Commodities used in
Friday price
$/lb change $/lb change
*Barrel cheese is not used in
**Dry Whey (average of the
Western ‘mostly’) is used only in the Class 1 formula.
Another high
for the year. There were nice
increases every day but Friday. Overall
inventories of butter are down this year compared to last year, in spite of high
production levels. DMN provides this
observation: “ …handlers
concerned about the drawdown of inventories at earlier and faster rates than
anticipated”. Part of the drawdown
in inventories of butter is the strong demand from Class II demand.
Cheese – does Friday bump in barrel signal turn upward?
Thirteen loads of Block cheese were sold this week.
Four loads on Monday pushed the price down 2 cents as did the four loads
on Tuesday but the 5 loads sold on Thursday and Friday were absorbed without
further price erosion. On the other
hand Barrel with only 2 loads sold, held even after Monday’s 2 cent drop and
then jumped 3 cents on Friday. Barrel
is now 4 cents higher than Block. Market
comment is that export interest is increasing at this price level.
Nonfat
Dry Milk – price “resistance” at $1.50
CWAP prices are off just a quarter cent this week on
reasonable volumes. The DMN
“mostly” quote for NFDM at $1.4323 is unchanged from last week.
DMN comments that producer stocks are in good balance.
Whey
products – WPC 34 drops 4 cents.
Dry Whey prices hold level this week at 28 cents but there
has been steady erosion in the Dry Whey futures.
The average price for the rest of this year decreased by 1.3 cents per
pound. WPC 34 buyers appear to be
holding off purchases until prices find a bottom.
SB 201 (Florez) Fresh Raw Milk Act of
2008
As expected the Raw Milk Act passed out of both the Public
Health and Ag committees this week. At
each committee hearing it was noted that the bill needed some additional
tweaking to make sure that CDFA, which has the primary responsibility to
administer the new law, has a chance to participate in the drafting process.
CDFA has been reluctant to participate because they have been - and still
are - the target of multiple lawsuits filed by Organic Pastures – the larger
of the 2 raw milk dairies in
Undersecretary
George Gomes will retire as of July 1.
Mr. Gomes has good and understandable reasons for retiring
but we certainly wish it were not so. He
has been an excellent administrator and has been willing to take on the tougher
challenges and make the tough decisions. He
will be missed. We wish him well in
his retirement.
Corn
Con: Errata, rain, feed costs and sugar
It is raining again in much of the corn belt.
So after just a few days of nice weather during which futures prices for
corn dropped 3 out of 4 days last week, prices shot up as the rain started to
fall. Dec 08 corn hit a high of
$7.96 per bushel on Friday. March
09, May 09 and Jul 09 are all over $8.00. That
is the corn that is now in the ground and trying to grow.
That is the corn that must supply next year’s 10.5 billion gallon
ethanol mandate!
Let’s take a moment to look forward to May 09.
Here are your choices for feed for your cows:
Corn $8.00 per bushel. Wheat
$10.00 per bushel. Soybeans $15.50
per bushel. Both corn and soybeans are at all time record highs!
On the other hand the May 09 BFP contract has settled at $19.50.
I cannot make this compute and something just has to give!
Who could have imagined just two years ago that a milk price of $19.50
would be inadequate? But there you
have it. These numbers have got to
be playing in the minds of many dairymen as they try to determine whether or not
to put a bid into CWT. Sell the
cows, continue to raise corn and/or soybeans and spend every winter in
Ethanol prices have been climbing in response to the higher
corn prices and for the past few weeks have settled in the range of $2.80 cents
per gallon. I have complained,
correctly I believe, a great deal about the 54 cent tariff we place on incoming
ethanol but even with it in place, there will be a price level in this country
that will allow the importation of sugar-based ethanol.
There is also a 2.5% duty tax. Let
us go backwards with these numbers to calculate the price at which ethanol from
Calculation of est. trigger price for Brazilian ethanol imports
US price of ethanol
$2.80 per gallon
Less: tariff $0.54 “
Less: duty (2.5%) $0.07 “
Less: Freight $0.16 “
Value in
This formula may have some flaws in it, but it shows that
at the point sugar-based ethanol can be imported there is effectively a cap on
corn prices in this country. We must
be nearing that point. That is
horrible news to those who have invested in ethanol plants.
They like the dairymen face the prospect of increasing corn costs with no
ability to increase their sales price. Interestingly,
they may become allies in the effort to get rid of the mandates since they can
only exist profitably if corn costs are lower.
In trying to find the current price of ethanol from
The current price of sugar on the world market is 11.8
cents per pound. Corn at $8.00 a
bushel is 14.3 cents a pound. The
Economics is not a static science.
Things happen and people react. The
initial ripple (in this case ethanol mandates) may be political (in this case
irrational) but the response will be firm and rational.
Ethanol, even that which is made from corn, does have a place in our
overall corn demand structure but that place must be earned – not mandated.
Lowering the RFS by 50%, Mr. Johnson, will allow real economics forces to
work out the proper allocation of product.
CARES
Monthly report attached
It is a good read and nicely covers the issues surrounding
the “allure” of manure digesters.
Next
Week
Friday is the 4th of July.
Unless there is really big news to share do not expect the next issue of
the Weekly Update until
Bill Van Dam