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14 CapitalPress.com February 20, 2015 Dairy/Livestock Subscribe to our weekly dairy or livestock email newsletter at CapitalPress.com/newsletters USDA projects four years of declining milk prices By CAROL RYAN DUMAS Capital Press USDA is forecasting a sig- nifi cant downturn in milk and dairy product prices in 2015, with the all-milk price falling $4.90 per hundredweight and the cheese price retreating 45 cents per pound. Decreases in subsequent years are less dramatic, but an increase in milk prices aren’t expected until 2021 and an increase in the cheese price is not expected until 2022, according to the agen- cy’s long-term projections released this month. The all-milk price is ex- pected to drop to $18.05 by 2018, stabilize for a couple of years then move higher to reach $19.20 by 2024, USDA economists reported. Milk production is pro- jected to continue its long- term upward trend, increas- ing 37.1 billion pounds from 212.3 billion pounds in 2015 to 249.4 billion pounds by 2024, with favorable returns encouraging expansion of the herd through 2018. Milk per cow is expect- ed to rise more than 4,000 pounds over the next 10 years, from 22,770 pounds in 2015 to 27,060 pounds by 2024, the economists project. The agency forecasts higher feed costs will bring year-to year declines in the number of cows from 2020 through 2024. Production per cow, however, will con- tinue upward, reflecting con- tinued developments in tech- nology and genetics. Future demand for dairy products looks bright in USDA’s projections, with domestic commercial use growing faster than the U.S. population. While per-capita consumption of fluid milk is expected to continue its slow decline, domestic demand for cheese is expected to increase due to greater con- sumption of prepared foods and increased eating away from home. The economists project domestic commercial use (on a milk fat basis) to rise from 202.6 billion pounds in 2015 to 234.6 billion pounds in 2024. The upward trend in dairy exports is also projected to continue, with the U.S. well positioned to expand ex- ports, according to USDA. Commercial exports (on a milk fat basis) are projected to increase steadily over the next decade, reaching record levels and growing from 11 billion pounds in 2015 to 17.9 billion pounds in 2024, the economists reported. Imports of dairy products are projected to remain fair- ly steady, between 3.8 billion pounds and 4.1 billion pounds over the next 10 years. For the report: www. usda.gov/oce/commodity/ projections U.S. dairy long- term prices (Projected) Year Milk * 2013 $20.05 2014 24.20 2015 19.30 2016 18.70 2017 18.30 2018 18.05 2019 18.05 2020 18.05 2021 18.25 2022 18.50 2023 18.90 2024 19.20 Cheese † $1.77 2.18 1.73 1.70 1.66 1.64 1.63 1.63 1.63 1.65 1.68 1.71 *All milk price, dollars per hundredweight † Cheese price, dollars per pound Second-half slowdown curbs 2014 dairy exports Rabobank explores cow-calf confi nement to rebuild beef herd By CAROL RYAN DUMAS Capital Press U.S. dairy exports, which soared 22 percent in the first half of 2014, slumped in the second half of the year to finish 6 percent above 2013. U.S. dairy exports in 2014 totaled $7.1 billion, an increase of nearly $400 mil- lion from $6.7 in 2013, ac- cording to the latest export report by U.S. Dairy Export Council. At mid-year, those ex- ports were up 22 percent from a year earlier at $4.5 billion, an increase of $800 million over $3.7 billion in the first half of 2013. U.S. exports to China saw the biggest retreat in the second half of 2014, down 1 percent for the year after having been up 32 percent in the first half of 2014. China slowed its purchas- es overall, not just from the U.S., in the second half of the year, said Alan Levitt, USDEC vice president of communications. China purchased $452 million worth of U.S. dairy products in the first half of 2014 but only purchased another $245 million in the second half for a total of $697 million. Southeast Asia and Mid- dle East/North Africa also pulled back significantly on purchases of U.S. products, according to USDEC. Southeast Asia’s imports of U.S. product were up 21 percent year over year in the first half of 2014 but up only 3 percent for the entire year. By mid-year, Southeast Asia had purchased $885 million in U.S. dairy products but only purchased about half that, $437 million, in the second half for a total of $1.3 billion Dairy imports to Middle East/North Africa from the U.S. were up 22 percent in the first half of the year and down 18 percent for the en- tire year. By mid-year, U.S. imports to the region totaled $518 million and increased only $125 million in the sec- ond half for a total of $643 million. There were a few reasons By CAROL RYAN DUMAS Capital Press Carol Ryan Dumas/Capital Press U.S. dairy exports, which soared 22 percent in the fi rst half of 2014, slumped in the second half of the year to fi nish 6 percent above 2013. Top 10 U.S. dairy export markets, 2014 Rank/Country % change 2013-14 Value (Million of dollars) 1. Mexico 2. S.E. Asia 3. China 4. MENA* 5. Canada 6. S. Korea 416.8 39 7. Japan 406.8 34 8. Oceana 297.8 15 9. S. America 291.9 5 10. Caribbean $1,644.1 1,322.3 697.4 643.3 591.6 224.6 15 % 3 -1 -18 4 6 *Middle East/North Africa Sources: USDA ; USDEC Carol Ryan Dumas and Alan Kenaga/Capital Press for those declines, Levitt said. First was price disparity, with the U.S. price much higher than Oceana and EU pricing. U.S. prices were fairly close to record high due to the strong domestic dairy market, he said. Russia’s ban on EU prod- ucts also played into the de- cline in U.S. dairy exports to Southeast Asia and MENA. Russia consumes about 2 percent of EU milk produc- tion and is EU’s biggest mar- ket. When Russia stopped buying EU cheese, EU man- ufacturers switched to skim milk powder production, he said. Southeast Asia is the big- gest buyer of U.S. skim milk powder, but EU prices were more competitive than U.S. prices, he said. New Zealand also switched production from whole milk powder to skim milk powder when China stopped buying, and New Zealand’s prices were also more competitive than U.S. prices in the Southeast Asia market, he said. The Middle East is EU’s logical next biggest market after Russia, and the U.S. lost sales to MENA on the whole range of dairy prod- ucts, he said. Other highlights of US- DEC’s report show: • Exports of U.S. nonfat dry milk powder in 2014 were slightly below 2013 with declines in China, Indo- nesia, Vietnam, and MENA and increases in Mexico and the Philippines. • U.S. cheese exports in- creased for the fifth year in a row, up 17 percent year over year with large gains in South Korea and Japan • Overall whey exports were up fractionally with a 31 percent gain in shipments of whey protein isolate and a 3 percent decline in dry whey exports. • U.S. butterfat exports were down 21 percent with sales slumping after April. • Total U.S. exports in 2014 were equivalent to 15.4 percent of U.S. milk pro- duction, down slightly from 15.5 percent in 2013. An unprecedented run in price for all classes of cattle in 2014 has cow-calf producers sending fewer cows to slaughter and holding back heifers to re- build the U.S. beef herd. But those producers and herd expansion are challenged by a signifi cant reduction in grazing acres and high prices to lease or rent pasture, according to Rabo- bank economists in a report re- leased earlier this month. The report “Outside In …” explores confi ned cow-calf pro- duction as a viable means for re- building the beef cow herd. “Clearly the economic signal has been sent that the cow-calf sector needs to expand,” said Don Close, Rabobank Food & Agribusiness senior analyst. Profi tability, required for expansion, has been taken care of, but availability of land is questionable, he said. USDA statistics show a 32 million-acre loss in grazing land over the last 10 years, driv- en by such things as expansion of row crops, urban sprawl and restricted Bureau of Land Man- agement grazing. If cow num- bers are to grow by the project- ed 3 million to 4 million head, alternative production models will be required, Rabobank’s report stated. While traditional cow-calf production will remain the pri- mary method, a signifi cant part of herd expansion will need to incorporate systems for con- fi ned calf production. Confi ned and semi-confi ned production are viable and valu- able options and “very com- petitive” when compared with conventional grazing models, Close said. The two most applicable production models are convert- ing existing excess feed-yard pen space and aligning confi ne- ment buildings with conven- tional row crop production in the Corn Belt, the bank’s econ- omist reported. Both offer increased effi - ciency from the cow herd and healthier animals and show higher per-cow returns than conventional grazing, Rabo- bank reported. Confi ned and semi-confi ned management systems allow the operator to tailor feeding pro- grams to the different stages of the animal production cycle, sort and feed cows by their body condition scores and better man- age high-quality calf programs. The confi nement systems also achieve better productivity gains through better cow man- agement, artifi cial breeding and stock selection for end markets. Limited research also suggests those systems can improve cow health and extend reproductive life, Rabobank reported. The confi ned systems also results in exceptional calf health where prenatal calf health is better than average through balancing the cow’s nutritional requirements. The systems also result in less stress in weaning, even early weaning, and intro- duction into a feedlot system, according to Rabobank. As for return on investment, mid-range price scenarios found per-cow profi t in the Northern Plains was $220 for conven- tional grazing, $324.50 for semi-confi nement, $363 for old- er cow confi nement, and $253 for young cow confi nement, the economists reported. “A primary benefi t of con- verting existing feed-yard space to cow-calf confi nement is that it enables facilities to use ex- isting structures with minimal modifi cations while allowing the feed yard to remain a viable entity and sidestep the extreme competition for feeder cattle,” the economists stated. With current excess pen space, the production units can vary in size, from several hun- dred cows to units with 3,000 to 5,000 cows. Existing structures would require some enhance- ments such as lower bunk and water access for calves, a sepa- rate area for bedding and shade and creep gates or other fence spacing to allow a safe zone for calves that is inaccessible to cows, Rabobank reported. Cash butter, powder see busy week By LEE MIELKE For the Capital Press C 8-4/#4N ash cheese prices saw little change the second week of February. The block Cheddar closed Friday the 13th at $1.53 per pound, down a half-cent on the week and 57 1/2-cents below a year ago, when they weren’t so “lucky” and dropped almost 13 cents, to $2.1050. The Cheddar barrels closed Friday at $1.4850, up a quar- ter-cent on the week and 57 3/4-cents below a year ago. Only two cars of barrel were sold last week on the spot market. The markets were closed Monday for the President’s Day holiday but the blocks inched up a penny Tuesday while the bar- rels were unchanged. Cash butter headed south last week, shedding 8 1/2-cents by Wednesday, but gained back a penny Friday to close at $1.72 per pound, down 7 1/2-cents on the week and 5 cents below a year ago. It was unchanged Tuesday. A lot of butter found its way to Chicago last week, with 36 loads exchanging hands, up Dairy Markets Lee Mielke from 18 the previous week. Cash Grade A nonfat dry milk saw a fourth week of strength, fi nishing Friday at $1.15 per pound, up a nickel on the week. It was another big week of sales, with 44 loads exchanging hands, up from 54 loads the previous week and 34 the week before that. The pow- der was up another 2 cents Tues- day, hitting $1.17, highest spot price since Nov. 19. California March Class I milk down The California Department of Food and Agriculture an- nounced the state’s March Class I milk price at $16.66 per hun- dredweight for the north and $16.93 for the south, down 42 cents and 43 cents, respective- ly, from February. Both are an eye-catching $8.72 below March 2014 and the lowest Class I prices since January 2011.