National Milk will again conduct a series of producer conclave meetings to gather input on future dairy policy to take to Congress. NMPF’s Chris Galen reported in Thursday’s DairyLine that the Federation held similar meetings in 2000 and the gathered input was presented to lawmakers as the “policy priorities for the dairy producer community” for consideration in writing the farm bill.

"A lot of the things that were included in the conclave document six years ago were ultimately reflected in the 2002 farm bill,” Galen said, and Congress is now beginning the process of writing another farm bill and, while it probably won’t be completed until at least 2007, NMPF wants to get its “ducks in a row and hear from producers again.

State and regional dairy farm organizations have been invited, according to Galen, as well as cooperatives involved in the CWT program and NMPF’s “idairy” coalition and the conclaves are restricted to producers only.

“No organizational staff, no academics, no politicians,” Galen said, “Only people who work on farms, the ones that ultimately have to try to come to consensus on a lot of these often tough and complicated policy issues.”

The first meeting will be Jan. 30-31 in Sacramento, Calif. The second is Feb. 2-3 in Chicago, and Feb. 6-7 in Reston, Va. Collected input will be put into a draft document, he said, and presented to the rest of the NMPF membership, the rest of the dairy industry, members of Congress and the USDA.

Cheese prices comfortable
The cash cheese market started the second week of 2006 still on holiday break but ended with some weakness. Downes-O’Neill dairy economist, Bill Brooks, said in Tuesday’s broadcast that everybody seems “somewhat comfortable with cheese prices where they are.”

They’re probably still analyzing what happened over the holidays, he said, and what orders look like for the football playoff season that got underway on the weekend.

Butter wise, Brooks was skeptical of the previous week’s 6.5-cent increase, because “There wasn’t much trading behind it and the price moved up so quickly in the face of reports that a lot of cream is available.”

He said that there’s a lot of butter being produced and inventories are starting to grow and “We’re coming into the new year with a lot larger base for inventories to grow off of.”

Last week’s Dairy Products report showed an 8.6 percent increase in butter production in November and a surprising 6.4 percent increase in nonfat dry milk production. That’s the first time powder production was above the previous year since August 2004, according to Brooks, and may indicate a slowing in exports. If that’s the case, Brooks believes it will have a big impact on 2006 dairy prices. If powder exports slow, we could start seeing additional milk back up into domestic channels and put pressure on dairy prices, he warned.

Brooks viewed the Dairy Products report as “slightly bearish” and said it showed continued increases in cheese production and most of the categories came in with stronger output than what he had anticipated. It was nothing overly bearish, he concluded, but it “Did give us a slight bearish tone to the marketplace, especially given the time of year that we’re looking at right now.”

The cash block cheese price stood at $1.3675 per pound, as of “Friday the 13th,” unchanged on the week, but 26.25 cents below a year ago when it jumped 13.75 cents. Barrel closed at $1.3275, down 1.25 cents on the week and 27.25 cents below a year ago when it gained 15 cents. Nothing was traded in the second week of 2006. The NASS-surveyed block price averaged $1.3908 across the U.S., down 3.6 cents. Barrel averaged $1.3759, down 3.2 cents.

Cash butter, now trading five days a week, closed Friday at $1.33, down 7 cents on the week, and 30.25 cents below a year ago. Thirteen cars were sold. NASS butter averaged $1.3339, up 1.2 cents. The cash Grade “A” nonfat dry milk price lost 2.5 cents this week, the first decline since March 2005, and hit 97 cents per pound. NASS powder was down 1.7 cents, averaging 98.41 cents per pound.

Forecasts changed a bit
The USDA’s milk supply and use forecasts for 2005 and 2006, detailed in the latest World Agricultural Supply and Demand Estimates report, were little changed from last month’s. Whey and butter price forecasts were changed fractionally but Class III and Class IV milk prices were unchanged. The all milk price forecast for 2006 was raised slightly, to $13.40-$14.20 per cwt.

The 2005 milk production estimate was put at 176.6 billion pounds. 2006 output is projected to hit 181.3 billion. The 2006 Class III milk price is expected to range $12.05-$12.85, down from the 2005 average of $14.05. The 2006 Class IV price is projected at $11.45-$12.35. The 2005 average was $12.87.

Meanwhile, history was made this week as cash butter trading at the Chicago Mercantile Exchange switched from three days a week to five. The switch follows on the heels of last year’s advent of the cash-settled butter market.

Downes-O’Neill dairy broker, Jeff DeGrand, said in Wednesday’s DairyLine that the CME is “doing a good job of finding more ways to get participants into the marketplace.” Five days a week trading will help increase the visibility of butter prices for all traders, he said, and he sees it as a step toward increasing the hours of trading at some point in the future.

“The CME saw the success of the cash-settled butter,” DeGrand said, “And it “woke a dormant industry in terms of butterfat price risk management, and now they’re trying to parlay off that success and draw more attention to the exchange and its dairy complex.”

Acceptance of the cash-settled market has been “beyond anyone’s wildest expectations,” he said, and already eclipsed 1,000 contracts in open interest, something that typically takes years; “We did it in less than three months.”

It remains to be seen how five day a week trading on spot butter is received. DeGrand said. There was some initial grumbling only because of how quickly the change occurred, he said, because many butter manufacturers price off of a weekly average with their clients so some logistical reconfiguration had to occur, but in the long run he believes it will be well accepted.

The switch was discussed at a July meeting at the CME, according to DeGrand, and there were very few dissenters. The timing was a little bit of a surprise, he said, but the concept certainly wasn’t and he sees no downside to daily trading other than the fact that companies will have to devote a little more time and resources to monitoring the market. “Expanded price visibility and opening the markets to more trading is always a good thing in our opinion,” he concluded.

Published in the January 18, 2006 issue of Farm World.