DairyBusiness Update: May 2, 2014Print
April Dairy Margins Were Mixed but Strong
Dairy margins were mixed since the middle of the month, weakening slightly in spot Q2 but strengthening through the remainder of 2014 according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC.
The first quarter of 2015 was also down slightly over the past two weeks. Margins remain strong from a historical perspective, above the 90th percentile through Q3 while approaching the 90th percentile in deferred periods.
Milk prices have generally been stronger since the middle of April although feed costs have likewise moved higher. USDA reported the April 2014 Class III Milk price at a new record high of $24.31/cwt., up 98 cents from last month while the April All-Milk price of $25.50 also represented a new high.
Nearby margins have been pressured slightly as spot cheese prices have dropped more than 28 cents/lb. since the beginning of April which will weigh on the May Class III price, while feed costs have also advanced during the month. Corn prices continue to draw support from the slow pace of spring planting progress.
USDA reported corn planting at 19% complete through April 27th which is up 13% from last week but still 10 points below the 10-year average for planting progress as of this date. Most of the progress last week was made in southern states, and concern is mounting that intended corn acres in the Northern and Western Corn Belts may either get switched to soybeans or possibly enrolled in prevented plantings should current weather trends continue as it has been too cold and wet to advance progress. Soybean meal prices have also marched to new highs as they continue drawing support from tight old-crop supplies.
For more details, log on to www.cihmarginwatch.com.
Dairy Producer Group Has Concern About Milk Prices
The National Dairy Producers Organization stated in a Friday release that “We are grateful for the recent upturn in prices being paid to producers and wanted to share a few ideas about how dairy producers can make sure that these prices remain above what it costs to produce a hundred weight of milk.
The National Dairy Producers Organization, Inc. was established to help dairy producers gain needed influence in the dairy markets of this country so as to achieve and maintain market conditions that will continuously provide profitable prices for milk. We can no longer tolerate management practices on the farm or within the industry that created and maintain market conditions that for decades have paid producers a price for their milk below the actual cost of producing milk.
We have provided some important numbers for you to review that will help you understand our number one concern. The chart shows the USDA Pay Price of milk in America, laid over the production of milk by dairy producers nationwide. Dairy producers for the past decade and more have never intentionally responded to market conditions by reducing their milk production to protect or gain profitable prices for their milk. Our single greatest message to you is that dairy producers can get and remain profitable controlling milk production on the farm.
As part of this email distribution we have provided ample information to help you determine what can be done to really fix the problem...Read the Whole Letter
For More Information visit our website www.nationaldairyproducers.org
Dairy Products Report: Supportive on Cheese & Butter, Bearish on Powder
HighGround Dairy’s Eric Meyer reports that the chatter in the halls was fairly mixed at this week’s American Dairy Products Institute Annual Meeting in Chicago. But Thursday’s release of USDA’s Dairy Products Production report provides a clearer picture of recent butter market bullishness as well as the convergence between CME spot cheddar and milk/cheese futures markets at the CME.
But while those markets appear well-supported, production and inventories of milk powders in March casts a bearish shadow over the NDM/SMP complex in the US.
We view this report as supportive for both cheese and butter while somewhat bearish NDM prices in the near term.
Write for Eric’s complete analysis at email@example.com.
Central Milk Production Below Expectations
Central milk production at the farm is maintaining to slightly higher, but below expectations, according to USDA’s Dairy Market News. Spot load milk availability is increasing, prices range from $2.00 under to $1.00 over Class. Bottling orders are flat and retail sales are heavily contingent on promotions. Class II demand is mostly steady. Class II cream multiples increased, ranging from 1.28 to 1.36. Buyer interest for cream is active, keeping supplies relatively tight.
Wisconsin Governor Wants to Grow Dairy
The Lacrosse Tribune reports that, in the latest push to increase Wisconsin’s milk output to 30 billion pounds by 2020, Gov. Scott Walker announced Thursday the third round of Grow Wisconsin Dairy 30x20 grants.
Forty three Wisconsin farmers -- including six in the Coulee Region -- received grants of up to $5,000 for improvements to make their farms more productive and profitable. Walker announced the 30x20 initiative in March of 2012 and awarded 85 grants in its first two years.
“Farming is not just a business; it’s a way of life here in Wisconsin,” Walker said.
Flanked by a row of dairy cows and dressed in a blue barn coat and brown work boots, Walker touted the importance of Wisconsin’s dairy industry, which boasts more than 10,800 farms and about 1.27 million cows.
The state produced 27.6 billion pounds of milk in 2013, up 5 percent from 26.1 billion pounds in 2011. Wisconsin has lagged behind California in milk production since 1993 but is still the nation’s top cheese producer, with 134 cheese plants making 2.8 billion pounds of cheese annually. Up to 90 percent of the milk used to make Wisconsin cheese comes from in-state producers. The rest is imported, Walker noted. “We have even greater demand than we can keep up with,” he said.
Walker made his announcement at Lane Creek Farm in the town of Barre, where Jeff and Jo Berg tend a herd of about 60 cows.
Read more at http://goo.gl/Z5xAow
Vermont Preps for GMO Labeling
It was Thursday’s topic on DairyLine radio with National Milk’s Christ Galen. Vermont is the first state to require genetically modified food to be labeled as such, he said, and “What is interesting is that they have made some exceptions to this law, including dairy products.”
“If a cow has been fed GMO grains, which most of them are in this country, you would not have to label for that,” Galen reported. “You would also not have to label meat or any foods sold at food service type establishments like restaurants.”
Meanwhile, Vermont is gearing up for a legal defense as they expect the mandatory labeling law to be challenged in court. The issue is whether the law violates some provision of the constitution. Those in the dairy industry may recall what happened 20 years ago when Vermont lawmakers tried to label rBST “bovine growth hormone” but was defeated by a court.
The National Milk Producers Federation backs voluntary labeling at the federal level, as opposed to mandatory labels that apply to some foods and settings but not others, according to Galen. “What we really need to have is a clear definition of what GMO foods are and how you can go about voluntarily labeling them,” he said. “We don’t see the need for mandatory labeling like what’s been passed in Vermont or what’s being considered by other states.” “Until some bills are passed in the nation’s capital, we might continue to see bills like Vermont considered or even passed,” Galen concluded.
Ag Census Reveals New Trends in Farming
There are now 3.2 million farmers operating 2.1 million farms on 914.5 million acres of farmland across the United States, according to the 2012 Census of Agriculture, released today by the U.S. Department of Agriculture. The agriculture census presents more than 6 million pieces of information, which provide a detailed look at the U.S. farm sector at the national, state and county levels.
“Once every five years, farmers, ranchers and growers have the unique opportunity to let the world know how U.S. agriculture is changing, what is staying the same, what’s working and what we can do differently,” said Dr. Cynthia Clark, the retiring head of USDA’s National Agricultural Statistics Service, which administered the survey. “Today, we can start to delve into the details.”
Census data provide valuable insight into the U.S. farmer demographics, economics and production practices. Some of the key findings include:
-Both sales and production expenses reached record highs in 2012. U.S. producers sold $394.6 billion worth of agricultural products, but it cost them $328.9 billion to produce these products.
-Three quarters of all farms had sales of less than $50,000, producing only 3 percent of the total value of farm products sold while those with sales of more than $1 million – 4 percent of all farms – produced 66 percent.
-Much of the increased farm income was concentrated geographically or by farm categories.
-California led the nation with 9 of the 10 top counties for value of sales. Fresno County was number one in the United States with nearly $5 billion in sales in 2012, which is greater than that of 23 states. Weld County, Colorado ranked 9th in the top 10 U.S. counties.
-The top 5 states for agricultural sales were California ($42.6 billion); Iowa ($30.8 billion); Texas ($25.4 billion); Nebraska ($23.1 billion); and Minnesota ($21.3 billion).
-Eighty-seven percent of all U.S. farms are operated by families or individuals.
-Principal operators were on average 58.3 years old and were predominantly male; second operators were slightly younger and most likely to be female; and third operators were younger still.
-Young, beginning principal operators who reported their primary occupation as farming increased 11.3 percent from 36,396 to 40,499 between 2007 and 2012.
-All categories of minority-operated farms increased between 2007 and 2012; the Hispanic-operated farms had a significant 21 percent increase.
-144,530 farm operators reported selling products directly to consumers. In 2012, these sales totaled more than $1.3 billion (up 8.1 percent from 2007).
-Organic sales were growing, but accounted for just 0.8 percent of the total value of U.S. agricultural production. Organic farmers reported $3.12 billion in sales in 2012, up from $1.7 billion in 2007.
-Farms with Internet access rose from 56.5 percent in 2007 to 69.6 percent in 2012.
-57,299 farms produced on-farm renewable energy, more than double the 23,451 in 2007.
-474,028 farms covering 173.1 million acres were farmed with conservation tillage or no-till practices.
-Corn and soybean acres topped 50 percent of all harvested acres for the first time.
-The largest category of operations was beef cattle with 619,172 or 29 percent of all farms and ranches in 2012 specializing in cattle.
“This information is critical to understanding the conditions of U.S. agriculture and determining future policy,” said incoming NASS Administrator Dr. Joseph T. Reilly. “Today’s data release is the culmination of years’ worth of planning and work that NASS has made openly available for public use.”
Conducted since 1840, the Census of Agriculture accounts for all U.S. farms and ranches and the people who operate them. The Census tells a story of how American agriculture is changing and lays the groundwork for new programs and policies that will invest in rural America; promote innovation and productivity; build the rural economy; and support our next generation of farmers and ranchers.
For access to the complete data series and tools to analyze this information, visit www.agcensus.usda.gov. A link to census data will also be available on the USDA Open Data portal, www.usda.gov/data.
California Dairies Elect New Board Members
The member-owners of California Dairies, Inc. (CDI), the nation’s second largest dairy processing cooperative, voted in six new board members at its annual member meetings held last week. In addition, two incumbents were reelected to the 16-person board of directors. All elected directors will serve a three-year term.
The six newly elected board members include: Brian Medeiros, Charles DeGroot, Frank Konyn, Justin Gioletti, Paul Pacheco, and Steve Scheenstra.
CDI member-owners voted to reelect incumbents John Moons and Brian Pacheco.
The CDI board of directors will hold its annual executive committee elections at the May board meeting.
California Dairies, Inc. is the largest member-owned milk marketing and processing cooperative in California producing 47 percent of California’s milk. Co-owned by more than 430 dairy producers who ship 18 billion pounds of Real California Milk annually, California Dairies, Inc. is a manufacturer of quality butter, fluid milk products and milk powders. In addition, California Dairies, Inc. is the home of two leading and well-respected brands of butter – Challenge and Danish Creamery. California Dairies’ quality dairy products are available in all 50 United States and in more than 50 foreign countries.
For additional information on California Dairies, Inc., visit www.californiadairies
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 prices keep slipping and the descent doesn’t appear to be slowing. The 40lb. blocks dropped another 3¢ this morning in Chicago, seeing declines every day this week and close the day and the week at $2.07/lb. Four cars traded hands this morning, the 1st at $2.10/lb. and they kept ticking lower from there but a bid at $2.07/lb. went unfilled. The 500lb. Cheddar barrels were down 4.5¢, and close the day and the week at $2.0550/lb. Three cars were sold; 2 at $2.0550/lb. and 1 at $2.06/lb.
This is the second week of decline for the cash cheese and the blocks are down a total of 14¢ on the week and the lowest since January 6, but still 16¢ above a year ago when they peaked for the year at $1.91/lb. The barrels are down 12.5¢ on the week but 32.5¢ above a year ago. NDPSR-surveyed block averaged $2.2908/lb., down 7.1¢. Barrels averaged $2.2495/lb., down 3.2¢.
Class III futures reversed a good part of yesterday’s gains.
FC Stone dairy economist Bill Brooks was quoted in this morning’s Insider Opening Bell: "There continue to be concerns surrounding the milk supply. But I think current prices are a little inflated." He adds that “the dryness in California and spillover corn planting concerns could have spurred the recent rally.”
Butter continued to head in the other direction this week, soaring 7.25¢, to $2.0750/lb. on 1 lonely unfilled bid, after jumping 4¢ yesterday. Butter hasn’t seen $2 since April 1, and closed today 16.5¢ above last week and 42.5¢ above a year ago. Only 1 car sold on the week, the gains all came on unfilled bids. NDPSR butter plunged 10¢, to $1.8631/lb.
Bill Brooks said we saw less butter production than expected in Thursday’s Dairy Products report but adds; "Over the last month there's been a fair amount of subsidized exports accepted by CWT (Cooperatives Working Together program), but international butter prices at the moment are stable to declining."
Cash Grade A nonfat dry milk was steady, holding at $1.7875/lb. A bid at $1.75/lb. was unfilled and 2 offers at $1.7975/lb. went nowhere. The powder is down 3.25¢ on the week. NDPSR powder averaged $2.0173/lb., up 0.6¢, and dry whey averaged 68.72¢/lb., up 0.8¢.
Today’s Market Closing Prices
Butter: Up 7.25¢, to $2.0750/lb.
Cheddar blocks: Down 3¢, to $2.07/lb.
Cheddar barrels: Down 4.5¢, to $2.0550/lb.
Grade A nonfat dry milk: Down 1¢, to $1.7775/lb.
Class III milk: May $22.75, -10 (+18¢ on the wk.); Jun. $21.55, -27¢ (-10¢ on wk.); Jly $20.55, -24¢ (+50¢ on wk); Aug. $19.94, -22¢ (+24¢ on wk); & Sept. $19.87, -11¢ (+27¢ on wk). Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.12, -19¢ from Thursday. The 2nd half average is now at $19.59, -12¢ from Thursday.
The Agriculture Department issues its weekly Crop Progress report on Monday. The Global Dairy Trade auction (GDT) is Tuesday morning. Friday, the California Department of Food and Agriculture announces its June Class I milk prices, USDA issues its monthly World Agricultural Supply & Demand Estimates report, which will include the latest estimates on milk production and milk prices, and the monthly Crop Production report is issued.
Monday on DairyLine:
The world market is softening according to USDEC's Alan Levitt.
Plus, we "Make the Connection" with another dairy team meeting
This Week in DairyBusiness Weekly:
- Looking Back with HolsteinWorld to the 1940's
- Silage safety should be top priority
- Update on the milk markets
- Scenes from the California State Show
- Defining today's ag grad
- Pagel's Ponderosa Dairy hosts Ag Career Days
- Banning chocolate milk backfires
- Plus check out our calendar, industry briefs and more!
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