DairyBusiness Update: January 23, 2014

December Milk Production Up Only Slightly from 2012
   December milk production in the top 23 producing states totaled 15.7 billion lbs., according to preliminary data in USDA’s latest Milk Production report issued this afternoon, up slightly from December 2012. The 50-state output, at 16.8 billion lbs., was down fractionally from a year ago. Revisions subtracted 32 million lbs. from the original November estimate, now put at 14.9 billion lbs., up just 0.1% from November 2012. Total 2013 milk output in the U.S. hit 201.19 billion lbs., up from 200.32 billion in 2012.
   December 2013 cow numbers totaled 8.5 million head, up 1,000 head from November and 6,000 head above a year ago. Output per cow averaged 1,846 lbs., down 1 lb.
   California output in December was up 1.6% from a year ago, thanks to a 30lb. gain per cow and 1,000 more cows being milked. Wisconsin was down 1.9%, on a 35lb. loss per cow as the cold and weather took its toll. Cow numbers were unchanged.
  Idaho -1.1%, Michigan +0.8%, Minnesota -2.5%, New Mexico -1.8%, New York +1.6%,Pennsylvania -0.7%, Texas -0.2%, Washington +1%

Feb. Federal Order Class I Price a Record $22.02
   The Agriculture Department announced the February 2014 Federal order Class I base milk price this afternoon at a record high $22.02 per hundredweight, up 54¢ from January, $3.81 above February 2013, the highest since September 2011’s $21.78, and equates to about $1.89 per gallon.   
   The two-week AMS-surveyed butter price used in calculating the Class I value averaged $1.5939/lb., down 4.7¢ from January. Nonfat dry milk averaged $2.0270/lb., up 8.5¢; cheese averaged $2.0308/lb.; up 17.3¢; and dry whey averaged 59.39¢/lb., up 2.7¢.

December Livestock Slaughter
   USDA’s Livestock Slaughter report, also issued this afternoon, estimates 256,700 culled dairy cows were slaughtered under federal inspection in December 2013, up 7,600 from November 2013, but 2,100 less than December 2012. 
   The 2013 total was estimated at 3.125 million head, 23,400 more than 2012.

Dairy Title Still being Negotiated
   National Milk is exploring an alternative approach to the dairy safety net, according to NMPF’s Chris Galen in today’s DairyLine. Galen said the plan would hopefully include a margin insurance program with “the proper economic incentives for participants that reflect and help address supply and demand signals that also have some cost control mechanisms.”
   NMPF is currently engaging with Ag Committee staff on an alternative dairy safety net which, Galen said, will “include certain inducements to achieve a supply demand balance using the framework of our margin insurance program.” He said they’re hopeful those adjustments would be to the program’s margin insurance payout structure or the premiums that participants would have to pay to name a few.
   “We still want and need to have any alternative approach to offer an effective risk management tool for dairy farmers,” Galen charged, and pledged that NMPF will not support any program that “doesn’t effectively address the needs of our members throughout the U.S.” The process is ongoing, according to Galen, although delayed some due to the winter storm this week.

Get Processors Out of the Mix
A posting on the International Dairy Foods Association website reports that, “As negotiations continue on the dairy title of the Farm Bill, it now appears that the Dairy Market Stabilization Program will not be included in the final version. Conferees are said to be looking at modifying the premiums and indemnities of the revenue insurance program that is included in the dairy titles of both the House and Senate versions of the bill.”
   Early last week Agriculture Secretary Tom Vilsack indicated that one way to solve the stalemate on the dairy title would be “to get the processors out of that mix.” He was referring to a provision of the Dairy Market Stabilization Program that would require processors to withhold payments from farmers who deliver milk in excess of their "base" level when milk prices are low relative to feed costs. Under the DMSP, the withheld funds would be submitted to the U.S. Department of Agriculture to make purchases of dairy products for donation.
   Responding to Vilsack's comments, the conferees are now considering ways to allow USDA to buy what they consider "excess" dairy products with funds that USDA has available under existing authorities. An existing provision, known as Section 32, and used primarily to purchase specialty crops and meat products, could be changed or expanded to include dairy products.”

“Slouching Milk Production” Ends Jobs
The Times-News MagicValley.com reports that Twin Falls-based Glanbia Foods is cutting about 5 percent of its 1,100 employees in Idaho and New Mexico because of a “slouching Magic Valley dairy supply,” said Jeff Williams, Glanbia president and CEO. All 50 layoffs are in Idaho.
   “The cuts have nothing to do with demand for Glanbia cheese,” Williams said. “We are responding to slow supply in the milk market.”
   Williams said the cut, of about 50 full-time and part-time south-central Idaho workers, probably will not be long term.
   Idaho milk production in November was down 1.8% from November 2012, according to USDA’s preliminary data. Cow numbers were down 8,000 head and output per cow was down 10 pounds. December output was down 1.1%, despite a 30lb. gain in output per cow. Cow numbers were down 15,000 head, according to preliminary data.

NDPSR Product Prices Up   
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report, released today shows the U.S. average block cheese price at $2.0722/lb., up 6.8¢ from the previous week. Barrel averaged $2.0424/lb., up 9.3¢; butter averaged $1.6244/lb., up 5.5¢; nonfat dry milk averaged $2.0362/lb, up 2¢; and dry whey averaged 59.50¢/lb., up 0.2¢. These prices are used in determining Federal order Class milk prices.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Cash cheese set a new record high today. Cheese buyers, anticipating this afternoon’s Milk Production and Livestock Slaughter reports, bid the blocks up another 2.5¢, to $2.2950/lb., the 5th consecutive session of gain. The barrels were up 1.5¢, to $2.2575/lb. One unfilled bid of each was all it took. Again the sellers sat on their hands.  
   FC Stone risk management specialist Brendan Curran wrote in this morning’s eDairy Insider Opening Bell that yesterday's Cold Storage report was “slightly bearish for cheese, but the market could have anticipated the December rise in stocks.” He adds that the report was “bullish for butter and international demand is supporting prices.”
   Cash butter gave up some of yesterday’s 7¢ gain, dropping 4¢ today, to $1.90/lb. Four cars exchanged hands following yesterday’s 18 loads, 2 of them at $1.93/lb. and 2 at $1.90/lb. Two offers at $1.95/lb. were uncovered.  
   Cash Grade A nonfat dry milk lost 1.5¢, following yesterday’s 1.75¢ decline. Five cars were sold this morning, the 1st at yesterday’s close of $2.0850/lb. but the price kept slipping from there, ending at $2.07/lb. One bid at $2.07 went unfilled and an offer at $2.08/lb. was left at the close. Extra Grade held at $2.09/lb, with no activity.

Today’s market closing prices:
Butter: Down 4¢, to $1.90/lb.
Cheddar blocks: Up 2.5¢, to $2.2950/lb.
Cheddar barrels: Up 1.5¢, to $2.2575/lb.
Grade A nonfat dry milk: Down 1.5¢, to $2.07/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.
Class III milk: Jan.$20.92, -1¢; Feb. $22.35, +28¢; Mar. $20.45, -15¢; Apr. $19.50, -23¢, May $19.21, -13¢, & Jun. $18.85, -16¢. Based on today’s CME settlements, the first half 2014 average now stands at $20.21, -7¢ from Wednesday, and the 2nd half average is $18.15, -3¢ from Wednesday.
Looking ahead:
   Today’s busy schedule leaves the Agriculture Department with a break till Monday as far as dairy reports are concerned. The Economic Research Service issues its U.S. Dairy Situation at a Glance Monday afternoon. The monthly Ag Prices report is issued Friday, Jan. 31, and will include the latest Milk Feed Price ratio.

Friday on DairyLine:
   The U.S. Dairy Export Council’s Alan Levitt reacts to this week’s rise on the GDT and  
   talks about the dairy export market in general
   Dr. Mike Hutjens discusses cold weather and its impact on young calves.