rbST Ohio Ruling

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Today, the Sixth Court of Appeals handed down a ruling regarding Ohio's rbST labeling rule. The ruling was not exactly an all out win for either side.

Ohio Department of Agriculture (ODA) (corporate friendly) had decided to create a rule which would virtually eliminate any labeling of rbST issues on milk. Ohio claimed consumers were misled.

The Appellate Court sent the case back to the lower court with explicit instructions.

Here is some of the opinion:

The ODA then issued a proposed Rule restricting the types of claims that dairy processors could make about milk and milk products. To gauge public support for these labeling restrictions, the ODA solicited comments about the proposed Rule and held two public hearings. Less than 70 of the 2,700 emails and letters sent to the ODA during this time period were in favor of the proposed Rule, according to estimates made by the Processors. (page 5)


The district court held that the composition claims were inherently misleading
because “they imply a compositional difference between those products that are
produced with rb[ST] and those that are not,” in contravention of the FDA’s finding that there is no measurable compositional difference between the two. This conclusion is elied by the record, however, which shows that, contrary to the district court’s assertion, a compositional difference does exist between milk from untreated cows and conventional milk (“conventional milk,” as used throughout this opinion, refers to milk from cows treated with rbST). (page 9)


Also unhelpful are the consumer comments that the ODA received after issuing
the proposed Rule. The State received approximately 2,700 comments, of which the Processors estimate that only 70 were in support of the Rule. We agree with the State that some of these comments demonstrate consumer confusion regarding the use of rbST in milk production. One commenter, for example, asserted that she needed “to know that the milk I drink has no added hormones,” thereby indicating that she believed rbST to be present in conventional milk. But few if any of these commenters indicated that their
confusion stemmed from the product labels. The commenter quoted above, for instance, was informed about rbST and milk production from conversations with her oncologist,not from reading the labels. Although there is not a “complete absence of deception” as there was in Ibanez, the proof falls far short of establishing that Ohio consumers have been misled by dairy-product labeling. (Page 13)

we conclude that the Rule’s prophylactic ban of composition claims such as “rbST free” is more extensive than necessary to serve the State’s interest
in preventing consumer deception. (page 14)

No one can make a macroeconomic case of rbST benefiting the dairy farmers. Logically, rbST has probably hurt the dairy industry.

This whole pro-corporate defense of rbST was started by Dennis Wolff when he Secretary of Agriculture in Pennsylvania. http://www.politicalfriendster.com/showPerson.php?id=6096&name=Dennis-C-Wolff The Govenor would have nothing to do with it. So, the corporate strategy moved to Ohio, where they found a friend.

Russia

Word has it that Russia has banned all further imports of U.S. dairy products because of concerns about paratuberculosis or more correctly, Mycobacterium avium subspecies paratuberculosis (MAP) - Johnes in cows Crohns in humans.

Here is today's Dairy Market News mention relative to NFDM:

MD_DA640
DA
MD DA640 Nonfat Dry Milk - West

MADISON, WI. September 30, 2010 (REPORT 39)

NONFAT DRY MILK - WEST

Western low/medium heat nonfat dry milk prices are unchanged for the
mostly series, but slightly lower for the top end of the range. The
market tone is steady. A cautious undertone surfaced as the trade
assesses what effects the Russian stoppage of importing U.S. dairy
products will have on the NDM and other dairy product markets.
Higher world SMP prices are noted, but the U.S. price is not moving
towards those levels at this time. Current NDM producer offerings
are generally light and expected to be limited over the next few
weeks. There are sporadic offerings of older NDM available along
with availability from resellers. Production of NDM is steady to
slightly higher and mirroring changes in milk production in the
region. Stocks are light to moderate. Western high heat prices are
trending slightly higher. The market tone remains fully balanced
with seasonal demand noted. The spot market is only lightly tested.
High heat output often remains limited and being held for contracted
or later committed needs. Stocks are mostly light.

Agricultural Prices

Today, USDA released its "Agricultural Prices" report, available at: http://usda.mannlib.cornell.edu/usda/current/AgriPric/AgriPric-09-29-2010.pdf

The "All Milk" price for September 2010 milk is $17.20 per hundredweight. On page 22 is the September 2010 parity equivalent of $41.90 per hundredweight. You may notice the parity price is quite a bit higher than generally occurred when it was in effect.

So, lets drop it back to that level and approximate production. What that would mean is that for September 2010 an additional $2,746,350,000 would have flowed into rural America.

DIAC Blog

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The Dairy Industry Advisory Committee (DIAC) has a blog and a recent entry is at: http://blogs.usda.gov/2010/09/24/milk-price-volatility-solutions-discussed-during-third-diac-meeting/


The part I find offensive is: "From 2008-09, dairy farmers suffered a loss in income as consumers and businesses cut back on the amount of milk and milk-based products they bought, creating a surplus and driving prices down. During the first quarter of 2009, milk prices — which are based on commodity markets and fluctuate with global demand — dropped from $16.80 per cwt to $12.23 per cwt due to oversupply."

According to USDA dairy farms marketed 187.3 billion pounds of milk in 2009. Commercial disappearance totaled 189.4 million pounds.

The dairy farmers were an ATM machine for the dairy marketing chain. What part of "know" don't they understand?

Bubble

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Everybody, or most everybody, knows there has been a financial bubble based on credit and real estate. The elevator is going down in ways which have not occurred since the Great Depression. The private debt to GDP ratio has fallen 31 points since the high of February 2009.

As can be seen in the above graph, farm loans based on real estate rose at the same rate as real estate loans altogether (farm loans are on the right axis). The bubble will have to deflate considerably before anyone can breathe easy.

Milk Production

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In yesterday's post I quoted a USDA report,"Milk production continues to shift to the western half of the United States." In the above graph the relationship of home price (bubble) and California milk production is obvious.

But, that is not just my opinion. The abstract for a 2003 Rural Sociology article "Dairy Industrialization in the First Place: Urbanization, Immigration, and Political Economy in Los Angeles County, 1920-1970" by Jess Gilbert and Kevin Wehr states:

Rural sociologists are currently debating the pace and extent of industrialization in the dairy sector of the United States. We offer the perspective of historical sociology to this debate, arguing that time and place significantly determine the outcomes of processes such as industrialization. We present an historically grounded
explanation For the rise of industrial dairying, which first occurred in Los Angeles County. Beginning with the immigration of Dutch dairy farmers to Los Angeles (L.A.) in the I920s, a contingent and sequential process--embedded within the local/California political economy—of exploding population growth, rapid urbanization,and skyrocketing land prices led to repeated geographical 'relocations and expansions of large-scale dairies during the next three decades. We conclude that agricultural industrialization is not inevitable but instead is the result of contingent factors (cultural and political-economic) as well as the particular sequencing of events and processes. In thus historicizing the industrialization debate, we seek limited, rather than universal, generalizations.

More recently "Foundations for a Consumer-Driven Dairy Growth Strategy" Prepared by McKinsey &Company for the California Milk Advisory Board Spring 2006 ($2.3 million)stated, "The industry also benefited from a vitalizing cycle of reinvestments, spurred by steadily appreciating land values, useful capital gains tax treatment, and cash accounting."

So, it is really not all about "supply and demand" and the"market." Policy makers and mainstream discussion seems to have ignored the recent reality of "asset appreciation" in their projections.

USDA on Dairy

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USDA has a new report,"Overview of the United States Dairy Industry" which is available at: http://www.usda.gov/nass/PUBS/TODAYRPT/dyview10.pdf


The report states: "Milk production continues to shift to the western half of the United States." But there is no explanation as to why.

If it is all supply and demand and dairy farmers responding to price signals, why is not all the production moved to Florida? The map above is essentially saying, it is not all that simple. So, why do the experts and policy "leaders" encourage people to think in terms so simplistic that no answers can be found and the gravy train keeps rolling along for those same people? The answer is hidden in the previous sentence.

Volatility Analysis

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I must confess I hesitate to deal with the recent paper "Analysis of Proposed Programs to Mitigate Price Volatility in the U.S. Dairy Industry" by Charles F. Nicholson and Mark W. Stephenson which was just released.

See:http://dairy.wisc.edu/Volatility/Analyses_of_Volatility_Programs.pdf


My problem begins in the first paragraph:

Volatility of prices and incomes has been an issue of importance for the U.S. dairy industry since the early 1990s. Much of this volatility appears to arise in the dairy supply chain, particularly the production sector, consistent with observed patterns of behavior for other commodities (both agricultural and non-­‐agricultural).

If you look at the above graph (fig 5 from the report)there is no evidence of volatility in the production sector. The report states, "It is apparent that the major segment of growth in U.S. milk supply is coming from dairy herds who are moving into a larger herd size category and the 740 herds in the largest herd size category (2000+ Head in year 2009) now account for more than 31 percent of the total milk supply." Then the authors state, "The cost structure of farms in the different herd size categories is quite different as is the responsiveness to price signals." which is to say large operations cannot respond to price signals.

If 31% of the milk supply cannot put on the brakes, why send the "price signal"?

Occam's razor (http://en.wikipedia.org/wiki/Occam's_razor) says, ""the simplest explanation is usually the correct one". When competing hypotheses are equal in other respects, the principle recommends selection of the hypothesis that introduces the fewest assumptions and postulates the fewest entities while still sufficiently answering the question." The rational thing to do is to eliminate those who cannot respond - to wit those over 1999 head.

They do not suggest this solution nor am I suggesting keeping all operations below 1999 head. Obviously, though, the idea should be on the table for discussion.

The paper concludes:

Milk price volatility has clearly become a significant problem for the dairy industry since the 1990s, although the underlying causes of volatility continue to be debated. Some observers have hypothesized that without an active Dairy Product Price Support Program dairy manufacturers will simply not hold enough commercial stocks of product to buffer supply and demand imbalances. Others have suggested that it is our emergence into world trade in dairy products that has been a cause of the price swings. Still others have suggested that it is simply a faulty price discovery mechanism in the Federal Milk Marketing Order system. But some dairy producers have also suggested that volatility results from rational responses to profitability incentives in the absence of coordinated expansion decisions.

Pretty much a "tea leaf" reading.

The is no mention of the CME relative to volatility. At the very least there should be some mention of the correlation of price and production - none. In California where most of the production gains originated, the correlation between price and production for the last 20 years is minus .13.

Butter

Butter futures prices rose today. The most recent report from Dairy Market News offers insight:

Wednesday's butter trading at the CME Group was unchanged at $2.2250. Tuesday saw the market go up $.0025 on sales of two loads. The current price matches the year's highest level. Butter supplies remain tight and prices are firm. Cream supplies are increased and multiples are lower. Butter manufacturers continue to fill orders from a mix of fresh butter and drawing from stored inventories. Demand is described as good for immediate needs with butter producers looking to determine fall and holiday season needs as soon as possible to assure delivery. According to the CME Group, weekly butter stocks in CME approved warehouses decreased 2.7 million pounds last week to 23.5 million pounds. This total compares to 92.3 million pounds in 2009 and 67.5 million pounds in the comparable week in 2008. Since the Memorial Day week, stocks have reduced every week for a total reduction of 44.9 million pounds. The current level in storage at CME approved warehouses is the lowest level
since the first week of 2005. According to the NASS Cold Storage report, stocks of butter as of August 31, 2010, total 151.8 million pounds, -42% or 107.7 million pounds less than August last year. Stocks were 22% lower or 41.7 million pounds less than July 2010. Prices for bulk butter range from flat to 3.5 cents under the market, based on the CME with various time frames and averages used.

Many consider the CME butter numbers to be more indicative of supply than USDA's numbers.

Powder Predictions

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In the above Rich Lewis predicts NFDM prices by the end of the year close to ONE DOLLAR.

Fonterra, on the other hand just had their mid-month auction which averaged $1.465 per pound.

Something is wrong.

Why Not Just Quit?

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Many who do not milk cows wonder why dairy farmers do not just throw in the towel? Well, for one thing, jobs are very, very had to find. According to the Bureau of Labor Statistics (BLS) male over 55 unemployment rate now stands at 8.4%. Most dairy farmers fit that category. Females over 55 have it a little better at 6.9% unemployment.

But, maybe, there is another reason. Quitting is seen as failure and failure is very personal in America.

Roland Benabou and Jean Tirole published a very thought-provoking paper, “Belief in a Just World and Redistributive Politics” (Quarterly Journal of Economics in 2006). A telling part states:

International surveys reveal striking differences between the views held in different countries concerning the causes of wealth and poverty, the extent to which individuals are responsible for their own fate, and the long-run rewards to personal effort. American “exceptionalism,” as manifested by the widely held belief in the American Dream, is but the most striking example of this phenomenon. At the same time, ethnographic studies of the working and middle classes reveal that people do not come to these views as dispassionate statisticians. On the contrary, they constantly struggle with the cognitive dissonance required to maintain and pass on to their children the view that hard work and good deeds will ultimately bring a better life, that crime does not pay, etc., in spite of signals that life may not always be that fair. Psychologists have similarly documented the fact that most individuals feel a strong need to believe that they live in a world that is just, in the sense that people generally get what they deserve, and deserve what they get. When confronted with data that conflicts with this view they try to ignore, reinterpret, distort, or forget it—for instance, by finding imaginary merits to the recipients of fortuitous rewards, or assigning blame to innocent victims.

For virtually all dairy farmers these are exception times. Still it is very hard to shake the ingrained idea that a bit more hard work will eventually pay off.

The Public

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On a fairly regular basis someone suggests the public needs to be "educated" about modern dairy farming. Perhaps, we need a mirror and need to think about what the public knows.

As can be seen in the above graph, the public has not benefited from all the change in dairy farming. All of the productivity gains, all the so-called economies of scale have in no way benefited the public.

Since dairy farmers, as a whole, have not benefited from increased productivity either, maybe it is time to think about how a system could be put in place in which both dairy farmers and the public benefit.

Globalism and the Dollar

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Largely as a result of monetary policy, beginning with the Reagan administration the value of the dollar rose dramatically. The phrase "Morning in America" really should have been "Mourning in America." America lost industry. American workers had to compete with low foreign wages.

In the first 9 months of 2008, the index averaged 97. In the last three months of 2008, the index stood at 108.4. No wonder we exported so much dairy, particularly NFDM in the first nine months of 2008.

For the first eight months of 2010 the index stands at just over 100, exports are up and imports are down. While some programs may wish to claim success for the dairy exports of 2010, the U.S. dollar was probably a bigger factor.

Projections & Predictions

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Projections and predictions are two different things. However,the two seem to get mixed together most of the time.

Although there is talk of the 2012 Farm Bill, and how any changes in dairy policy will have to wait until then, I say good luck , if that is what you are counting on. Most any bureaucrat and most any politician will look at some variation of the above graph and believe entirely in staying the course. Plenty of milk and the dairy cases are full in the stores - life is good.

But, the East is deficit in milk and the costs of hauling milk to the East, in 2010, is going to be about $2.17 BILLION. Therefore things may not be all that good.

If there is to be public dairy policy, the good of the public needs to be served. I would venture to say that few, if any, have given this any thought. We still hear about dairy farmers getting together. Why? Can everyone benefit from a monolithic, one-size-fits-all, public policy? I think not.

Milk Production

Naturally, contrary to virtually all early reports, milk production in the 23 lead dairy states was up an astounding 2.8% when compared to August 2009.

The latest report compares only the current August with August of a year ago. Comparing August 2008 with August 2010 shows an increase of only 3.3%. Not much of a gain in two years.

Notice though, there is no processor who is complaining about the flood of milk and begging for some form of supply management.

The export data, available through July, shows a very large increase in exports. For the fifth straight month cheese exports have been high. The July 2010 cheese exports were the highest for the past six years.

Milk price volatility has been huge in the last three years. The difference in the average "all milk" January - August, was $7.06 comparing 08 with 09. So, I would hope another hundred years or so of the same 'ol milk pricing system, people will find the is no relationship, to speak of, between price and production.

Dairy Cooperatives

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The latest California NFDM price (September 10, 10) IS $1.0851 per pound. California drives NFDM price because, or maybe because, a lot of NFDM is made there.

But, the California NFDM price makes no sense. Why, when all other dairy product prices are rising, should NFDM prices fall? The NFDM made in California is made by cooperatives. Capper-Volstead only exempts co-ops from antitrust action provided the operate for the mutual benefit of members.

State law is the basis for most co-op rules. California's lae begins:http://law.justia.com/california/codes/2009/corp/14550-14551.html

Agricultural Marketing Associations
CORPORATIONS CODE
SECTION 14550-14551

14550. In order to promote, foster, and encourage the intelligent and orderly marketing of agricultural products through cooperation;to eliminate speculation and waste; to make the distribution of agricultural products between producer and consumer as direct as can be efficiently done; and to stabilize the marketing of agricultural products, this act is passed.

14551. It is here recognized that agriculture is characterized by individual production in contrast to the group or factory system that characterizes other forms of industrial production; and that the ordinary form of corporate organization permits industrial groups to combine for the purpose of group production and the ensuing group marketing; and that the public has an interest in permitting farmers
to bring their industry to the high degree of efficiency and merchandising skill evidenced in the manufacturing industries; and that the public interest urgently needs to prevent the migration from the farm to the city in order to keep up farm production and to preserve the agricultural supply of the nation; and that the public
interest demands that the farmer be encouraged to attain a superior and more direct system of marketing in the substitution of merchandising for the blind, unscientific, and speculative selling of crops.

Someone must have oversight of cooperatives in California.

Within the Federal Orders, the task of oversight is the responsibility of one person:

Order Operations
William Newell, Branch Chief
Phone: 202-720-3869
Fax: 202-720-2454

Some might want to know what exactly he does is his oversight role? Would there be as many dairy lawsuits if actual oversight had been conducted?

Milk Production

Friday the "milk production" report will be released. There is no telling what the story will be. But, at the moment Dairy Market News (DMN) reports today, September 15, 2010,the Northeast report states, "Strong Class I demand and continued declining milk production, along the seasonal trend, in the Northeast and Mid Atlantic regions has significantly reduced manufacturing milk supplies."

DMN also reports continuing high cream prices.

In the Central report DMN states, "For those manufacturers that were looking for
additional milk, volumes were not overly abundant. Pricing multiples
remained firm in the $2.75 - 3.00 per cwt over Class delivered."

So, the numbers Friday will be interesting.

Futures Gain

Low and behold class III Milk futures gains big today. January - June 2011 gained $0.12.

Futures are commonly called "risk management" but, what really makes futures tick, making money for those in the middle, is really what is known as "loss aversion." See:http://en.wikipedia.org/wiki/Loss_aversion

"In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains."

Actually, humans seemed "hard wired" to do dumb, stupid things when contemplating a loss.

See: http://www.ted.com/talks/laurie_santos.html

Futures

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Lately, some have been writing about the worrisome fall in futures prices with predictions of MILC payments. Scary.

Predictions are not my department but, if you look above, you will see the number of futures contracts have been off this year. Something has to scare people into the zero-sum game in which there can be only one winner.

There ought to be a law. Right, there is a law legitimizing plunder.

Farm Bill Thoughts

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While we are still in the early stages of thinking about the next farm bill, perhaps there might be something to be gained by reflecting upon where policy has taken us since 1929.

In 1929 grain was first taken in a binder and the thrashed. Crop yields per acre were much lower. Cows were milked mostly by hand and produced maybe, 3,000 per lactation.

So, where has all this early adoption of technology taken us? As can be seen in the above graph, there is hardly any difference, a mere 8%, between 1929 and 2009 when inflation is factored (constant dollars).

The trend on farm income is even more disturbing. Certainly, no one will stand up in congress and suggest that all the proceeds from increased productivity be handed over to those above the farmer. How then to proceed from here is a huge question.

NFDM Price

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During this past week the trade data was released for July 2010. According to United States International Trade Commission (USITC) trade database, the U.S. exported NFDM in July 2010 for an average of $1.29 per pound.

The numbers collected by NASS and CDFA are all weighted by volume. That is, the price associated with the highest volume carries the most clout. So in July 2010, the average NASS price was $1.22 per pound - 7 cents less than the export price. The difference adds up on the export volume to $4.7 MILLION. Pretty bad.

But, but wait, if the NFDM sold by the U.S. (whoever that is)had sold at world price the difference would be an ADDITIONAL $ 8.3 MILLION.

The real outrage here is not in what I have shown but rather, what I have just described is "business as usual."

Exports of Dairy to China

I saw a figure recently on dairy exports to China, which were up considerably. However, I have no idea whether or not that figure constitutes all the dairy exports to China or just one country.

Our dairy exports to China January - July increased 48%. Of course, even the USA is not too concerned about the accuracy of exports (no duty to collect).

But, here is what you get looking at official sites in China: http://www.chinacustomsstat.com/

Good luck. I can tell you the data is only through April. I'll keep working on it though. I am very curious what percent of the dairy imported into China comes from the U.S.

July MPC Imports

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This is a case where one picture is worth a thousand words.

In this case too, the value per pound of MPC imports in July 2009 was $1.57/lb. In July 2010 the value jumped to $1.96/lb.

SE Case Class Certified

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This ruling has been long anticipated. In a class action suit those who are part of the class have to be verified by the judge - this has now been done.

Mostly, the Judge granted certification of all classes with the main exception of DFA members in the Southeast claim for “breach of contract.” The Judge seems to think those DFA member somehow benefitted from DFA’s action. The Judge stated, “To the extent that DFA has engaged in the wrongdoing alleged in plaintiffs’ complaint, it would appear on the surface that most, if not all, of DFA member dairy farmers have in fact benefitted from DFA wrongdoing.” “On the surface” indeed.

In footnote 9 on page 19, the Judge states, “Plaintiffs’ breach of contract claims appear to focus on claims that DFA has participated in “sweetheart” deals, made “secret” payments to insiders, wasted money on unnecessary expenses, and the like.”

If the Judge owned cows and shipped milk in the Southeast he might have a better grasp of the facts in the DFA member’s claim.

EU Farm Debate

http://news.bbc.co.uk/democracylive/hi/europe/newsid_8973000/8973657.stm

The European Commission has been urged to do more to protect farmers from the effects of unfair competition and abuses by supermarket chains.

Opening a debate on 6 September, French green MEP José Bové, a farmer, called on new laws to regulate the food distribution and retail industry.

Mr Bové's report comes amid consultation ahead of future reform of the Common Agriculture Policy (CAP).

MEPs on the Agriculture Committee have called for tougher penalties and easier complaint procedures in instances of alleged breaches of existing laws.

Mr Bové said that prices paid to farmers by supermarket chains had fallen, but that a similar fall had not been passed on to consumers.

He called for an EU-wide "observatory" of farm prices.

British conservative MEP Ashley Fox urged MEPs to reject the original report, and said that Mr Bove and his supporters did not understand that "markets work".

However Irish centre-right MEP Mairead McGuinness said she was "horrified" at any move towards "light-touch" regulation.

Responding to the debate, Agriculture Commissioner Dacian Ciolos admitted there was "abuse" by the distribution sector and promised that the Commission would do more to help food producers to have a "fair chance" in the global market.

At committee stage the report was adopted by 32 votes to 4 and was formally adopted by the Parliament as a whole at the daily voting session on 7 September. However an amendment calling for preferential treatment for farmers' organisations by authorities awarding public procurement contracts was defeated by one vote

José Bové, is a well known sheep dairy farmer - something of a hero in France and elsewhere.

If you watch the video, the term "tabled" in Europe means the opposite of the meaning in America - "tabled" means brought forward.

Bank Failure

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The FDIC has taken over quite a few banks since the financial crisis began. But, as can be seen in the above graph, something quite different happened in the 80's.

Not only did farm milk price drop, for very political reasons, but also, dairy farmers likely lost their local banker.

Banking used to be a matter of gaining deposits from local people and then lending those deposits, often based upon personal knowledge of the loan applicant. Banks were part of the local community support system.

Markets may efficiently determine efficient allocation of resources but, markets are very poor at making certain needs, especially community needs, are filled.

Money

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The money spent by dairy lobbyist may seem like a bunch. Actually, the amount is nothing compared with the top ten banks $16.3 million in the first half of 2010.

But, what is interesting in the table above, is the amount spent by cooperatives combined is the majority of the lobbying money. Either they have really poor lobbyist or they are not representing the interest of their members.

DIAC

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USDA's (note: 's does mean "possessive")Dairy Industry Advisory Committee with meet again September 23 & 24, 2010.

The agenda does not install any confidence other than that the status quo will be well represented.

DIAC: http://www.fsa.usda.gov/FSA/webapp?area=about&subject=landing&topic=dia

Butter Prices

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Butter prices are high and most likely, will continue to rise, if rumors are correct. Prices need to rise at the same rate as from the third week in August, 2010 to reach the high price of April 2004.

Powder prices need to rise. Powder is way below the world price of $1.45/pound. The co-ops which produce virtually all the NFDM need to represent their members for a change.

Butter

Today, September 2, 2010 the USDA "Dairy Products" report was released. Total cheese for July up 4.7% compared with July 2009. But, butter was down 2.9% below July 2009. The cream is needed in the cheese vat to meet fat to protein requirements.

Then on "Dairyline"


http://dairyline.com/news-main.htm#Butter Dropped From CWT Program

Butter Dropped From CWT Program
(September 2, 2010) The CWT program, in view of current prices, announced its last export assistance bids on butter on August 30, totaling 291,000 pounds. The program drew criticism that it even included butter but CWT chief operating officer Jim Tillison said in Thursday’s broadcast that the decision to include butter was made in July when butter was running around $1.79 and CWT members were reporting being undercut by foreign competition so the decision was made to assist those who had existing business.

July milk prices were still not at a level dairy producers wanted them to be yet, Tillison argued, and “The real run up in the butter price happened in just a matter of days.” Butter was at $1.95 and in four trading sessions it hit $2.15.

“Butter was very tight in this country,” he said, “And we didn’t want to do anything that would potentially push the price higher.” He mentioned other factors affecting the price such as the hot weather which impacts the milk supply and yields. The remaining CWT export funds will be directed to exporting cheese, he said.

Herd audits for CWT’s latest herd removal program have been completed though information is still being collected and analyzed. Tillison reported that about 31,000 cows will be removed, representing 600 million pounds of milk, but final numbers won’t be available until all information has been collected from the producers who participated.

U.S. milk prices are higher but so are feed costs and that could mean that MILC payments will resume next spring. To maximize those payments, dairy farmers they may need to change their payment ‘start’ dates. Dairy Profit Weekly’s, Dave Natzke, has details on tomorrow's DairyLine and Dr. Paul Chandler, has his weekly “Nutrition Update” in our second half.

Store brand butter price is up.

Prices Up

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Prices continue to rise on the CME and at Fonterra's latest internet auction (see above). Note the skim milk powder price. That means U.S. NFDM prices are very, very low.

The stock market also rose and when that happens oil goes up, which it did. When oil goes up, almost certainly corn will rise, which it did.

As Yogi Berra said, "Its tough to make predictions,especially about the future."