November 25, 2014 — Andy Novakovic of Cornell’s Charles H. Dyson School of Applied Economics and Management, provided some last minute thoughts about enrollment in the Margin Protection Program this year. The report does not include any recommendations about electing coverage in MPP, but does offer valuable information that you may want to consider when making your decision before December 5th. Read it here: http://dairymarkets.org/PubPod/Pubs/IL14-03.pdf
Archive for the ‘Todays Dairy News’ Category
November 24, 2014 — Fuel Up to Play 60 is a program founded by the National Dairy Council and NFL, in collaboration with USDA. Executive VP Mark Leitner joined DairyLine’s Bill Baker today to update us on the program and how it empowers students to take charge in making small, everyday changes at school. Here’s part one in our series with Leitner:
November 21, 2014 — The National Milk Producers Federation issued this statement following the White House’s executive action on immigration policy.
“The executive action announced by the White House this week will not solve the current or future needs of dairy farmers. We still need congressional action, in the form of comprehensive legislative reform of our broken immigration system. This is both an opportunity and an obligation for Congress. We need action in both the House and Senate, with support from both Republicans and Democrats, to do the job that needs to be done,” Jim Mulhern, President and Chief Executive Officer, NMPF.
“NMPF’s focus remains the same going forward, as it has been in the past decade: we must secure a permanent fix to our broken immigration system – and that must be done by the Congress. “Regardless of the executive order announced by the White House, we must continue pressing for a long-term, meaningful solution that provides permanent relief for current workers and future labor needs. It is imperative that Congress address this issue in 2015 and resolve it, once and for all,” he concluded.
In this week’s address, President Obama laid out the steps he took this past week to fix our broken immigration system. From WhiteHouse.gov:
“Enacted within his legal authority, the President’s plan focuses on cracking down on illegal immigration at the border; deporting felons, not families; and accountability through criminal background checks and taxes. These are commonsense steps, but only Congress can finish the job.
As the President acts, he’ll continue to work with Congress on a comprehensive, bipartisan bill — like the one passed by the Senate more than a year ago — that can replace these actions and fix the whole system.”
November 21, 2014 — Cash block cheese, as of Thursday, has dropped almost 17 cents this week in addition to the 25 3/4-cents lost last week. The barrels plunged 20 1/2-cents
last week and dropped 16 1/2 cents Thursday. I had scheduled “Chicken Little” for our Friday DairyLine interview but chose Jerry Dryer, editor of the Dairy and Food Market Analyst, instead hoping he’d have a different message. He didn’t.
Dryer sees product prices continuing to dip because prices around the world are significantly lower than here. U.S. exports are slowing, he said, as other cheese is available. He pointed to the Russian blockade of European cheese, for example, which is “pushing product in this direction so there’s going to continue to be pressure on the market.”
He added the caveat; “My version of Chicken Little, however does have a safety net and that’s the futures market which is higher than I think prices are going to be as we progress into 2015. It’s an opportunity to do some hedging.”
Dryer predicts that milk prices will hit “sub $15 (per hundredweight), maybe sub $14 for a few months next year and there’s still some $17 futures protection that could be bought.”
I ask if China will re-enter the market any time soon and turn things around. He quickly answered, “Things are not looking that way.” He reported that China has a significant volume of product in storage and Dryer’s sources in China state that milk production there has “more than recovered from last year’s downfall so domestically they have a little more milk available and the huge irrational surge of imports in the early part of this year have them backed up.” Sources tell Dryer that China may not be back in the market until Third Quarter 2015, he concluded.
November 20. 2014 — The National Milk Producers Federation this week joined 41 other agricultural organizations in urging Congress to restore a tax code provision that allows small businesses, including farms, to write off capital purchases such as equipment immediately, instead of over time.
The provision, known as Section 179, is one of more than 50 expired tax policies the House and Senate are likely to consider for reinstatement during their post-election lame duck session. The farm groups urged restoration of Section 179 in a November 18 letter to congressional leadership.
“Farming requires significant investments in machinery and equipment,” said NMPF President and CEO Jim Mulhern. “By allowing farmers to immediately write off these purchases on their taxes, Section 179 gives producers an incentive to invest in their businesses while it reduced their record-keeping burden.”
Mulhern said restoring Section 179 will encourage farmers to purchase machinery and equipment in years when they have a positive cash flow. “On the other hand,” he said, “failure to restore Section 179 will add to the financial strains on asset-rich, cash-poor family farmers who already find it difficult to pass on their farms to the next generation.”
Section 179 allows farmers to write off capital expenditures in the year that purchases are made. The farm groups asked that the maximum amount of annual expensing be restored to $500,000, as it was in 2013. In addition, they asked Congress to reinstate the 50 percent bonus depreciation for the purchase of new capital assets, including farm equipment.
November 19, 2014 — Milk production in the 23 major States during October totaled 16.0 billion pounds, up 3.9 percent from October 2013. September revised production, at
15.5 billion pounds, was up 4.3 percent from September 2013. The September revision represented an increase of 22 million pounds or 0.1 percent from last month’s preliminary production estimate.
Production per cow in the 23 major States averaged 1,868 pounds for October, 51 pounds above October 2013. This is the highest production per cow for the month of October since the 23 State series began in 2003.
The number of milk cows on farms in the 23 major States was 8.59 million head, 89,000 head more than October 2013, and 3,000 head more than September 2014.
October Milk Production in the United States up 3.8 Percent
Milk production in the United States during October totaled 17.1 billion pounds, up 3.8 percent from October 2013. Production per cow in the United States averaged 1,842 pounds for October, 52 pounds above October 2013.
The number of milk cows on farms in the United States was 9.28 million head, 77,000 head more than October 2013, and 4,000 head more than September 2014.
November 19, 2014 — The Agriculture Department announced the December Federal order Class I base milk price this afternoon at $22.53 per hundredweight, down $1.53 from November but $2.16 above December 2013, and equates to about $1.94 per gallon. That puts the year’s Class I average at $23.29, up from $18.84 in 2013, $17.46 in 2012, and $19.13 in 2011. Contrast that to the disastrous 2009 average of $11.48.
The two-week NDPSR-surveyed butter price average used in calculating today’s price was $1.9828 per pound, down 84.9 cents from November. Nonfat dry milk averaged $1.4517, down 5.4 cents. Cheese averaged $2.1872, down 11.3 cents, and dry whey averaged 64.41cents, 1.5 cents from November.
November 18, 2014 — “Dairy prices have been a little crazy lately,” said Penn State dairy economist James Dunn. He joined us on Tuesday’s DairyLine Radio program to share his latest outlook.
November 17, 2014 — As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued this morning, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued November 10.
After a record-setting increase in milk and dairy product prices, prices declined in October, especially the butter price. Exports fell substantially from August to September. Export projections were reduced for the fourth quarter of 2014 and for 2015. Prices for cheese, butter, and nonfat dry milk in 2015 are expected to be lower than projected last month. With relatively low feed prices, conditions continue to encourage expansion in milk production, although at a lesser rate than previously forecast.
The October all milk price of $25.30 per hundredweight (cwt.) was second only to the record-high September price of $25.70 per cwt. The October USDA benchmark 16-percent dairy-feed ration was $8.25 per cwt. of feed, the lowest since November 2010. The milk-feed ratio of 3.07 for October 2014 was at its highest level since October 2007. However, from September to October, dairy product prices and Federal order minimum milk prices declined. As buyers felt more comfortable with supplies ahead of the holidays, the national weekly butter price as reported by USDA Agricultural Marketing Service (AMS) fell more than a dollar in 4 weeks, from a record high of $3.01 per pound for the week ending October 4 to $1.99 per pound for the week ending November 1.
Although U.S. dairy product prices have declined, they are still significantly higher than export prices of competitors. For example, for the week ending November 1, the AMS butter price was $1.99 per pound while the Oceania export price ranged from $1.10 to $1.45 per pound for the 2 weeks ending November 7. Several factors are contributing to relatively low dairy prices abroad. New Zealand and the European Union (EU) have both experienced robust growth in milk production. For the January through August period, New Zealand experienced 14-percent year-overyear growth, while the growth for the EU was 5 percent over the same period (Dairy Companies Association of New Zealand and Eurostat). A reduction in dairy import demand from China has played a role as China’s imports of milk powder have fallen from a peak of 159,034 metric tons in January 2014 to 25,518 metric tons in September. EU export prices have declined since Russia announced a 1-year ban on agricultural product imports from several countries in August.
The large differences between U.S. domestic prices and foreign export prices have influenced the U.S. dairy trade. On a milk-fat milk-equivalent basis, exports for the third quarter were 23.1 percent less year-over year. On a skim-solids basis, the year-over-year decrease was 10.1 percent. Notably, from August to September, monthly exports fell 29.4 percent for nonfat dry milk and skim milk powder.
While exports have decreased, year-over-year imports have increased. Third quarter imports on a milk-fat basis were 1.1 billion pounds, about 0.3 billion pounds higher on a year-over year basis but slightly lower than projected last month. On a skim-solids basis, imports for the third quarter were 1.5 billion pounds, 0.4 billion pounds higher on a year-over-year basis and 0.1 billion pounds more than projected last month. Notably, from August to September, monthly imports rose 26.1 percent for milk protein concentrate (40-90 percent protein) and 42.5 percent for milk albumin.
U.S. milk production during the third quarter totaled 51.1 billion pounds, up 3.5 percent from the third quarter last year and slightly higher than projected last month. Milk cow numbers for the quarter were lower than expected, while milk per cow for the quarter was higher than expected. Of the 23 Selected States reported monthly by USDA National Agricultural Statistics Service, all had September yearover-year gains in milk production with the exception of Illinois, which had a decline of 0.7 percent. Despite persistent drought conditions, milk production for California continues to grow, with September milk production 2.9 percent above last year.
To view the entire report log on to: http://www.ers.usda.gov/media/1701895/ldp-m-245.pdf.
November 14, 2014 — Dairy farmers face some tough decisions planning their risk management strategy. Block cheese hit the lowest level since December 16, 2013 on Thursday and the falling dairy product prices mean lower milk prices ahead. The December 5 deadline is approaching for signing up for the new Margin Protection Program (MPP). They also have the option of the Livestock Gross Margin program (LGM), and there’s the trading of dairy options and futures at the CME.
I ask FC Stone dairy broker, Dave Kurzawski, in Friday’s DairyLine, do dairy producers need anything beyond the Margin Protection plan. Kurzawski admitted that his “crystal ball is not that clear,” but warned if producers go with the MPP, they can’t use the LGM, “it’s one or the other.” The use of dairy options and futures and forward contracts with coops, on the other hand, can be used with either program, he said, but a lot depends on where a producer is located in the country and how much feed has already been purchased for next year.
“It’s a unique year to go into the MPP,” Kurzawski stated, “Because there are some folks who have some higher priced feed in inventory already, which would negate some of those potential benefits that might kick out from the MPP.”
Going into next year, Kurzawski said he believes more people will sign up for it, though he thinks we’ll see “widespread participation but we just don’t know what level people are going to look at it.” The question, he added is “How meaningful it would be if a producer already has feed inventory already put away.”
If a producer elects to use dairy options and futures, what does Kurzawski recommend? While he admits that “things have got a little worse for 2015,” he still believes you can get some “decent coverage that would rival anything you can get on the Margin Protection Program for next year.” He suggests a “min/max type structure where you have a floor that might be around $16 on Class III and maybe $15 on Class IV and a ceiling closer to around $18.” It depends on a farm’s basis, he said.
The use of futures or forward contracts on a portion of their milk at a $17 Class III average or a $16 or $16.50 Class IV average would be a “wise strategy,” he concluded, “But it depends on what their profit margin looks like, where they got feed locked up or where they don’t have feed locked up, so it’s really a case by case basis.”