Farm gate milk prices are heading down. The Agriculture Department announced the September Federal order Class III milk price this morning at $19.07 per hundredweight (cwt.), down $2.60 from August, but still $2.81 above September 2010, and equates to about $1.64 per gallon. That pulls the 2011 Class III average to $18.28, up from $14.07 at this time a year ago and $10.49 in 2009.

Looking ahead, Class III futures settled Thursday as follows: October $17.64, November $16.98, and December at $16.88.

The September Class IV price is $19.53, down 61 cents from August, but $2.77 above a year ago. California’s comparable September 4a and 4b prices are scheduled to be announced October 3.

The four week NASS-surveyed cheese price averaged $1.8592 per pound, down 28.1 cents from August. Butter averaged $1.9886, down 8.1 cents. Nonfat dry milk averaged $1.5439, down 3 cents, and dry whey averaged 59.26 cents, up 2.4 cents.

The October Federal order Class I base milk price was announced by the Agriculture Department this morning at $19.56 per hundredweight, down $2.22 from September, but still $2.98 above October 2010. That equates to about $1.68 per gallon. The drop pulled the 2011 Class I average to $19.26, still $4.26 above a year ago at this time, and $8.17 above 2009. 

The two-week, NASS-surveyed butter price averaged $1.9893 per pound, down 9.6 cents from September. Nonfat dry milk averaged $1.5461, down 3.4 cents. Cheese averaged $1.8347, down 3.2 cents, and dry whey averaged 59 cents, up 2.6 cents.

The Class IV advanced pricing factor became the “higher of” in driving the Class I value and no MILC payment to producers is expected for October but is possible for November or December.

The World Dairy Expo runs October 4th through the 8th in Madison Wisconsin.  General Manager Mark Clarke gives us a preview of the big show coming up in Madison.

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This week’s Feed Facts podcast – Univesrity of Illinois extension dairy specialist Mike Hutjens talks about strategies when dealing with nitrates in corn.

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ARLINGTON, VA —  The National Milk Producers Federation?s Board of Directors voted today in favor of a revised approach to reforming federal dairy policy, with the key change of allowing farmers an individual choice between receiving the financial protection of a government safety net, or opting out of such protection. 

As originally proposed back in 2010, NMPF’s Foundation for the Future (FFTF) program contained a government-subsidized safety net, the Dairy Producer Margin Protection Program, to protect against periods of low milk prices, high feed costs, or a combination of the two. This program offered a Basic level of subsidized insurance coverage, plus the option of Supplemental fixed-cost coverage partially paid by farmers. The FFTF program also contained the Dairy Market Stabilization Program, which was a mandatory means to reduce market volatility by discouraging new milk production during periods of compressed margins. 

Under the revised approach backed today by NMPF, the Dairy Producer Margin Protection Program (DPMPP) would continue to be voluntary, but if a producer opts to participate in the DPMPP, his/her participation in the Dairy Market Stabilization Program (DMSP) would then be mandatory. If a producer chooses not to participate in the insurance program, then participation in the DMSP would not be required. As with NMPF?s original reform package, the Milk Income Loss Contract program would be eliminated, as would the Dairy Product Price Support Program. 

The NMPF Board believes that the new approach will result in beneficial changes to the legislative version of Foundation for the Future, which is expected to soon be formally introduced in the House of Representatives by Reps. Collin Peterson (D-MN) and Mike Simpson (R-ID). 

“Based on the feedback we received this summer from our cooperative membership, and during our grassroots tour, when 1,300 farmers came to 12 cities to talk with us about Foundation for the Future, we decided that a slightly different approach to reforming dairy policy was the best way to go,” said Randy Mooney, NMPF Chairman, and a dairy farmer from Rogersville, MO. “Clearly, a number of farmers are uncomfortable about having a mandatory government program to manage milk production. So we are endorsing a new approach which gives farmers a clear choice.”

 ”This new approach of making the Market Stabilization program optional will appeal to those who philosophically do not want government telling them what to produce. At the same time, those who want the benefits of a government safety net must accept some government-led market stabilization as the price of that protection,” Mooney said. 

The other changes endorsed today by NMPF include:

 Increasing the Basic Plan’s coverage to 80% of a producer’s production history on margins between $0.00 and $ 4.00 per cwt. In the legislative draft of FFTF released earlier this summer, the Basic coverage was limited to 75% of a farm?s production history.

 Giving farmers the option of acquiring coverage for their production growth under the Supplemental Plan. Under such an option, the production history would be revised annually as the producer’s production grows. The percentage of the producer’s production history to be covered, and the premium rate per cwt., would remain fixed over the life of the Farm Bill.

 Accepting an administrative fee to be charged to all producers signing up for margin protection coverage under the DPMPP, with modest fees on a sliding scale. This will help keep the cost of the program to a minimum.

 Eliminating the distribution of 50% of producer-generated funds to the U.S. Treasury under the Dairy Market Stabilization program, ensuring that all of the monies generated by producer withholdings would be available to purchase dairy products for donation to non-commercial food assistance programs as originally proposed. 

Lastly, the revised FFTF package endorsed by NMPF alters how reforms to the Federal Milk Marketing Order system would be pursued. Under NMPF’s original approach, the legislation would have specifically prescribed how competitive prices and a streamlining of the classified pricing system were to be implemented by the USDA, without a hearing process. The new version directs the USDA to eliminate the cumbersome end product price formulas and make allowances for Class III, and use a competitive pay price instead to determine the Class III price. It also specifies that after USDA makes its decision, a majority vote by producers will put the changes into effect. If the changes are not approved, the current Federal Order provisions remain in place. 

The underlying objectives we have been pursuing for the past two years ” offering a better dairy program featuring protection, stability, and growth ” remain intact in what our Board has endorsed today,” according to NMPF President and CEO Jerry Kozak. “But by making some adjustments, we strongly believe that many of the concerns raised in the past year to our first approach now have been addressed and eliminated.”

 Kozak went on to point out that NMPF’s Foundation for the Future proposal, along with the initial legislative discussion draft released this summer by Rep. Peterson and cosponsored by Rep. Simpson, allowed the dairy industry and Congress “to kick the tires and really scrutinize the best way to reform dairy policy. We’ve listened, we’ve analyzed and considered options, and now we’re endorsing a course correction that will still take us to the same place, only with greater unanimity and support from dairy farmers, and hopefully from others across the industry and on Capitol Hill.” 

Mooney added that “it’s time everyone in the dairy industry recognizes that the Peterson-Simpson bill offers the best and perhaps only opportunity to create an effective safety net that allows us to take advantage of the challenges and opportunities of a global marketplace.” 

The National Milk Producers Federation, based in Arlington, VA, develops and carries out policies that advance the well being of dairy producers and the cooperatives they own. The members of NMPF’s 31 cooperatives produce the majority of the U.S. milk supply, making NMPF the voice of more than 40,000 dairy producers on Capitol Hill and with government agencies. For more on NMPF’s activities, visit our website at www.nmpf.org.

 http://www.nmpf.org/latest-news/press-releases/sep-2011/nmpf-board-advocates-changes-to-peterson-simpson-dairy-policy-re

High feed prices and low milk prices will trim the U.S. dairy herd in 2012, according to the latest Livestock, Dairy, and Poultry Outlook report released Friday.

Dryness and heat throughout the Corn Belt led to a downward revision in the corn yield forecast in for 2011/12 in the September Crop Production report. If the

forecast is realized, the projected yield would be the lowest since 2005/06. Despite lower expected yields, production could be the third highest ever because of

expanded acreage. The corn price forecast was increased from last month to $6.50 to $7.50 per bushel for September and soybean meal price forecasts were raised in

September to $360 to $390 per ton. The higher soybean meal prices reflect both lowered soybean plantings and expected yields compared with 2010/11.

Despite rising feed prices, milk production continues to advance, with forecast milk output rising 1.5 percent in 2011 to 195.7 billion pounds. Cow numbers continue to

increase more than expected earlier and output per cow appears to have rebounded from the July and August heat. Cow numbers are projected at 9.2 million head this

year, and output per cow was raised slightly from last month to 21,280 pounds for the year. In 2012, the U.S. dairy herd is expected to decline slightly to 9.19 million

head, with most of the contraction coming in the second half of the year. With an additional milking day in 2012, milk per cow is forecast to climb by 1.5 percent to

21,605 thousand pounds. Although milk production and output per cow will be higher next year compared with 2011, the September forecast represents a downward revision from August estimates.

Fats basis milk equivalent imports were virtually unchanged from last month to 3.2 billion pounds both this year and in 2012. On a year-over-year basis, these

forecasts continue a trend in declining imports that began in 2009. Skim-solids basis imports are projected at 5.3 billion pounds in 2011, falling to 5.1 billion

pounds next year. In contrast to fats basis imports, these forecasts are an upward revision from August reflecting continued imports of caseins.

Fats basis exports are forecast to reach 9.2 billion pounds in 2011 and were revised up from August based on year to date exports of whole milk and cream, despite

some fall-off in butter exports. In 2012, the expected weakening in butter exports will likely lead to reduced overall fats basis exports to 8.6 billion pounds.

Skimsolids exports were bumped up from last month on the basis of nonfat dry milk (NDM), and dry whey exports and are projected to total 32.6 billion pounds for the

year. In 2012, exports were reduced on expected declines in whey exports, although NDM exports will likely continue. The skim-solids export total is forecast

at 32.3 billion pounds.

Fat basis domestic commercial use is expected to increase only slightly in 2011 to 188.2 billion pounds. Growth is expected to be stronger in 2012, with use forecast

at 192 billion pounds. Skim-solids domestic commercial use is expected to rise over 2 percent to 167.5 billion pounds after contracting in 2010. Growth in skimsolids

domestic use will likely slow in 2012 to a forecast 170.6 billion pound total for the year.

Product price projections were changed only slightly from last month. Cheese prices, for both blocks and barrels, slid under $2 a pound for the week ending 20 Livestock, Dairy, and Poultry Outlook/LDP-M-207/September 16, 2011

Economic Research Service, USDA September 3, 2011 for the first time since the week ending June 18, 2011, according

the weekly Dairy Products Prices report. Cheese stocks continued to build in July.

Consequently, the cheese price forecast was lowered in September to $1.825 to $1.845 a pound for 2011, but was unchanged at $1.670 to $1.770 a pound for 2012.

Butter prices are projected to be $1.955 to $1.995 this year and are forecast to decline to $1.615 to $1.745 a pound next year as butter stocks will likely build by

year’s end. The nonfat dry milk (NDM) price is expected to be $1.505 to $1.525 a pound in 2011 and $1.375 to $1.445 next year. NDM exports continue apace, supporting the high price this year. Lower expected exports in 2012 prompt the price weakening in 2012. Exports are also contributing to stronger prices for whey, which is forecast at 50.5 to 52.5 cents a pound this year. Lower exports will lead to softening prices next year, averaging 41.5 to 44.5 cents a pound.

Class III milk prices for 2011 were lowered from August to $18.25 to $18.45 per cwt as higher whey prices partially offset lower cheese prices. Next year, Class III

prices are forecast at $16.10 to $17.10 per cwt. Class IV prices were unchanged this month from last. The Class IV price is projected to average $19.05 to $19.35 per cwt. Next year, the Class IV price is forecast at $16.50 to $17.60. The all milk price is forecast at $20.15 to $20.35 per cwt, a slight drop from the August forecast.

Next year, the all milk price is expected to be $17.80 to $18.80 per cwt, unchanged from the August forecast.

Dairy Farmers of America, Inc. (DFA) is submitting comments to the House Committee on Agriculture in regard to its hearing on current dairy programs and their ability to support the domestic dairy sector.

John Wilson, DFA’s senior vice president spoke to DairyLine about it:

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Phoebe Bitler from the Beef Quality Assurance Commission is our guest during this segment of the Cattlemen’s Beef Board podcast.

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The butter market absorbed 18 cents in declines the last two weeks, but has remained steady the past few days, ending the week at $1.9025.

Fall is in the air in many parts of the country and retailers are thinking about what they are going to be doing for Thanksgiving promotions.

“But with price declines we have seen the past couple weeks and potentially more coming, they are probably holding off and waiting a few more weeks until they really have to finalize any of their plans and lock in prices for those type of features,” Bill Brooks, FC Stone dairy economist said.

Since May and until recently the butter price was over $2.00. Retailers may have passed on butter as being an item they wanted to feature, but now the declines below $2.00, puts butter in a position to be more prominent as we go into the Thanksgiving and Christmas holidays.

“Hopefully that will move more product and give us a higher base at the end of the year,” Brooks commented.

We also saw some declines in the cheese market, now moving sideways in the $1.70’s according to Brooks.

‘Blocks having spent so much time there at $1.79 allowed some stability to the market and allowed barrels to work through some excess supplies and rebound a little bit,” Brooks said.

Blocks were down a half-cent Friday to $1.7775, while the barrels held at $1.72.

“I think people are still a little bit nervous about where cheese could potentially go,” Brooks said. “Buyers are looking at maybe some potential downside risk, while sellers are anticipating seeing the price go higher, and as a result we are holding steady and tracking sideways.”

PEAQ is the discussion with Mike Hutjens, extension dairy specialist at the University of Illinois.

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