DairyBusiness Update: January 28, 2014
We May Have a Farm Bill
The House Committee on Agriculture advanced H.R. 1947, the Federal Agriculture Reform and Risk Management Act (FARRM) of 2013, on May 15, 2013 by a vote of 36-10. The House and Senate Agriculture Conference Committee filed a new Farm Bill late Monday and may be considered on the House floor as early as tomorrow.
The International Dairy Foods Association and National Milk Producers Federation issued releases yesterday commending the bipartisan compromise.
High Ground Dairy’s Eric Meyer summarized the specifics of the Dairy Title:
- USDA will establish a Margin Protection Program for dairy producers no later than Sep 1, 2014. The current MILC program will be in place until the new program is launched
- Producers will have the option to select margin insurance coverage between $4 and $8/cwt of the milk feed price margin.
- Premiums for the insurance will be tiered; with cheaper levels on the first 4 million pounds and more expensive above that level. Pricing will be tiered; less expensive for the first 4 million pounds of milk and costlier on anything above that amount.
- $4.00/cwt base protection will be included with no cost to producers other than a nominal administration fee ($100).
- Producers will still have the option to participate in the Livestock Gross Margin (LGM) for Dairy program but would then be opting out of the new Margin Protection Program.
- USDA must establish a "dairy production donation program" to address low margin periods. After sub-$4.00 milk feed margins are recorded for 2 consecutive months, USDA will purchase dairy products from the market for a maximum of 3 consecutive months or when the margin returns above $4.00/cwt.
- If US prices are 5% above world prices, USDA purchases would cease in order to protect export markets.
- The legacy Dairy Product Price Support Program, Dairy Export Incentive Program and the Federal Milk Marketing Order Review Commission will cease to exist in the new legislation but the Dairy Forward Pricing Program, the Dairy Indemnity Program and Dairy Promotion and Research Board will remain in place.
In a press release yesterday, the National Milk Producers Federation stated that “Over the past week, NMPF has worked with agriculture leaders in the House and Senate to develop a margin insurance program that will offer dairy farmers an effective safety net in the absence of the market stabilization component featured in our original program.”
“That process is now complete. Despite its limitations, we believe the revised program will help address the volatility in farmers’ milk prices, as well as feed costs, and provide appropriate signals to help address supply and demand.”
The dairy title “establishes a reasonable and responsible national risk management tool that will give farmers the opportunity to insure against catastrophic economic conditions, when milk prices drop, feed prices soar, or the combination” NMPF stated. “By limiting how much future milk production growth can be insured, the measure creates a disincentive to produce excess milk. The mechanism used is not what we would have preferred, but it will be better than just a stand-alone margin insurance program that lacks any means to disincentivize more milk production during periods of over-supply.”
Furthermore, NMPF says the program “doesn’t discriminate against farms of differing sizes, or preferentially treat those in differing regions.”
“The revised bill also establishes a system for USDA to purchase consumer-packaged dairy products during low-margin periods, which will stimulate demand and help dairy farmers when they need it most, and only then.”
Dairy Processors On Board With New Farm Bill
The International Dairy Foods (IDFA) has given the compromise dairy title a thumbs-ups. A posting on its website stated: "IDFA commends the Farm Bill conferees for their hard work and we congratulate them on reaching a compromise that represents historic reform of our nation’s dairy policies. The agreement establishes a new margin insurance program for dairy farmers, which was included in both the House and Senate bills, and rejects the effort to have our government limit milk supplies. This is a major step toward moving our dairy industry away from the failed agriculture policies of the past and toward policies of the future that will enable our entire industry to grow and capture new markets.”
IDFA states that “The conference report is good news for consumers of dairy products who will not be forced to pay unnecessarily higher prices, and good news for dairy farmers who will receive an effective and efficient safety net to help them through hard times, without our government telling them how much they can produce. The conference report rejects a proposed new regulatory burden on dairy food manufacturers and will allow dairy companies, particularly those that are now exporting about 15% of the milk produced in this country, to continue to grow and create thousands of new jobs.”
November Dairy Product Commercial Disappearance Up 5.4%
U.S. commercial disappearance of dairy products totaled 17.72 billion lbs. in November, up 5.4% from November 2012. Year to date, total disappearance hit 187.86 billion lbs., up 1.23% from 2012. American cheese disappearance in November hit 366.1 million lbs., was up 0.3% from a year ago. Other than American cheese, at 627.3 million lbs., was up 5%; butter, at 204.5 million lbs., was up 23.9%; and nonfat dry milk, at 93 million lbs., was down 0.3%.
Dairy Exports Keep Pressure on Prices
Cooperatives Working Together (CWT) accepted 29 requests for export assistance today from Bongards Creameries, Dairy Farmers of America, Foremost Farms USA, Maryland Virginia Milk Producers Cooperative Association and Tillamook County Creamery Association to sell 5.758 million pounds of Cheddar, Gouda and Monterey Jack cheese and 551,156 pounds of butter to customers in Asia, Central America, the Middle East and North Africa.
The product will be delivered through June and brings CWT’s 2014 export sales to 8.494 million pounds of cheese and 3.542 million pounds of butter to 12 countries on four continents. These sales are the equivalent of 158 million pounds of milk on a milkfat basis, according to CWT.
Raw Milk Sales Controversy in Maryland
Maryland lawmakers face a decision whether to legalize the sale of unpasteurized milk. A strong opponent of such sales, the National Milk Producers Federation (NMPF), testified at a hearing today before Maryland House’s Health and Government Operations Committee, urging the state’s delegates to oppose a bill that would legalize the sale of unpasteurized milk in Maryland through the use of cow-share programs.
NMPF’s Beth Briczinski, Vice President of Dairy Foods and Nutrition, testified that unpasteurized milk “carries significant public health risks” and said its consumption “is discouraged by every major health organization in the United States, including the American Medical Association and the American Academy of Pediatrics, as well as federal health agencies like the Food and Drug Administration.”
Briczinski also addressed the “misinformation and supposed health benefits of raw milk that are often touted by advocates and the media,” charging that “No claim related to the purported health benefits of raw milk has been substantiated in any of the medical literature. The only scientific consensus is that raw milk can cause serious illnesses and hospitalizations, and can result in life-long negative health complications and death.”
Currently, 30 states allow the legal distribution of unpasteurized milk, according to NMPF, “which is also where nearly 75% of the raw milk-associated outbreaks have occurred. Americans have become ill after consuming raw milk from numerous sources, including cow-share programs and raw milk producers who are licensed, permitted, or certified,” NMPF said.
Methane Gas Starts Barn Fire
The Monday Drudge Report carried a Reuter’s story about methane gas from 90 flatulent cows exploding in a German farm shed, damaging the roof and injuring one of the animals. “High levels of the gas had built up in the structure in the central German town of Rasdorf,” the report stated, “then a static electric charge caused the gas to explode with flashes of flames.” “One cow was treated for burns, according to a police spokesman.
World’s Largest Farm Equipment Show Starts Feb.11
The 47th annual World Ag Expo will be held February 11-13, 2014 in Tulare, California. The largest annual agricultural exposition of its kind features 1,500 exhibitors who display cutting-edge agricultural technology and equipment on 2.6 million square feet of show grounds. An estimated average of 100,000 individuals from 70 countries attend the Expo each year.
For complete details and to purchase tickets in advance, log on to www.worldagexpo.org and use coupon code "WAE2014" to save $5 on each ticket.
More than 40 seminars will be offered in beef, dairy, hay and forage, international trade, irrigation and general agriculture categories.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
The cash climb in cheese may not be over just yet and Class III futures saw more gains today, with the Feb. contract settling today at $22.92/cwt., highest milk price ever in any class.
An unfilled bid this morning took the 40lb. blocks up 1¢, to $2.32/lb., a new record high. And, an unfilled bid took the 500lb. barrels up 0.5¢, to a record $2.28/lb. Again today, sellers were nowhere to be seen.
Spot butter was unchanged this morning, following yesterday’s 1¢ rise on a trade, and held at $1.90/lb. An offer at $1.91/lb. was left at the close.
A sale took the cash Grade A nonfat dry price up to $2.07/lb., but 2 unfilled bids inched it a little higher, to $2.0750/lb., up 2.5¢ on the day, and recaptured almost half of last week’s losses. Extra Grade is no longer trading at the CME.
Today’s market closing prices:
Butter: Unchanged, at $1.90/lb.
Cheddar blocks: Up 1¢, to $2.32/lb.
Cheddar barrels: Up 0.5¢, to $2.28/lb.
Grade A nonfat dry milk: Up 2.5¢, to $2.0750/lb.
Class III milk: Jan.$21.07, +2¢; Feb. $22.92, +14¢; Mar. $20.89, +13¢; Apr. $19.78, +21¢, May $19.17, +9¢, & Jun. $18.88, +5¢. Based on today’s CME settlements, the first half 2014 average now stands at $20.45, +10¢ from Monday, and the 2nd half average is $18.18, +4¢ from Monday.
Again, this week’s USDA report schedule doesn’t offer much for the markets to feed off of, with the monthly Ag Prices report being the only report we regularly monitor. That report is issued Friday afternoon and will include the latest Milk Feed Price ratio.
Tuesday on DairyLine:
Ag Secretary Tom Vilsack joins us on the radio as we wait for the ink to dry on a new
5-year Farm Bill.
Taylor Fritsch tells us about PDPW’s new Cornerstone Dairy Academy.