April 13, 2018
CapitalPress.com
11
Dairy
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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