DairyBusiness Update: March 20, 2014Print
Dairy Cow Slaughter Down from January & a Year Ago
The Agriculture Department’s latest Livestock Slaughter Report shows 237,000 culled dairy cows were slaughtered under federal inspection in February, down 33,000 head from January and 22,000 head less than February 2013. Thus far in 2014, 507,000 dairy cows were “retired” from the dairy business, down 49,000 from this time a year ago.
Farmers Need Immigration Reform
That was the basic message from farmers and ranchers who gathered at the National Press Club in downtown Washington, D.C. Tuesday calling for Congress to act on immigration reform. NMPF’s Chris Galen reported details in today’s DairyLine.
Dairy producers Mary Kraft of Colorado and Russell Boening from Texas spoke on a personal level of how important it is to have access to an adequate work force of immigrant laborers.
“We need to have the farmers in mind when we go up to Capitol Hill and talk about the stakes for agriculture,” NMPF’s Chris Galen said. “All of agriculture is really dependent on getting this issue fixed.”
The issue of immigration reform is nothing new but it appears to have stalled in the House. Congress is not expected to get a lot done in 2014 before the elections, but farmers say immigration reform should be one issue that needs to be addressed.
“The clock is ticking,” Galen said. “There are only so many days left in the legislative calendar.”
The agriculture industry is working on building alliances with other sectors of the economy, according to Galen, and NMPF is part of a partnership for a new American economy, largely focused on hi-tech workers to make sure they get visas to work in the U.S.
“We are trying to partner with those folks,” Galen concluded, and “Talk about how agriculture needs this so called a blue card for people who work specifically in agriculture in this country.”
Interpreting the February Milk Production Report
US milk production has grown for the second straight month versus the prior year, and the rate of growth is increasing, but not enough for those wishing for more reasonable dairy commodity prices to get excited in the near future, according to High Ground Dairy’s Eric Meyer.
With the All Milk Price tracking over $20.00/cwt. for seven straight months (including March, which will likely break the record of $24.70/cwt set last month), there has not been enough traction to grow milk production at an above average rate to meet burgeoning international demand. Meyer views this report as neutral versus expectations.
There are some glimmers of bearish hope out there, Meyer says, as January revisions showed increases in milk cows and milk per cow to the tune of an additional 25 million pounds (+0.1%) of total US milk. But the 104 million pound increase to January’s 23 State volume was explained by USDA - South Dakota was added to the rolls while Missouri was excluded beginning this month. This accounted for more than two-thirds of January’s 23 State revision, though it was promising to see states like Idaho and Wisconsin post upward revisions of 25 and 13 million pounds, respectively.
What is NOT promising in this report, says Meyer, is the lack of herd growth on the back of very strong on-farm margins. Milk cows in the 23 States are 13,000 head above last February but LOST 1,000 head versus the prior month. In the entire US, the milking herd still trails last year by 12,000 head and failed to add ANY cows between Jan and Feb. And while 2013 year-to-date weekly dairy cow slaughter rates are 8.5% BELOW last year accounting for 49,300 less animals culled (thru March 1) overall, the milking herd is just 9,000 head more than it was at the end of 2013.
Meyer adds that regional differences continue to play out as major factors in commodity pricing. California has averaged 5% YOY growth since the beginning of the year while Minnesota and Wisconsin have both seen setbacks for four straight months. Extremely challenging weather conditions and poor feed quality have been to blame for their woes, home to major cheese producers. And though Idaho has come back from its struggles earlier this year it did endure six straight months (July-Dec) of YOY declines.
Cheese Manufacturers Using NFDM & Skim to Boost Output
So reports USDA’s Dairy Market News (DMN). DMN says the Midwest cheese market is strong, both in terms of prices and sales and that cheese manufacturers are working to meet the demand. More cheese manufacturers have increased production schedules and some manufacturers are using additional nonfat dry milk and condensed skim to help boost cheese output.
Milk production regionally continues to increase which benefits cheese making. Spot milk is available for those looking, but the $2.00 over class price is higher than many cheese manufacturers believe is economically sensible, leaving most to rely on existing contracted and patron milk.
Northeast cheese production is mostly steady. Milk supplies are sufficient for cheese plants current needs, and expected to increase along seasonal levels. Cheese demand is very good with active sales in both domestic and international markets. The market tone is steady, according to DMN.
Butter Churns Slowing/ Exports Still Competitive
Some butter churn operators' production rates were slightly reduced as a result of cream supplies firming up from Easter demand for Class II dairy products, according to yesterday’s Dairy Market News (DMN). U.S. butter prices continue to have a comparative advantage over most international market prices, keeping U.S. export orders steady to higher. The market tone is firm with print demand improving. Many butter makers are primarily focused on Easter/Passover print orders. However, a few manufacturers are electing to produce 82% unsalted over 80% salted. Inventories are adequate for current demand.
$2 Butter Just 9 Pennies Away
"It looks like $2 butter isn't out of the realm of possibility," says FC Stone risk management consultant Chris Hildebrand in this morning’s Insider Opening Bell. "Futures are range bound and light inventory is holding the market up coming into Easter," Hildebrand wrote. “Exports also are supporting butter and cheese markets. Prices are lower in the United States than in Europe, and Oceania stocks are light as manufacturers there focus on powder. The Cold Storage report tomorrow afternoon will provide fresh data for the butter market,” he concludes.
No Waivers to Schools: Vilsack
The International Dairy Foods Association (IDFA) reported last week that Congress had passed a provision directing the U.S. Department of Agriculture to develop a waiver process that would allow schools to delay implementing the new School Breakfast Program and Smart Snacks standards. Two days later, Agriculture Secretary Tom Vilsack said that by law he cannot grant waivers to any schools.
Speaking before the House Agriculture Appropriations Committee, Vilsack said USDA’s general counsel determined that the National School Lunch Act prohibits USDA from “granting a waiver that relates to the nutritional content or program meals served or the sale of competitive foods.”
Some school districts and the School Nutrition Association had requested the waivers to allow more time for schools to adjust their procurement strategies to meet the new requirements. The new school meal regulations were put in place during the 2012/13 school year; however, the new rules on competitive foods go into effect for the first time for the 2013/14 school year.
In letters to the chair and ranking member of the committee, Vilsack said USDA will continue to listen to stakeholders and provide guidance and flexibilities, as appropriate, to help schools and students adapt to the new requirements. “As our track record on school meals demonstrates, USDA will pay careful attention to issues that come up during the Smart Snacks implementation and work with stakeholders to resolve them,” the letter said.
IDFA recently wrote to Vilsack asking for delayed implementation of the snack food rule. For more information, contact Ruth Saunders, IDFA vice president of policy and legislative affairs, at email@example.com or Michelle Matto, IDFA’s nutrition and labeling consultant, at firstname.lastname@example.org.
Fonterra to Build Plant in Indonesia
Reuters news service reports that New Zealand-based Fonterra will build a $35 million milk factory in Indonesia, as the world's largest dairy exporter expands in emerging Asian markets to meet rising demand for milk products. The company confirmed a Bisnis Indonesia newspaper report that the factory would be built in the manufacturing hub of Bekasi, West Java province, and would begin operation in November, processing 20,000 tones of milk annually.
Fonterra would not provide further details. Currently, the company has a sales office in Indonesia, which is a major importer of New Zealand milk powder, but has previously announced plans to build a packaging and blending facility. (Reporting by Naomi Tajitsu; Editing by Stephen Coates)
New Zealand Dairy Reputation in Question
The New Zealand Herald reports that Chinese consumers regard New Zealand milk products as less safe than those produced in our key dairy competitors like the United States and Europe, Massey University research suggests.
The university surveyed 531 people in Lanzhou, the capital of China's Gansu province, in October last year - two months after Fonterra's botulism botch up.
The false food scare spooked consumers in the world's second biggest economy and is likely to have influenced the survey results.
Just over 28 per cent of respondents rated New Zealand's dairy products as "not very safe", a much higher percentage than for products from Australia (14.8 per cent), the US (13.2 per cent) and European Union (12.5 per cent).
This country fared much better than China in the survey, however, with 64.9 per cent of respondents rating Chinese dairy products not safe.
Almost 72 per cent of those surveyed regarded New Zealand dairy products as "very safe", compared with 87.6 per cent for European products, 85.1 per cent for Australian products and 86.9 per cent for US products.
Massey University professor of food safety and microbiology Steve Flint said that if the botulism scare did affect the survey, the research demonstrated the power of publicity in influencing people's trust in food.
Read more at http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11222692.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
Cheeseheads at the CME, after absorbing Tuesday’s GDT downfall and yesterday’s Feb. Milk Production report, took the Cheddar blocks up another 0.75¢ this morning on an unfilled bid, to $2.4275/lb., another new record high. The barrels rolled down hill 0.5¢, to $2.30/lb., widening the spread to an unsustainable 12.75¢.Three cars traded hands this morning, the 1st sold at $2.33/lb., but the following sales brought it down to the close of $2.30/lb. An offer at $2.30/lb. was uncovered.
Butter, on 2 unfilled bids, gained another 0.5¢, a repeat of yesterday, and is now trading at $1.91/lb., 9¢ away from $2. An offer at $1.92/lb. was left on the board.
Grade A nonfat dry milk was unchanged for the 10th consecutive session, holding at $2.04/lb., with no activity.
"The nonfat market has been in a sideways grind for the past three sessions," says FC Stone’s Chris Hildebrand. "It is well supported by fundamentals, notably demand from China.”
Today’s Market Closing Prices:
Butter: Up 0.5¢, to $1.91/lb.
Cheddar blocks: Up 0.75¢,to $2.4275/lb.
Cheddar barrels: Down 0.5¢, to $2.30/lb.
Grade A nonfat dry milk: Unchanged, at $2.04/lb.
Class III milk: Mar. $23.33, -9¢; Apr. $23.05, -4¢; May $21.28, -6¢; & Jun. $20.55, -12¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $21.63, -7¢ from Wednesday. The 2nd half average is now at $19.51, -3¢ from Wednesday.
The Agriculture Department issues its February Cold Storage report tomorrow afternoon. Next week won’t have a lot for the markets to feed off of. The monthly Dairy Situation report is released Wednesday and will include the latest dairy product commercial disappearance data. The monthly Ag Prices report is out Friday afternoon and will include the latest milk feed price ratio.
Friday on DairyLine:
DairyBusiness Communication’s Joel Hastings reports on this week’s DFA annual meeting in Kansas City.
Dr. Mike Hutjens has his weekly “Feed Facts” program in our second half.
Listen to it at http://dairyline.com/friday.mp3
This Week in DairyBusiness Weekly:
- Results from the Western Classic Junior Dairy Show
- U.S cheese exports lead the world
- Oregon Dairy Farmers Association presents awards for lifelong contribution
- The 2014 World Dairy Expo honorees are announced
- Co-Vale Holsteins: Getting 'there'
- Ration management: Tips to be proactive versus reactive
- Plus check out our calendar, industry briefs and more!
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