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Views and opinions: New legislation bringing whole milk to schools could help production
New legislation that might aid fluid consumption drew praise this week from the National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA). “The Whole Milk for Healthy Kids Act of 2019” (H.R. 832) would allow whole milk in school nutrition programs and “reflects research showing that such products benefit children and gives school administrators one more tool with which to develop healthy eating habits.” “Whole milk provides yet another way for children to receive dairy’s nutritional benefits as part of a healthy eating pattern,” said NMPF’s Jim Mulhern. “This bill encourages the proper nutrition they need to lead healthy lives.” Meanwhile; the government’s reopening for three weeks after the 35-day partial shutdown prompted NMPF to call on Agriculture Secretary Sonny Perdue to quickly implement the 2018 Farm Bill’s dairy provisions which were delayed. “Dairy farmers just completed a fourth consecutive year of depressed milk prices and are facing an uncertain outlook for 2019,” wrote NMPF’s Jim Mulhern. “We believe that the significant dairy policy reforms we worked successfully with Congress to enact in the new farm bill will be critically important to helping farmers better manage difficult periods of low margins.” He said that dairy programs should be fast-tracked because of the nature of farm bill reforms. U.S. milk prices are beginning a slow rebound but have a long way back to profitability. The Agriculture Department announced the January Federal order (FO) Class III benchmark price at $13.96 per hundredweight (cwt.), up 18 cents from December but 4 cents below January 2018. It equates to $1.20 per gallon, up from $1.18 in December and compares to $1.20 a year ago. The January Class IV price is $15.48, up 39 cents from December, $2.35 above a year ago, and the highest Class IV price since September 2017. California, now a federal order, saw its January 4b cheese milk price at $13.37 a year ago and that was 63 cents per cwt. below the FO Class III. A drop in the U.S. All Milk price average could not be offset by some lower prices on feed and thus pulled the November milk feed price ratio down after three months of advances. The Agriculture Department’s latest Ag Prices report shows the November ratio at 2.18, down from 2.20 in October and down from 2.54 in November 2017. 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. In other words, one pound of milk today purchases 2.18 pounds of dairy feed containing that blend. The U.S. All-Milk price averaged $17 per cwt., down 40 cents from October and $1.20 below November 2017. New Mexico again had the low at $15.30, followed by Kansas at $16.00. California, at $16.44, was down 2 cents from October; and Wisconsin was at $16.90, down 70 cents from October. The national corn price averaged $3.41 per bushel, unchanged from October but 26 cents per bushel above November 2017. Soybeans averaged $8.37 per bushel, down 21 cents from October and 85 cents per bushel below a year ago. Alfalfa hay averaged $178 per ton, down $3 from October but $25 per ton above a year ago. Looking at the cow side of the ledger; the November cull price for beef and dairy combined averaged $52.70 per cwt., down $5.10 from October, $10.70 below November 2017, and $18.90 below the 2011 base average of $71.60 per cwt. Cheese and butter started February with some strengthening. Block Cheddar closed Feb. 1 at $1.50 per pound, highest CME price since Oct. 30, 2018, up 11 cents on the week, reversing four weeks of decline, up 8 1/4-cents on the month and 3 3/4-cents above a year ago. The barrels finished at $1.30, up 18 cents on the week, a quarter-cent lower on the month, 2 1/2-cents below a year ago, and 20 cents below the blocks. 14 cars of block traded hands on the week, 29 on the month. 28 cars of barrel traded on the week, 82 on the month. The USDEC’s latest Dairy Outlook looks positive for 2019. Alan Levitt, vice president of communications and market analysis reported in the Feb. 4 Dairy Radio Now broadcast; “We start 2019 with some optimism but we face headwinds through the first half of the year.” Previous years always had concerns over the milk supply growth and intervention stocks, he said, and “that put us in a buyer’s market and kept a lid on global prices, but we start 2019 with much lower milk production growth from the major suppliers so less exportable surplus and we don’t have intervention stocks” Levitt said milk production growth from the top five milk suppliers is expected to be flat in the fourth quarter, maybe down as much as 1 percent in the first quarter of this year, and possibly close to flat for the full year “so that provides a different vive for trading sentiment in 2019, something we haven’t seen in a few years.” But he cautioned; “That doesn’t mean a crazy rally right away, in fact the first half of the year it doesn’t look like there’ll be much price movement or strengthening but we’re finally moving toward a better balance.” He adds that “Just because intervention stocks have been drawn down, it doesn’t mean they’ve been consumed, they’ve just moved further down in the pipeline so at some point, all of that has to be used up.” The elephant in the room is still the tariff wars and that has to be resolved. Though China has made some overtures to resolve differences, Levitt said the U.S. has lost marketshare in China to Europe and others suppliers though he says “We’re holding our own on cheese exports to Mexico.” He added that we face a new trade agreement between Japan and the EU that started Feb. 1. A study by the USDEC projects that new trade agreements between Japan and other countries will put U.S. dairy exports at a competitive disadvantage, resulting in lost U.S. sales of $5.4 billion over 21 years. “The Japanese dairy market, the fourth-largest export destination for U.S. dairy exports, is expected to continue to grow in years to come,” says USDEC. “With a level playing field, the U.S. could roughly double its market share, according to the study, which was conducted by Tokyo-based Meros Consulting. However, without swift and effective action by the U.S. to secure a strong trade treaty with Japan that exceeds Japan’s agreements with Australia, New Zealand and the EU, the U.S. could see its market share drop in half over the next decade.” 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.