DairyBusiness Update: Jan. 9, 2014

Dairy title part of holdup of new Farm Bill
   Sources on Capitol Hill say Speaker of the House John Boehner (R-OH) has informed conferees that he will not allow a Farm Bill that includes supply management to pass the House of Representatives. The International Dairy Foods Association (IDFA) reports that conferees had targeted the second week of January to finish negotiations, but chances are now good that a conference report will not be filed until later this month.
   IDFA says, “With the so-called stabilization program seemingly off the table, news reports are saying that the conferees are seriously considering a compromise proposal that would provide dairy farmers with the option of participating in either the existing Milk Income Loss Contract (MILC) program or the new margin insurance program that was included in both the Senate dairy title and the Goodlatte-Scott amendment that is now the House dairy title. This proposal was revealed several weeks ago by two economics professors, John Newton and Cam Thraen, of Ohio State University’s department of Agricultural, Environmental and Development Economics.”
   “In The Dairy Safety Net Debate of 2013 Part II, Questions and Answers, the professors say combining a modified MILC program with a revised margin insurance program would hold down taxpayer costs and provide a better way forward for dairy than proposals offered by the House and the Senate.”
   “A combination of MILC and margin insurance offers more choices to accommodate the assortment of U.S. dairy farm operations,” the authors said. “By limiting both the amount of income support and adverse gaming incentives, our independent analysis reveals MILC-Insurance could cost significantly less than the currently debated margin insurance programs.”

Dairy Title battle is not between two lawmakers
Rep. Bob Goodlatte, in a press release issued this afternoon, stated that “The House of Representatives’ resounding rejection of supply management provisions in the dairy title of the Farm Bill speaks loud and clear.” “More than 140 diverse groups have joined with 291 House Members, including 95 Democrats, in voicing their opposition to supply management.  A supply control program that will directly intervene in markets and increase milk prices will ultimately hurt dairy producers and consumers.”
   Rep. David Scott (D-GA) added that the media is portraying the dairy policy debate as a “struggle solely between Speaker Boehner and Ranking Member Peterson.” “Nothing could be further from the truth,” Scott said. “The overwhelming bipartisan vote count on the Goodlatte-Scott amendment, which passed 291-135 with 95 Democratic votes, was a clear and strong statement of the will of the entire House on this issue. To that end, Farm Bill conferees should honor the House vote and insist on inclusion of the Goodlatte-Scott amendment in the final conference report on the Farm Bill.”

California continues examining a Federal order
California-based Western United Dairymen (WUD) reports that its President, Tom Barcellos, will hold an informational meeting with Deputy USDA Administrator Dana Coale and her team in Tulare next Thursday, Jan. 16, at 1 pm. Coale and her team will be available to answer questions about Federal Milk Marketing Orders that might be considered for the State of California following passage of a Farm Bill. The meeting will be open to the public and held at the Tulare County Ag Commissioner’s Auditorium located at 4437 S. Laspina Street in Tulare.

Dairy exports supporting prices here
Final numbers won’t be available until February but the United States set a dairy export record in 2013, shipping $6.1 billion worth of product in the first 11 months alone, according to the U.S. Dairy Export Council (USDEC), up 17% from the entire year of 2012, and likely to be about 30% more, or $6.7 billion, when USDA’s Foreign Agricultural Service releases year-end data next month.
   “The past year marked a major step in U.S. dairy export expansion, not only because of the value and volume gains, but because of the activities of U.S. suppliers and industry organizations to lay the groundwork for future growth,” says Tom Suber, USDEC president.
   A USDEC press release stated that “In one sense, 2013 is simply another stop along the way in the evolution of the United States as a consistently significant global dairy supplier,” adding that “While favorable pricing and supply shortages in New Zealand may have accelerated growth in 2013, overall U.S. performance was not surprising given long-term trends.”

January-November 2013 dairy export values top $6 billion
The value of U.S. dairy product exports slipped a little in November 2013, but still topped $500 million for the eighth consecutive month, according to USDA’s Economic Research Service and the U.S. Department of Commerce. At $587 million, November exports were down 6% from October 2013, but up about 47% from the November 2012 total of $398 million.
   At $287 million, the value of November 2013 imports was down 6% from October 2013 and down about 4% from November 2012.  The November dairy trade surplus (exports minus imports) was $300 million.
   Calendar year 2013 (CY ’13, Jan.-Nov. 2013) exports total $6.198 billion, up about 29% from the same period in record-setting CY ’12. CY ’13 imports total $2.881 billion, up about 1% from the same period in CY ’12. The CY ’13 dairy trade surplus stands at $3.317 billion.
   At $122 million, November 2013 cheese imports were down 4% from October 2013 and down about 6% from November 2012. CY ’13 cheese imports total $1.039 billion, up 8% from the same period in CY ’12.

‘Total solids’ trade balance
U.S. dairy product exports were equivalent to 15.5% of U.S. milk solids production in November, bringing the year-to-date average to 15.6%. Meanwhile, imports as a percent of milk solids production were just 3.2% in November. 
   Through November, the United States exported 58% of the nonfat dry milk/skim milk powder produced in 2013, as well as 6.2% of its cheese, 10.4% of its butterfat and 57% of its dry sweet whey.
     Source: U.S. Dairy Export Council, National Milk Producers Federation

China, SE Asia and ME/NA drive dairy export gains
U.S. dairy exporters maintained global share of nonfat dry milk/skim milk powder (NDM/SMP) and cheese in November, as New Zealand focused its flush milk supply on producing and exporting whole milk powder, according to a monthly summary from the U.S. Dairy Export Council (USDEC). In total, U.S. suppliers shipped 154,168 tons of milk powder, cheese, butterfat, whey and lactose during November, up 29% from the prior year.
Looking at individual commodities:
• NDM/SMP exports were lower in November vs. the prior month, but still 54% ahead of the year before. November volume (45,527 tons) marked the eighth straight month of exports of at least 45,000 tons. 
• Cheese exports reached a record high 28,424 tons in November, up 54% from a year earlier. Shipments have topped 25,000 tons for nine straight months.
• Butterfat exports in the June-November period were more than triple the volume of a year ago, bringing the year-to-date figure to 80,550 tons. 
• WPC exports have lagged year-ago levels for the last six months. From June-November, WPC shipments were down 9%.
• Lactose exports have declined for four straight months; the November volume of 23,338 tons was the lowest since June 2010. 
• Fluid milk exports were up 42% in January-November period.
   Through November 2013, aggregate export volume of dry ingredients (milk powder, whey products and lactose), cheese and butterfat was 1.76 million tons, 17% more than a year earlier, with gains across all product categories. NDM/SMP, cheese and lactose already reached record highs with one month in the year to go.

NDPSR prices up except butter
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report, released yesterday, shows nonfat dry milk topped $2/lb. The average came in at $2.0029/lb, up 2.4¢ from the previous week. The U.S. average block cheese price hit $1.9579/lb., up 4.6¢, while the Cheddar barrels averaged $1.9666, up 6.8¢. Butter slipped 0.3¢, to $1.5698/lb., and dry whey jumped 2.6¢, to 59.75¢/lb. These are the prices used in determining Federal order Class milk prices.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   All eyes were on the CME spot dairy market this morning following 5 consecutive sessions of gain for the Cheddar blocks and 4 for the barrels but it was like nobody showed up. Prices were unchanged and even at these high levels no one had cheese to sell. Class III futures lost some ground.
   The Cheddar blocks, after gaining a total of 20¢ since the clock ticked to 2014, remained at $2.20/lb. and the barrels held at $2.16/lb., up 31¢ since the 1st. The spread remains at 4¢.
   FC Stone risk management advisory Chris Hildebrand wrote in this morning’s eDairy Insider Opening Bell that cheese makers are producing for Super Bowl demand which should be filled soon. “The Dairy Export Council reported record-high cheese exports in November, up 54% from a year earlier. Demand for U.S. cheese rose as New Zealand moved more of its milk into powder for China,” he explains.
   Cash butter was where the action was today and it came on 2 unfilled bids which drove the price up another 2.5¢, to $1.6750/lb., the highest it has been since Nov. 22, 2013. You’ll recall the Double A price reversed gears New Year’s Eve and has climbed 15.25¢ since then.
   Hildebrand says strong domestic demand and exports to the Middle East and North Africa have supported prices. "The market is not necessarily tight, but a lot of butter is being moved around," he wrote. Weekly stocks of butter in selected storage centers as of Jan. 6 were up 10.5% on the week and up 24% from a year earlier.
   Cash powder was quiet today. Grade A held at $2.0825/lb. and Extra Grade remains locked in at $2.09/lb., with no activity in either market.

Today’s market closing prices:
Butter: Up 2.5¢, to $1.6750/lb.
Cheddar blocks: Unchanged, at $2.20/lb.
Cheddar barrels: Unchanged, at $2.16/lb.
Grade A nonfat dry milk: Unchanged, at $2.0825/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.
Class III milk: Jan.$20.42, +3, Feb.$20.16 -29¢, Mar. $19.12 -38¢, Apr. $18.62 -24¢, May $18.41 -19¢, & Jun. $18.25 -7¢. Based on today’s CME closing prices, the 2014 average now stands at $18.52 -11¢ from Wednesday.
Looking ahead:
   California’s February Class I milk prices will be announced by CDFA tomorrow. The Federal order Class I base price is announced by USDA on Jan. 23. USDA’s monthly Crop Report will be issued tomorrow afternoon and we’ll get USDA’s latest milk price and milk production estimates from its monthly World Agricultural Supply and Demand Estimates report.
Friday on DairyLine:
FC Stone risk management specialist Dave Kurzawski explains what’s happening in the cash dairy markets
Nutritionist Mike Hutjens recaps his trip to the Manitoba Dairy Conference