DairyBusiness Update: June 9, 2014

Corn Crop 60% in Good Condition
   The Agriculture Department’s latest Crop Progress report, issued this afternoon, shows 15% of the nation’s corn, grown in the 18 states which comprised 91% of the 2013 crop, is rated in excellent condition, as of the week ending June 8. That’s up from 13% the previous week and 10% a year ago. Sixty percent is rated good, down from 63% the previous week, and compares to 53% a year ago. The states are listed below:

State                               Week Ending
                Very poor           Poor          Fair          Good       Excellent  
Colorado       -                       -             23%          54%        23%
Illinois           1%                   2%          23%          53%        21%
Indiana         1%                   5%          22%          55%        17%
Iowa             1%                   2%          15%          64%        18%
Kansas         2%                   6%          45%          42%         5%
Kentucky      1%                   3%          17%          63%        16%
Michigan       -                      2%           17%         68%         13%
Minnesota     -                      2%           18%         65%         15%
Missouri        -                      6%           27%         56%         11%
Nebraska      2%                  4%           24%         59%         11%
N Carolina    1%                  4%           20%          66%          9%
N Dakota      1%                  2%             8%          81%          8%
Ohio             1%                   2%          20%          60%         17%
Penn.            -                      1%          14%          77%           8%
S Dakota       -                      1%          14%          77%          8%
Tennessee   2%                   5%          19%          56%         18%
Texas           -                       5%          45%          37%         13%
Wisconsin    -                       2%           17%         67%         14%

   Corn emerged is rated at 92%, up from 80% the previous week, up from 83% a year ago, and 2% ahead of the 5-year average.
   The report shows 87% of the soybean crop is planted, as of the week ending June 8, up from 78% the previous week, up from 69% a year ago, and 6% ahead of the five year average. The data shows 71% of the soybeans are emerged, up from 50% the week before, and 46% a year ago, and 9% ahead of the five year average. And, 12% of the soybean crop rated as excellent, with 62% rated as good.
   There is 89% of the cotton crop planted, up from 74% the week before, up from 87% a year ago, but 2% behind the five-year average. The report shows 8% of the cotton squaring, up from 5% the previous week, up from 6% a year ago, and 2% behind the five-year average. The report shows 13% of the cotton crop is rated in excellent condition and 37% as good.

Importance of Month-End USDA Reports on Corn Examined
   Dr. Darrel Good, of the Department of Agricultural and Consumer Economic at the University of Illinois, writes in his FarmdocDaily posting that the USDA will release its quarterly Grain Stocks and Acreage reports on June 30.  These reports provide important fundamental information that will set the tone for the corn market going into the critical stage of the growing season. There is always opportunity for surprises in these reports and there is particular interest in the estimates this year given the $0.70 decline in corn prices over the past month.
   The stocks report will provide an estimate of the inventory of corn on June 1, revealing the pace of feed and residual use during the previous quarter and providing for a clearer expectation of the magnitude of stocks at the end of the 2013-14 marketing year. Given the difficulty of anticipating the magnitude of quarterly feed and residual use revealed in the report, it is useful to calculate the magnitude of the stocks estimate that would be considered neutral for prices. That calculation is based on the magnitude of use in other consumption categories during the March-May quarter, the USDA's forecast of feed and residual use for the year, and revealed feed and residual use during the first half of the marketing year. 
   Quarterly estimates of corn use in non-feed and residual categories (ethanol production, other processing uses, and exports) can be reasonably estimated based on monthly and weekly reports of use during the quarter. Based on monthly and weekly estimates from the U.S. Energy Information Administration, ethanol production during the March-May quarter this year exceeded that of last year by 7.8 percent. 
   Assuming corn consumption increased by the same amount, corn use during the quarter should have totaled about 1.286 billion bushels. As a side note, to reach the projection for the entire year, ethanol production during the last quarter of the year needs to average about 37.84 million gallons per week. Production during the most recent 4-week period averaged about 39 million gallons per week. The production rate may slow somewhat due to some build-up of stocks, but it appears that ethanol production, and therefore corn consumption, will reach or slightly exceed the current forecast.
   Estimates of corn consumption for other domestic processing uses are not readily available, but quarterly use is very consistent from year to year. Based on the USDA's projection of use for the year and use during the first half of the current year, use during the March-May quarter should have been near 375 million bushels.
   Estimates of corn exports are available in weekly USDA reports and monthly Census Bureau reports. Census estimates become the official estimates in the USDA corn balance sheet, but are currently available only through April. Cumulative Census export estimates through April exceeded USDA estimates by 26 million bushels. Assuming that margin persisted through May, USDA export estimates suggest that exports for the March-May quarter totaled 619 million bushels, equal to the record exports for the quarter in 1981. 
   To reach the USDA projection of 1.9 billion bushels for the year, exports will need to average 41 million bushels per week during the final quarter of the marketing year. The most recent 5-week average for corn export inspections was 43.9 million bushels.
   Read the complete posting at: http://farmdocdaily.illinois.edu/2014/importance-of-month-end-usda-reports-corn.html.

Milk Flowing to the Vat
   Cheese production was mostly steady last week with many plants operating full schedules, reports Dairy Market News. Milk volumes available for manufacturing were heavy. Discounted milk is becoming available for those plants wanting or able to increase production. Some plants are turning back some offered milk to better balance their inventories to match current demand. Retail demand is moderate to good. Export demand has slowed with some resistance to current price levels. Buyers are looking to increase spot orders on price breaks.

Butter Inventories Not Being Built
   The butter market tone is steady, according to Dairy Market News and butter operators churned at mostly steady rates. Demand for butter is good, especially bulk supplies, while a few manufacturers noted slower print sales in the Central region. Supplies are adequate for contractual obligations, but many manufacturers have not yet built up inventories like in years past.

“Mother Government” Knows Best
The KATO Institute’s Walter Olson writes “We warned at the time that the ill-conceived Food Safety Modernization Act (FSMA) of 2011 would tend to choke off many non-industrial food sources. Now the FDA, interpreting FSMA as part of its regulatory process, is moving to ban the aging of cheese on wooden boards, a process that dates back thousands of years and has been practiced safely by many of the world’s finest cheese makers.
   The agency apparently intends to apply the same standard to imported cheese as well, which means that in addition to devastating artisanal cheese producers in this country, the move would cut off Americans’ access to large numbers of classic European cheeses, many of which, like Comte and Reblochon, “are required to be aged on wood by their standard of identity.” [Jeanne Carpenter, Cheese Underground (Wisconsin); Matt Spiegler, Cheese Notes]
   Our coverage of FSMA, including its many-sided impact on traditional and artisanal farm and food practice, is http://overlawyered.com/?s=fsma“>here.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Trades moved the cash cheese up a bit this morning. The Cheddar blocks were up 1¢, to $2.06/lb., on 1 carload. The Cheddar barrels, inched up 0.5¢ on a trade, to $1.9725/lb.   
   FC Stone dairy broker, Dave Kurzawski, wrote in this morning’s Insider Opening Bell that “The market needs a bullish prod or it will get weaker. Cheese is just not that tight right now."  He adds that "Fresh cheese is available. Deals are getting done. The spot block market seems to be pretty well in balance between $1.95 and $2.05."  
   Cash butter continued its meltdown, losing 1.25¢ this morning on 4 trades, following last week’s 7.75¢ decline. Two offers at that price were left on the board.
   Grade A nonfat dry milk was unchanged at $1.8575/lb., following a 0.25¢ loss Friday, and there was no activity today. 

Today’s Market Closing Prices
Butter: Down 1.25¢, to $2.21/lb.
Cheddar blocks:  Up 1¢, to $2.06/lb.
Cheddar barrels: Up 0.5¢, to $1.9725/lb.
Grade A nonfat dry milk: Unchanged, at $1.8575/lb.
Class III milk: June $21.27, +3¢; July $20.54, +16¢; Aug. $20.44, +11¢; & Sept. $20.41, +9¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.46, +12¢ from Friday. The Fourth Quarter average is now at $19.53, -1¢ from Friday. The First Quarter 2015 average is now at $18.39, +5¢ from Friday.
Looking ahead:
   July Class I milk prices will be announced tomorrow by the California Department of Food and Agriculture for the Golden State. The Federal order Class I base price is announced by USDA June 18. The Agriculture Department issues its latest milk production and milk prices estimates in its monthly World Agricultural Supply & Demand Estimates report on Wednesday, along with the National Dairy Products Sales Report (NDPSR).


Tuesday on DairyLine:
   U of Wisconsin’s Brian Gould on the shaping of the Farm Bill’s Margin Protection
   Dr. David Reid joins us with some udder health talk in our second half.