DairyProfit Update for May 8, 2012

Senate Ag Committee dairy title, Dairy Security Act impacts compared

New analysis comparing the dairy title of the Senate Ag Committee’s 2012 Farm Bill proposal with the Dairy Security Act, introduced in the House of Representatives, has been completed by dairy economists Mark Stephenson-Madison, and Andrew Novakovic, Cornell University. 

According to the authors, one difference between the House and Senate versions is that the Dairy Production Margin Protection Program (DPMPP) has two tiers of pricing in the Senate version. Tier 1, for the first 4 million lbs. of annual production (approximately a 250-cow farm), sets premiums at a significantly lower price. The much higher prices in Tier 2 apply to a farm’s marketings above 4 million lbs. This change has very significant implications for the cost of margin insurance on farms that are well above the 4 million lbs. per year break point.

A second change affects the cost and benefit of the margin insurance plan for all farmers. The Senate formula for calculating feed ration costs was changed by lowering the feed parameters to 90% of the DSA levels. This seemingly small change increases the value of the margin calculation by a bit more than $1/cwt. when feed prices are at levels that have prevailed over the last four years.

The paper is titled, “Dairy Provisions of the Senate Agriculture Reform, Food, and Jobs Act of 2012 — An Estimation of Farm-Level Impacts. Find it at http://dairy.wisc.edu/PubPod/Pubs/BP12-05.pdf.

USPTO rejects ‘gruyere’ trademark application

The Consortium for Common Food Names (CCFN) sent a letter to the U.S. Patent and Trademark Office (USPTO) commending their decision to reject the trademark applications for “Le Gruyere” and “Le Gruyere Switzerland AOC”. In its rejection notice, USPTO stated that “…the evidence of record clearly shows that the U.S consumer views gruyere as a style of cheese that can be made anywhere and is not just a cheese from Gruyere, Switzerland.” 

In March USPTO found that “The existence of 7 U.S. cheese manufacturers of gruyere cheese and the widespread generic internet and dictionary usage made of record clearly demonstrates that gruyere has lost its geographical significance and is now viewed as a genus of cheese.” Other generic indication elements CCFN pointed to in its letter to USPTO include the long-term existence of a U.S. standard of identity for gruyere; the presence of a gruyere category which is open to all applicants in the World Cheese Championship, held biannually in Wisconsin; citation by the World Customs Organization as an example of a type of cheese category; and specific mention by name in multiple countries’ tariff schedules in a manner that does not restrict imports under those lines solely to Switzerland.

World milk production expected to grow

2012 world milk production is forecast to grow by 2.7%, to 750 million tonnes, according to the United Nations Food & Agriculture Organization’s (FAO) Food Outlook report.  Asia is expected to account for most of the increase, led by India, with increased output also anticipated in China, Pakistan and Turkey.

In Oceania, a prolonged period of high prices for dairy products on the international market and associated levels of profitability have stimulated milk production. In New Zealand, output rebounded strongly during the 2011/12 season, stemming from an increase in herd size combined with above average pasture conditions, and is expected to close 9% above the previous season. In Australia, the end of the prolonged drought has encouraged farmers to rebuild their dairy herds which, combined with generally good rainfall during the 2011/12 season, could boost milk production by 4%.

In North America, milk production in the United States is forecast to rise to 90.6 million tonnes, reflecting dairy herd expansion. Production in Canada is expected to remain stable at 8.3 million tonnes, within the limits set by the milk quota system. In Europe, the EU is forecast to raise production by 1% to 156.5 million tonnes in 2012, as improved milk yields more than compensate for reduced cow numbers.

MARKETS: All products lower; Class III mixed

Today's market closing prices:

Cheddar barrels: down 1.5¢, to $1.4525/lb.

Cheddar blocks: down 4.25¢, to $1.4925/lb.

Butter: down 1.0¢, to $1.30/lb.

Extra Grade nonfat dry milk: down1.0¢, to $1.0875/lb.

Grade A nonfat dry milk: down 1.0¢, to $1.1275/lb.

Class III milk: mixed in a narrow range through March 2013. Based on current closing prices, the 2012 average is $15.38/cwt.; 2013 average is $15.76/cwt. 

Corn higher, soybeans lower

Corn: +1¢ to +5¢/bushel through December 2012. The 2012 average is $5.89/bu.; 2013 average is $5.45/bu.

Soybeans: -13¢ to -27¢ through November 2012. The 2012 average is $14.02/bu.; 2013 average is $12.83/bu.

Soybean meal: -$3.50 to -$9.30 through December 2012. The 2012 average is $396.48/ton; 2013 average is $342.14/ton.