DairyBusiness Update for Nov. 18, 2013

‘Solids’ exports top 16%

September U.S. dairy product exports were equivalent to 16.6% of U.S. milk solids production – the fifth straight month above 16%. In the first three quarters of 2013, exports were equivalent to 15.5% of U.S. milk solids production. Meanwhile, imports as a percent of milk solids production were 2.6% in September 2013. 

Source: U.S. Dairy Export Council, National Milk Producers Federation

 

Dairy promotion directors elect officers

Leaders of Dairy Management Inc. (DMI), the National Dairy Promotion and Research Board (NDB) and the United Dairy Industry Association (UDIA) announced the following dairy producers as officers. They include: 

• DMI: Chair – Paul Rovey, Glendale, Ariz.; Vice Chair – Harold Howrigan, Sheldon, Vt.; Secretary – Skip Hardie, Lansing, N.Y.; and Treasurer – Larry Hancock, Muleshoe, Texas

• NDB: Chair – Kenton Holle, Mandan, N.D.; Vice Chair – Zach Myers, Jonesville, N.C.; Secretary – Marilyn Hershey, Cochranville, Pa.; and Treasurer – Ray Prock, Denair, Calif.

• UDIA: Chair – Neil Hoff, Windthorst, Texas; 1st Vice Chair – Ryan Anglin, Bentonville, Ark.; 2nd Vice Chair, American Dairy Association® (ADA) – Tom Woods, Gage, Okla.;  2nd Vice Chair, National Dairy Council® (NDC) – Jerry Messer, Richardton, N.D.;  2nd Vice Chair, UDIA Member Relations – Paul Broering, St. Henry, Ohio; Secretary – Steve Frischknecht, Manti, Utah; and Treasurer – Allen Merrill, Parker, S.D.

 

DPAC, DBA members tag team on Capitol Hill

Dairy farmers representing producers in Wisconsin, Pennsylvania, Minnesota and Ohio joined forces to make visits on Capitol Hill in support of the House Dairy Title in the Farm Bill. Members of the Wisconsin Dairy Business Association (WIDBA) and the Dairy Policy Action Coalition (DPAC) made visits to Senate offices to discuss concerns about the Dairy Market Stabilization Program (DMSP) currently in the Senate version of the Farm Bill that would require farmers to agree to reduce production in order to participate in a margin insurance program.

The farmers urged Senate conferees to follow the lead of the House of Representatives to include Farm Bill language that allows farmers to participate in a margin insurance program without being required to participate in the DMSP.

"The growing export markets are critically important to the future of the U.S. dairy industry," explained Alan Kozak, a dairy producer from Ohio.  "Quota requirements in the DMSP would harm this growth by sending the wrong message to our global trading partners."

The producers explained that export sales are setting new records and any federal policy should encourage continued growth, not damage it.

Conferees are expected to meet again this week

 

EPA decision lowering ethanol blend ‘not enough’

The U.S. Environmental Protection Agency’s decision last week to reduce the amount of ethanol blended into fuel in 2014 has come under fire as not being enough.

Reps. Bob Goodlatte (R-VA), Peter Welch (D-VT), Jim Costa (D-CA) and Steve Womack (R-AR), authors of the Renewable Fuel Standard Reform Act (H.R. 1462), stated in a press release; “While the EPA’s slight reduction of the RFS for 2014 acknowledges that the mandate is unworkable, it is not enough to provide the much-needed relief businesses, farmers, and consumers need,’ said Goodlatte. 

Today’s announcement makes it even clearer that it will now be up to Congress to fix this broken mandate. There is a growing appetite in Congress to reform the ethanol mandate, and I urge Chairman Upton and the House Energy and Commerce Committee to consider the RFS Reform Act (H.R. 1462) as a legislative fix to the growing problems with the RFS.”

The Milk Producers Council’s Rob Vandenheuvel provides some interesting perspective on what’s behind the EPA’s decision in his Friday member newsletter. You can read it at www.milkproducerscouncil.org/updates/111513.pdf.  

 

Not so fast California: A federal order may not be what you think

Western United Dairymen CEO Michael Marsh shared some concerns in his Friday newsletter over California forming a federal milk market order from Hilmar Cheese’s John Jeter.

“Producers need to be aware,” said Jeter, “a California federal milk marketing order doesn’t simply mean that pool revenues for dairymen from milk going into cheese vats in the state will increase. Federal orders operate very differently than our existing marketing order and dairymen need to carefully evaluate those many differences as they consider a federal order for California. Details are posted at www.westernuniteddairymen.com 

 

Dairy margin summary: Steady into November

Dairy margins held largely steady since the end of October, changing by 5¢/cwt. or less in all forward marketing

periods, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC.  

From a historical perspective, margins remain quite strong – above the 90th percentile of the past 10 years through the first half of 2014, and above the 80th percentile of Q3 as well. With the exception of nearby December futures, milk prices were flat over the past two weeks, while feed costs likewise have moved sideways following the release of USDA’s November World Ag Supply & Demand Estimates report.

Corn production was raised in line with expectations, with yield increasing 5.1 bushels per acre from September to 160.4 although harvested area declined 1.9 million acres to 87.2 million. While corn production increased 146 million bushels to 13.989 billion, much of that increase was offset by higher demand with ending stocks only rising 32 million bushels to 1.887 billion which was below the range of pre-report estimates. The soybean balance sheet likewise featured larger production offset by higher demand as lower prices stimulate increased usage.

Meanwhile, USDA resumed the monthly milk production report following its discontinuation due to the sequester earlier this year. September milk production totaled 15.8 billion lbs. which was about 1% above September 2012, with a slight 0.13% increase in cow numbers and a 0.82% gain in milk production per cow. The figures were considered supportive for prices as demand remains very strong. 

Visit www.cihmarginwatch.com.

 

Mielke’s Market Daily

(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)

Eyes will be on the cash cheese market this week for confirmation that holiday demand is softening. Prices were unchanged today, with the blocks holding at $1.82/lb. and the barrels at $1.7575/lb. One uncovered offer of barrel at $1.7675/lb. was the only activity. The spread, for now, remains at 6.25¢.

Chris Hildebrand, risk management consultant at INTL FCStone, Chicago, wrote in this morning’s eDairy Insider Opening Bell that "The bulk of buying for the holidays should be taken care of, so we expect to see spot continue down." 

Butter was unchanged this morning as well, holding at $1.65/lb. One car was sold at $1.6475/lb. but 2 bids at $1.65/lb. took it back to Friday’s close although an offer at $1.65/lb. went uncovered.

Eyes are also on the powder markets. Grade A nonfat dry milk actually inched down 0.25¢ this morning, first slippage Sept. 26, and is now trading at $1.9725/lb. One sale was at Friday’s close of $1.9750/lb., but the next one took it down. Extra Grade jumped 6.5¢, to $1.9650/lb., on 1 lonely bid which did not draw a seller.

FC Stone’s Hildebrand says “Asian demand (for nonfat dry milk) continues to be strong and demand from Mexico has picked up after faltering.” The other unknown factor is China’s change in its one child policy, which has been in effect since 1980. Couples will now be allowed to have a second child, provided one of the parents is an only child. Infant formula demand could take a big jump. On the powder downside is a possible decline in imports from the Philippines due to the typhoon.

Today’s market closing prices:

Butter: unchanged, at $1.65/lb.

Cheddar blocks: unchanged, at $1.82/lb.

Cheddar barrels: unchanged, at $1.7575/lb.

Grade A nonfat dry milk: down 0.25¢, to $1.9725/lb.

Extra Grade nonfat dry milk: up  6.5¢, to $1.9650/lb.

The Global Dairy Trade auction takes place tomorrow, producing an international flavor for dairy traders to feed on. The Agriculture Department issues its preliminary estimate on October milk production tomorrow afternoon. The federal order Class I base milk price is announced on Wednesday afternoon; the Livestock Slaughter report is out on Thursday; and the October Cold Storage report is released Friday afternoon.

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