Archive for the ‘Todays Dairy News’ Category

July is National Ice Cream Month

“Let me be the first to wish you a happy National Ice Cream Month.” reported IDFA’s Peggy Armstrong on today’s DairyLine broadcast:

We’re celebrating an anniversary this week.  It was 30 years ago when President Ronald Reagan proclaimed July as National Ice Cream Month and the third Sunday of the month as National Ice Cream Day.  Calling ice cream the ‘perfect dessert,’ he recognized ice cream as a fun and nutritious food that is enjoyed by 90 percent of the nation’s population. In his proclamation, President Reagan called upon the people of the United States to observe these events with
“appropriate ceremonies and activities.”

But Ronald Reagan wasn’t the first American president to appreciate ice cream.Records show that George Washington spent approximately $200 for ice cream during the summer of 1790.  Back then then ice cream was considered a rare and exotic treat.

President Thomas Jefferson also enjoyed ice cream and had a favorite 18-step recipe for an ice cream delicacy that resembled a modern-day Baked Alaska. In 1813 Dolley
Madison served a magnificent strawberry ice cream creation at President Madison’s second inaugural banquet at the White House. By the early 1800s, ice cream was becoming more accessible thanks to the industrial revolution.

Technological innovations, including steam and electric power, mechanical refrigeration, the homogenizer, all enable the emerging ice cream industry to grow.  Thanks to ongoing technological advances, today the United States produces more than 1.6 billion gallons of ice cream a year.

Ice cream is often part of national celebrations, such as this week’s 4th of July picnics, parades and fireworks. Ice cream became a morale symbol during World War II, with each branch of the military serving ice cream to its troops. In 1945, the first “floating ice cream parlor” was built for sailors in the western Pacific.

When the war ended and the dairy product rationing was lifted, America celebrated its victory with ice cream, consuming nearly 20 quarts of ice cream per person in 1946.
So be sure to find fun and creative ways to celebrate National Ice Cream Month throughout July.

Is CME Butter Overvalued?

July 1, 2014 — The CME spot butter price is now trading at $2.50, up 11 cents to start the week Monday. Some analysts believe the price is overvalued based on our current FCstonefundamentals.

“Butter is a Johnny-come-lately,” FC Stone’s Bill Brooks reported on Monday’s DairyLine. “We had the strong powder prices last year and that spread over into the cheese market and it took a long time for butter to get into this mode here.”

Because of the rapid drop in inventories last fall going into the holiday season, both from a domestic and international demand standpoint, buyers became nervous. They went ahead and bought the product even though they probably won’t use it until later this year.

When all the economic activity was taking place and driving other prices up, butter is the one commodity that has not been able to set a new record.

The butter price hit $2.81 in September of 1998, back when the CME traded it only on Fridays. So, we’re 31 cents away from the record price and given some of the gains we’ve seen the last couple weeks, Brooks said it is possible we could get up to that level.

The U.S. is the most expensive place to buy butter at the wholesale level.  The European price (80% equivalent) recently topped $2.11 and Oceania is down to $1.75. Brooks reported that butterfat was moving out of Europe and on its way to the U.S. , but at the same time the U.S. continues to fill export orders.

So we could see a situation on the East Coast where you have a ship laden with U.S. butter heading out and passing a ship coming in with butter from Europe.

3″ Fish Isn’t Helping Drought Stricken Farmers

June 30, 2014 — The drought in California continues to take its toll on thousands of farmers. Not helping is an endangered three inch fish called the Delta smelt. Rob Vandenheuvel, General Manager of the Milk Producers Council, joined us on today’s DairyLine to tell us the latest.

Meanwhile, the State Water Resources Control Board on Tuesday, July 1, will consider imposing fines on farmers and other water users to “ensure timely compliance” with curtailment orders. Those fines could impact thousands of San Joaquin Valley irrigators who hold junior rights to water that normally flows down river and streams. That includes those who use water from the Stanislaus, Tuolumne, Merced and San Joaquin rivers. Violators could be fined $1,000 per day plus $2,500 per acre-foot of water diverted. And farmers would have to stop using water before – not after – they go through the state’s appeal process. The Stanislaus County Farm Bureau, the Modesto Irrigation District and the Turlock Irrigation District are sponsoring a bus for those who want to go to Sacramento and attend the hearing. The bus can be boarded at the MID office 1231 11th Street at 7 a.m. Food is on your own. Seating is on a first-come, first-serve basis. Call (209) 522-7278 to RSVP by noon on Monday.

Cheese Prices Remain Above $2

June 27, 2014 — Cheese prices above $2/lb. are being sustained as the cash market moved a little higher again Thursday, the 8th consecutive session of gain for the barrels and, gotmielkedepending on what happens Friday morning, the blocks are poised to reverse 2 weeks of decline, though they are a penny below the barrels.

Some Wisconsin cheesemakers have been offered milk at $5.00 under the class price but are also seeing peak levels of milk intake, according to USDA’s Dairy Market News.  Many are unable to take advantage of the surplus milk because, as one cheese plant manager said, his operation is already scheduled 7 days a week and can’t physically make any more cheese.

Cheese buyers, looking for blocks or barrels this week, are being told by many manufacturers that no cheese is available, due to existing commitments. A few cheese plants are dipping into inventory to make sales. Inventories are tight to comfortable.

So, where is the high in butter? It hit $2.3575 per pound Thursday and the sky is the limit. Hopefully, it doesn’t start attracting imports and rejection by users due to the high levels.

USDA’s National Milk Cost of Production report, issued Wednesday, shows May’s total costs were up slightly from April.
Total feed costs averaged $13.32/cwt., up 9¢ from revised April estimates and up 28¢ from March. Year ago estimates were not available due to budget sequestration.

Purchased feed, at $6.63/cwt., was down 22¢ from April and down 51¢ from March. Total costs, including feed, bedding, marketing, fuel, labor, taxes, etc. came to $24.59/cwt., up 12¢ from April and 24¢ above the March level.

Encouraging News Coming From Mainstream Media

June 26, 2014 — Many people who surf for their news on the internet realize there is a lot of misleading information out there, particularly when it comes to food production issues. But National Milk’s Chris Galen has been encouraged lately by some of the news he’s seen released from various media outlets, like the Washington Post, Wall Street Journal and Time magazine.

“They’re sharing information and writing stories that are challenging some of the popular notions that may not have a lot of basis in fact,” he said.

One of the more recent examples is from The Washington Post, which shared five myths about organic food production, including whether it’s really better for humans or healthier for the environment.

“In some cases you can make that case, but it’s not an open and shut case for everything including dairy products,” Galen reported. “So I think that helps open some eyes.”

The Wall Street Journal recently reported on the “gluten free” fad and whether or not it makes a difference in people’s diets and health. Time magazine’s cover had a picture of butter on its most recent issue, challenging the conventional wisdom that saturated fat is really bad for you.

“The issue is where do people get information from?” Galen asked “Is it sourced credibly? Is it promoted by Dr. Oz?” The television personality was recently called on the carpet by the U.S. Senate for promoting things that have no evidence behind him.

Hopefully the pendulum is swinging more towards issues that can be supported by sound science rather than fads that are going to be here today and gone tomorrow. Galen says consumers should do their research and one of the policies NMPF stands by is sharing credible information.

“You’re only as good as the evidence you have and can point to – to support your case,” Galen said. “The good news about food production now is that there is more evidence of what people assume…isn’t necessarily always the case.”

Be Aware of Possible Protein Price Scenarios

June 25, 2014 — With all eyes on the milk prices lately, it seems equally important to review protein prices. With no real good substitute for soymeal or canola meal, farmers need to purchase it. What is happening in the protein market currently? Senior market analyst Matt Mattke of Stewart-Peterson, Inc. joined us on today’s DairyLine to discuss:

July soybean meal future contracts have climbed from a low of about $390 per ton to $508 per ton. That’s only $46 per ton less than the 2012 high when prices peaked due to drought conditions.

Soybean export commitments, as of week 31, are running about 4.8 percent ahead of 2012-13. That’s following a year where commitments were up 27.3 percent from 2011-12. At this point in the marketing year, total export commitments have never been this high.

Why is there so much interest in soybean meal this year? Three possible reasons are:

  • Freight and logistics advantages in the U.S.
  • Another is stability. Uncertainty and risk of port strikes in South America make the U.S. a more reliable source of product.

    Matt Mattke Stewart-Peterson, Inc.

    Matt Mattke Stewart-Peterson, Inc.

  • Plus, there’s always the argument U.S. meal is of higher quality and consistency.

What do you think might next for soybeans prices?  Where to from here?

We always encourage producers to review possible scenarios in preparation for the coming months, especially with weather always playing a factor in the summer. A first possible scenario is if we have good weather, the price of soybean meal could fall to around $304.

A second is if we have poor weather, the price could rally up to $600.

And, a third is a change in demand for protein could be trigged by a sharp increase in the value of the U.S. Dollar. This could send the price to the 2008 low of $235.

Of course there are even more scenarios to consider as time progresses. The point is to be prepared and not let good milk-feed margins prevent you from thinking about what could happen tomorrow.

If you’d like to hear Matt Mattke’s interview in its entirety, or previous “At the Corner of Strategy and Discipline” podcasts, please visit stewart-peterson.com and click on the News and Events tab on the home page. And, you can read Matt’s column on this topic in DairyBusiness East this month.

Dunn’s Dairy Outlook

June 24, 2014 — Jim Dunn, Professor of Agricultural Economics at Penn State University joined us on Tuesday’s DairyLine to share his latest dairy outlook report. Here’s a synopsis:

The prices of all dairy products have been mixed in the last month. The CME block cheese price fell by 3.4% since early May, having zigzagged regularly in the interim. It is now $2.00/lb. This lower cheese price of course is reflected in a weaker May Class III price, which was well below the April Class III price, with June expected to be lower yet.  CME butter prices are up 13.5¢/lb. in the past six weeks at $2.235/lb. The butter price rose through much of May before stabilizing in June near its present level. The CME skim-milk powder price fell by 13¢/lb. for the second month in a row to $1.835/lb. Dry whey prices rose 1.1% to $0.661/lb.

The May Pennsylvania all-milk price was $0.30 lower than April at $26.50/cwt., although still a near-record price level. Feed prices have fallen, but so the effect on margins is less. The May Class III price was $1.74 lower than April at $22.57/cwt. The latest Class III futures price for June is $21.34. Average Class III futures prices for the remaining seven months of 2014 are $2.60 above 2013 prices for the same months at $20.88. The April Class III price will likely be the highest for the year, as cheese markets are expected to fall as the year progresses. The May Class IV price was down $0.69/cwt. from April at $22.65/cwt. The prices for Class IV futures average $21.85/cwt. for the rest of 2014, also up from last month. Like Class III, Class IV futures prices are expected to decline through the rest of 2014, although not as much as Class III. The forecast all-milk prices for the rest of 2014 average $24.37/cwt., or $2.50/cwt. above the same period of 2013. The decreasing prices for the remainder of 2014 reflect the expectation that milk production will grow by more than it has so far this year in response to better margins, especially in the eastern half of the country.

The U.S. dollar is higher in the past month against the Euro and about the same versus the Australian and New Zealand dollars. The Euro zone continues to have a variety of challenges as it tries to manage the disparate economies of the member states as well as the problems with Russia’s behavior in Ukraine and elsewhere, which affects its natural gas supply and other things. The Wall Street Journal Online recently reported that, “China’s food-safety regulators pulled production permits from more than a third of the country’s infant-formula makers, pushing for consolidation and greater control in an industry that has suffered quality scandals.” The same article noted that foreign brands have a 55% share of the formula Chinese market.

Corn and Soybean Markets

Corn prices have fallen 12% since last month, ending at $4.50/bu. for the July 2014 contract. Growing conditions are favorable in the Midwest. Other northern hemisphere producers are also having good weather. Soybean prices are down 3% from last month, also a reflection of the good weather in the Corn Belt. Soybean meal is down 7.8% from last month.

Income over Feed Costs (IOFC)

Penn State’s measure of income over feed costs fell by 1.3% in May, but it is still very high. Figure 1 shows how unusual these values are compared to recent years. This month’s decrease is 16¢/cow/day. The May value of $11.64/cow/day is near the highest values seen since we began calculating this measure. Although the milk price fell in May, so did the feed costs, by 0.7%, with lower prices for soybean meal, but no change in Pennsylvania corn or hay prices. The cost of feeding a cow fell by 4¢/day to $5.58. Income over feed cost reflects daily gross milk income less feed costs for an average cow producing 65 pounds of milk per day.

The milk margin is the estimated amount from the Pennsylvania all milk price that remains after feed costs are paid. Like income over feed cost, this measure shows that the May PA milk margin was 1.3% lower than in April.

Milk Production

Milk production for April and May was more than for these months in 2013. This recent year-over-year growth (1.2% in April and 1.35% in May) is a bit more that the past few months, but still not much, given the milk margins shown above. The small increase reflects the continuing challenges facing western producers with drought and high hay prices. The changes in the number of dairy cows are shown in Figure 3. No cow numbers were collected during April and May 2013, so no year-to-year comparisons are available. High beef prices are affecting cull rates, which are slowing the herd expansion one expects in periods with good margins.

Poland’s Dairy Industry

I just returned from two weeks in Poland. Poland was admitted to the European Union (EU) in 2004. At that time, its dairy industry included large numbers of backyard cows, with most rural residents having one or two cows. This is an aftermath of Poland’s inability to feed itself under communism. The EU dairy regulations required bulk tanks and since Poland’s EU entry most of these backyard cows have disappeared. The average herd size in still small by US standards, but the industry is very different than a decade ago. A similar consolidation happened in the processing industry with many small milk plants disappearing and considerable investment from western European countries. With EU Dairy Quotas ending in 2015, Poland could see considerable outside investment in dairy production by farmers from Britain and the Netherlands that seek access to the lower labor and land costs and the opportunity to expand without the quotas. The end of quotas could change the EU’s dairy surplus as price supports are reduced and less intervention to support milk prices should reduce its subsidized dairy product exports.

 

 

Table 1. Milk Prices and Milk Futures Prices for 2013 and 2014(Based on futures prices of June 19, 2014) 2013 Class III 

 

Class IV 

 

PA All Milk 

 

2014 

 

Class III 

 

Class IV 

 

PA All Milk 

 

$/cwt 

 

$/cwt 

 

$/cwt 

 

$/cwt 

 

$/cwt 

 

$/cwt 

 

Jan 

 

$18.14 

 

$17.63 

 

$21.40 

 

Jan 

 

$21.15 

 

$22.29 

 

$24.90 

 

Feb 

 

$17.25 

 

$17.75 

 

$21.10 

 

Feb 

 

$23.35 

 

$23.46 

 

$ 25.90 

 

Mar 

 

$16.93 

 

$17.75 

 

$20.70 

 

Mar 

 

$23.33 

 

$23.66 

 

$ 26.70 

 

Apr 

 

$17.59 

 

$18.10 

 

$20.80 

 

Apr 

 

$24.31 

 

$23.34 

 

$ 26.80 

 

May 

 

$18.52 

 

$18.89 

 

$21.00 

 

May 

 

$22.57 

 

$22.65 

 

$ 26.50 

 

Jun 

 

$18.02 

 

$18.88 

 

$21.00 

 

Jun 

 

$21.34 

 

$22.87 

 

$ 25.05 

 

Jul 

 

$17.38 

 

$18.90 

 

$20.70 

 

Jul 

 

$21.61 

 

$22.87 

 

$ 25.20 

 

Aug 

 

$17.91 

 

$19.07 

 

$21.00 

 

Aug 

 

$21.31 

 

$22.57 

 

$ 24.91 

 

Sep 

 

$18.14 

 

$19.43 

 

$21.70 

 

Sep 

 

$21.26 

 

$22.01 

 

$ 24.64 

 

Oct 

 

$18.22 

 

$20.17 

 

$22.00 

 

Oct 

 

$20.76 

 

$21.32 

 

$ 24.07 

 

Nov 

 

$18.83 

 

$20.52 

 

$23.00 

 

Nov 

 

$20.22 

 

$20.89 

 

$ 23.60 

 

Dec 

 

$18.95 

 

$21.54 

 

$23.40 

 

Dec 

 

$19.68 

 

$20.42 

 

$ 23.10 

 

Annual 

 

$17.99 

 

$19.05 

 

$21.48 

 

Annual 

 

$21.74 

 

$22.36 

 

$25.11 

 

Annual change 

 

$ 0.55 

 

$ 3.05 

 

$ 1.45 

 

Annual change 

 

$ 3.75 

 

$ 3.31 

 

$ 3.63 

 

% change 

 

3.1% 

 

19.0% 

 

7.2% 

 

% change 

 

20.8% 

 

17.4% 

 

16.9% 

 

USDA’s latest Dairy Outlook

June 18, 2014 – As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued Wednesday, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued June 11. Milk and dairy product prices remain near record levels on continued strong demand and forecasts were raised only slightly in June from May. However, higher expected production next year lowers milk and dairy product prices in 2015 compared with 2014.

June projected corn prices were lowered slightly from May to $4.45 – $4.65 per bushel for 2013/14, based on reported prices to date. The 2014/15 corn price is forecast below current year prices but is unchanged from the May projection of $3.85 – $4.55 per bushel. The soybean meal price for 2013/14 is estimated at $485 per ton. The 2014/15 soybean meal price forecast is unchanged from May but is expected to be sharply lower than this year at $355 – $395 per ton.    The preliminary alfalfa price was reported in the May Agricultural Prices report at $224 per ton; higher than April’s reported price and about the same as May a year ago.

Consequently, the milk-feed price ratio is likely to remain at a level that would support expansion in the dairy herd in 2015.

Last month’s forecast of herd expansion in the second half of the year was based on strong milk prices and moderating feed costs. The June forecast is unchanged from May and cow numbers are placed at 9.26 million head for the current year. Cow

numbers for 2015 are forecast up slightly from 2014 to 9.34 million head, also unchanged from the May forecast. Current-year output per cow is lowered fractionally from May to 22,270 pounds per cow and is based on lower expected output per cow in the second quarter. Next year’s forecast of output per cow is unchanged from May and is up nearly 2 percent from the 2014 projection. The June milk production forecast for 2014 rounds to 206.1 billion pounds, unchanged from May. For 2015, milk production is unchanged from May at 212.1 million pounds. The likely stronger milk-feed price ratios for both this year and next should presage expanded year-over-year production.

Fats basis 2014 milk equivalent imports were raised in June to 3.5 billion pounds, but are expected to slip to 3.4 billion pounds in 2015. Skims-solids basis milk equivalent imports are raised this month to 5.6 billion pounds for the current year and to 5.2 billion pounds for 2015. The forecast increases from May are based on higher imports of food preparation items, whey products, and, to a lesser extent, casein and milk protein concentrates.

June forecast fats-basis exports for 2014 are increased this month from May to 13.4 billion pounds and to 13 billion pounds for 2015. Butter exports have retreated as U.S. prices have become less competitive on the global market. The butter decline was more than offset by continued strong cheese exports. The higher June forecasts are expected to carry over into 2015. However on a year-over-year basis, the 2015 forecast export decline is based on expected strong foreign competition.

Exports on a skims-solids basis are increased to 39.4 billion pounds for 2014 and are unchanged at 38.6 billion pounds for next year. Higher skimmed milk powder, whey, and cheese are the basis of the higher skim-solids export number this year.

Although the United States is expected to remain competitive in the global market, foreign competition will likely lower exports on a year-over-year basis in 2015.

Milk production is expected to increase in 2015 compared with this year. Lower feed prices will improve the profit outlook for producers next year. Continued strong demand, both foreign and domestic, will moderate price declines in 2015.    To view the entire report log on to: http://www.ers.usda.gov/publications/ldpm-livestock,-dairy,-and-poultry-outlook.aspx.

 

Quarterly and annual milk prices and projections

Year           All milk         Class III         Class IV

2009

12.83

11.36

10.89

2010

16.26

14.41

15.09

2011

20.14

18.37

19.04

2012

18.53

17.44

16.01

2013

  Q1

19.53

17.44

17.71

  Q2            19.57           18.04          18.62
  Q3            19.60           17.81          19.13
  Q4            21.50           18.67          20.74
Year            20.05           17.99          19.05

2014

  Q1            24.53           22.61          23.10
  Q2 24.40-24.60 22.65-22.85 22.95-23.25
Q3 21.95-22.45 19.65-20.15 20.80-21.40
Q4 20.85-21.65 18.40-19.20 19.05-19.95
Year* 22.90-23.30 20.80-21.20 21.45-21.95
2015
  Q1            20.50-21.50 16.45-17.45 18.05-19.15
  Q2
Q3
Q4
Year* 19.75-20.75 16.95-17.95 18.65-19.75

 

2012    2013    2014  1st      2nd  3rd     4th     2015  1st

Milk Output (bil.lbs.)  200.5   201.2   206.1  51.1  52.8  50.9  51.3  212.1  52.5

Cow #s (mil)                 9.23     9.22    9.26   9.22   9.24  9.27  9.29   9.34    9.30

July FO Class I Milk Price Up 16 Cents

June 18, 2014 – The Agriculture Department announced the July Federal order Class I base milk price Wednesday at $23.02 per hundredweight, up 16 cents from June, $4.11 above July 2013, and equates to about $1.98 per gallon.

The seven month average now stands at $23.02, up from $18.32 at this time a year ago and compares to $16.34 in 2012 and $18.55 in 2011.    The two-week, NDPSR-surveyed, butter price used in calculating this month’s Class I value was $2.1845 per pound, up 16.7 cents from June. Nonfat dry milk averaged $1.8526, down 2.4 cents. Cheese averaged $2.0334, down 17 cents, and dry whey averaged 67.67 cents per pound, up fractionally.

No Crash in Cash Cheese or Butter

June 13, 2014 –  No crash in cash cheese or butter….That’s  the read of FC  Stone dairy broker Dave Kurzawski. Speaking in

Dave Kurzawski, FC Stone

Dave Kurzawski, FC Stone

Friday’s DairyLine, Kurzawski said the cheese  market seems more stable right now and he credited pipeline refilling as buyers  try to replenish supply from previous sales. But, he admits that we’re putting  more milk into the cheese vat right now and he sees that continuing for awhile  and more cheese will be made over the next 30-60 days than less. That will  result in continued pressure on spot prices, he warned, and he expects lows in  the $1.85-$1.90/lb. range.

Butter wise, Kurzawski says the market is tighter right now and he  pointed to strong ice cream sales as cream demand is strong. He doesn’t see much  downside for butter, in fact the “pricing skew,” he said, is directing milk out  of the churn and more into the vat as “manufacturers don’t want to make a ton of  excess butter at these price levels.” He looks for “inflated butter prices” for  at least the next 30-45 days.

DairyBusiness Update editor Lee Mielke asked him how he, as a long time dairy broker, views the Farm Bill’s  new safety net for dairy farmers, the “Margin Protection Program.” Do you, in  any way, see it as a threat or competition to using dairy options and futures  for risk management?

He admitted that there’s a lot of talk of that potentially cannibalizing some of the sell side interest on the futures and options market but he doesn’t quite agree. He called the program “a good tool, a progressive tool as far as from a government perspective, a government program that has been put out.” He said it’s a “real advancement in that sense,” but believes it will be used to “augment a producer’s risk management plan, not replace it.”

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