DairyBusiness Update for May 3, 2013
The California Assembly Ag Committee approved an amended AB 31 on a 6-0 vote, May 1. However, the form of the bill that left room 126 of the Capitol contained “intent” rather than policy. And, whether the vote is judged as a decision akin to Solomon, or just the proverbial “kicking the can down the road” could play out over the next three weeks.
Removed was the original language, introduced last December by Assemblyman Dr. Richard Pan (D-Sacramento), that would have set the California Class 4b “dry whey factor” at no less than 80% of the federal order Class III "dry whey factor." Also removed was a whey factor exemption on the first 3 million lbs. of milk purchased by cheese plants per month, designed to protect small cheese processors – unable to capture revenues from whey – from higher milk procurement/processing costs.
In its place, committee chair Susan Eggman (D-Stockton) inserted language intended to get dairy producers, processors, the state's Dairy Future’s Task Force and the California Department of Food & Agriculture (CDFA) to come up with new policy to address the Class 4b dry whey factor and processor exemption. Read more …
‘Total solids’ trade balance steady
March dairy product exports were equivalent to 13.4% of U.S. milk solids production for the month, matching the pace established over the last three years. Since May 2010, exports have represented 13.4% of U.S. milk solids production. Meanwhile, imports as a percent of milk solids production were 3.2% in March 2013.
Source: U.S. Dairy Export Council, National Milk Producers Federation
CIH: Late April dairy margins weaken
Dairy margins dipped slightly since the middle of April, as a sharp rise in corn and steady-to-lower milk prices combined to pressure profitability, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. In the bigger picture, forward margins still remain highly profitable, projected at or above the 90th percentile of the previous 10 years through the first quarter of 2014.
Milk futures prices have been largely steady over the past couple weeks, with the exception of deferred contracts that have displayed some weakness. Stronger dairy product prices in weekly sales reports appear to be supporting nearby futures, along with increased cow culling due to high beef prices, although the outlook is less certain further in the future. The stronger indicated margins seem to be slowing down the pace of cow slaughter recently, which, along with cheaper feed costs projected for new crop, may combine to increase milk production later in the year. Visit www.cihmarginwatch.com.
March dairy products report
With March 2013 U.S. milk production nearly unchanged compared to a year ago, March dairy product production also changed little compared to a year ago, according to USDA’s monthly report, issued May 2. March 2013 production, compared to March 2012 and year-to-date (Y-T-D) estimates included:
• Total cheese: 954.3 million lbs., down 0.2%; Y-T-D 2.746 billion lbs., up 0.6%.
• Total Italian cheese: 415.8 million lbs., up 1.3%; Y-T-D 1.177 billion lbs., down 0.6%.
• Mozzarella: 326.4 million lbs., up 2.5%; Y-T-D 916.8 million lbs., down 0.5%.
• American-type cheese: 383.5 million lbs., up 1.4%; Y-T-D 1.107 billion lbs., up 1.5%.
• Cheddar: 281.8 million lbs., up 2.6%; Y-T-D 813.9 million lbs., up 1.8%.
• Butter: 183.6 million lbs., up 4.2%; Y-T-D 545.5 million lbs., up 3.2%.
• Dry milk powders – Nonfat dry milk, human, 146.1 million lbs., down 22.8%, Y-T-D 426.6 million lbs., down 16.8%; and skim milk powders, 47.5 million lbs., up 276.2%, Y-T-D 138.7 million lbs., up 92.1%
• Dry whey (total): 84.1 million lbs., down 4.5%; Y-T-D 251.8 million lbs., down 7.9%.
• Yogurt: 421.3 million lbs., up 4.4%; Y-T-D 1.175 billion lbs., up 2%.
MARKETS: Cheese headed back up; Class III futures mixed but mostly lower
Today's market closing prices:
Butter: down 3.5¢, to $1.65/lb.
Cheddar blocks: up 0.5¢, to $1.91/lb.
Cheddar barrels: up 3.0¢, to $1.73/lb.
Grade A nonfat dry milk: down 1.25¢, to $1.7475/lb.
Extra Grade nonfat dry milk: unchanged at $1.70/lb.
Class III milk: +4¢ to -40¢ through June 2014. Based on current CME closing prices, the 2013 average is $18.39/cwt.; and the 2014 average is $16.91/cwt.
Corn mostly lower; soybeans, meal futures higher
Corn: +2¢ to -6¢ per bushel through September 2014. The remaining 2013 average is $6.23/bu.
Soybeans: +14¢ to +19¢ per bushel through September 2014. The remaining 2013 average is $13.33/bu.
Soybean meal: -$0.80 to +$5.50/ton through September 2014. The remaining 2013 average is $377.38/ton.
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