DairyBusiness Update: January 29, 2014

House Passes Farm Bill/“Devil is in the Details”
   The House of Representatives passed the new Farm Bill today, 251 to 166. The Senate is expected to approve the measure by week’s end and send it to the President for his signature.
   The bill is bittersweet for the National Milk Producers Federation (NMPF), which fought long and hard for a controversial supply management provision to control milk production, only to see it dropped when House Speaker John Boehner, threatened to keep such a bill from even coming to the Floor for a vote.
   NMPF has begun to explain the resulting Dairy Title and, yesterday, released an analysis of the proposal, pointing out that the main feature is the Dairy Producer Margin Protection Program.
   NMPF says the Margin Protection Program is a “new and unique safety net program that will provide dairy producers with indemnity payments when actual dairy margins are below the margin coverage levels the producer chooses on an annual basis. Its focus is to protect farm equity by guarding against destructively low margins, not to guarantee a profit to individual producers. The Farm Bill requires the Margin Protection Program to be established no later than September 1, 2014.”
   The program supports producer margins, not prices, according to NMPF, and is designed to address both catastrophic conditions as well as prolonged periods of low margins. Under this program, the “margin” will be calculated monthly by USDA and is simply defined as the all-milk price minus the average feed cost. Average feed cost is determined using a feed ration that has been developed to more realistically reflect those costs associated with feeding the entire dairy farm enterprise consisting of milking cows, heifers, and other related cost elements. To read the complete analysis log on to http://www.nmpf.org/files/Farm-Bill-Dairy-Title-Summary-012814.pdf.

Dairy Farmers Listed as “Losers” in the Farm Bill
   The January 28 Wall Street Journal (WSJ) listed what it considers are the winners and losers in the new Farm Bill. Dairy farmers got the dubious “loser” honor. The WSJ stated: “Dairy farmers lost a clash with milk processors over a market stabilization program that would have protected producers from falling milk prices. Nonetheless, trade groups like the National Milk Producers Federation say the bill establishes a reasonable risk management tool that gives farmers the opportunity to insure against economic catastrophe.” Read the complete lists at:

Will Dairy Title Impact Futures Trading?
   Analysis and speculation on the impact of the new Farm Bill’s Dairy Title is just beginning, if indeed Congress passes the legislation and the President signs it. One bit of perspective was raised in yesterday’s Daily Dairy Report, which pointed out that “On-farm profit margins can differ drastically from national average margins. Nonetheless, the prospect of subsidized margin protection could reduce the incentive for producers to hedge using futures and options and might limit dairy market liquidity.” The DDR adds that “The impact of insurance payments during periods of low margins could also send mixed signals to producers and encourage greater milk production than the market requires.”

NDPSR Dairy Product Prices all Higher
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released today shows the U.S. average block Cheddar cheese price at $2.1382/lb., up 6.9¢ from the previous week, while the barrels averaged $2.1496, up 10.7¢. Butter jumped 4.5¢, to $1.6689/lb. Nonfat dry milk averaged $2.0434/lb., up 0.8¢, and dry whey averaged 60.87¢/lb., up 1.3¢. These prices are used in determining Federal order Class milk prices.

Joint Effort Improves Genomic Selection for the Jersey Breed
A cooperative effort by the American Jersey Cattle Association (AJCA), the Cooperative Dairy DNA Repository (CDDR) represented by National Association of Animal Breeders (NAAB), and Canadian Dairy Network (CDN) will improve genomic evaluations for Jersey breeders across the United States and Canada. A press release today reports that they have increased the North American Jersey database of genotypes on proven bulls by more than 1,100 through an exchange of Jersey genotypes with Scandinavian-based Viking Genetics. The reliability of genomic predictions increased 1.8%.
   The formation of the CDDR by six U.S. and one Canadian A.I. center almost 20 years ago provided the sire DNA which enabled research by the Agriculture Research Service of the United States Department of Agriculture (ARS USDA), the University of Guelph, and CDN that resulted in genomic predictions now being utilized by dairy producers in both countries.
   The new agreement establishes an ongoing exchange of genotypes for progeny-proven bulls in North America and Scandinavia. This groundbreaking agreement will further enhance selection programs aimed at maximizing genetic potential while maintaining genetic diversity.

California Cheese Output Up 3%
   California’s 2013 cheese output hit 2.314 billion pounds, according to the California Department of Food and Agriculture’s latest Dairy Information Bulletin released yesterday, up from 2.247 billion pounds in 2012 or about 3 percent. Cheddar, Monterey, and Mozzarella accounted for about 85 percent of the Golden State’s total cheese output, with mozzarella representing more than half of all the cheese produced in the state. Breakdowns of other dairy product production and total milk output are included in the report available at www.cdfa.ca.gov/dairy.

California Powder Inches Up Slowly
The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $2.0085/lb. for the week ending January 24, on sales of 7.69 million lbs. The price was up slightly from $2.0044/lb. the week before, on sales of 10.49 million lbs.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Cash block cheese tacked on another 2¢ this morning on an unfilled bid and hit a record $2.34/lb. Barrel was also up 2¢, hitting a record $2.30/lb. Three carloads traded hands, the first sale of barrel since Jan. 14. All of the sales were at $2.30/lb., as was an unfilled bid.
   Butter gave back 0.5¢, slipping to $1.8950/lb. Four cars were sold. The first sale was at $1.89/lb. and the price inched back to $1.90/lb. but an uncovered offer at $1.8950/lb. ended things. A bid at $1.86/lb. went unanswered. .
   Cash Grade A nonfat dry milk dropped 2.25¢, after gaining 2.5¢ yesterday. Eight cars found new homes this morning. Four sales were at $2.0750/lb., 2 at $2.05/lb., and 2 at the closing price of $2.0525/lb. Three bids at $2.05/lb. went unfilled and an offer at $2.06/lb. was left on the board.

Today’s market closing prices:
Butter: Down 0.5¢, to $1.8950/lb.
Cheddar blocks: Up 2¢, to $2.34/lb.
Cheddar barrels: Up 2¢, to $2.30/lb.
Grade A nonfat dry milk: Down 2.25¢, to $2.0525/lb.
Class III milk: Jan.$21.06, -1¢; Feb. $22.91, -1¢; Mar. $20.96, +7¢; Apr. $19.80, +2¢, May $19.15, -2¢, & Jun. $18.88, unchanged. Based on today’s CME settlements, the first half 2014 average now stands at $20.46, +1¢ from Tuesday, and the 2nd half average is $18.21, +3¢ from Tuesday.
Looking ahead:
   The Agriculture Department will issue its monthly Ag Prices report Friday afternoon. The report will include the latest Milk Feed Price ratio. Looking to next week, the California Department of Food and Agriculture will announces the state’s January 2014 Class 4a and 4b milk prices on Monday, February 3. USDA issues its monthly Dairy Products report on Tuesday, and the January Federal order Class II, III, & IV milk prices are announced on Wednesday.

Thursday on DairyLine:
   National Milk’s Chris Galen breaks down the dairy provisions of the Farm Bill
   The “Silage Man” Keith Bolson has his monthly “Silage Solutions” report.