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DairyBusiness Update: May 15, 2014

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USDA Dairy Outlook: May 15, 2015
  
As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued this morning, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued May 9. Milk production is expected to increase in 2015 compared with this year. Lower feed prices will improve the profit outlook for producers next year. Continued strong demand, both foreign and domestic, will moderate price declines in 2015.
   Feed prices are likely to remain moderate compared with recent years for the balance of 2013/14 and into 2014/15. Corn prices for 2013/14 are raised in May from April and forecast at $4.50-$4.80 per bushel; the price range was narrowed at the lower end, boosting the mid-point by 5 cents. Initial forecasts for the 2014/15 year call for corn prices to decline to $3.85-$4.55 per bushel. Current-year soybean meal price estimates are raised slightly from April to $485 per ton. The initial 2014/15 soybean meal price forecast is much lower, at $355-$395 per ton. The forecast is based on higher soybean plantings and yields. April’s Agricultural Prices report placed April’s preliminary price for alfalfa hay at $206 per ton, above March’s $191 price but below the April 2013 price of $213 per ton.
   April’s Milk Production report shows the January-March 2014 U.S. milk production at 51.1 billion pounds, up 1 percent from the corresponding period last year. Cow numbers are forecast at 9.255 million head for 2014, unchanged from April and only slightly higher than 2013 levels. Forecast cow numbers for 2015 are for 9.34 million head. Prices for dairy replacements are ahead of year-earlier prices, and first-quarter dairy cow slaughter trails last year. However, this is a modest expansion in light of the strong profit signals to producers.
   Current-year output per cow also remains unchanged in May from April at 22,280 pounds per cow. Output per cow is projected at 22,710 pounds in 2015. Continued month-over-month declines in Midwestern milk output are moderated by higher milk output in the West. Increased output per cow reflects both improved producer returns and improved forage conditions, especially in the Midwest, after last year’s poor-quality harvest.
   Total milk production is forecast at 206.1 billion pounds this year, climbing to 212.1 billion pounds in 2015. Milk production expansion to date appears to be coming mostly from increased output per cow rather than from herd expansion.

Quarterly and annual milk prices and projections
Year            All milk                Class III      Class IV

2009

12.83

11.36

10.89

2010

16.26

14.41

15.09

2011

20.14

18.37

19.04

2012

18.53

17.44

16.01

2013

 

 

 

  Q1

19.53

17.44

17.71

  Q2

           19.57

          18.04                      

         18.62

  Q3

           19.60

          17.81

         19.13

  Q4

           21.50 

          18.67

         20.74

Year

           20.01

          17.99

         19.05

2014

 

 

 

  Q1

           24.53

          22.61

         23.10

  Q2

24.40-24.70

22.70-23.00

22.70-23.10

Q3

21.30-21.90

18.95-19.55

20.30-21.00

Q4

20.20-21.10

17.65-18.55

18.60-19.60

Year*

22.70-23.00

20.55-20.85

21.25-21.65

2015

 

 

 

  Q1

           20.35-21.35

16.40-17.40

17.60-18.70   

  Q2

 

 

 

Q3

 

 

 

Q4

 

 

 

Year*

19.70-20.70

16.90-17.90

18.65-19.65

                                     2012    2013    2014  1st     2nd  3rd     4th     2015  1st

Milk Output (bil.lbs.)  200.5   201.2   206.1  51.5 52.9  50.9  51.3  212.1  52.5   
Cow #s (mil)                 9.23     9.22    9.26   9.22  9.24  9.27  9.29   9.34    9.30

Congress Demands U.S. Defend Common Food Names
   177 members of the U.S. House of Representatives joined the call for U.S. negotiators to push back on the European Union's (EU) efforts to hamper U.S. production and exports by confiscating common food names, an abuse of the geographical indications (GIs) program. The House echoes similar statements made recently by U.S. Senators on the subject, demonstrating a unified effort to protect common cheese names such as "parmesan" and "feta", and meat names such as "bologna".
    "This type of barrier to trade and commerce defies the fundamental goals of a trade agreement, and we urge you to work aggressively against the EU's efforts in this respect in order to preserve both domestic and export opportunities for these products," the House members state in a letter to U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack.
    "We thank these Representatives for this strong letter, which helps create a forceful, unified U.S. front against this flawed EU strategy to continue to erect even bigger, more significant agricultural trade barriers," said Jaime Castaneda, Executive Director of the Consortium for Common Food Names.
   "This is nothing other than an effort to shut out competitors and block fair trade," said Castaneda. "The members of the Consortium are not against GIs, but we emphatically reject the EU's abusive policy of pocketing common food names under the guise of fake geographical indications, plain and simple."
    In the letter, the House members urge the U.S. Administration to defend common food names, especially as U.S. negotiators work with the EU on the Trans-Atlantic Trade and Investment Partnership (TTIP).The Congressional Dairy Farmer Caucus co-chairs, led by Representatives Reid Ribble and Peter Welch, spearheaded the message to the Administration.
    The EU's efforts are directed not just at the U.S. but also at dozens of other nations around the globe. In country after country, the EU has been using its free trade agreements (FTAs) to persuade trading partners to impose barriers to trade through restrictions on common food names.
    For example, Canada agreed as part of its recently concluded FTA with the EU to impose new restrictions on the use of "feta" and other common cheese names. The EU has instigated similar trade barriers throughout Latin America, and is expected to pursue such restrictions in its negotiations with many Asian countries.
    "We need to remind Europe that they do not own 'parmesan' and 'feta'," said Castaneda. "Many nations outside the EU have made award-winning parmesans, fetas and other cheeses for decades. In fact, some U.S. cheeses have beat out Europe's in international cheese competitions. And sometimes it is because of the dedication and marketing of food producers outside the EU that these products have become popular around the world."
   When food producers are unable to use common food names in either domestic or international trade, it severely hampers their ability to compete in established markets. These actions also confuse consumers by removing available products from the market and suggesting that there is only one place to get a given product, when in reality many choices exist.
    The full letter can be found here on the CCFN website, www.CommonFoodNames.com

House Members Urge Obama to Use Trade Talks
   A bipartisan group of 177 members of the U.S. House of Representatives today urged the Obama administration to use the transatlantic trade talks with the European Union (EU) to address a variety of export barriers hampering the U.S. dairy industry. Among the barriers are the EU’s recent efforts to prevent U.S. companies from using common food names like parmesan and feta in export markets, including the EU, and even in the U.S. domestic market.
   The Congressional Dairy Farmer Caucus co-chairs, led by Reps. Reid Ribble and Peter Welch, spearheaded the letter to U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack. In that message House members said negotiations with the European Union over the proposed Transatlantic Trade and Investment Partnership (T-TIP) offer a good opportunity to address protectionist measures that block U.S. dairy sales to 500 million consumers. “We urge you to achieve a strong and beneficial outcome for the U.S. dairy industry in these trade negotiations,” the letter said
   The House members noted that EU dairy tariffs, which average roughly three times the level of U.S. dairy tariffs, have contributed to the $1.3 billion trade deficit for U.S. dairy products. “While the EU enjoys a country-specific tariff rate quota for dairy access into the U.S. market, the U.S. has no such similar preferential access to EU countries,” they said. “Furthermore, while U.S. certification requirements for the vast majority of EU dairy products are relatively nominal, EU certificate requirements for dairy products are more extensive, impeding U.S. access into the EU market.” EU non-tariff barriers are a major impediment for U.S. imports.
   Also in the letter, House members singled out EU efforts to restrict the use of many common food names – including a number of cheese names used in this country for decades, such as parmesan and potentially havarti – under the guise of geographical indication regulations. “The EU is taking a mechanism that was created to protect consumers against misleading information and instead using it to carve out exclusive market access for its own producers,” they said. “This type of barrier to trade and commerce defies the fundamental goals of a trade agreement, and we urge you to work aggressively against the EU’s efforts ….”
   With the exception of the EU market, U.S. dairy exports have risen dramatically across the globe in recent years, reaching $6.7 billion in 2013 and accounting for more than 15 percent of domestic milk production. The congressional letter noted that foreign markets now account for one day of milking every week. “This dynamic helps support good American jobs in rural areas all across the country,” the letter said.
   The Congressional Dairy Farmer Caucus has been an active and leading voice on dairy trade issues. The other co-chairs joining Reps. Ribble and Welch on the letter include: Bruce Braley, Joe Courtney, Tom Petri, David Valadao, and Tim Walz.
   http://www.nmpf.org/latest-news/press-releases/may-2014/177-house-members-urge-obama-administration-remove-eu-trade

Consumers Are Thirsty For More Than Milk
   Juices, teas and coffees challenge milk for that all important “share of stomach.” Keeping an eye on nondairy beverage trends is important for dairy processors because many dairies also bottle juices, teas and coffee-based drinks. According to the Dairy Foods 2014 Beverage Study, 43% of survey respondents process juices, 34% coffee drinks, 27% smoothies, 23% sports drinks, 20% tea and 16% punches. Other dairy processors, like makers of yogurt or ice cream, can use beverage flavor trends to direct the development of new products.
   Nondairy beverages are competitive products to fluid white and flavored milks. Sales in the juice and drink categories (including refrigerated, frozen and shelf-stable products) totaled about $16.6 billion in the 52 weeks ended Jan. 26, 2014, nearly as large as the $17 billion fluid milk category, according to the market research firm Information Resources Inc., Chicago
   The total refrigerated juices and drinks category increased 1.7% to $6.6 billion in the period, with unit sales up by 2.5%. While the increase in the juices/drinks category looks slight, keep in mind that orange juice makes up 51% of the category and OJ sales dropped 2.5% to $3.4 billion. Other beverages showing declines include cranberry juice and blends (down 38%), grapefruit juice/cocktail (down 31%) and grape juice (down 25%).
   On the other hand, juice varieties making sales gains include cranberry cocktail/drink (29%), vegetable juice/cocktail (29%), drink smoothies (23%) and blended fruit juice (up 17%).Lemonade showed sales gains of 3% to $534.5 million.
   Sales of refrigerated teas and ready-to-drink coffee registered impressive gains. Cappuccino/iced coffee sales increased 10% to $1.2 billion and RTD refrigerated coffee sales rose 37% to $168 million. Refrigerated tea sales rose 5.4% to $881 million. Although sales of canned and bottles tea rose just 0.8%, these formats are a $3 billion market.
   Read more about the competition at http://digital.bnpmedia.com/display_article.php?id=1702328&id_issue=208089

Dairy Breeding Leader to Address American Jersey Cattle Association
   Dr. Ole M. Meland, Chair of the Council on Dairy Cattle Breeding (CDCB), will be the guest speaker at the 146th Annual Meeting of the American Jersey Cattle Association. The meeting will convene at 8:00 a.m. Eastern on Saturday, June 28 at the Holiday Inn & Suites – Historic District in Alexandria, Va.
   As CDCB chairman—a voluntary, uncompensated position—Dr. Meland is leading the dairy industry’s work to construct a new system for managing genetic and management information and delivering genetic evaluation services to producers.
   This effort started in 2009 after the Agricultural Research Service of USDA notified the industry of its intent to discontinue service for genetic evaluations and focus solely on research. That led to the Council on Dairy Cattle Breeding, comprised of four industry sectors—the Purebred Dairy Cattle Association, Dairy Records Providers, Dairy Records Processing Centers and the National Association of Animal Breeders—developing a business plan and negotiating a non-funded cooperative agreement with ARS-USDA that was signed March 27, 2013.
   The transition in providing service began immediately. CDCB delivered the April 2013 official genetic evaluations for production traits, and has been delivering all official, monthly and interim evaluations since last December. By December of 2015, CDCB will be self-sufficient in computer resources and staffing with the capacity to run genetic evaluations, provide dairy management benchmarks, and maintain the industry cooperative database.
   Read more and register for the 2014 AJCA-NAJ Annual Meeting on the USJersey web site. Deadline for hotel reservations at the convention rate is June 3. Log on to www.USJersey.com  or connect on Facebook at USJersey.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Silence is golden, as the song says, and things were pretty quiet again in this morning’s cash cheese trading in Chicago. The blocks held at $1.9975/lb. for the 2nd day in a row, after dropping 4.75¢ Tuesday. The barrels held at $1.96/lb., after losing 6¢ Tuesday. A bid of block at $1.9975/lb. went unfilled and an offer of barrel at $1.96/lb. was left on the board.
   FC Stone dairy broker, Dave Kurzawski, wrote in this morning’s Insider Opening Bell: "Warming temperatures in California should knock back production there a little bit, and while output is strong in Texas, Idaho, Colorado, and Kansas, production in the Upper Midwest is still flat. Milk production is adequate but not overwhelming as some expected. Weaker global prices have taken the wind out of cheese's bullish sails for now."    
  After slipping 1.5¢ yesterday on a trade, cash butter inched 0.5¢ lower on a trade this morning, but the 1st and last trades were at yesterday’s close so the price on the day remained at $2.16/lb., but an offer at that price didn’t attract another buyer.  
   There was a lot of action in the powder today which saw 7 carloads go to new homes. The 1st 4 sales were at $1.79/lb., 2 were at $1.78/lb., and the last at $1.7825/lb., up 0.25¢ on the day, after holding steady for 3 sessions in a row. But, 5 offers at $1.78/lb. went uncovered.

Today’s Market Closing Prices
Butter: Unchanged, at $2.16/lb.
Cheddar blocks: Unchanged, at $1.9975/lb.
Cheddar barrels: Unchanged, at $1.96/lb.
Grade A nonfat dry milk: Up 0.25¢, to $1.7825/lb.
Class III milk: May $22.55, -9¢; Jun. $20.57, -37¢; Jly $19.92, -33¢; Aug. $19.88, -22¢; & Sept. $19.77, -23¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $19.86, -26¢ from Wednesday. The 2nd half average is now at $19.48, -16¢ from Wednesday.
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Looking ahead:
   There are no USDA reports that we regularly monitor tomorrow but it’s a busy week next week. The Agriculture Department issues its April Milk Production report Monday afternoon. The Global Dairy Trade auction is Tuesday morning, the National Dairy Products Sales report is out Wednesday afternoon, USDA announces the June Federal order Class I base milk price on Wednesday afternoon, and preliminary April Cold Storage data is issued Thursday, along with the monthly Livestock Slaughter report.
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Friday on DairyLine:
   How low will it go? DairyBusiness Update Associate Editor, Lee Mielke, talks with FC
       Stone dairy broker Dave Kurzawski about the cash dairy markets.
   Dr. Mike Hutjens tells us about his recent trip to China in his weekly “Feeding Facts”
       program

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