DairyProfit Update: Oct. 12, 2011

Oct. 12, 2011

USDA October reports: Another mixed bag for dairy
USDA’s World Ag Supply & Demand Estimates and Crop Production reports provided a mixed bag of news for the nation’s dairy farmers.
Based on an expanding dairy herd and increased milk per cow, USDA’s World Ag Supply & Demand Estimates (WASDE) report raised its milk production forecast for 2011, but reduced expectations for 2012 due to the impact of lower milk prices and weakening milk-feed ratios that could pressure cow numbers and feeding management.
The projected Class III price is lowered for 2011, but higher whey price will more than offsets a decline in the cheese price in 2012, pushing Class III prices up from last month’s forecast. The Class IV price is lowered for both years due to lower forecast butter and NDM prices. The all milk price forecast is lowered to $20.00 to $20.10/cwt. for 2011, and $17.75-$18.65/cwt. for 2012.
Impacting cull cow prices, the 2011 and 2012 cattle (steer) price forecasts were raised slightly. 
Both 2011 corn and soybean crop production estimates were reduced about 1% from September’s report, but USDA also lowered corn and soybean price projections. USDA’s WASDE report projected the 2011/12 U.S. season-average farm price for corn at $6.20-$7.20/bushel, down 30¢ on both ends of the range compared to a month ago. The projected 2011/12 U.S. season-average soybean price remains in a wide range, $12.15-$14.15/bushel, down 50¢/bushel on both ends of the range. Soybean meal prices are forecast at $335-$365/ton for 2011/12, down $25/ton on both ends of the range.
2011 cottonseed production is forecast well below 2010, as is alfalfa and other dry hay.
IDFA, tax group oppose dairy plans
It’s no surprise, but the International Dairy Foods Association (IDFA) formally opposed a 2012 Farm Bill proposal, introduced by U.S. Sen. Dick Lugar (R-Ind.) and U.S. Rep. Marlin Stutzman (R-Ind.), which includes dairy policy reforms supported by many dairy farmer organizations.
IDFA expressed opposition to the Rural Economic Farm and Ranch Sustainability and Hunger Act of 2011 (S. 1658 and H.R. 3111) because the dairy processor organization said the dairy provisions would limit the U.S. milk supply, raise milk prices and fail to reform the antiquated federal milk pricing system.
And, Americans for Tax Reform has joined IDFA's efforts to urge legislators to oppose the Dairy Security Act of 2011, introduced in the U.S. House last month by Rep. Collin Peterson (D-Minn.).
Dairylea reports strong demand for milk in the Northeast
With dairy processors like the makers of Chobani Greek yogurt adding significant capacity, demand for milk in the Northeast “is creating a once-in-a-generation opportunity for expanding dairy farmers to access the market,” according to Greg Wickham, CEO, Dairylea. Wickham addressed delegates and guests attending the nation’s fifth-largest dairy co-op’s 104th annual meeting, Oct. 10-11, in Syracuse, N.Y., where the organization is headquartered. 
Proximity to big population centers, combined with a strong dairy infrastructure, is attracting processors to the Northeast, both those headquartered here, like Agro Farma of Chobani fame, and those with locations in the Midwest, like cheese companies Great Lakes and Bel Giosiosio. To meet the demand, Dairylea partners with other cooperatives and independent producers to market 1.4 billion lbs. of milk per month from 7,500 farms in the region through Dairy Marketing Services (DMS).    
Amie Thomas, DMS director of sales and marketing, explained that last year, 11% sales growth required the milk from an additional 141,000 cows. Demand grew 6.6% this year, and the forecast for 2012 is for another 14%. In perhaps the understatement of the session, she said, “I’m a little nervous” about meeting the demand from top customers like Dean Foods, H P Hood, Great Lakes Cheese, Land O’ Lakes and Kraft, along with Agro-Farma, DFA Ingredients, St. Albans, Leprino and Sorrento, rounding out the top 10.
MARKETS: Cheese, Class III futures mixed in narrow range
Closing on Wednesday, Oct. 12:
Cheddar barrels: up 1.0¢, to $1.73/lb.
Cheddar blocks: down 2.0¢, to $1.68/lb.
Butter: up 2¢, to $1.82/lb.
Extra Grade nonfat dry milk: unchanged, at $1.58/lb.
Grade A nonfat dry milk: unchanged, at $1.49/lb.
Class III milk: mixed in a narrow range through January 2013. The October-December 2011 average is now $17.11/cwt., yielding a 2011 average of $17.99/cwt.; 2012 average is $16.61/cwt.
Corn/soy futures slightly lower
Corn: -7.4¢ to -4.2¢/bushel through September 2012. The December 2011 price is $6.41/bu.; 2012 average is $6.39/bu.
Soybeans: -1.0¢ to +4.0¢/bushel through September 2012. The November 2011 price is $12.39/bu.; 2012 average is $12.54/bu.
Soybean meal: +$1.10 to +$3.20/ton through September 2012. The October-December 2011 average is $321.40/ton; 2012 average is $327.88/ton.
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Dave Natzke, Editor