped another 3.5¢, following yesterday’s 3.75¢ decline, and are now at $1.9975/lb., a 1¢ inversion above the blocks. Five cars found new homes this morning. The first sale was at $2.0225/lb. and inched lower from there but an offer at $1.9975/lb. was left on the board.
Cash butter took a rest from five consecutive sessions of gain, and held at $2.62/lb. today, with no activity whatsoever. They never even plugged in the coffee pot!
FC Stone risk management consultant Ryan Cox stated in this morning’s Insider Opening Bell that butter has surged higher on “tightness.” He pointed out that “We currently have 34 days worth of use, compared to 37 days last month and 63 days last year. International prices continue to weaken however, and I suspect we will see a softer tone come into this market once the summer heat subsides."
Cash Grade A nonfat dry milk was unchanged for the third session in a row, holding at $1.6750/lb., with 1 car sold and an offer at that price going nowhere.
Today’s Market Closing Prices
Butter: Unchanged, at $2.62/lb.
Cheddar blocks: Down 5.25¢, to $1.9875/lb.
Cheddar barrels: Down 3.5¢, to $1.9975/lb.
Grade A nonfat dry milk: Unchanged, at $1.6750/lb.
Class III milk (prelim.): July $21.53/cwt., +1¢; Aug. $21.69, -11¢; Sept. $20.91, -7¢, Oct. $20.10, -11¢; Nov. $19.54, +10¢; & Dec. $19.19, -9¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.38, -5¢ from Wednesday. The Fourth Quarter average is now at $19.61, -10¢ from Wednesday. The First Quarter 2015 average is now at $18.22, -4¢ from Wednesday.
The Agriculture Department issues its Milk, Cost of Production report tomorrow. Looking to next week, the monthly Ag Prices report is out Monday, which will include the latest Milk Feed Price Ratio, and the weekly Crop Progress report is out Monday afternoon. USDA announces July Federal Order Class II, III, and IV milk prices Wednesday afternoon and California’s comparable July Class 4a and 4b prices are announced by the California Department of Food and Agriculture on Friday. USDA also issues its monthly Dairy Products report Friday afternoon.
Friday on DairyLine:
HighGround Dairy’s Eric Meyer talks about the mixed signals of the June Milk Production report and the June Cold Storage report, answering the question are you bullish or bearish?
Dr. Mike Hutjens discusses cooling dry cows in his weekly “Feed Facts” program.
This Week in DairyBusiness Weekly:
- Empire Farm Days dairy tours planned
- Lessons learned in Denmark
- Update on the milk markets
- Step up warm weather calf management
- Ferme Blondin: Humble beginnings to global recognition
- Ask your specialist if earlier “open” checks might fit your herd’s reproductive program
- Scenes from the show ring
- View our calendar, industry briefs, plus more!
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