April 26, 2012 MARKET MOOS 4-27-12
(by Sherry Bunting)
East losing market share
March milk production in the U.S. was up 4.3% over year ago in the 23 major milk producing states, according to USDA’s report last Thursday, April 19. Pennsylvania’s production, however, was down 0.6%, while the other 22 major states were all higher. Texas, in fact, was 5.7% higher, putting the lone-star state within less than 50 million pounds of the fifth place keystone state.
Heavyweights California and Wisconsin were up 6.2 and 4.2%, respectively. Other states with large percentage increases included Utah 7.8%, Michigan 7.3%, Colorado 7.1%, Arizona 6.6%, Illinois and Indiana at 5.4 and 5.2% respectively, and New Mexico 5.3%.
New York saw a 3.1% increase over year ago compared with Idaho’s increase at 3.3%. The two states continue to produce around the same amount of milk.
From a year-over-year pounds perspective (see graph), the Western States of Texas, Arizona, Colorado, New Mexico, Idaho, Utah, Washington, Oregon – along with California – accounted for 63% of the year-over-year increase. The Upper Midwest / Mideast states of Michigan, Minnesota, Illinois, Ohio, Indiana – along with Wisconsin – accounted for 30% of the year-over-year increase. The Eastern states, consisting of Pennsylvania, New York and Vermont, along with Florida and Virginia accounted for a mere 5% of the year-over-year increase.
Cheese mixed at midweek
The Chicago Mercantile Exchange (CME) took in stride the news of a confirmed BSE (mad cow) case in Central California. The dairy from which the cow came was not identified at press time; however, the cow never entered the food supply. The beef complex reacted with limit-down cattle futures trading Tuesday, although boxed beef prices rallied in the cash markets, prompting a reversal of losses on Wednesday.
In the CME Class III milk futures, trading lost a little more ground this week with June in the low $14’s at midweek and the second half of 2012 future contracts averaging below $16/cwt.
On the CME spot market, cheese trends were mixed as blocks traded higher at $1.5250/lb on seven loads and barrels were ¾ of a penny lower Wednesday at $1.4475/lb on one load traded.
Butter fell a penny to $1.39/lb Wednesday, on offers, but no sales were transacted.
Butter stocks are way up -- at levels 46% above year ago on March 31, according to the USDA NASS Cold Storage Inventory Report Friday, April 20. However, when comparing cheese stocks on hand to year ago levels, the total inventory is lower. This is contrary to what some in the industry are reporting. Total natural cheese stocks in refrigerated warehouses on March 31 rose 2% from the previous month, but were down 2% from the same month a year ago. Within the total inventory, the American style cheese (cheddars and colbies) were up 2% from year ago, while there was 12% less Swiss cheese on hand; and 8% less of all other varieties -- combined. Considering that the U.S. currently makes more Italian cheese than American style, these are interesting statistics. The CME, however, looks at American style cheese inventories because it trades only Cheddar blocks and barrels. The USDA-regulated Class III milk price is based on Cheddar, not the other cheese varieties.
The May Class I advanced base price was also announced late last week at $15.85/cwt. This was based on Class III as the "higher of." That's 19 cents higher than April's Class I mover and almost $4 below the year ago Class I mover.
PMMB to consider premium
The Pennsylvania Milk Marketing Board (PMMB) will have a hearing and monthly sunshine meeting next Wednesday, May 2 in room 202 of the Agriculture Building in Harrisburg.
The purpose of the hearing is to consider the over-order premium level for July through December 2012.
The Pennsylvania Milk Dealers and Handlers are expected to present testimony seeking to lower the current level of the state-mandated over-order premium, which is currently set at $2.15/cwt. through June 30, 2012, plus the fluctuating fuel adjuster.
The Pennsylvania Farm Bureau, and the state Grange are among the groups that typically testify when the over-order premium is set every six months.
Pennsylvania’s over-order premium was added to the PA Milk Marketing Law in the 1980s during a time of severe drought affecting the supply and price of feed for dairy cows in the Commonwealth. The retailers and bottlers separately receive their cost-recovery and 2.5 to 3.5% profit margins set within the state-mandated minimum retail and minimum wholesale price of fluid milk. The over-order premium, intended for dairy producers, reflects the cost of production, especially feed.
Pennsylvania dairy producers endured substantial losses in the quality and quantity of homegrown feeds due to droughts and flooding throughout last growing season. This is leaving many farms short on feed and paying more for feed than in years past. Pennsylvania is also the only state of the 23 major milk producing states to have less year-over-year production so far this year while other states among the 23 continue to grow their production.
The PMMB is also slating a hearing on June 6 to receive testimony and exhibits concerning minimum resale prices for non-fat flavored milk. Persons who wish to present evidence at that hearing must file with the PMMB on or before 3:00 p.m. May 17. It is unclear at this time whether any sector of the dairy industry wants to change the designation of flavored packaged milk in relation to state minimum pricing.
At the federal level, store shelves increasingly contain more varieties of milk-based energy drinks and bottled "milk shakes." Some of these milk-based products are classified as Class I and others are not. The new Federal Order Class I definition went into effect January 2011.
Crop progress way ahead
Crop progress is ahead of schedule nationwide, and Pennsylvania benefited from much needed rain this past weekend.
USDA NASS reports 28% of the nation's corn was planted as of the week ending April 21. This compares to a five-year national average of 15%. In Pennsylvania, 15% of the corn is planted, compared to a five-year average of 6%. Nationwide, 9% of the corn has emerged, compared to 2% over the past five years.
Rye harvest commenced last week in some locations. April proved to be a good month for fieldwork, but in Pennsylvania, the conditions have been very dry. Soil moisture improved this week, but cooler than normal temperatures have returned and will linger into next week.