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National Milk Producers tout two-step roll back of WOTUS

 

The National Milk Producers Federation (NMPF) told the U.S. Environmental Protection Agency (EPA) last week that the dairy industry supports a two-step process to roll back the existing Waters of the U.S. (WOTUS) regulation and generate a new policy that provides farmers greater certainty in the future.

NMPF said it has supported efforts by the Trump Administration since January to restart the regulatory process behind the controversial 2015 WOTUS rule and supports rescinding it “so the agency can initiate a new regulatory process defining and regulating groundwater sources.”

“A fresh start and a more reasonable approach that complies with past Supreme Court rulings will be in the best interests of the environment and dairy farmers,” said NMPF’s Jamie Jonker in comments to the EPA.

NMPF also called on federal and state food regulators to take enforcement action against imitation dairy product ‘Blue Magic Cashew Milk’ for continuing to ignore federal standards of identity for dairy products.

In a letter sent to the federal Food and Drug Administration and the California Department of Food and Agriculture, NMPF charged, “The continued use of a standardized dairy term, ‘milk,’ on a plant-based imitation made mostly from nuts and water, is a violation of standards defining milk as the product of a dairy animal.”

“Beyond ignoring clearly-defined regulations specifying what milk is, this ‘Blue Magic’ product is an affront to consumers seeking appropriate levels of nutrition for their families,” said Jim Mulhern, President and CEO of NMPF. “It’s obvious that this beverage is not a nutritional substitute for real milk, regardless of its desire to co-opt dairy terms.”

NMPF, the International Dairy Foods Assoc. and the Dairy Export Council called on Japan to “respect current market access between Japan and its trading partners, including the U.S., when reviewing a list of geographical indications (GIs) proposed by the European Union (EU), or else risk disrupting one of the world’s largest consumer marketplaces.”

In a joint letter to the Japanese Minister of Agriculture, Forestry and Fisheries, the U.S. dairy groups said “it is imperative that Japan not overlook the enormous significance of the EU food name list for Japanese consumers and producers, and for your lasting relationships with key international trading partners.”

A joint press release stated that “The European Union is in the final stages of negotiating a free trade agreement with Japan, establishing the rules of commerce for hundreds of food products produced in each region. In doing so, the EU is seeking to monopolize a long list of common names under the guise of geographical indications in trade deals with Japan and other nations, including China and Mexico. This campaign attempts to restrict generic product names such as parmesan, feta and asiago to products made only by EU producers, and runs counter to international trade commitments.”

Butter and cheese supply

Americans helped empty some of the nation’s butter and cheese supply in August, but cheese stocks remain above those a year ago. The USDA’s latest Cold Storage report pegged Aug. 31 butter stocks at 280.2 million pounds, down 27.1 million pounds or 8.8 percent from July and 38.5 million pounds or 12.1 percent below August 2016.

American type cheese, at 800.5 million pounds, was down 31.1 million pounds or 3.7 percent from July but 58 million or 7.8 percent above a year ago. The “other” cheese category showed stocks of 505.7 million pounds, down 5.3 million pounds or 1 percent from July but 33.1 million or 7 percent above a year ago. The total cheese inventory stood at 1.33 billion pounds, down 36.4 million pounds or 2.7 percent from July but 92 million or 7.4 percent above a year ago.

Just as the July Cold Storage report sent dairy product prices lower, backed by a higher than expected August Milk Production report, the August Cold Storage numbers were far more encouraging.

FC Stone broker Dave Kurzawski even saw silver lining in the milk output, writing in his Sept. 25 Early Morning Update, “It appears farmers are reacting more quickly to the moderating prices the past few weeks by trimming the herd and that was one of the things we focused on coming off the milk production report. Yes; milk production was high, but we are not adding cows and with an uptick in slaughter rates that’s a sign strong production levels may not last.”

CME block Cheddar cheese climbed to $1.74 per pound on Sept. 28 but closed Friday and the month at $1.7350, up 12.25 cents on the week, 20.25 cents above a year ago, and 19.5 cents above its Sept. 1 perch. The barrels hit $1.73 on Sept. 27, but ended Friday at $1.6925, up 9.25 cents on the week, 18.25 cents above a year ago, and up 17.25 cents on the month. Thirteen cars of block traded hands in the final week of the month at the CME and 61 of barrel.

Variety affects cheese demand

Cheese demand continues to differ by variety, according to Dairy Market News. The football season is underway and pizza cheese manufacturers are adding production days to fulfill steady to heavy orders. Milk availability is also mixed. Some cheesemakers, in certain areas, are still receiving spot milk offers.

Others are experiencing fewer milk offers. Fresh cheese inventories are reportedly harder to find, whereas aged cheese stocks are long. DMN warned, “The cheese market tone is unstable. CME market prices are stronger but contacts are not altogether optimistic that the market will not shift downward in the near term.”

Western cheese makers report modest cheese prices and favorable exchange rates are helping develop export opportunities. Domestic demand has remained solid, especially as buyers look for available cheese blocks ahead of the holiday buying season, and schools and food service pull more cheese.

“Cheese inventories are generally long, but many processors have come to understand this as a reality of the times. Manufacturers are hopeful the steady call for cheese will continue and will help keep stocks in check. Production is solid,” said DMN.

Butter saw a meltdown to $2.3150 per pound on Sept. 29, down 13.25 cents on the week, lowest price since May 12, but is 41.75 cents above a year ago when it lost 13 cents and was on its way to a $1.76 bottom in mid-October. It’s also down 19.25 cents from Sept. 1. Thirty-one cars sold on the week.

Dave Kurzawski said, “Although overall (butter) inventory puts the U.S. in a largely favorable position heading into holiday demand, the pricing advantages the U.S. offers for export opportunities still exist. We have enough for ourselves, but the balance sheet could be fairly tight if we begin exporting more aggressively. Perhaps, exporting actually started in August. That may explain the larger than anticipated butter drawdown.”

Analyst Jerry Dryer pulled back his prediction that the CME would see $3 per pound butter “given inventories and this point in the demand cycle.”

DMN said retail butter demand is steady. “Grocers’ orders remain strong, as their busy season has commenced. Cream is available. Offers from cream suppliers, located in states recently affected by the hurricanes have increased. The butter market tone is uncertain. Contacts note that global prices are comparatively high, while consecutive NASS Cold Storage reports have shown domestic stocks are decreasing. However, the market prices continue to resist bullish news.”

Western contacts report that some processors are taking export orders for Fourth Quarter. Supplies in the West are steady to higher and production is steady, said DMN. Some manufacturers stopped producing butter for the moment but others are running at or near full schedules to meet Fourth Quarter demand. “Cream supplies are sufficient but some processors expect that in the coming weeks, higher volumes of cream will be exported to Mexico.”

Class III futures pretty bleak

Cash Grade A nonfat dry milk ended Sept. 29 a half-cent higher on the week, at 82.75 cents per pound, 10 cents below a year ago, and down 3.5 cents on the month. Eight carloads found new homes on the week at the CME.

Class III futures have been looking pretty bleak, with prices close to or below $16 per cwt. through July 2018. Many wonder if the export market will bail us out. FC Stone’s Dave Kurzawski, speaking in the Sept. 25 Dairy Radio Now broadcast, said “I think it is, going forward.” Export numbers the last couple months were “disappointing,” he said, particularly lower than expected on cheese, “but they were still good for the year overall.”

He said it’s been slower on the demand side the past couple months, and there’s a “generous amount of finished product out there in the dairy world however the U.S. dollar is down over 10 percent this year so when you look at the currency considerations and you look at the prices in Europe and Oceania being quite a bit above where the U.S. price is, I certainly think that, as we head into the Fourth Quarter, we are very attractive for the export market and I think that could certainly help us finish out the year on a strong note.”

Milk inventories are being rebuilt in Europe, New Zealand, Australia, and other places that had seen declines in 2016,” he concluded, “The world is not necessarily awash in milk just yet and that does open up opportunity for prices to see some lift here as we go into the Fourth Quarter.”

The Sept. 22 Dairy and Food Market Analyst (DFMA) reports that foodservice sales continue to struggle in the U.S., according to Census Bureau data. The DFMA said, “Total foodservice sales grew a measly 3 percent in August and were up just 3.4 percent January through August. This year is setting up to have the slowest pace of restaurant sales growth since 2010. Limited-service sales (the cheese friendly side of the business) did not do much better; were up 3.5 percent in the first seven months of 2017.”

The DFMA reported, “The (IDFA) and (NMPF) are rumored to have reached an agreement on a draft proposal to change the Class 1 pricing formula. In the draft that we saw, the “higher-of” advanced Class III or Class IV prices is replaced with a 50-50 combination of the advanced Class III and advanced Class IV price.

“Additionally, there is a new 74 cent per cwt. premium to compensate farmers for the lost value of the ‘higher-of.’ It appears that industry leaders are now working together to reform the fluid milk pricing system. We note that the proposal is still in ‘draft’ phase, meaning it could change.”

DFMA’s Jerry Dryer said in the Oct. 2 Dairy Radio Now program that he believes such a plan would benefit both producers and processors as it would more accurately reflect the value of the milk going into Class I and it might even be a little easier to hedge.

Milk, feed price ratio higher

Lower corn, soybean and hay prices plus a higher All-Milk price propelled the August milk, feed price ratio to 2.49, up from 2.29 in July and 2.44 in August 2016, according to the latest Ag Prices report.

The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. One pound of milk today purchases 2.49 pounds of dairy feed of that blend.

The U.S. average All-Milk price was $18 per cwt., up 70 cents from July and 80 cents above August 2016. Prices ranged from a low of $16.60 in Michigan to $22.20 in Florida. California, at $17.07, was up 42 cents from July, $1.01 above a year ago, but $1.13 below Wisconsin. The Badger State averaged $18.20, up $1.10 from July and 20 cents above a year ago.

August corn averaged $3.27 per bushel, down 22 cents from July but 6 cents per bushel above August 2016. Soybeans averaged $9.24 per bushel, down 18 cents from July and 69 cents per bushel below a year ago. Alfalfa hay averaged $147 per ton, down $5 per ton from July but $10 per ton above August 2016.

Looking at the cow side of the ledger; the report shows the August cull price for beef and dairy combined averaged $76.30 per cwt., down a dollar from July, $4.30 per cwt. below August 2016, but $4.70 above the 2011 base average.

Cooperatives Working Together (CWT) accepted nine requests for export assistance this week from member cooperatives to sell 1.296 million pounds of Cheddar and Monterey Jack cheese, and 385,809 pounds of butter to customers in Asia, the Middle East, North Africa and Oceania.

The product has been contracted for delivery through December and raised CWT’s 2017 exports to 55.148 million pounds of American-type cheeses and 4.115 million pounds of butter (82 percent milkfat) to 21 countries on five continents.

The latest Crop Progress report shows 61 percent of U.S. corn was rated good to excellent, the week ending September 24, unchanged from the previous week and down from 74 percent in 2016. About 11 percent of U.S. corn has been harvested, up from 7 percent the previous week, 3 percent behind a year ago.

Sixty percent of the soybeans were rated good to excellent, up 1 percent from the previous week but down from 73 percent a year ago. Ten percent of the soybeans have been harvested, up from 4 percent the previous week and 1 percent ahead of a year ago.

Sixty percent of the cotton was good to excellent, down 1 percent from the previous week but compares to 48 percent a year ago.

World Dairy Expo begins

Don’t miss World Dairy Expo, which gets under way Oct. 3-7 in Madison, Wis. The theme this year is “Discover New Dairy Worlds” and features more than 2,500 head of cattle and over 800 companies providing goods and services to the dairy industry with global participation among exhibitors and visitors.

Expo seminars and virtual farm tours make Expo a trip well worth taking.

10/5/2017