The October Federal order Class I base milk price was announced this morning by USDA at $15.53 per hundredweight, down $2.12 from September, and $6.06 below October 2007. Let’s see if the major media reports this huge drop in milk prices.

The Class IV advanced pricing factor become “the higher of” in driving the Class I value for the first time since December 2007. The base price may still be above the trigger for an MILC payment to producers. With the addition of the “feed cost adjuster” into the pricing formula, we may not know the status of the MILC payment for awhile. The Agriculture Department hasn’t been clear on this and market analyst, Alan Levitt, speculates that the determination may not be made until the October 31 Ag Prices report is issued, detailing October feed costs.

Meanwhile, the two week NASS-surveyed butter price averaged $1.6125 per pound, up 4.1 cents from September. Nonfat dry milk averaged $1.2628, down 11.6 cents. Cheese averaged $1.7279, down 17.6 cents, and dry whey averaged 22.41 cents, down 2.5 cents from September.

The announcement this morning was delayed from Friday due to a court challenge to the revised make allowances which were used in calculating today’s price announcement and was included in the USDA’s Interim Final Rule published in the July 31, 2008 Federal Register.

The Agriculture Department’s latest Cold Storage report issued this afternoon shows August butter stocks totaled 221.2 million pounds, down 10 percent or 24.9 million pounds from July, and were down 15 percent or 39.7 million from August 2007. July’s  butter stocks were revised down 2.1 million pounds.

The American cheese inventory stood at 569.4 million pounds, down 1 percent or 8.2 million pounds from July, but 4 percent or 20.6 million above a year ago. July American cheese stocks were revised up 1.5 million pounds. Total cheese stocks amounted to 895 million pounds, was down 1 percent or 7.8 million pounds from July but up 6 percent or 48.8 million above a year ago. July stocks were revised up 1 million pounds.

The Agriculture Department latest Livestock, Dairy, and Poultry Outlook issued this morning says that, “While milk production continues to rise, the increases are small compared with recent years.” Cow numbers are expected to decline in 2009, according to the Outlook, and production increases will come from slightly higher expected yields.

“Commercial use should pick up in 2009 compared with 2008,” the report said, “but export prospects will be limited.” Class III prices are forecast lower, while Class IV prices should climb slightly. The overall impact is for a slightly lower all milk price in 2008 compared with last year and a lower price in 2009 compared with this year.

The milk production forecast was raised slightly in September from last month as cow numbers were adjusted to continued herd growth. Cow numbers are projected to average 9,260-thousand head for 2008. Next year, herd size is forecast to contract to 9,235-thousand head. The forecast decline is based on expected higher feed costs and lower milk prices. Cow slaughter is higher than a year ago and replacement prices lower.

Production is expected to rise incrementally to 190.8 billion pounds in 2009, less than a 1-percent rise from 2008?s estimated production. The increase is based on gains in production per cow, which are estimated to average less than 1 percent in 2008. However, the milk per cow increase forecast for 2009 will be the smallest since 2004.

It appears that higher feed prices and lower product prices are continuing to have an impact on the rate of increase in milk production, since the rate of increase in output per cow has been declining since 2005. That the impact has not developed more rapidly suggests that many largeroperators may have lowered breakeven points in recent years.

Demand growth across all major products appears to be slowing. Cheese and butter production in 2008 lead last year?s totals on a year-to-date basis. This month?s forecast shows higher expected stock levels on skim-solids basis, indicating softening demand for butter and powder products. A slowing domestic economy has stressed the restaurant sector, which?along with higher food and energy prices?is dampening cheese demand.

Butter and nonfat dry milk (NDM) had benefited from strong export sales, but exports are forecast to taper off toward the end of 2008 and decline slightly in 2009. A slowing global economy, the dollar strengthening against the Euro and other currencies, and increasing foreign production underpin the export forecast. Of special note, is that declining oil prices may affect a number of major NDM importers (Mexico and Algeria among others).

While slower milk production growth should limit price declines, softening demand both domestically and internationally contributes to lower prices for the balance of 2008 and into 2009 compared with 2007. The cheese price is forecast at $1.905 to $1.925 per pound this year and to decline to $1.840 to $1.940 per pound in 2009.

Butter prices, which have been near record highs this year, are projected to average $1.405 to $1.445 per pound in 2008 and decline to $1.350 to $1.480 per pound next year. Slower exports take a toll on NDM prices both this year and next, as the annual price is expected to average $1.375 to $1.395 per pound in 2008 and $1.455 to $1.525 per pound in 2009. Whey prices, in the doldrums after 2007 highs, areexpected to average 26.0 to 28.0 cents per pound this year and increase fractionally in 2009 at 26.0 to 29.0 cents per pound.

Milk production in the 23 major States during August totaled 14.5 billion pounds, up 1.5 percent from August 2007.  July revised production at 14.8 billion pounds, was up 1.8 percent from July 2007.  The July revision represented an increase of 12 million pounds or 0.1 percent from last month’s
preliminary production estimate.

Production per cow in the 23 major States averaged 1,717 pounds for August, 2 pounds below August 2007.

The number of milk cows on farms in the 23 major States was 8.47 million head, 137,000 head more than August 2007, but 3,000 head less than July 2008.

Farm audits for the fifth herd removal of the Cooperatives Working Together (CWT) program are complete. A National Milk press release reports that 24,860 cows were removed representing 436 million pounds of milk. National Milk’s Chris Galen talked about it on Thursday’s DairyLine.

The program removed 203 herds in 37 states after receiving 607 bids from 41 states. Most of the herds were again from the western region of the country and 275 bred heifers were removed. The average bid was $6.10 per hundredweight, up slightly from the 2007 average but lower than 2005.

“As always, we take out the most amount of milk we can afford while paying a reasonable price to farmers,” Galen said, and that average price was a reflection of current slaughter values as well as the productivity of the herds. Some herds are worth more because their cows on average are more productive, he said.

The price tag was $27 million but $142 million remains in CWT coffers. When asked if another herd removal might be held in 2008, Galen replied that CWT’s export assistance continues but the committee continues to monitor the economic indicators of the dairy industry and if it feels it’s prudent to conduct another herd retirement in 2008 or in 2009, it will do so.

Some have criticized the CWT for running a herd removal when milk prices were strong. Others say it hasn’t done enough. Galen SAID “There’s always going to be some Monday morning quarterbacking, but in the end, the program has to be operated like a business and done in a methodical way and I think the record will show that over the past five years we’ve had five herd retirements we’ve taken out a significant number of cows and milk at a reasonable price.”

Attendees at World Dairy Expo are invited to stop by the CWT booth to ask questions and, if you’d like to see the names of the producers who had their bids accepted, log on to www.cwt.coop.

The Agriculture Department’s latest World Agricultural Supply and Demand Estimates report issued this morning, raised its 2008 milk production forecast fractionally from last month’s issue. 2008 output was pegged at 189.6 billion pounds, up from 189.5 billion forecast a month ago. 2009 output was raised to 190.8 billion pounds; up from last month’s 190.3 billion.
Cow numbers for both years are expected to decline less rapidly than previously expected, according to the report, and milk per cow in 2009 is expected to increase at a slightly higher rate.
Dairy trade forecasts were adjusted to reflect complete second quarter data but forecasts were unchanged from last month. Stocks were adjusted to reflect tighter expected stocks of fat-basis products but potentially larger stocks of nonfat dry milk.
Butter, cheese, nonfat dry milk, and whey prices are forecast lower as milk production is forecast higher. Look for the 2008 Class III milk price to average $17.65-$17.85 per hundredweight, according to the USDA, down from the $17.85-$18.05 range projected a month ago. Department analysis project the 2009 Class III to average $16.75-$17.75, down from $17.10-$18.10 projected last month. The 2007 average was $18.04. The 2008 Class IV price is now expected to average $15.80-$16.10, down from $15.95-$16.25 projected a month ago. Look for a range of $16.10-$17.20 in 2009, down from the $16.40-$17.50 anticipated a month ago. The 2007 average was $18.36

Milk prices are one side of the economic teeter totter. The other side is feed. Fall is in the air, and that means harvest season is near in the nation’s major corn- and soybean-producing states. With spring flooding and the late start to planting season, there’s a lot of interest in where those crops stand right now.  

Dairy Profit Weekly editor, Dave Natzke, said in Friday’s broadcast that we’ll get a clearer picture in the next couple of days, when USDA releases its Crop Production and Feed Outlook reports. He reported that we do know that, due to the late start in the growing season, the maturity of much of the nation’s corn and soybean crops is behind normal for this time of year and the concern is that a killing frost would end crop development.

“We’ve had several frost warnings already this month on the northern edge of the Corn Belt,” Natzke said, “but temperatures have moderated and the threat of frost has been avoided for now.”

The hurricanes that caused problems in the Southeast delivered much-needed moisture to the Midwest, according to Natzke, and combined with more favorable growing conditions, several factors led to falling prices on the Chicago Board of Trade futures market, good news for dairy producers who buy feed.

The U.S. dollar is strengthening against other currencies, which puts downward pressure on exports, Natzke reported, and keeps more corn and soybeans available for the U.S. market. Latest projections from the Agriculture Department suggest 2008-09 marketing year corn exports could be down about 18 percent from the record set last year, with soybean exports down about 13 percent.

Foreign production of other course grains, which can replace corn in livestock diets,  is strong, according to Natzke, but there’s concern that a general slowdown in the global economy could reduce demand for meat, which would lower the demand for corn for livestock feed. 

In addition, Agriculture Secretary Ed Schafer hinted this week that U.S. ethanol producers would see declining federal subsidies, which could reduce the amount of corn used for ethanol production. Finally, there are reports China is looking to increase corn exports.

As of the close of trading on September 10, corn and soybean futures prices were down about 8 percent from a month earlier, with soybean meal futures prices down about 6 percent.

California’s October Class 1 milk price was announced today at $18.23 per hundredweight for the North and $18.50 for the South. They are down $1.00 and $1.01 respectively from September and both are down$5.31 from October 2007. The Federal order Class I base price is announced September 19.

The 2008 joint annual meeting between those who set policy and those who promote the dairy industry will be held next month in Nashville. As they’ve done the past 11 years, the National Milk Producers Federation will team up with Dairy Management Incorporated, National Dairy Board and United Dairy Industry Association. 

“We’re excited about our speakers this year,” Chris Galen said on Thursday’s DairyLine. Syndicated columnist Stuart Rothenberg is a regular on CNN. He’ll be speaking a week before the November general election. “It should be interesting what Stuart Rothenberg says about the prognosis for the elections coming up just a few days after our annual meeting,” Galen said. 

Other speakers include Bob Engel, CEO of CoBank, who will discuss financial issues surrounding agriculture. Mark Davis, CEO of Davisco Cheese, one of the leading cheese processors in the country. Lastly, Andrew Winston, author and consultant on the connection between environmentalism and business strategy. “I think this is an important thing for the dairy industry to be thinking about as we deal with the whole issue of the carbon footprint of the dairy industry and climate change,” Galen said. 

This years annual meeting will be held October 28-30 at the Gaylord Opryland Resort Hotel and Convention Center in Nashville, Tennessee. More Info

The first of season’s most elite dairy cattle shows will be broadcast online starting this Friday. Sara Schmidt from Holstein World gave us a preview on Wednesday. The Northeast Fall Holstein Showcase from the Big E, in West Springfield, Massachusetts, leading off five of the season’s most elite shows for the dairy industry. 

‘We’re bringing the show to your desktop,” Schmidt said. So for anyone interesting in seeing the breed’s best cattle on display, “we’re going to be there, live, taking pictures, cataloging the results and posting that information on our website, holsteinworld.com. Semex is  helping sponsor the event.

“It’s a great way for all of us to get involved in some of the industry’s biggest shows,” Schmidt said. It’ also a great meeting place and a great platform to talk about the progress of cattle in the world today. 

Last year, holsteinworld.com received 6,200 visitors each day of the show, but that number triples to nearly 20,000 per day with the International Holstein World Show at World Dairy Expo. “All logging on to see who won the two year old class or who was recently names as Expo’s champion. It’s realy quite impressive” she said.

To handle that much traffic, holsteinworld.com has created a brand new website, dairyshowsonline.com.