Dairyline.com Blog

National Milk Producers Federation has called on the USDA to raise the purchase prices for cheese and nonfat dry milk under the Dairy Price Support program for about 90 days. Chris Galen said in Thursday’s broadcast that doing so would enhance the safety net program in last year’s farm bill by boosting the purchase price of cheese by 6 cents and nonfat dry milk by 4 cents per pound and would allow more product to clear to the government, thereby boosting producer milk prices by about $235 million, according to Federation calculations.

USDA has not yet responded, Galen reported, but there are a lot of ideas being considered to help dairy farmers and some have already been taken, including the use of the Dairy Export Incentive program (DEIP) and efforts to clear the 200 million pounds of powder USDA currently has in storage.

The good thing about National Milk’s proposal, he said, is that it does not involve passing legislation through Congress but simply relies on a USDA decision, a decision that NMPF believes USDA has the authority to make.

The Farm Bill specifies minimum support prices, according to Galen, but there’s nothing in the bill that prohibits USDA from temporarily raising those prices and “that would provide a short term boost for farm level milk prices, which is what’s desperately needed right now.”

The Federation has no cost estimate to the government of doing this. Galen admitted there would be some extra cost but, “We don’t think this would result in any huge flood of cheese going to the government.” Nonfat dry milk already is moving weekly to government storage but it would be paying 84 cents per pound, instead of the current 80 cents, he said.

National Milk also called on USDA to reauthorize the DEIP. The DEIP fiscal year ended June 30 and a renewal would allow an additional 1.7 billion pounds (milk equivalent) of product to be exported.

dairyline Todays Dairy News, nmpf

During periods of low farm milk prices, we often hear complaints that retail milk prices have not fallen at the same rate. The International Dairy Foods Association’s chief economist, Bob Yonkers, said in Wednesday’s broadcast that “There are a number of reasons why retail milk prices may not change in lock step with changes in farm milk prices however available data show that retail milk price changes do follow farm milk price changes over time.”

One reason for confusion about this price relationship, according to Yonkers, is that dairy producers receive a blend price that reflects the value of farm milk sold for all uses. However, the cost of farm milk to processors of fluid milk products regulated by Federal Orders is the Class I minimum price. For any given month, the farm blend price and the Class I price do not change by the same amount, he explained, and in some months actually move in opposite directions.

Another reason for the confusion is that retail prices are in dollars per gallon, while farm milk prices are reported in dollars per hundredweight. Yonkers gave an example that, between May 2008 and 2009 the average Class I price declined from $19.50 to $13.85 per hundredweight, a drop of 29 percent. According to the Bureau of Labor Statistics, the U.S average retail price for a gallon of whole milk fell from $3.760 to $3.068 per gallon for that same period, a drop of only 18 percent.

However, when you convert the farm milk price per hundredweight to a price per gallon, the Class I price per gallon fell between May 2008 and 2009 from $1.677 to $1.191, a decline of 48.6 cents. Compare this to the decline in the retail price per gallon of 69.2 cents during that same period, he said. “The reality is that the retail price of milk fell by over 20 cents per gallon more than the price dairy producers received for the farm milk used to process fluid milk products at the Federal order regulated minimum price.”

“While the relationship between the two prices is not exact,” Yonkers concluded, “They do tend to move together over time despite the many other factors that influence the difference between them.”  View Graph Here

dairyline IDFA, Todays Dairy News

 

 Standard Podcast: Play Now | Play in Popup | Download

dairyline John Ellsworth, Success Strategies, podcasts

Cash cheese prices started the 4^th of July week mixed. The blocks lost a half-cent while the barrels gained a half, but both remain below the government support price. That doesn’t bode well for Class III milk prices but the University of Wisconsin’s, Dr. Brian Gould, said in Tuesday’s DairyLine broadcast that there is at least one positive trend in dairy commodities, specifically dairy protein.

Dry whey prices, as reported weekly by the National Agricultural statistics Service (NASS), have seen a steady rebound since the middle of February, he said, climbing from a February 7 low of 15 cents per pound, to a June 20 high for the year of 27 cents, an 80 percent increase. He added that the 27 cent price level compares very favorably to the international price which is about 28 cents per pound, FOB Europe.

Furthermore, dry whey exports, in contrast to other dairy commodities, saw their second best quarter ever in pounds removed in first quarter 2009, so “It’s been a very very positive part of the dairy side.”

Concurrent with that and, one of the reasons for those higher prices, is that manufacturer stocks of dry whey are significantly below a year ago, according to Gould. Looking at April, for example, dry whey stocks amounted to 48.8 million pounds, he said, down 15 percent from April 2008 and, since December 2008, we had a steady decline in end of month stocks, to the tune of 25 percent since December.

“I know cheese prices aren’t the best,” he concluded, “But the whey is starting to recover and the futures market looks very positive for whey and that helps the Class III price.”

dairyline Brian Gould, Todays Dairy News

Dr. Doug Braun, Pfizer Animal Health, continues his discussion on vaccines. This week, Dr. Braun discusses USDA’s role.

 

 Standard Podcast: Play Now | Play in Popup | Download

dairyline Vet Visit, podcasts

Dairy Profit Weekly editor, Dave Natzke, explained in Friday’s DairyLine broadcast that the Dairy Export Incentive Program (DEIP) pays cash bonuses to exporting companies, subsidizing the sale of U.S. dairy products to foreign buyers at prices less than cost, and enables U.S. companies to compete in global markets where other countries may be subsidizing their own dairy product sales.

dairyline Dairy Profit Weekly, Dave Natzke, Todays Dairy News

Dairy producers are also beef producers, according to Lucinda Williams, Hatfield, Massachusetts dairy producer and chair person of the Beef Board in Wednesday’s broadcast. Listen Here:

 

 Standard Podcast: Play Now | Play in Popup | Download

She said dairy producers need to know what the beef checkoff does for them. Currently 13 dairy producers serve on the Beef Board, she said, and 20 percent of the total beef supply comes from dairy breeds.

Beef may make up only 6-8 percent of a dairy’s annual income, but dairy does play an important role in the beef industry, Williams said, because dairy cull cows and bull calves eventually go into the beef supply chain and dairy producers need to be aware of all the great things their beef checkoff dollars are accomplishing.

Dairy beef is more than just ground beef, Williams said, and research shows that 44 percent of the muscle from dairy animals is used for steaks, roasts, filets and strips. Since 1998, more than 2,500 new products have been created, according to Williams, such as the Flat Iron Steak which quite often uses dairy beef.

Checkoff-funded foreign marketing efforts also help build beef demand overseas, according to Williams, where 94 percent of the population lives. “Producers can’t be everywhere,” Williams concluded, “But your beef checkoff can.”

dairyline Cattlemen's Beef Board, Todays Dairy News

John Ellsworth, Success Strategies Inc, asks the question - who are you?

 

 Standard Podcast: Play Now | Play in Popup | Download

dairyline John Ellsworth, Success Strategies

Cash dairy product prices were unchanged in the first day of trading in the fourth week of June Dairy Month and, if cheese prices stay very long below the government support level, particularly the barrels, we could begin to see product move to Uncle Sam under the price support program, according to the University of Wisconsin Emeritus Professor, Dr. Robert Cropp. Speaking in Tuesday’s broadcast, Cropp said the cost to sell to the government makes some plants reluctant to sell to the government, but it could happen. 

The recording was made prior to the release of the May Cold Storage report but Cropp said milk production will have to fall below year ago levels before cheese prices will start to climb, due to the lower demand of the domestic and world market. The May production data showed that output is holding, he said, and there’s plenty of cheese in storage and enough to meet current demand so buyers have to be convinced that things will get tighter as we move into the summer and fall demand period. 

That will happen, Cropp predicted, and he expects milk production will fall below year ago levels in the next report as cow numbers fall due to CWT and that should trigger an increase in prices. 

Reports continue to surface that dairy farmers will dump milk in protest of the low prices but Cropp questions the success of doing so because it’s usually done by a very few farmers for a short period of time. It would have to be national to have much impact, he said but he admitted that it does “demonstrate the depressed prices and the financial conditions that some farmers are facing.”

dairyline Robert Cropp, Todays Dairy News

This week’s Pfizer Vet, Dr Doug Braun, Pfizer Animal Health, continues his topic of vaccine labels.

 

 Standard Podcast: Play Now | Play in Popup | Download

dairyline Vet Visit, podcasts