DairyBusiness Update for 10.3.13
By Lee Mielke
The dust is settling over this week’s government “shutdown” due to political differences in Washington but while the majority of government workers are unaffected, many were furloughed. The impact on the dairy industry boils down to this: the National Agricultural Statistics Service (NASS), Economic Research Service (ERS) and Agricultural Marketing Service (AMS) have been furloughed. Data reported by these agencies will be on hold. USDA’s Dairy Market News is also shuttered and, with it, its daily and weekly reports.
The monthly Dairy Products report – to be released today – was not and, unless the Administration and Congress come to an agreement, several others will be suspended, including the October Milk Production report, which would have resumed milk cow numbers and output per cow data, stopped because of the sequester. Other casualties are the Cold Storage, Livestock, Dairy & Poultry, World Ag/Supply/Demand Estimates, and Ag Prices reports.
USDA will not publish the weekly National Dairy Products Sales Report (NDPSR), AMS-surveyed dairy product prices used to calculate federal order Class milk prices, as well as settlements for Chicago Mercantile Exchange (CME) futures.
High Ground Dairy’s Eric Meyer reports sources at USDA informed him that it would be invoking a special rule taken from the Code of Federal Regulations titled “Equivalent Price” in calculating this week’s class prices.
Remaining on the job are USDA dairy graders and inspectors, as well as federal milk marketing administrators, as their funding is provided by the industry.
Next week is going to be very lean regarding government reports for the dairy markets to feed on, with or without all government workers at their posts. The only scheduled USDA report is the World Agricultural Supply and Demand Estimates report. The California Department of Food and Agriculture would have issued its November Class I milk prices on Thursday, Oct. 10, but that is being delayed until Oct. 22 as a result of the recent milk price hearing in Sacramento.
Program on Dairy Markets and Policy
Andy Novakovic joins Mark Stephenson for a Skype video to discuss the impact of the government shutdown on the dairy industry. You can stream the 13-minute Podcast here and get the rest of Bob's Cropp’s outlook in the months ahead.
Penn State University’s measure of income over feed costs (IOFC) rose 8.3% in September, according to the latest Dairy Outlook report from economist Jim Dunn. At $8.95/cow/day, the September IOFC is up 69¢/day from August, and the highest since November 2012.
IOFC reflects daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day, and most of the improvement in September came from lower feed prices. The September Pennsylvania all-milk price was up 30¢/cwt. from August’s revised estimate, to $21.30/cwt. The cost to feed the same cow dropped 49¢, to $4.9/day. Pennsylvania corn prices were down sharply from $6.10 to $5.00 per bushel, and hay prices fell 5.8%. The soybean meal price rose, reflecting the dry conditions in the western Corn Belt in August and September.
Measured another way, feed costs per hundredweight of milk produced averaged $7.54/cwt., down 76¢ from August’s revised estimate. With the higher milk price, the milk margin over feed costs was $13.76/cwt., up $1.06/cwt. from August’s revised estimate. It's also the highest since November 2012.
Dunn’s forecast of the average 2013 Pennsylvania all-milk price is $21.22/cwt., $1.19/cwt. (5.9%) more than the 2012 average price. His all-milk price forecast through the first half of 2014 is $20.34/cwt., which would be down 88¢ (5.4%) from 2013’s estimated price.
To read Dunn’s latest 2013 Dairy Outlook report, click here.
Former USTR: Exports offer ‘sea change’ for dairy
Ambassador Ron Kirk, former U.S. Trade Representative, believes agriculture -- and dairy in particular -- can help America regain its fiscal prosperity. Kirk will deliver the Chairman’s Lecture at the International Dairy Foods Association’s Dairy Forum 2014, which will be held Jan. 26-29 at the JW Marriott Desert Springs Resort & Spa in Palm Desert, Calif.
Kirk said the growth of the export market for dairy products has been a “sea change” for the industry.
“Our domestic industry, for the most part, has historically dominated the North American market, and exports have been a new trend for us. That can be a real growth opportunity for the dairy industry,” Kirk said.
Reflecting on his time as the lead negotiator for long-pending trade deals with South Korea, Colombia and Panama and on the frontlines of enforcing trade rules with China and other foreign competitors, Kirk said enforcing existing trade rules is important to U.S. companies.
Kirk’s presentation on Sunday, Jan. 26, will kick off the four-day Dairy Forum. To learn more about his topic, watch a video of his interview with IDFA’s Connie Tipton. To see the agenda and to register, visit the Dairy Forum 2014 page.
MARKETS: Barrels up
Cash block cheese was steady this morning at the Chicago Mercantile Exchange and the barrels reversed yesterday’s downturn, according to DairyBusiness Update associate Editor Lee Mielke. The block price remains at $1.7650/lb. Four cars traded hands. The barrels jumped 1.25¢, following yesterday’s 0.75¢ slip, and are now at $1.72/lb. Two cars were sold on the day.
Double A butter held at $1.61/lb. Two cars traded hands this morning while 3 bids went unfilled.
Grade A nonfat dry milk moved 0.25¢ higher, following yesterday’s 0.50¢ gain, and hit $1.8375/lb., on an unfilled bid. Extra Grade remained at $1.78/lb. with no activity.
Today’s market closing prices:
Butter: unchanged, at $1.61/lb.
Cheddar blocks: unchanged, at $1.7650/lb.
Cheddar barrels: up 1.25¢, to $1.72/lb.
Grade A nonfat dry milk: up 0.25¢, to $1.8375/lb.
Extra Grade nonfat dry milk: unchanged, at $1.78/lb.
Have you invested in some new dairy production/management technology (equipment, product or system) in the past year? Are you planning to invest in some new technology in the next 6-12 months, but want to read more about it before making a decision? Is there some new technology you purchased recently that you simply can't live without? To take the short DairyBusiness technology/innovation survey (and be eligible for a $5 gift card), click here.