DairyBusiness Update for 7.12.13

WUD: Class 4b price, whey value increases possible  

Source: Western United Dairymen

Financial relief for California dairy families may be on the way as dairy producers and processors have agreed to a process that would ask the California Department of Food & Agriculture (CDFA) for an increase of 46¢/cwt.  in the Class 4b milk price, and expand the whey scale to $1 from its existing cap of 75¢. It is expected that the 4b increase would generate an additional $110 million in the producer pool. 

The developments came as the California Senate Ag Committee held a special hearing on AB 1038, authored by Assemblyman Dr. Richard Pan (D-Sacramento). The bill declares the Legislature’s intent to encourage the CDFA to hold two hearings regarding milk pricing: 

• A hearing to amend the recent emergency price relief decision, issued by the Secretary of Food and Agriculture on June 24, to allow for additional emergency price relief. 

• A hearing to address changes to the whey scale factor currently used to determine the amount paid into the milk pool in California by California cheesemakers. 

Additionally, the bill would charge the California Dairy Future Task Force, whose members are dairy producers and processors, with providing economic research materials and proposed structural changes to the California dairy industry’s milk pooling and milk pricing programs. The bill would require the administration and activities of the California Dairy Future Task Force, which has been previously established by the secretary, be funded by the assessments collected by the secretary. 

The developments come after lengthy discussions between industry stakeholders. 

“We are extremely pleased with the hard work that all have put in to help our family dairies,” said Western United Dairymen government relations director Gary Conover. “Although we have already lost hundreds of dairy farms in California, there is a light at the end of the tunnel for those that are still fighting to stay in business.” 

California’s dairy industry has suffered more than $2 billion in losses in the past five years, forcing nearly 400 dairy farms in California out of business, according to WUD. The remaining 1,500 dairies are fighting for survival. 


House Farm Bill: Where does it leave us?

July 11 approval of a House version of the 2013 Farm Bill leaves a lot of questions, especially since it differs so greatly from a Senate version passed previously. Bob Gray, editor of the Northeast Dairy Famers Cooperatives NFDC Newsletter, offers the following scenarios on House/Senate negotiations:

• The House and Senate Agriculture Committees could start negotiations right away on the Commodity and other titles passed by the House. But right now the Senate leadership says this is a “non starter” and that negotiations won’t officially begin until the House has passed a Nutrition title.

• That could take some time, since the House Ag Committee has to go back to square one and re-do a new Nutrition bill.

• This will be very tough to do, since House Republicans will likely insist on deeper cuts in the food stamp program, which will bring even stronger opposition from the Democrats on the House side.

• Further cuts in the Nutrition title would clearly result in another partisan vote on the House floor, either later this month or in September.

• Time is not on their side. Congress begins a five-week recess starting in just three weeks and does not return until the middle of September.

• Current Farm Programs have been extended to Sept. 30  as a result of a last-minute deal made on New Year’s eve last year.

• If the  clock runs out on Sept. 30, then we revert back to “permanent farm bill law” which goes all the way back to the 1949 and 1938 Acts when farm programs were first put in place.

• If we reverted to the 1949 Act, the federal price support program would increase to $38+/cwt. You all remember the so‐called “milk cliff” that the press played up last fall.

• So it behooves the House and Senate to complete final action on a Farm Bill before Sept. 30. If not they will have to pass another short‐term extension.

• The House and Senate Agriculture Committees will likely start to informally negotiate the Farm Program provisions while they wait to see what the House is going to do on the Nutrition programs.

• If the House cannot come  to grips with a Nutrition title, then the other option is to negotiate directly with the Senate on its version of the Nutrition programs.


Looking ahead to next week 

USDA announces its August federal order Class I base milk price, along with release of the monthly Livestock, Dairy, and Poultry Outlook report, both on Wenesday, July 17. The preliminary June Milk Production report is due on Friday, July 19.


MARKETS: The week in review; Class III futures lower

Cash cheese was mixed for the week of July 8-12, as a good amount of product found its way to Chicago. The blocks closed Friday at $1.6750/lb., unchanged on the day with no activity. The block price is up 1¢ on the week; but 0.05¢ below a year ago. The barrels lost another 2¢ on Friday on a trade, closing at $1.65/lb., down 2¢ on the week and 3¢ below a year ago. Twenty-three cars of block found new homes on the week; 20 of barrel. 

Butter gave back over half of the previous week’s gain, closing Friday at $1.46/lb., down 3.5¢ on the day, 6.5¢ on the week and 9¢ below a year ago; 1 car traded hands Friday, with a bid going unfilled. Ten cars were sold on the week. 

Cash Grade A nonfat dry milk inched up another 0.05¢ on Friday, closing the week at $1.75/lb., up 1¢ on the week. Extra Grade was unchanged on the day, at $1.7250, up 1.5¢ on the week.

Friday’s market closing prices:
Butter: down 3.5¢, to $1.46/lb.
Cheddar blocks: unchanged, at $1.6750/lb.
Cheddar barrels: down 2.0¢, to $1.65/lb.
Grade A nonfat dry milk: up 0.5¢, to $1.75/lb.
Extra Grade nonfat dry milk: unchanged, at $1.7250/lb.

Class III milk: mostly -1¢ to -15¢ through March 2014. Based on current CME closing prices, the 2013 average is $17.83/cwt.; and the 2014 average is $17.19/cwt.


Corn, soybean, meal futures lower

A summary of Friday’s futures prices at the Chicago Mercantile Exchange:

Corn: -13¢ to -18¢/bushel per bushel, December 2013 through December 2014, settling in a range of $5.09 to $5.35/bushel. 

Soybeans: down sharply. November 2013 through November 2014 prices settled in a range of $12.21-$12.61/bushel.

Soybean meal: -$12.40 to -$14.70/ton, October 2013 through December 2014, settling in a range of $359-$376/ton.


Monday on DairyLine:

• USDEC’s Alan Levitt reports on another record month for U.S. dairy exports.

• Cornell PRO-DAIRY program continues to thrive: coordinator Debbie Grusenmeyer explains.


This week in DairyBusiness Update:

1) House Farm Bill: House passes split Farm Bill with Goodlatte-Scott, but not nutrition programs. What's next?

2) WASDE: Latest USDA outlook raises 2013 milk output estimate, lowers projected prices.

3) Trends: Catching up on two weeks of dairy trade, price and cost reports.

4) Industry: USDA accepting bids for Greek yogurt school pilot program. 

5) Washington: Livestock truckers, antibiotic limits, EPA restraint & USDEC funding.