The National Milk Producers Federation praised the introduction this week of H.R. 5275, the Agricultural Certainty for Reporting Emissions (ACRE Act).

An NMPF press release said, “There is now bipartisan, bicameral support for legislation that will reduce a significant regulatory burden on U.S. dairy farms. We fully support the House companion to the Senate’s Fair Agricultural Reporting Method (FARM) Act, which would prevent dairy farms from having to generate meaningless air emissions data under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA).

“The CERCLA provisions in question were originally enacted to address accidental hazardous air emission emergencies from toxic waste sites, and were never intended to be applied to dairy and other livestock farms. Through this legislation, Congress is stipulating that this burdensome regulatory overreach serves no legitimate health or safety purpose.”

Farmers are beginning to wonder when the Agriculture Committees will introduce their respective versions of the farm bill in the House and Senate.

Bob Gray, editor of the Northeast Dairy Farmers Cooperatives newsletter said authorization for the 2014 Farm Bill ends on Sept. 30. He speculated it will more than likely have to be extended until Dec. 31, and it may carry over into 2019.

The House Agriculture Committee will likely introduce its bill first, Gray said, “Probably the end of this month or in early April. The Senate bill will come along a little later, probably in mid-April.”

Gray added that USDA’s Farm Service Agency is moving ahead with the new Margin Protection Program (MPP) sign up and will be announced in early April and will be retroactive to Jan. 1.

“Letters will be sent to dairy producers this month outlining the specifics of the program that include changes made in insurance premiums on the first 5 million pounds of milk. The letters will include detailed information on the payments based on the insurance premiums at the various margin levels,” Gray said.

Section 199A rewrite gets OK

The International Dairy Foods Assoc. gave a thumbs up to a congressional proposal that would amend Section 199A of the Tax Cuts and Jobs Act to “resolve unintended consequences that have distorted the dairy marketplace,” an IDFA press release stated.

“The proposal is designed to level the playing field for IDFA’s cooperative and non-cooperative members that produce milk and dairy products, and IDFA urges Congress to include this proposal in the final appropriations, or omnibus, bill for fiscal year 2018 later this month.

“Prior to passage of the Tax Cuts and Jobs Act on Dec. 22, 2017, a tax provision called Section 199 provided businesses, including farmers and agricultural cooperatives, with a deduction based on the business income from domestic production activities. The new tax law significantly altered the tax code and Section 199 along with it. A new Section 199A was included in the Tax Cuts and Jobs Act to continue providing this type of benefit to cooperatives and their members, but the provision created an imbalance in the agriculture marketplace, including the marketplace for milk and dairy products.”

Milk production per cow is up

As it always does, USDA’s monthly Livestock, Dairy and Poultry Outlook, issued March 14, mirrored dairy projections contained in the March 8 World Agricultural Supply and Demand Estimates report.

The Outlook credited recent growth in milk production per cow for the increased forecasts for milk yields for the first half of 2018 and said that will result in a 2018 forecast of 23,255 pounds per head, 25 pounds higher than last month’s forecast.

The forecast for the size of the milking herd in 2018 was unchanged at 9.415 million head.

Feed price forecasts were raised. The 2017-18 corn price forecast is $3.15-$3.55 per bushel, an increase of 5 cents at the midpoint of the range. The soybean meal price forecast is $325-$355 per short ton, an increase of $20 at the midpoint of the range. The alfalfa hay price was $152 per short ton in January, an increase of $4 from December and $26 from January 2017. Drought in alfalfa hay production areas has contributed to the higher prices.

Cash block cheese lost some ground the week of March 12 but rebounded and closed March 16 at $1.5850 per pound, up 1.5 cents on the week and 18.5 cents above a year ago. The barrels finished at $1.56, up 6.25 cents on the week, 19.5 cents above a year ago, and the highest since Dec. 18, 2017.

Seventeen cars of block traded hands on the week at the CME and 26 of barrel.

Snowstorms in the Northeast caused a number of Midwestern cheese producers to reduce production, according to Dairy Market News.

“Cheese demand, particularly in the Italian-style sector, has been negatively affected by the inclement weather as retail and restaurant shoppers are understandably remaining at home. Other cheesemakers continue to run full tilt, as demand for traditional Cheddar and specialty products are seeing continually steady to strong demand ahead of the spring holidays.”

Milk suppliers are somewhat perplexed by the lack of intakes from Class III producers, as spring holidays loom and fluid supplies are readily accessible. Fluid milk prices ranged from $1 over to $3 under Class III. That said, a majority of contacts are uninterested in the spot milk market and suggest the discounts would need to exceed current offerings in order to consider re-entering the fray.

Western contacts anticipate cheese output will continue to ramp up as milk output increases through the spring. While relatively strong demand has kept pace with cheese volumes the last few months, a few manufacturers suggest cheese stocks and production were a little lower, helping to support prices.

“Seasonal spring holiday demand is now mostly filled, but as long as U.S. cheese prices remain favorable compared to international prices, there should be a steady pull on stocks,” said DMN. “Some contacts are still concerned about the abundance of milk and whether the spring flush will overwhelm the capacity to produce cheese and pump inventories higher. Many feel the excess milk will find its way into cheese vats and could put further pressure on cheese markets.”

Spot butter climbed to $2.2175 per pound on March 14, but closed at $2.21, up a half-cent on the week and 8 cents above a year ago, with six sales on the week.

Cream accessibility is slight

Cream accessibility remains somewhat slight for butter makers, DMN reported.

Some contacts expected cream prices to decline this week, but prices maintained a steady path. Undoubtedly, Class II and III production increases are holding cream prices up, said DMN. Some Central analysts expect butter market prices to see a slight drawdown following the recent market bounce.

“The noticeable price increase, they posit, was due to the new crop butter requirement put out by the CME Group,” DMN said. “Regardless, butter market tones are undoubtedly unique in dairy, as they are determinedly bullish while other markets struggle.”

Grade A nonfat dry milk closed Friday at 69 cents per pound, a half-cent higher on the week but 11.5 cents below a year ago, with 15 cars sold on the week.

U.S. dairy market price transparency was enhanced this week as CME traders were enabled for the first time to buy and sell physical loads of dry whey during a spot call just before the cheese. The new market finished March 16 at 29.25 cents per pound, up 3.25 cents on the week, with one sale reported for the week.

California’s April Class I milk prices were announced by the California Department of Food and Agriculture at $15.97 per cwt. for the north and $16.24 per cwt. for the south. Both are up 77 cents from March but 79 cents and 80 cents respectively below April 2017.

That put the four-month average at $15.68 for the north, down from $18.07 at this time a year ago and compares to $15.88 in 2016. The southern average is $15.95, down from $18.34 a year ago and $16.15 in 2016. The April Federal order Class I base price will be announced by the USDA on March 21.

Efforts to create a Federal Milk Marketing Order in California are back on track after a judicial snafu put the procedure on hold. The issue has been resolved and the Agriculture Department is expected to issue a recommended final decision soon. California dairy producers will then need to ratify it.

U.S. dairy exports are strong

U.S. dairy exports started 2018 with a strong showing, with all products seeing increases from January 2017 except whole milk powder.

FC Stone dairy broker Dave Kurzawski called it a “continuation of recent trends,” and while the report was “pretty neutral to the market,” it was “a good way to start off the year.”

Cheese exports were down 1.4 percent from December but were up 18.9 percent from a year ago, with Cheddar exports down 19.7 percent from December but up 19 percent from a year ago. That was weaker than FC Stone had forecast, he said. Butter exports were down 23.8 percent from December but 17.6 percent above those a year ago.

Kurzawski reported that dry whey exports were up 29.8 percent from a year ago and attributed that to taking market share from Europe. He added that, at current price spreads, he expects that to continue.

The talk of trade wars and ending NAFTA has added uncertainty to the global market, Kurzawski said. “We wonder if the Administration is crazy like a fox or is just crazy,” but believes President Trump may be “using some of the recent negotiation tactics and tariffs and things of that nature as bargaining chips for a more favorable NAFTA deal,” he concluded. “I’m not really sure what that really looks like, because we had a pretty good deal to begin with.”

U.S. imports of cheese were down 20 percent from December and 3.1 percent below a year ago. Butter imports were up 46.5 percent from December but down 1.1 percent from a year ago. Anhydrous milkfat was down 73.8 percent from December but 8 percent above a year ago.

The Livestock, Dairy and Poultry Outlook said, “It appears that U.S. domestic dairy product prices have been competitive with foreign export prices. In February, Oceania export prices for butter, cheese, and skim milk powder (SMP) were $2.39, $1.69, and 90 cents per pound, respectively. Western Europe export prices for butter, SMP, and dry whey were $2.56, 76 cents, and 40 cents per pound, respectively.”

The Outlook added, “The value of China’s dairy imports from countries around the world in January totaled $1.241 billion U.S. Adjusted for inflation, this is about the same as the level reached in January 2014. Most of China’s dairy imports by value come from New Zealand and the European Union (EU); Australia and the United States vie for distant third.

“China’s highest dairy import values by trading partner are for whole milk powder from New Zealand, infant formula from the European Union and Australia, and whey products from the U.S. China’s imports of cheese increased substantially in January; effective Dec. 1, 2017, China unilaterally lowered its cheese tariffs for most countries, including the U.S. and the EU, from 12 to 8 percent. New Zealand benefits from preferential treatment due to its free trade agreement with China. Australia also has a free trade agreement with China, but benefits are smaller since the agreement is only in its third full year and tariff reductions are being phased in.”

Intellectual property protections

In testimony before the Office of the U.S. Trade Representative (USTR), the Consortium for Common Food Names (CCFN), an international non-profit organization representing the interests of consumers, farmers, food producers and retailers, urged the U.S. government to “intensify its efforts to repel attempts by the European Union (EU) to confiscate generic terms within major trading markets, as well as within the United States itself.”

CCFN’s testimony was presented as part of the USTR’s preparation of its annual Special 301 review of intellectual property rights protections among U.S. trading partners, according to a CCFN press release.

“The persistent and serious problem of the EU’s transgressions regarding geographical indications (GIs) continues to be highly problematic for the U.S. food and agriculture sector,” said CCFN Senior Director Shawna Morris. “It will require continued vigilance and action on the part of the U.S. government. We ask you to continue the core objectives outlined in the 2017 Report and to continue to enhance U.S. efforts to hold our trading partners to their commitments.”

Legislation touted by U.S. Sen. Kirsten Gillibrand (D-N.Y.) would establish a national, inflation-adjusted floor price for milk at $23.34 per cwt. The plan would be included in the Farm Bill now being drafted by the Senate Ag Committee.

The March 14 Daily Dairy Report said, “whenever the U.S. All-Milk price were to drop below the proposed floor, eligible producers would receive 45 percent of the difference, which is the same percentage once paid by the defunct Milk Income Loss Contract (MILC) program. Because January’s All-Milk price of $16.10 per cwt. was $7.24 less than the proposed price floor, January’s payout would have been close to $3.26 per cwt. Under the bill, only farms participating in the Dairy Margin Protection Program (MPP) would be eligible for payments and only on the first 5 million pounds of production, providing more help to smaller farms than larger operations.”

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.