DairyBusiness Update: March 27, 2014

January 2014 Commercial Disappearance Below Milk Marketings
Commercial disappearance of milk in all dairy products fell below U.S. dairy farmer milk marketings by 296 million lbs. in January 2014, according to USDA’s latest Dairy Data report.
Commercial disappearance of milk in all dairy products for January was estimated at 16.9 billion lbs., up 3.8% from January 2013, while January farmer milk marketings totaled 17.2 billion lbs., up 1% from 2013.
American cheese commercial disappearance was estimated at 371.2 million lbs., up 10% from January 2013. Other-than-American cheese, at 596.1 million lbs., was up 3.1%. Butter commercial disappearance totaled 157.8 million lbs., up 15.8%, and nonfat dry milk disappearance, at 124.3 million lbs., was down 2.6%.

Cheese Production is Maxed Out?
   Some large cheese manufacturers continue to operate at full production levels, with sales commitments running months ahead of production, according to USDA’s Dairy Market News (DMN). An official of a fully scheduled multi-plant cheese manufacturer noted that more milk is available, some milk due to production increases and some due to lower Class I demand, but is not taken because cheese production is already maxed out. He commented "we can't make any more cheese". 
   There are also some, but not many plant officials who say sales and production are down due to high prices. Overall, the majority of manufacturers continue to have strong cheese sales and a number not already at full production have taken extra milk this week to increase output. Some manufacturers have also moved barrels getting some age into the spot market to meet current cheese demand. Fat and protein tests are mixed, up in some instances but down in others.
  Many cheese sellers are not available to contact through normal methods this week, says DMN, because they are in Las Vegas for an international pizza exposition, working to sell even more cheese.

What’s Going on Down Under
   Australian late season milk production is above year ago levels, according to DMN. Good milk prices are prompting producers to extend late season production with supplemental feeding. Meteorological forecasts are calling for average rainfall through the end of the production season. The Australian hay situation, as reported by
Dairy Australia shows hay supplies very short in Northern Australia, due to the hot, dry conditions earlier in the year. Northern hay buyers are focusing on Victoria hay supplies to augment their needs.
   New Zealand milk production in January was reported by DCANZ at 2.47 million tons, up 7.4% from January 2013 and 12% higher than two years ago. Cyclone Lusi underperformed, and provided less rain to the dry North Island than was expected. The current dry conditions on the island are prompting producers to dry off lower producing cows, to better conserve feed supplies. The South Island has received timely rains keeping pastures in good condition. Current milk production for New Zealand is good with volumes at or above expected volumes.

EU Milk Production Up 5.1%
   Milk production, as reported by Eurostat, shows EU-28 production up 5.1% from January 2013, reports DMN. Changes in January production from a year ago for selected countries are:  France, +3.5%; Germany, +4.0%; Ireland, +2.2%; Netherlands, +5.1%; and the UK, +11.4%. 
   Spring has come early to Western Europe with some cows in Holland already on pastures. The new quota year begins April 1 and producers are entering the new production year with strong production, opposite the situation last spring. Weather, milk prices, and feed costs are very good from the producer perspective. 
   Increases in milk volumes are maximizing capacities at some plants. Additional drying facilities are anticipated to come on line in the near term. Dairy product prices are under downward pressure, due to the significant increase in milk supplies, a stronger Euro, weaker demand from China for milk powders, and uncertainty regarding future trade with Russia.  
   January EU exports were above year ago levels for butter, skim and whole milk powder, lower for cheese and nearly equal with levels seen the previous two years for whey.

China Buying Spree Softens   
  China continued its fervent buying spree in February but was not able to match the lofty goals set in last month, reports High Ground Dairy’s Eric Meyer. Every major product category showed month-over-month declines in excess of 20%, he said, but due to January’s stratospheric imports, whole milk powder and cheese exports were still the second highest monthly volumes on record.
Even though China’s imports remain sharply higher than the previous year, there appears to be a somewhat bearish story building in the international powder markets, according to Meyer.   
  Milk powder prices are showing signs of weakness with the EU leading the way down for the past 5-8 weeks, Meyer reports. GDT WMP prices for May delivery showed a marked decline and suggests that China has backed off from the market as they have built quite a position over the past four reported months.
  Excess WMP from both the EU and Oceania will need to find a home, Meyer says, which could keep the downward correction in place for another month or two as China and others step aside.
   Meyer still believes that the milk powder needs of China and other major importing nations will keep major export regions pushing incremental milk into that channel, leaving the US to fill the void created on cheese and butter. While we will continue to see short-term corrections from the extremes in the US ($2.40 cheese, $2.00 butter), unless we see milk production pick up in a notable way, we could be in store for some pretty high cheese and butter prices for the foreseeable future with inventories currently well behind last year. For more details, write Eric at: ericm@highgroundtrading.com.

Farm Bill Fails Dairy Producers
   “Another Farm Bill has passed without any consideration of a new pricing formula for our American dairy farmers,” says Pro-Ag’s Arden Tewksbury in Wednesday’s DairyLine. “Oh, I know while the prices paid to dairymen are escalating, and some people will say, ‘See, we don’t need a new pricing formula.’ However, I remember that so many times we have seen milk prices escalate, but a sudden drop of prices always seems to follow,” Tewksbury said. “Yes, the people in charge always seem to find a way to have the prices fall,” he continued.  “Maybe this time the prices to dairy farmers will stay reasonable a longer time than usual.”
   With the Class I price in Boston reaching $26.90 per cwt. (hundredweight) there is a bright side to look at, he admitted. “However, the milk supply management program contained in the Farm Bill is not sufficient to prevent a possible escalation of milk production,” he argues, “In addition, there are even some people claiming there is not a milk supply program in the Farm Bill.”
   “There is an old saying that if it looks like a duck, quacks like a duck, and walks like a duck, then it must be a duck,” he said. “Whenever a dairy farmer is assigned a milk production base, and when a dairy farmer is penalized for producing over his allowable base, (even if it is the wrong program) then indeed it is a milk supply management program.”
   Senator Collins from Maine and Senator Gillibrand from New York are still attempting to have milk hearings in an attempt to give dairy farmers an opportunity to present testimony to price milk in a different method, according to Tewksbury. “We have always said the time to develop a new pricing formula is when the prices are at a reasonable level (like now), not after they crash,” he said.
   Tewksbury believes it’s time to develop a pricing formula that allows dairy farmers a chance to cover their cost of production, plus a reasonable profit. However, along with a new pricing formula, there must be a milk supply management program that would be implemented only when some dairy farmers over-produced more than the real market can bear. If exports of dairy products hold up, then that would be great, he said.
   “Some people say that our proposed program tells dairy farmers how much milk they can produce. This is positively not true,” he said. “A program is only needed when there is overproduction, and only then. This program would be paid for by dairy farmers, not the American taxpayer. The milk supply management program contained in the Farm Bill is not the answer, and certainly the milk supply management program that was in the original Dairy Security Act certainly was not the way to go,” Tewksbury argued.
   Tewksbury’s organization strongly feels the supply management program contained in the Federal Milk Marketing Improvement Act is the way to go. “However, it’s time reasonable people sit down and develop a program that is feasible and acceptable,” he said. “It might not be our plan, but it’s got to be somebody’s!”
   Tewksbury invites lawmakers to have a milk hearing that uses a pricing formula that gives credence to the dairy farmers’ cost; plus a supply management program that allows a dairy farmer to produce milk, that acknowledges that dairy farmers who over-produce milk beyond the needs of the market must pay the fiddler.
   “We and other people for years have proclaimed that these over-produced dairy products (if they exist) must be given to needy people (and they are out there) throughout the United States,” he concluded. Pro-Ag can be reached at 570-833-5776.

Dairy Producers & Processors Unite to Oppose Raw Milk Sales
   The nation’s dairy farmers and dairy companies today expressed their opposition to new legislation in Congress that would allow the interstate sales of raw milk, saying that any additional availability of the product will increase the number of sicknesses and deaths of people who consume it.
    The International Dairy Foods Association and the National Milk Producers Federation, in a joint press release, said that “the risks inherent in raw dairy products are not worth any imagined benefits to either consumers or producers of unpasteurized milk products. Raw milk skips the pasteurization safety process, and this is playing Russian roulette with the health of too many Americans – including many of our children.”
    The two associations urged lawmakers to reject the “Interstate Milk Freedom Act of 2014,” a bill introduced by Rep. Thomas Massie (R-KY), which would repeal a long-standing ban on the sales across state lines of unpasteurized milk. Federal law currently gives states the discretion to regulate raw milk within their borders, but the dairy organizations expressed concern that repealing the interstate ban would greatly increase the production and consumption of a known health hazard.
    “If this measure passes, those most vulnerable to dangerous pathogens, children, are the ones who will suffer the most. The benefits of consuming raw milk are illusory, but the painful costs of illness and death are very real,” said Jim Mulhern, President and CEO of the National Milk Productions Federation.
    “Consumption of raw milk is a demonstrated public health risk. The link between raw milk and foodborne illness has been well‐documented in the scientific literature, with evidence spanning nearly 100 years. Raw milk is a key vehicle in the transmission of human pathogens, including E. coli O157:H7, Campylobacter, Listeria monocytogenes, and Salmonella,” he stated.
    “Our dairy industry benefits from a very high degree of consumer confidence, confidence built in large part due to the excellent food safety record of milk and dairy products,” said Connie Tipton, President and CEO of the International Dairy Foods Association. “While choice is an important value, it should not pre‐empt consumers’ well‐being. To further ease the regulations surrounding the national sale of raw milk is an unnecessary risk to consumer safety.”

Food Production Message in the Movie
   Over the past few years there have been several documentaries critical of agriculture which may have prompted the producers of conventional food products to fight back with a film of their own. Academy Award®-winning filmmaker James Moll’s new feature length documentary, Farmland, will be released nationally May 1, 2014. The film will be distributed via D&E Entertainment in more than 60 major markets. Numerous national exhibitors will be carrying the film including: Regal Cinemas, Marcus Theatres, Carmike Cinemas, Landmark Theatres and many key independent theaters.
   “It’s not about the mechanics or science of producing food, but rather about the high risk, high reward opportunities and the way of life involved in food production, and how it is being passed down from generation to generation,” Chris Galen of the National Milk Producers Federation reported on Thursday’s DairyLine.
   The film will have its New York premiere at a private screening on April 17, during the 2014 Tribeca Film Festival. Additionally, Farmland has been selected to be in competition this year at Cleveland International Film Festival on March 28-29, 2014; Atlanta Film Festival on April 6, 2014; Nashville Film Festival on April 19, 2014; and Newport Beach Film Festival in April 2014.
   Farmland offers viewers an intimate and firsthand glimpse into the lives of six young farmers and ranchers across the U.S., chronicling their high-risk/high-reward jobs and their passion for a way of life that has been passed down from generation to generation, yet continues to evolve.
   “In Farmland, audiences will hear thoughts and opinions about agriculture, but not from me, and not from a narrator,” Moll says about his film. “They’re from the mouths of the farmers and ranchers themselves.”
   The documentary features an original score composed by Nathan Wang with the City of Prague Philharmonic Orchestra. The film also includes an original recording of “This Land is Your Land” performed in a first-ever collaboration with platinum rock band Everclear and Grammy® Award-nominated artist Liz Phair.
   Visit www.FarmlandFilm.com to locate a theatre near you where Farmland will be screening, as well as additional information about the film and to watch the trailer.
Farmland was produced by Moll’s Allentown Productions, with generous support from the U.S. Farmers & Ranchers Alliance®(USFRA®).

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Yesterday’s crack grew a little bigger this morning as cash cheese prices slid lower. The Cheddar blocks were down 1.5¢, following yesterday’s 1¢ drop, and slipped to $2.4075/lb. One carload sold at $2.4225/lb., but an uncovered offer at $2.4075/lb., took the price lower on the day. The barrels lost 1¢, after losing 3¢ yesterday, and 1.75¢ on Tuesday, and closed today at $2.32/lb., 8.75¢ below the blocks. There were 2 sales at $2.32/lb., and an offer at $2.34 was left uncovered.
   Class III futures recovered some ground, with  April and May up 52¢ & 54¢ respectively.
       Butter, after jumping 2¢ yesterday, 0.5¢ on Tuesday, and 2.5¢ on Monday added 1.5¢ this morning, on 2 unfilled bids at $1.9850/lb. An offer at $2.00/lb. got no response.
   Cash Grade A nonfat dry milk was steady today, holding at $2.0225/lb. after picking up 2.25¢ yesterday on an unfilled bid. A bid this morning at $2.01/lb. was left on the board as well.

Today’s Market Closing Prices:
Butter: Up 1.5¢, to $1.9850/lb.
Cheddar blocks: Down 1.5¢, to $2.4075/lb.
Cheddar barrels: Down 1¢, to $2.32/lb.
Grade A nonfat dry milk: Unchanged, at $2.0225/lb.
Class III milk: Mar. $23.29, Unchanged; Apr. $24.03, +52¢; May $21.69, +54¢; & Jun. $20.65, +33¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $22.12, +36¢ from Wednesday. The 2nd half average is now at $19.47, +7¢ from Wednesday.
Looking ahead:
   USDA’s Ag Prices report is issued tomorrow afternoon and includes the latest milk feed price ratio. The Prospective Plantings report is out Monday. The California Department of Food and Agriculture announces its March Class 4a and 4b milk prices. Federal order prices are announced by USDA on Wednesday and the monthly Dairy Products report is out on Thursday afternoon.
Friday on DairyLine:
   Jerry Dryer, editor of the Dairy & Food Market Analyst, talks about the falling cheese prices and looks at commercial disappearance.
   Dr, Mike Hutjens has some tips on purchasing your corn silage hybrids.


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