Image provided by: University of Oregon Libraries; Eugene, OR
About Capital press. (Salem, OR) 19??-current | View Entire Issue (April 13, 2018)
April 13, 2018 CapitalPress.com 11 Dairy Subscribe to our weekly dairy or livestock email newsletter at CapitalPress.com/newsletters Calif. milk prices higher in federal system By CAROL RYAN DUMAS Capital Press California dairy farmers are deciding whether to leave their state marketing order behind and join the federal milk marketing order system, which sets regulated mini- mum prices on pooled milk. California produces more than 18 percent of the nation’s milk, and milk prices in the state are typically the lowest or near the lowest in the coun- try. Dairy farmers there hope to increase the price they re- ceive for their milk by joining the federal marketing system. But because the state is such a large milk producer, joining the federal system also has the potential to affect pricing and production in oth- er parts of the country. An economic analysis by USDA Agricultural Market- ing Service shows positive impacts for California dairy farmers but negative impacts on dairy farmers in some oth- er regions. The market for milk in the U.S. is basically national. Eventually, what happens in one part of the U.S., unless it is trivial, will reverberate to other parts of the U.S., An- drew Novakovic, an econo- mist with the Dyson School of Applied Economics and Management at Cornell Uni- versity, said. “If the Northeast is awash Effects of a California Federal Milk Marketing Order Average annual changes from baseline projections (without a California FMMO) by region, 2018-2026. Area All-milk price (Dollars per cwt) Milk production (Millions of pounds) -0.19 0.32 0.05 0.09 0.16 -0.15 -0.27 -0.19 0.04 -0.17 0.43 0.36 -0.1 0.33 0.08 -34 11 6 17 143 -21 -67 -11 25 -16 383 113 -2 1 545 Northeast Appalachia Florida Southeast Upper Midwest Central Mideast Pacific Northwest Southwest Arizona California Former Western* Unregulated West Hawaii, Alaska U.S. *Covering parts of Utah, Idaho and Nevada. Source: USDA AMS in milk, it creates a downward pressure on markets else- where, not just in the North- east. If cheese is rocking in Wisconsin or export sales are gangbusters in Washington, that tide raises our boat as well,” he said. All federal order minimum prices are tied to the same mov- ers. There are some small re- gional differences in the price formulas but these parts are Capital Press graphic constant. Mostly what moves prices up and down are the na- tional formula prices, he said. A significant part of the California FMMO analysis is the expectation that dairy farmers in California will see a sufficiently higher price to inspire them to increase pro- duction. If this is true, the production increase could put downward pressure on prices everywhere, he said. This outcome was includ- ed in the original USDA im- pact analysis. More current analysis by Mark Stephen- son, director of dairy policy analysis at the University 0f Wisconsin, calls into question whether the California price will actually increase appre- ciably or at all, he said. Joining the federal sys- tem would raise California’s all-milk price an average of 43 cents per hundredweight from 2018 to 2026, compared with projections of prices if producers stay with the state order, according to the AMS analysis. It would also increase California’s blend price across all utilizations by an average of 45 cents per hundredweight. In addition, a California FMMO would also increase the all-milk price in the U.S. as a whole by an average of 8 cents per hundredweight, compared with projections without it. But it would also reduce the all-milk price in the Pacific Northwest, the un- regulated West, Arizona, the Northeast and the Central and Mideast regions. The higher milk prices would encourage more U.S. production, with an annual average increase of 545 mil- lion pounds. Eight regions would show an increase, led by California with an annual increase there of 383 million pounds. The regions with the low- er all-milk price, however, would have lower production compared with projections without a California FMMO. Adoption of a California FMMO would raise producer revenue estimates by an aver- age of $284 million per year in the U.S. and by an average of $269 million in California. Revenue would be lower in the seven regions of lower milk prices, compared with the scenario with no Califor- nia FMMO. Nearly all milk produced in California is currently pooled in the state order and marketed with regulated min- imum prices. But in federal orders only Class I milk for fluid consumption is fully regulated. Manufacturers of dairy products such as cheese, have the option to participate in the milk pool. California producers want- ed to retain mandatory pool- ing of all milk, but USDA denied that proposal as a de- parture from the workings of the other 10 federal orders. The analysis estimates that 32.7 percent of Class II milk (for cream, yogurt cottage cheese and ice cream), 42.4 percent of Class III milk (for cheese) and 41.8 percent of Class IV milk (for butter and powder) currently pooled un- der the state order would not be pooled in the federal order. The pricing of dry whey in California’s pricing for- mula for milk to manufacture cheese fueled the move to a federal order. Adoption of a California FMMO would re- duce the amount of pooled milk used for cheese and whey production in Califor- nia, leading to a national in- crease in prices for cheese and whey and consequently an in- crease in Class III prices. In California, the Class III price is projected to average 31 cents per hundredweight higher if producers vote to join the federal system than it is projected to be if they don’t. Higher Class III prices na- tionally would shift U.S. milk supplies from making cheese to increased butter and nonfat powder, decreasing prices for butter and powder and con- sequently lowering prices for Class IV milk. In California, however, Class IV prices are projected to average $1.42 per hundred- weight higher with a Califor- nia FMMO than with the state order. Class II is projected to average $1.98 per hundred- weight higher if producers join the federal system. Class I prices would be an average of 88 cents per hundredweight lower due to the difference in how Class I is priced in the federal system compared with the state order. CWT changing direction on dairy exports By CAROL RYAN DUMAS Capital Press Cooperatives Working To- gether, which provides export assistance to dairy cooper- atives, will be seeing some changes to its business mod- el to adapt to today’s export challenges. Developed by National Milk Producers Federation, CWT has undergone signif- icant evolutionary shifts to maximize its effectiveness and return on investment. Launched in 2003, it initially supported both dairy herd re- tirement and product exports. Since 2010, the voluntary, producer-funded program has focused exclusively on enhancing exports, targeting products containing a signif- icant amount of milkfat such as cheese and butter. Those products contain- ing a higher fat content “have more bang for the buck be- cause they have the most im- pact on farmers’ milk checks,” Chris Galen, NMPF senior vice president of communica- tions, said. Moving ahead, CWT will continue to focus on those higher-value products and ex- pand those offerings, he said. CWT is funded by dairy co-ops and individual farm- ers, paying monthly dues of 4 cents per hundredweight of milk marketed. Cooperatives needing help to seal a deal overseas — such as when U.S. product prices are higher than world market prices — apply for assistance, he said. NMPF, with the support of the CWT board, has formulat- ed a new strategic assessment to evolve the program to meet the challenges of today’s mar- ketplace, he said. The biggest thing is rather than just helping cooperatives capture short-term sales this week or this month, it’s more of a strategic shift to build long-term business opportu- nities for farmer-owned busi- nesses, Galen said. It’s the same thing CWT is already doing but doing it in a more methodical fashion, helping cooperatives build a foothold in markets for long- term sales, he said. The strategy includes ex- panding the range of exports to engage more products, shippers and customers and facilitating longer-term con- tracts for delivery. It also includes encourag- ing higher-value marketing strategies in retail and food- service; developing improved market intelligence on prices and market needs; and max- imizing collaboration with other farmer-funded efforts, such as USDEC and Dairy Management Inc. The Associated Press File Cheese is pressed at the Emmi Roth USA production plant in Monroe, Wis. The National Milk Producers Federation is changing its Cooperatives Working Together export program to focus on developing long-term trade instead of spot sales overseas. Dairy prices begin to climb; cheese demand mixed D airy prices were most- ly higher last week. Cheddar block cheese closed Friday at $1.6025 per pound, up 7 1/4-cents on the week and 14 1/4-cents above a year ago. The barrels finished at $1.45, up a penny and 1 1/2-cents above a year ago. Six cars of block were traded on the week at the CME and 32 of barrel. The blocks were un- changed Monday but jumped 3 3/4-cents Tuesday, to $1.64, highest price since Nov. 16, 2017. The barrels were up 2 3/4-cents Monday to narrow the gap, but stayed there Tues- day at $1.4775, a still too high 16 1/4-cent spread. Cheese demand is mixed, says Dairy Market News. Re- versing a trend from previous weeks, Italian style cheese- makers report steady to in- Dairy Markets Lee Mielke creased sales. While tradition- al style cheesemakers, who have recently provided gener- ally positive demand reports, are relaying decreasing sales in some cases. More cheese- makers are taking discounted spot milk, with prices ranging $2.50 to $5 under class and milk offers are prevalent. Western cheese is active as milk continues to be read- ily available with the spring flush. “Some contacts report that prices are not reflecting the current condition of the market. Cheese inventories/ production are more than de- mand; therefore, according to contacts, prices are supposed to be lower than they are.” Cash butter shot up 9 1/2-cents last Wednesday to $2.3350 per pound, despite a lot of product finding its way to Chicago, but closed Friday at $2.2875, up 7 1/4-cents on the week and 19 cents above a year ago, with 51 cars sold last week. Monday’s butter jumped 3 1/4-cents and stayed there Tuesday, at $2.32, with 23 cars trading hands plus 12 on Monday. Cream headed for the churns is not where some but- ter producers were expecting following the holiday. Butter demand is not slow- ing and contacts say the in- creased cold storage data has not affected overall market positivity. Western butter makers report spring holiday retail sales were good but orders have slowed. Cream is readily available, butter production is vigorous, and inventories are heavy and growing. Cash Grade A nonfat dry milk closed Friday at 72 3/4-cents per pound, up 3 3/4-cents on the week but 8 1/4-cents below a year ago. The powder was steady Monday but inched three-quarters higher Tuesday, to 73 1/2-cents per pound. Spot dry whey finished at 32 cents per pound, up 3 1/2-cents on the week. It lost a penny both Mon- day and Tuesday, slipping to 30 cents per pound. Benchmark up below March 2017. It is 26 cents above California’s comparable 4b cheese milk price and equates to $1.22 per gallon, up from $1.15 in February and compares to $1.36 a year ago. The First Quarter average is at $13.87, down from $16.49 at this time a year ago and compares to $13.75 in 2016. Monday’s Class III futures portended an April price of $14.46; May, $14.87; and June at $15.19, with a peak at $16.16 in September. The March Class IV price is $13.04, up 17 cents from February but $1.28 below a year ago. Its First Quar- ter average stands at $13.01, down from $15.37 a year ago and compares to $13.75 in 2016. Projection unchanged The Agriculture Depart- ment left unchanged its 2018 milk production forecast in Tuesday’s World Agricultur- al Supply and Demand Esti- mates report. 2018 production and mar- ketings remain at 219.0 and 218.0 billion pounds, re- spectively. If realized, 2018 production would be up 3.5 billion pounds or 1.6 percent from 2017. The March Federal order Class III benchmark milk price started climbing out of its hole and hit $14.22 per hundredweight, up 82 cents from February but is $1.59 SAGE Fact #147 A tow of four wheat barges holds the equivalent of about 480 semi-trucks carrying the same cargo. 15-1/102 15-2/101