Looking ahead on our week; USDA issues its preliminary August Cold Storage data Wednesday afternoon and the monthly Livestock Slaughter report is out Friday morning. As always, complete details will be posted here as soon as possible.

Tomorrow on DairyLine, we have our weekly dairy market analysis from Downes-O’Neill dairy economist Bill Brooks and Dr. Alan Britten has his weekly "Udder Health Update" in our second half.

August Milk Production Up 2.8 Percent
(September 17, 2010) Milk production in the 23 major States during August totaled 15.0 billion pounds, up 2.8 percent from August 2009. July production was unrevised at 15.3 billion pounds, and was up 3 percent from last year. 

Production per cow in the 23 major States averaged 1,796 pounds for August, 51 pounds above August 2009.

The number of milk cows on farms in the 23 major States was 8.36 million head, 10,000 head less than August 2009, and 8,000 head less than July 2010.

California production was up 4.9 percent from a year ago,  with 37,000 fewer cows. However, output per cow gained 130 pounds. Wisconsin was up 0.5 percent, thanks to 6,000 more cows. New York was up 4.8 percent, on 7,000 fewer cows but output per cow was up 100 pounds. Idaho was up 7.8 percent, on 25,000 more cows and a 60 pound increase per cow. Pennsylvania was up 3.0 percent. Cow numbers were down 4,000 head but output per cow was up 60 pounds. Minnesota was down 0.8 percent, despite 1,000 more cows., however there was a 15 pound loss per cow.

The biggest increase was in Idaho, up 7.8 percent. Washington was next, up 7.4 percent, and Oregon was third highest in milk production, at 6.9 percent. 

The biggest decline was in Missouri, down 8.8 percent, due to 7,000 fewer cows, and output per cow was down 30 pounds from a year ago. Illinois was next, down 5.2 percent with 3,000 fewer cows, and output per cow down 35 pounds. Iowa had the third biggest drop at 2.7 percent with 8,000 fewer cows, but output per cow was up 20 pounds.

(September 17, 2010) Record corn and soybean crops will not mean a break for dairy feed prices. USDA updated 2010 crop estimates, forecasting a record-high soybean crop of nearly 3.5 billion bushels and, even though the corn harvest forecast was lowered somewhat, it is still expected to be a record-high 13.2 billion bushels.

But, the dairy feed price picture was clouded despite those record crops by a separate supply and demand report, according to Dairy Profit Weekly editor Dave Natzke in Friday’s DairyLine.

“The agency raised expectations for soybean exports, especially to China,” Natzke reported, “Putting a dent in expected season-ending inventories. And, USDA raised corn-use projections for both ethanol and exports reducing corn stocks to the lowest level in seven years, and inventories as a percent of annual use to the lowest level since 1996.”

As a result, USDA projects season-average soybean prices at $9.15-$10.65 per bushel, up 65 cents from previous forecasts, with projected soybean meal prices raised $20 per ton, to a season average of $270-$310.

USDA now projects the season-average corn price to be between $4.00 and $4.80 per bushel, up by 50-70 cents from previous forecasts. The corn futures market is also moving higher, and as of mid week, 2011 corn contracts were averaging nearly $5 bushel, Natzke reported.

That points to another factor, according to Natzke. As Downes-O’Neill dairy broker Dave Kurzawski noted in Wednesday’s report, higher commodity prices are attracting more market speculators.  

Renewable Fuels Association (RFA) vice president of research Geoff Cooper said speculators now control almost as much corn as the entire ethanol industry used in all of 2009. The bottom line, Natzke concluded is, “Even though milk prices are expected to improve, higher feed prices will take a bigger bite out of dairy farmer income.”  

Feed prices are forecast higher in 2010/11, with corn expected to average $4.00 to $4.80 per bushel and soybean meal to average $270 to $310 per ton. The milk-feed price ratio rose this year and is expected to average 2.3 for 2010; next year the index is expected to decline slightly from 2010 because of higher forecast feed prices. While this indicator of profitability has substantially improved from 2009’s depressed level, it remains low enough this year and next that some producers may face financial difficulties.

Despite a relatively weak milk-feed price ratio, cow numbers continue to rise year-over-year. The most recent Milk Production report indicated cow numbers higher in the second quarter of 2010 than in the first, although the herd was still smaller than in the corresponding quarter of 2009. USDA projects the number of cows in the U.S. dairy herd to average 9,125 thousand head this year, increasing to 9,160 in 2011.

Production per cow has also advanced In 2010 and is projected to rise by nearly 2.6 percent above 2009. A rise in production per cow is also forecast for 2011, but the rise is expected to be near trend at 1.5 percent. The expected rise in herd size and increased per cow production translates into more milk. USDA projects milk production at 192.7 billion pounds this year, rising to 196.2 billion in 2011.

Milk production in Oceania for the upcoming season is expected to recover from last year. The prospect of more milk on the world market is expected to impact U.S. exports next year. Milk equivalent exports on a fats basis are expected to total 6.6 billion pounds in 2010 but to slide to 5.4 billion next year, dampened by improved world production. Milk equivalent exports on a skims-solids basis are projected to be 29.3 billion pounds this year and to decline to 28.3 billion in 2011.

Imports declined this year compared with 2009 on both a fats and skims-solids basis; imports are expected to total 4.1 billion pounds, fats basis, and 4.5 billion pounds, skims-solids basis. In 2011, imports will likely decline slightly to 4.0 billion pounds and 4.3 billion pounds, respectively. Recovering global and higher domestic milk production is the major reason.

Stocks are forecast to end this year below 2009 totals on a fats basis, reaching 10.4 billion pounds, largely due to lower expected butter stocks. This year’s skim ending stocks are forecast slightly higher at 11.5 billion pounds. Next year, ending stocks are expected to tighten to 10.4 billion pounds on a fats basis and to 11.2 billion pounds on a skims-solids basis. International and domestic demand for butterfat is expected to remain strong both this year and next. Domestic commercial use on a fats basis is expected to rise 2.2 percent in 2011 after staging a 1.2 percent increase this year compared with 2009. Commercial use on a skims basis is projected to decline about 1 percent below 2009 but rebound in 2011, climbing 2.8 percent from this year’s total.

Cheese prices have risen sharply this year due to increased demand. Although cheese stocks remain above the 5-year average, prices are expected to average $1.530 to $1.550 per pound in 2010. Next year, prices are expected to rise, but not as precipitously, to average $1.530 to $1.630 per pound. Butter prices started to climb in late 2009 and have soared this year. The strong demand for fats has moved milk to other uses and, consequently, butter production has lagged and prices have spiked. The decline in milk production in 2009 may have contributed to the tightsupplies this year.

Butter prices are expected to average $1.690 to $1.730 per pound in 2010. Next year, butter prices will remain high by historic standards, but should moderate from 2010’s highs. Butter prices are expected to average $1.485 to $1.615 per pound in 2011. Greater milk production in 2011 should help lower prices. Nonfat dry milk (NDM) prices tracked the price runup for butter, since the movement of milk to other products reduced NDM production. Export demand for NDM also contributed to the rising NDM prices in 2010. NDM is expected to average $1.150 to $1.170 per pound. Next year’s price increases are forecast to moderate to $1.175 to $1.245 per pound. Export demand should support the higher price, while increased milk production should limit increases.

The 2010 Class IV price, which is projected to average $14.90 to $15.20 per cwt, will likely be lower in 2011, based on lower butter prices. In 2011, the Class IV price is forecast to average $14.25 to $15.35 per cwt. The Class III price is forecast to remain about the same in 2011, as greater milk supplies counter continued high cheese prices. The average Class III price is estimated to be $14.50 to $14.70 per cwt this year and average $14.40 to $15.00 per cwt next year. The price outlook for products should hold the all milk price nearly even, averaging $16.25 to $16.45 per cwt this year and averaging $15.85 to $16.85 per cwt in 2011.

October Federal Order Class I Price Up $1.08
(September 17, 2010) The October Federal order Class I base milk price was announced Friday morning by USDA at $16.58 per hundredweight (cwt.), up $1.08 from September and $4.23 above a year ago. That put the 2010 average at $15.00, up from $11.09 at this time a year ago, and compares to $18.32 in 2008. The Class IV pricing factor was the “higher of” in driving the Class I value and there will be no MILC payment to producers.  

The NASS-surveyed butter price averaged $2.1198 per pound, up 29.3 cents from September. Nonfat dry milk averaged $1.1351, down 1.9 cents. Cheese averaged $1.6747, up 7.4 cents, and dry whey averaged 36.07 cents, up fractionally.

Legislative Issues of Interest
(September 16, 2010) National Milk’s Chris Galen outlined some legislative issues of interest to dairy farmers that await action by Congress in Thursday’s broadcast. He said “There’ll be a whole lot of posturing and rhetoric but the real question is, are they going to be doing anything in the next three weeks because we obviously have a very momentous election looming the first Tuesday in November and Congress is anxious to come back into Washington and then leave and go back home and campaign come October.”  

First and foremost in NMPF’s eyes is the mandatory dairy and meat price reporting bill which would mandate weekly electronic reporting of dairy commodities, something NMPF has worked for and Galen hopes the House and Senate will ultimately pass in late September or early October.

The other big story this summer, according to Galen, is the massive egg recall and he said that may prompt Congress to pass a new food safety bill.

Another lingering issue is the reauthorization of the Child Nutrition Act which governs the school lunch program among other things and has a lot of consequences for the dairy industry. Galen said the First Lady and other prominent people are urging Congress to act on this before the end of the year.

Another issue that not only affects dairy but all citizens is the renewal of the reduced tax rates on capital gains and income taxes. Galen said that will be a “huge partisan football and we’ll see where that ends up settling.”

We again emphasize the importance of dairy farmers contacting their lawmakers to make their voice known. Galen said “They’re all going to be asking for your vote and it’s a good time for dairy farmers and others to weigh in with what they see the priorities needing to be for the dairy industry and for the country.”  

(September 15, 2010) Speculators in the dairy markets are bullish, according toDownes-O’Neill dairy broker Dave Kurzawski. Speaking in Wednesday’s DairyLine, Kurzawski referenced a recent Commitment of Traders report from the U.S. Commodities Futures Trading Commission and said “higher prices could lie ahead.”

The weekly report details the makeup of traders in any given market, dairy included, Kurzawski explained, and “is one of the more under-utilized reports to dairy traders but it certainly does key us into what various traders are doing.”

The higher prices Kurzawski is referring to is the Class III futures and “If you look at the Commitment of Traders report, there’s interest by large speculators to be long in Class III futures or options, meaning that they think there’s going to be more upside potential to price.”

He warned that this doesn’t mean they’re right but it does mean “The people who have no real physical skin in the game except to trade the price are bullish.” He adds that the reports points out that this is the first time speculators have been bullish on Class III milk since August 2008.

“It’s an interesting dynamic to look at in terms of the makeup of the market,” Kurzawski said, “It means that the people that are in the market solely for profit want to own milk.”

What does this mean for producer hedging? Kurzawski said “It will probably open up a lot of opportunity to buy put options or perhaps even sell futures at some point in time.” He doesn’t recommend selling futures at this level right now, going into 2011 but I would certainly look at some put options opportunities going into next year.” For more details, call Dave at 1-800-231-3089.

California Class 1 Price at $18.44
(September 14, 2010) California’s October Class 1 milk price is $18.44 per hundredweight for the North and $18.71 for the South, up $1.29 and $1.28 respectively from September, and $4.69 above October 2009. The October Federal order Class I base price will be announced Friday morning by the USDA.  

Alan Levitt, editor of the CME’s Daily Dairy Report, predicts it will come in at $16.88. That would be an increase of $1.38 from September and would be $4.53 above a year ago. He expects the Class IV advanced pricing factor to be the “higher of” in driving the Class I value and he does not expect a MILC payment to producers.

Market Analysis with Mary Ledman
(September 14, 2010) The cash dairy markets await Friday afternoon’s release of USDA’s preliminary data from the August Milk Production report. Market analyst Mary Ledman, Principal of Keough Ledman and Associates Incorporated in Libertyville, Illinois, said in Tuesday’s DairyLine broadcast that, she doesn’t believe the markets have topped out and we may see some incremental gains but no major 1, 2 or 3-cent jumps. She sees things holding through the end of September but warned, “October could bring with it a different story.”  

Ledman expects August milk production to be similar to July output. Cow numbers will continue to strengthen, she said, though not likely to repeat the 20,000 head increase of July over June.

Cull and slaughter rates have fallen in the last month, she said, so she expects cow numbers to expand though milk per cow will likely decrease from July in the Midwest and Northeast but warns that Western output will likely be strong in the West where weather has been favorable.

Demand is the other big factor. Ledman said it’s still “sluggish domestically but internationally has pulled us up.” She adds the caveat that we’re approaching Oceania’s peak milk production season. U.S. dairy exports were strong through July, according to Ledman, but she expects a slowdown in third and into the fourth quarter as Oceania’s production increases and adds more production to the global supply.

(September 13, 2010) A partnership between dairy producers, through the checkoff-funded National Dairy Council and Newsweek, has led to the distribution of more than 1 million copies of the “How to Build a Healthy Kid” back-to-school guidebook.

Dairy Management Incorporated’s Joe Bavido reported Monday that multiple copies of the guidebook, developed and produced by Newsweek will be included in information being distributed to more than 60,000 schools participating in NDC’s Fuel Up to Play 60 (FUTP60) program this fall. FUTP60 is a collaborative in-school effort with the National Football League that encourages the consumption and availability of nutrient-rich foods, including low-fat and fat-free dairy, along with 60 minutes of daily physical activity.

National and local dairy checkoff organizations will use remaining copies of the guidebook as a tool to help engage additional partners and resources among health professionals, local school officials, and community leaders.

FUTP60 is heavily emphasized in the guidebook which includes strong messages of support from USDA Secretary Tom Vilsack and former Surgeon General David Satcher. NDC provided FUTP60 success stories that showcase nutrition and physical activity, a health and nutrition advertorial that highlights  the benefits of flavored milk, supported by leading health professional organizations, a pledge of support for school-based initiatives such as FUTP60 from various health and nutrition organizations, including the American Dietetic Association, American Academy of Pediatrics, American Association of Family Physicians, and School Nutrition Association

“This guidebook is unprecedented for the dairy checkoff in gaining third-party support for our in-school program,” Bavido said. “Working with Newsweek to produce a high-quality educational tool speaks volumes about the acceptance and impact of Fuel Up to Play 60. This effort will make a difference in the lives of students, while reinforcing a positive view of dairy through credible, independent sources.” For more information, log on to www.fueluptoplay60.com.

Milk Production Estimate Raised Again
(September 10, 2010) The Agriculture Department continues to expect more milk. It raised its 2010 and 2011 milk production estimate again in its latest World Agricultural Supply and Demand Estimate report issued this morning. The report states that producers continue to add cows to the herd and inventories are forecast to increase into mid-2011. The rate of growth in milk per cow is also increased from last month.  

It projects 2010 production to hit 192.7 billion pounds, up 700 million pounds from their August estimate. 2011 Output is now projected at 196.2 billion, up 1.6 billion pounds from last month’s estimate. 2009 output was 189.3 billion.

Fat basis export forecasts for 2010 were raised on strong sales of butterfat and cheese, but 2011 exports were lowered. Skim-solids exports for 2010 and 2011 are forecast higher than last month. Imports are reduced from last month due to higher U.S. production and strong demand in other importing countries. Ending stocks for 2011 are increased as U.S. production is forecast higher.

Strong demand for cheese and tight supplies of butter support higher forecast prices for 2010 and 2011. Stronger demand is forecast to absorb most of the increased production although prices are expected to be tempered during the latter part of 2011.

Price forecasts for nonfat dry milk (NDM) are WASDE-486-5 raised for 2010, but the 2011 forecast is unchanged from last month as increased supplies limit price gains. The whey price forecast is unchanged.

Both Class III and Class IV price forecasts for 2010 and 2011 are raised due to the higher product prices. Look for the 2010 Class III price to average $14.50-$14.70 per hundredweight, up 35 cents on both ends from last month’s projection, and compares to $11.36 in 2009. The 2011 average is now put at $14.40-$15.40, up 25 cents from a month ago.

The 2010 Class IV average is estimated at $14.90-$15.20, up 40 cents from last month’s estimate, and compares to $10.89 in 2009. The 2011 average is expected at $14.25-$15.35, up 25 cents from last month’s estimate. The all milk price is forecast to average $16.25-$16.45 for 2010 and $15.85-$16.85 for 2011.

Dairy Product Consumption Up Slightly
(September 10, 2010) 2009 was a hard year financially for dairy farmers but it probably would have been worse had it not been for the increase in U.S. average dairy product consumption. Dairy Profit Weekly editor Dave Natzke reported Friday that the USDA’s Economic Research Service annual estimated per capita consumption of dairy products in the U.S. and dairy consumption was up slightly.  

“Cheese has been a favorite of dairy consumers in the past, and last year was no different,” Natzke said. The average American ate about 33 pounds of cheese last year, up about two-tenths from 2008. The 2009 total was actually about a quarter pound shy of the record high set in 2007.

With our love for pizza, Italian cheese consumption topped other cheese categories for the seventh straight year, according to Natzke. Total Italian cheese consumption was estimated at about 14 pounds, with Mozzarella making up 70 percent of the total.

When it comes to American-type cheese, cheddar remains the U.S. favorite. Total American cheese consumption averaged a record 13.4 pounds per person, with cheddar representing about three-quarters of the total.

It takes about 10 pounds of milk to make a pound of cheese, so at nearly 33 pounds, cheese represents more than half of the average of 611 pounds of dairy products consumed in 2009. On a milk-equivalent basis, dairy consumption was up 3 pounds from the year before, Natzke reported.

Other leading categories included fluid milk and cream, at 205 pounds; ice cream, at 20 pounds; and butter, at 5 pounds. 

Finally, Natzke reported that his report last week regarding the Milk Income Loss Contract (MILC) program payment "start" months caused some confusion. Of most immediate concern, dairy farmers who produce more than the MILC program maximum, and who had an MILC start month of October 2009 in the last fiscal year, should get to their USDA Farm Service Agency by September 14 to make changes for fiscal year 2011. Based on current estimates, highest MILC payments will be next spring and summer, Natzke concluded.

(September 9, 2010) Dairy farmers can take a proactive approach to the growing consumer concerns regarding animal care and food production in this country. The National Milk Producers Federation developed what they call a national FARM program; FARM standing for Farms Assuring Responsible Management.

Chris Galen said dairy farmers can now enroll independently or through their cooperative in it after the Federation spent the last year and a half educating the dairy industry to the need for a national, independently verifiable animal care program. He added that cooperatives of all sizes have been very positive about the program because they understand its importance.

While some might view this as “Big Brother” watching over one’s shoulder, Galen countered saying that we already have a lot of that going on right now and cited another recent undercover video of an Ohio veal operation, plus there have been many others in the past from dairy operations so there scrutiny about animal production in the dairy industry and other livestock sectors and the best defense that we can have for that is to play some offense by having a program that highlights the best animal care, environmental facility, nutrition, and  transportation practices that farms should have.

Big companies like Wal-Mart, Costco, and McDonalds are starting to raise these issues with suppliers and by having a program like this in place, it hopefully satisfies a variety of these retailers as opposed to each of those companies having their own individual programs that farmers would have to comply with.  

(September 8, 2010) Farm tours are all but a thing of the past with bio contamination and animal rightist concerns closing the gate but Genesee, Pennsylvania dairy producer Tricia Adams still believes farm tours are important.

Speaking in Wednesday’s “Beef Check off Update,” Adams said “It’s important because farmers need to stick up for what they do and to let their actions speak for themselves because, unfortunately there are a lot of misconceptions out there on how farmers care for their animals and produce their food and the general public is so far removed from the farming industry that it’s important for us to share our story.”

Tours on Adam’s farm are primarily for children from local schools, ages 5 to 18, but she wants them to see how a modern farm operates and to “see that farmers have an important role to play in that our livelihoods depend on our animals and how we care for them and how we produce the food.”

She tells the “beef story,” though hers is a dairy operation and she talks a lot about dairy products. “We produce beef too as we are raising our bull calves for beef,” she said, “So it all ties together, whether we’re producing milk or whether we’re producing beef we need to take care of our animals the same way.”

Response has been great, she said, “They (the kids) give us a lot of respect and they’re very happy to be here, they have intelligent questions, even the preschoolers ask intelligent questions and they go away and leave us with a feeling of great accomplishment for what we’re doing.”  

(September 7, 2010) Cheese price have to be close to the top in the opinion of analyst Alan Levitt, editor of the CME’s Daily Dairy Report. Speaking in Tuesday’s DairyLine, Levitt said “Labor Day is a watershed time of the year. It’s when supplies are generally the tightest and now we’re past that.”

He said that “dairy producers have made it through the worst of the summer, the weather is cooling, cows are more comfortable, components and milk volume start to climb, the school milk pipeline is just about filled so that makes more milk available to the vat and the churn.”

He also pointed to the heavy inventory of cheese, warning that could temper some of the buying going into fourth quarter. Exports are questionable, he said, because, with the run up in U.S. cheese prices, the U.S. price advantage on the world market is all but gone. The U.S. price had been running pretty well below the New Zealand price, he said, and now it’s pretty close to being on par.

Levitt viewed last week’s Dairy Products report as another bearish factor for cheese. “We have this growing milk supply that came on even though we heard how severe the weather was this summer,” Levitt quipped, “And yet milk production was up almost 3 percent and most of that went into the cheese vat.”

Cheddar production was up 2.6 percent from a year ago, total cheese output was up 4.7 percent, according to the latest data, but domestic consumption is “not running that high,” according to Levitt.  

(September 6, 2010) General Mills Foodservice has committed $100,000 to help schools build their breakfast programs through National Dairy Council’s Child Nutrition and Fitness Initiative Breakfast Grant program. Dairy Management Incorporated’s Joe Bavido reported in Monday’s “DMI Update” that schools participating in the Fuel Up to Play 60 program that are looking to expand their breakfast programs can apply to receive up to $3,000 in funding.

Bavido said “America’s dairy producers are excited about the commitment from General Mills to address a very important issue such as school breakfast” and “These efforts help create lifelong dairy consumers and healthier future generations.”

About 10 million children eat breakfast on any given day in U.S. schools, according to Bavido, nearly a third of the 30 million students who eat school lunch regularly. School foodservice administrators understand that a breakfast program provides significant benefits regarding healthy diets and increased learning capabilities, he said.

A review of data from the Bogalusa Heart Study suggests that kids who skip breakfast rarely make up for missed nutrients later in the day, Bavido reported. Furthermore, a study in Philadelphia and Baltimore public schools found that children who regularly participated in breakfast programs scored higher on math tests, were less likely to be tardy or absent, and had fewer reported discipline problems when compared with children who skipped breakfast.

(September 3, 2010) The Cheddar blocks closed the Friday before Labor Day at $1.72 per pound, up 2 1/2-cents on the week, and 45 cents above a year ago. Barrel caused a scare Thursday, inching back a half, but gained it back and then some Friday to close at $1.6850, up 2 cents on the week, and 43 3/4-cents above a year ago. One car of block traded hands on the week and five of barrel. The NASS U.S. average block price hit $1.6245, up 2.2 cents. Barrel averaged $1.6166, up 0.9 cent.

Cash butter moved higher for the 14^th week in a row, closing Friday at $2.2250 per pound, up 4 1/2-cents on the week, and $1.0550 above a year ago. Two cars were sold. NASS butter averaged $1.9659, up 7.2 cents.

Cash Grade A nonfat dry milk closed Friday at $1.23, up 3 cents on the week. Extra Grade held all week at $1.2250. NASS powder averaged $1.1413, down 0.8 cent, and dry whey averaged 35.84 cents, up 0.3 cent. Prices for whole milk powder, skim milk powder, anhydrous milkfat, and butter milk powder up sharply in this week’s Global Dairy Trade auction.

August Benchmark Milk Price Takes Big Jump
(September 3, 2010) The nation’s August benchmark milk price took a big jump. The Agriculture Department announced the Federal order Class III price this morning at $15.18 per hundredweight (cwt.), up $1.44 from July, $3.98 above August 2009, 79 cents above California’s comparable 4b price, and the highest Class III since December 2008. The 2010 average now stands at $13.80, up from $10.29 at this time a year ago, but compares to $18.14 in 2008. The August Class IV price is $15.61, down 14 cents from July, but $5.23 above a year ago.  

The NASS-surveyed cheese price averaged $1.6031 per pound, up 14.6 cents from July. Butter averaged $1.8508, up 11.3 cents. Nonfat dry milk averaged $1.1557, down 7.2 cents, and dry whey averaged 35.9 cents, down a half-cent.

Looking ahead; Class III futures settled Thursday as follows: September $16.13, October $15.65, November $14.98, and December $14.60 which would result in a 2010 average of $14.31, compared to $11.36 in 2009 and $17.44 in 2008.

MILC Payments Will Likely Begin Again in April
(September 3, 2010) While dairy profitability has improved with strengthened milk prices, feed prices have also strengthened and futures prices for common dairy feedstuffs, like corn and soybeans, are increasing. Dairy Profit Weekly Editor Dave Natzke pointed out in Friday’s DairyLine that could trigger Milk Income Loss Contract (MILC) payments in 2011 but he warned that dairy farmers need to act now to maximize potential payments next spring.  

National Milk Producers Federation’s Roger Cryan provides weekly updated MILC projections estimating payments based on milk and feed futures prices during the next fiscal year which starts October 1, 2010.

Based on his latest estimates, dairy farmers could receive MILC payments during a six-month period beginning in April 2011. Cryan’s estimated payments for that period average 22 cents per hundredweight, ranging from a high of about 38 cents in July, to lows of about 10 cents next April and 8 cents next September.

“It's important for any dairy farmers who produce more than the MILC cap of 2.985 million pounds of milk annually to designate a start month in which to receive payments,” Natzke warned. “If they fail to declare a new start month in fiscal year 2011, payment months automatically default to fiscal year 2010, or begin the first month MILC payments are triggered.”

Based on his latest projections, a dairy farmer producing the MILC maximum 2.985 million pounds of milk in a single month could see a payment of just $2,850 in April 2011, according to Natzke, compared to a payment of nearly $11,000 in July 2011.

Cryan notes that if market conditions change, dairy farmers can change their MILC start months later, but it's important to visit a USDA Farm Service Agency office to make the adjustments before payments are triggered, he concluded. More Here

Mozzarella cheese output totaled 291.8 million pounds, up 1.2 million pounds or 0.4 percent from June, and 18 million or 6.6 percent above a year ago.

Total Italian type cheese, at 364.4 million pounds, was up 1.4 million pounds or 0.4 percent from June, and 18.3 million or 5.3 percent above a year ago.

Cheddar production totaled 276.5 million pounds, down 9.6 million pounds or 3.3 percent from June, but 7 million pounds or 2.6 percent above a year ago.

American type cheese amounted to 368.9 million pounds, down 1.1 million pounds or 0.3 percent from June, but 14.2 million pounds or 4 percent above a year ago.

Total cheese output came to 882.3 million pounds, up 1.4 million pounds or 0.2 percent from June, and 39.5 million pounds or 4.7 percent above a year ago. 

Nonfat dry milk output, at 131.8 million pounds, was down 4.4 million  pounds or 3.2 percent from June, and 1.4 million pounds or 1 percent below a year ago. 

Butter Dropped From CWT Program
(September 2, 2010) The CWT program, in view of current prices, announced its last export assistance bids on butter on August 30, totaling 291,000 pounds. The program drew criticism that it even included butter but CWT chief operating officer Jim Tillison said in Thursday’s broadcast that the decision to include butter was made in July when butter was running around $1.79 and CWT members were reporting being undercut by foreign competition so the decision was made to assist those who had existing business. 

July milk prices were still not at a level dairy producers wanted them to be yet, Tillison argued, and “The real run up in the butter price happened in just a matter of days.” Butter was at $1.95 and in four trading sessions it hit $2.15.

“Butter was very tight in this country,” he said, “And we didn’t want to do anything that would potentially push the price higher.” He mentioned other factors affecting the price such as the hot weather which impacts the milk supply and yields. The remaining CWT export funds will be directed to exporting cheese, he said.

Herd audits for CWT’s latest herd removal program have been completed though information is still being collected and analyzed. Tillison reported that about 31,000 cows will be removed, representing 600 million pounds of milk, but final numbers won’t be available until all information has been collected from the producers who participated.