8 CapitalPress.com April 20, 2018 Dairy/Livestock Subscribe to our weekly dairy or livestock email newsletter at CapitalPress.com/newsletters Revised MPP should pay off for smaller producers By CAROL RYAN DUMAS Capital Press Legislative changes to the Margin Protection Plan for Dairy, providing more affordable premiums for a farmer’s first 5 million pounds of milk, are expected to pay off for smaller produc- ers this year. Significant changes in the program came just in time, given the dim outlook for producer margins this year, Peter Vitaliano, vice presi- dent of economic policy and market research for National Milk Producers Federation, said in a webinar for report- ers on how the improved pro- gram works. “Farmers should take a very, very serious look at the program,” he said. The program pays the dif- ference between a national average milk price and na- tional average feed costs at coverage levels selected by participating producers up to $8 per hundredweight. MPP has not been as ef- fective as anticipated in providing a safety net in the last few years, but changes passed two months ago in the Bipartisan Budget Act will improve the program’s effec- tiveness, Chris Galen, NMPF senior vice president of com- Carol Ryan Dumas/Capital Press File A cow ready to give birth lies in the close-up pen at Fairview Dairy near Buhl, Idaho, on Feb. 28. The revised Margin Protection Plan is more useful for small dairy operators than the previous version. munications, said. One big problem with the program is that Congress wa- tered down the original mar- gin calculation developed by NMPF, to where it wasn’t re- ally an adequate indicator of stress, Vitaliano said. “These changes … do not address the problems with the margin but by lowering the premiums, they go a … fairly decent way toward making the program again viable,” he said. The improved program merits a second look, espe- cially since producers can retroactively sign up back to Jan. 1, 2018. While January’s margin was above $8, February’s margin was $6.88 and mar- gins are projected to be below $8 into August, he said. The changes are skewed toward smaller producers, with the lower Tier I premi- ums aimed at the first 5 mil- lion pounds of milk — which represents a herd of slightly more than 200 cows, he said. At top coverage of an $8 margin, those premiums went from 47 cents per hundred- weight to 14.5 cents, he said. The program still isn’t perfect, and NMPF will con- tinue to work for improve- ments. But in a year of low prices like this one, the pro- gram warrants a serious look, he said. The bottom line is pre- miums at the Tier I level are much more affordable, down by about two-thirds, Galen said. Using USDA’s MPP cal- culator, available online, he demonstrated returns for producers covering 5 million pounds of production history. Coverage of 90 percent of production showed net returns to producers over premiums above the $6 mar- gin coverage level. At an $8 coverage margin in 2018, a producer could expect to pay $6,927 in premiums and receive payouts totaling $32,805. Annual production of 5 million pounds is the national average, Galen said. “For many producers, un- less the markets improve dra- matically … in all likelihood, there will be payouts through this program if you ensure at the highest levels for the next four or five months,” he said. Tier II premiums haven’t changed, however, and are pretty prohibitive, especially at the higher coverage levels, Vitaliano said. Above 5 million pounds, premiums make it uneco- nomical to participate at that level in most cases, he said. He also ran calculations on covering 10 million pounds of production history. Covering 90 percent of pro- duction produced all negative returns no matter the margin level protected. “It’s not going to be a pay- ing proposition,” he said. Covering half that produc- tion, however, would show a net return for protected mar- gins above the $6.50 level. NMPF also has an MPP calculator so producers can enter their price and costs estimates, at futurefordairy. com. MPP enrollment ends June 1. Analysts: Clouds linger over dairy markets Dairy prices encounter more ups and downs By CAROL RYAN DUMAS Capital Press By LEE MIELKE Global oversupply of milk and heavy stocks of dairy products have sent farm-gate milk prices lower in most ex- port regions by as much as 15 percent since the start of the year. With peak milk-produc- tion season in the Northern Hemisphere looming, markets aren’t likely to rebalance until the second half of 2018, Rabo- bank analysts said in their lat- est dairy quarterly report. Low on-farm margins are expected to slow year-on-year gains in global milk produc- tion, but milk-supply growth will continue to outstrip import demand through the second quarter, the analysts said. Markets took $2.49 per hundredweight out of the U.S. price for Class III milk used to manufacture cheese in the first quarter of 2018 and are expect- ed to take out 15 cents in the second quarter. In the U.S., high stocks, sluggish fluid milk sales and milk-production growth — up 1.8 percent year over year in January and February — have exerted downward pressure on wholesale product prices, they said. At the end of February, U.S. butter stocks were up 2.6 percent year over year, cheese stocks were up 7 percent and stocks of nonfat dry milk were up 50 percent. “(Non-fat dry milk) stocks For the Capital Press D Carol Ryan Dumas/Capital Press File Cows line up at the feed bunk as a feed truck makes its rounds at Bokma dairy near Twin Falls, Idaho. Rabobank analysts say lower milk prices will continue until the market rebalances in the second half of the year. have accumulated — in part due to weaker exports to Mex- ico — as buyers have sought to diversify their suppliers by importing more NFDM from the EU and Canada,” the ana- lysts said. U.S. domestic demand re- mains fragmented, with retail sales of natural cheese and but- ter up 3 percent and 6 percent, respectively, in January and February versus a year earlier. But sales were down 2.7 per- cent for processed cheese, 4 percent for yogurt and 1 per- cent for both fluid milk and ice cream, the analysts said. Foodservice dairy sales have helped, with quick-ser- vice restaurant sales up 5.5 percent and full-service restau- rant sales up 2.7 percent. Domestic demand should pick up, driven by U.S. eco- nomic expansion, which is an- ticipated to jump to 2.7 percent in 2018, compared with 2.3 percent growth in 2017. On the global front, im- proved demand and favorable pricing have helped boost U.S. dairy exports, which were up 4 percent year over year in the last quarter of 2017 and con- tinue to show growth. Sufficient U.S. supplies and international premiums also slowed U.S. dairy imports, which were down 6 percent year over year in the fourth quarter of 2017, and that trend continues. “Looking ahead, 2018 U.S. exports will remain competi- tive, with prices generally sit- ting below international levels and a persistently weak dol- lar,” the analysts said. Continued weakness in milk prices and rising feed costs, however, are expected to curb production growth. Dairy cow slaughter in January and February was more than 5 per- cent higher than a year earlier, and more recent weekly data indicate a similar pace. airy prices saw more ups and downs the second week of April. The Ched- dar blocks finished Friday the 13th at $1.6050 per pound, up a quarter-cent on the week and 13 cents above a year ago. The barrels closed at $1.46, up a penny and 3 1/4-cents above a year ago. Two cars of block were traded at the CME last week and 29 of barrel. The blocks were un- changed Monday, as the Midwest dug out from a mid-April blizzard, but they jumped 2 1/2-cents Tues- day, to $1.63, lifted perhaps by the morning’s Global Dairy Trade auction. The barrels were also unchanged Monday but gained 2 pen- nies Tuesday, hitting $1.48, a still too high 15 cents be- low the blocks. Cheese demand reports are generally positive from Midwestern producers, ac- cording to Dairy Market News. Spot milk remains $2 to $3.50 under class. Some cheesemakers have turned up production and are for- tifying with nonfat dry milk (NDM) to alleviate fairly heavy NDM stocks. Some questions arise with con- tacts regarding the block to barrel price gap, but gener- ally Central contacts view the markets with a bullish eye. Dairy Markets Lee Mielke Western cheese output is increasing. Contacts say the spring flush has com- menced and cheesemakers have plenty of milk; howev- er, demand has been strong. Inventories are heavy, but not necessarily burdensome at this point. “However,” warned DMN, “If U.S. and Europe- an cheese prices converge, manufacturers worry they may face the ineluctable realization that competition for export sales may be- come more fierce.” Spot butter climbed to $2.32 per pound on Monday but slipped 2 cents Thurs- day and closed Friday at $2.2875, unchanged on the week but 20 cents above a year ago. The week saw 46 cars sold. Monday’s butter inched back a quarter-cent only to regain three-quarters Tues- day, hitting $2.2925. Central butter plant managers are receiving more cream offers and but- ter sales are taking off, both on and off the CME. Some producers suggest there is strong interest from ex- port purchasers in multiple global localities, as butter prices domestically are competitive. Domestic in- terest is also adequate. Celebrate June Dairy Month in Capital Press’ 34 th Annual Dairy Industry SPECIAL SECTION June 1 st , 2018 WE SPECIALIZE IN BULK BAGS! BAGS: • Seed Bags • Fertilizer Bags • Feed Bags • Potato Bags • Printed Bags • Plain Bags • Bulk Bags • Totes • Woven Polypropylene • Bopp • Polyethylene • Pocket Bags • Roll Stock & More! HAY PRESS SUPPORT: • Hay Sleeves • Strap • Totes • Printed or Plain • Stretch Film (ALL GAUGES) WAREHOUSE PACKAGING: • Stretch Film • Pallet Sheets • Pallet Covers LOCATIONS: Albany, Oregon (MAIN OFFICE) Ellensburg, Washington CONTACT INFORMATION: Phone: 855-928-3856 Fax: 541-497-6262 Our annual Dairy Special Section spotlights dairy operations and operators in California, Idaho, Oregon and Washington. It features an in depth look at the situations and successes - needs and concerns of this dynamic industry. To reach our print and online readers, contact your sales representative or call 1-800-882-6789. Ad space reservation is by Friday, May 4 th . info@westernpackaging.com ....................................................... CUSTOMER SERVICE IS OUR TOP PRIORITY! PO Box 2048 • Salem, OR 97308 (503) 364-4798 (800) 882-6789 Fax: (503) 364-2692 or (503) 370-4383 www.capitalpress.com w w w. w e s t e r n p a c k a g i n g. c o m 16-4/100 ROP-15-3-3/HOU File Photo Several organizations are suing the USDA over its decision to withdraw a new rule governing organic livestock and poultry. Animal welfare groups join lawsuit over USDA organic rules By CAROL RYAN DUMAS Capital Press The ASPCA and Animal Welfare Institute have joined the Organic Trade Association in its lawsuit against USDA for not implementing new organic livestock standards. The original lawsuit, filed in federal court last September, was aimed at USDA’s repeat- ed delays in implementing the standards that were finalized by the Obama administration. On April 11, OTA revised its complaint to reflect USDA’s plan, announced last month, to withdraw the final regulation. USDA stated the rule ex- ceeds the agency’s statutory authority and could have a neg- ative effect on voluntary partic- ipation in the National Organic Program. The amended complaint ar- gues that USDA’s contention that it does not have the au- thority to regulate animal care, welfare or production standards under the Organic Food Pro- duction Act is “novel and erro- neous.” It also argues that it con- flicts with every previous administration’s approach to rulemaking under OFPA and the National Organic Stan- dards Board. OTA welcomes the support of the animal welfare commu- nity in standing up against the administration’s attack on this important standard for organic livestock and poultry, Laura Batcha, OTA executive direc- tor, said in a press release. “In USDA’s attempt to kill this fully vetted final regulation, they’ve taken a radical depar- ture from conclusions reached over more than 20 years of rulemaking regarding organic livestock care,” she said. It is an aberrant view that has no historical basis or legal justification, she said. Conventional livestock and poultry groups have fiercely opposed the rule, citing health threats to animals. They have argued its ani- mal-welfare standards aren’t based on science and are out- side the scope of the law, which limits organic regulations to feeding and medication prac- tices. They have also argued that it would vilify conventional livestock practices, open the door to activists’ lawsuits and create barriers for existing and new organic producers. The final rule — which ad- dresses living conditions, ani- mal health care, transportation and slaughter — was published after more than a decade of ex- tensive public input and thor- ough vetting, OTA contends. Public comment showed more than 63,000 comments opposed withdrawing the rule and 50 in support. The rule had been widely praised by animal advocates, consumer protection groups and the vast majority of the or- ganic livestock industry, Erin Thompson, staff attorney for the Animal Welfare Institute, said. The institute strongly dis- agrees with USDA’s position, saying not only has USDA al- ready determined it has the au- thority to regulate animal wel- fare, it has done so in the past. ASPCA is the acronym for the American Society for the Prevention of Cruelty to An- imals.