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CapitalPress.com
Friday, May 13, 2022
Dairy
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Dairy farmers concerned over water scarcity
Port issues, inflation
challenge dairy exports
In the midst of a years-
long drought, California is
implementing the Sustain-
able Groundwater Man-
agement Act, creating even
more concerns for the state’s
dairy farmers.
Signed in 2014, the law
— known as SiGMA —
requires local agencies to
sustainably manage ground-
water basins.
A big part of what
SiGMA can be is a way
to provide certainty about
water allocations in the
future, said Michael McCol-
lough, professor of agribusi-
ness at California Polytech-
nical State University.
“It’s really difficult to
run a business when you
have uncertainty and when
one of your main inputs …
how much you’re going to
have on a year-to-year basis
changes as much as it has
over the last few years,” he
By CAROL RYAN DUMAS
Capital Press
By CAROL RYAN DUMAS
Capital Press
UC-Davis
Water is important to dairy cows but also for growing
crops to feed them.
said during a virtual session
of the California Dairy Sus-
tainability Summit.
That uncertainty makes it
even more difficult and a lot
riskier for farmers. SiGMA
will hopefully give producers
an idea of how much water
will be available so they can
adjust, he said.
This is the first year
SiGMA has started mov-
ing into the implementation
phase, and people are start-
ing to see direct impacts,
said David DeGroot, princi-
ple civil engineer at 4Creeks
Engineering.
“It takes a lot of water to
operate a dairy. The good
thing about dairies is they
recycle a lot of that water
over the years to become very
efficient … but at the end of
the day, it’s still a numbers
game,” he said.
The biggest impact for
dairies may be not so much
on the dairy facility but on the
feed side. Without adequate
water or certainty of water,
the question is where the feed
will come from. The imple-
mentation of SiGMA is going
to impact local forages, hay,
silages and wheat, he said.
What goes hand-in-hand
with that is water quality
because dairies need to get
rid of the nutrients they pro-
duce. The most efficient way
to do that is to use crops to
utilize those nutrients, he
said.
“But if you can’t mix those
nutrients with adequate water
and grow enough forages,
then you’re going to have a
nutrient-reduction problem,”
he said.
Dairy producers need to
be focused on managing their
feed supply in concert with
managing their nutrients, he
said.
What would help dairy
farmers is phased-in imple-
mentation that would give
them time to adjust and
SiGMA plans that allow for
flexibility in water alloca-
tion and use from year to
year, McCullough said.
U.S. best positioned to capture dairy demand
By CAROL RYAN DUMAS
Capital Press
While U.S. milk produc-
tion has been constrained
since last August, the U.S.
is well positioned to become
the preferred supplier to
growing international dairy
markets due to structural
constraints in other export-
ing countries.
U.S. milk production has
been relatively subdued due
to short-term issues, said
William Loux, vice pres-
ident of global economic
affairs for the U.S. Dairy
Export Council.
“For one, we haven’t
really added too much new
capacity so far this year. For
another, we’ve had really
high input costs on our
farmers, making it less prof-
itable even as (milk) prices
have risen,” he said during
the latest “Dairy Defined”
podcast.
But the U.S. is the one
country that’s structurally
able to grow with global
dairy demand, which is still
growing overall, he said.
“Even in this inflationary
environment, we’re seeing
consumers around the world
really look to dairy, but spe-
cifically on the structural
and milk-production growth
that we’re talking about,” he
said.
Producers in Europe and
New Zealand are dealing
with the same short-term
issues as U.S. producers, he
said.
“You haven’t seen much
new capacity come online.
They are dealing with
incredibly high input costs,
especially Europe as it
relates to energy with Rus-
sia-Ukraine. But they’re
also dealing with higher
feed costs and the like as
well,” he said.
Those countries are run-
ning into these temporary
issues on top of the fact that
weather wasn’t that great
this past year, he said.
“But they have some
structural issues that are
really going to be more of a
constraint moving forward.
That’s where I think the U.S.
is well placed,” he said.
Both Europe and New
Zealand — the largest and
second-largest dairy export-
ers, respectively — aren’t
going to grow their milk
production
significantly
over the next five to 10
years, he said.
“A lot of that has to do
with environmental regula-
tions that both governments
are looking to put on the
dairy industry,” he said.
Those regulations aren’t
so much focused on sus-
tainability as a way of max-
imizing productivity, mak-
ing sure consumers are fed,
while at the same time help-
ing to protect the planet, he
said.
“Instead, they’re more
focused on, at times, really
disincentivizing dairy pro-
duction and moving away
from some of those animal
ag issues,” he said.
Countries like the Neth-
erlands are driving pro-
grams to reduce the num-
ber of dairy cows by 30%,
he said.
“That’s not really neces-
sarily in the spirit of ‘Hey,
there’s a globe right now
that is demanding dairy
products. How do we do that
sustainably,’ which I think
is the U.S. perspective,” he
said.
2021 was a record year
for U.S. dairy exports in
both volume and value
despite logistical issues
tied to the COVID-19 pan-
demic, but this year export-
ers face even more chal-
lenges, according to industry
analysts.
To start, constrained U.S.
milk production and strong
domestic demand are limit-
ing some opportunities for
export growth, said Wil-
liam Loux, vice president
of global economic affairs
for the U.S. Dairy Export
Council.
There are also contin-
ued logistical problems on
the West Coast, and what’s
happening with China con-
tinues to be a major issue, he
said during the latest “Dairy
Defined” podcast.
The final thing is relatively
high prices, which is causing
lower-income consumers in
key markets to push back at
grocery stores, he said.
“So, as a result of that,
we’re seeing a little bit
more subdued export per-
formance to start the year,
at least as far as volume
goes,” he said.
On a value basis, dairy
exports are starting the year
very strong due to higher
prices and more exports of
higher-value products —
cheese, butter and high-pro-
tein whey, he said.
“So that’s kind of creat-
ing this mismatch between
total volume, at least to start
the year, though I think the
second half of the year will
be much better compared to
value…,” he said.
Stephen Cain, director of
economic research and anal-
ysis at the National Milk
Producers Federation, said
he expects some pushback
from more price-sensitive
regions, such as sub-Sahara
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Africa, the Middle East and
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In addition, the U.S. is
still having problems get-
ting product out of the West
Coast and the buildup and
backlog at Chinese ports is a
growing issue, he said.
“COVID-induced lock-
downs throughout the region
have grown in number and
intensity and the amount of
people that are being locked
down. That’s effectively
shut down some of these
ports,” he said.
As of late April, there
were more than 500 vessels
waiting to berth outside Chi-
nese ports, he said.
“That backlog is really
going to have an impact on
global supply chain as well
as Chinese demand moving
forward,” he said.
But bright spots remain
in the export picture. Sales
of high-value whey pro-
tein have been positive and
saw some strong growth last
year, he said.
“I think we’ll continue to
see that this year, especially
in the countries like Japan
and South Korea that focus
on healthy aging, healthy
living,” he said.
Global cheese demand
also remains strong, he said.
“I think we’ll continue
to see that throughout 2022,
especially as regions con-
tinue to reopen, things get
back to normal, he said.
Southeast Asia has had
intermittent
lockdowns
during the pandemic. But
things are getting back to
normal, and that’s going
to be a boom for demand
within the region, he said.
While dairy export vol-
ume might struggle to start
the year, the U.S. is on a
really good trajectory in
terms of total export port-
folio increasing and higher
value in the back half of the
year and in the years ahead,
Loux said.
DAIRY
MARKETS
Lee
Mielke
Benchmark
milk price
jumps $1.97
By LEE MIELKE
For the Capital Press
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he Agriculture
Department has
announced the April
Federal order Class III
benchmark milk price of
$24.42 per hundredweight,
up $1.97 from March and
$6.75 above April of last
year. It is the highest Class
III price since July 2020 and
18 cents shy of the record
high.
Monday’s Class III
futures settlements por-
tend a May price at $24.77,
which would be a record,
June at $23.78; July at
$23.51; August, $23.12;
September, $22.81; Octo-
ber, $22.79; Novem-
ber, $22.44; and Decem-
ber at $21.92. If realized,
the 2022 average would
be $22.78, up from $17.08
in 2021 and compares to
USDA’s predicted average
of $22.75.
The four-month aver-
age stands at $22.04, up
from $16.40 at this time a
year ago, and compares to
$15.84 in 2020 and $14.71
in 2019.
The April Class IV price
set another record at $25.31
per cwt., up 49 cents from
March, and $9.89 above
a year ago. Its four-month
average is at $24.31, up
from $14.14 a year ago,
$14.78 in 2020, and 15.69
in 2019.
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S266472-1
You’ll recall March milk
production was down 0.5%
from March 2021 but the
month’s Dairy Products
report shows cheese vats
and butter churns still got a
workout.