Good news is hard to come by as we reach the halfway point of 2016. Heading into the locker room, milk prices continue 2016 swoon, but the latest GDT auction showed improvement. U.S. farm wages are higher. Tightening margins trigger more MPP-Dairy payments. Russia is expected to extend import embargo, weakening U.S. dairy export outlook. This and other U.S. dairy economic news can be found here.
U.S. average milk price lowest since May 2010
The U.S. average all-milk price declined again in April, falling to the lowest level in 6 years, according to the May 31 USDA Ag Prices report.
At $15 per hundredweight, April’s average is down $0.30 from March and $1.50 less than April 2015’s average of $16.50 per hundredweight. Through the first 4 months of the year, 2016 prices averaged $15.53 per hundredweight, about $1.35 less than the same period a year earlier.
Among major dairy states, only Florida posted a small gain compared to March (Table 1). Compared to a year earlier, average prices were down $2 per hundredweight or more in Illinois, Michigan, Minnesota, South Dakota and Wisconsin.
GDT index improves
Overall dairy prices improved at the Global Dairy Trade (GDT) auction, June 1. The GDT index rose 3.4 percent.
Whole milk powder prices were down 1.7 percent, but nearly all other prices were higher. Skim milk powder increased 12.1 percent to $1,867 ($U.S.) per metric ton and $0.85 per pound. Cheddar cheese rose 7.8 percent to $1.21 per pound, and butter increased 3.2 percent to $1.25 per pound.
HighGround Dairy called the auction neutral for whole milk powder and butter and bullish for skim milk powder and cheddar cheese.
U.S. farm wages top $12 per hour
The number of hired workers on U.S. farms rose in April, most worked a little longer and average hourly wages increased, according to a quarterly Farm Labor report from USDA’s National Ag Statistics Service.
Livestock workers (those tending livestock and milking cows) earned $12.01 per hour, up 4 percent. Benefits, such as cash bonuses, housing or meals, are not included in the average wages.
Read the full Progressive Forage article.
May FMMO, California order prices mixed
May 2016 federal milk marketing order (FMMO) Class III and Class IV minimum prices were announced June 2. The Class III fell $0.87 from April, but the Class IV price was up $0.41.
FMMO Class III ($ per hundredweight)
May 2016 – $12.76
April 2016 – $13.63
May 2015 – $16.19
January-May 2016 – $13.53
January-May 2015 – $15.84
FMMO Class IV ($ per hundredweight)
May 2016 – $13.09
April 2016 – $12.68
May 2015 – $13.91
January-May 2016 – $13.06
January-May 2015 – $13.65
Source: USDA Ag Marketing Service
California's May 2016 Class 4a/4b milk prices were announced June 1. Class 4a again saw a small increase, but Class 4b fell on a declining cheese market.
California Class 4a ($ per hundredweight)
May 2016 – $12.57
April 2016 – $12.54
May 2015 – $13.91
January-May 2016 – $12.81
January-May 2015 – $13.45
California Class 4b ($ per hundredweight)
May 2016 – $11.37
April 2016 – $12.71
May 2015 – $14.63
January-May 2016 – $12.69
January-May 2015 – $14.07
Source: California Department of Food and Agriculture
Pennsylvania law raises milk-hauling weight limits on interstate highways
Pennsylvania Governor Tom Wolf signed Senate Bill 1108 into law, raising the state’s weight limits for trucks hauling milk.
Long-sought by the Pennsylvania dairy industry, the bill (now known as Act 34) enables the state Department of Transportation (PennDOT) to issue special permits to milk-hauling trucks weighing more than 80,000 pounds.
PennDOT and the state Agriculture Department will develop a permitting and fee schedule, similar to what is in place for dairy haulers on non-interstate roads.
Read more about provisions of the law.
Russia preparing to extend dairy import ban
The Russian Agriculture Ministry is preparing to extend an existing food import embargo until the end of 2017, according to the TASS news agency.
The current sanctions against EU countries, the U.S., Canada, Australia and Norway run through Aug. 5, 2016. The embargo is frequently cited as a reason for weaker global dairy product demand and related low prices.
U.S. dairy export weakness to continue
USDA reduced fiscal year 2016 (FY’16) U.S. dairy product export projections further, forecasting values to be down nearly $900 million from a year earlier.
FY’16 (Oct. 1, 2015 through Sept. 30, 2016) dairy exports are expected to dip to $4.7 billion, $200 million less than February’s quarterly Ag Trade Outlook report. After a record high of $7.4 billion in FY’14, FY’15 U.S. dairy product exports fell $1.85 billion (25%) to $5.56 billion.
As in FY’15, the weaker U.S. export values are attributed to strong competition in an oversupplied market.
Meanwhile, the FY’16 U.S. dairy import forecast was estimated at $3.5 billion, up about $100 million from the February forecast, and compares to $3.49 billion in FY’15.
FY’16 cheese imports are projected at $1.4 billion, compared to $1.31 billion in FY’15.
Slowing U.S. dollar appreciation, low oil prices and growth in European Union and Asian economies underpin the overall export outlook. After a sustained period of appreciation, the dollar weakened significantly against the currencies of key U.S. agricultural trading partners and competitors in the first few months of 2016. Despite recent trends, however, the dollar is expected to appreciate on average in 2016 against most key currencies, although much less than in 2015.
The total U.S. agricultural trade surplus is forecast at $9.7 billion in FY’16, down from $25.7 billion in FY’15.
Tightening margins trigger more MPP-Dairy payments
April’s Margin Protection Program for Dairy (MPP-Dairy) average milk income margin over feed costs fell to just $6.83 per hundredweight, the lowest level in the program’s short history.
When combined with March calculations, the average margin for the 2-month pay period was about $7.15 per hundredweight. That means any farmers insured at $7.50 or $8 per hundredweight margin levels will see payments of $0.35 and $0.85 per hundredweight, respectively, for one-sixth of their annual milk production. Individual payments will be subject to a 7.3 percent federal sequestration deduction.
About 345 dairy farmers have insured margins at the two highest levels, representing about 1.5 percent of the 23,328 total MPP-Dairy participants.
At $15 per hundredweight, April 2016 milk prices continued to slide. Feed costs averaged $8.17 per hundredweight nationally, with more than a $27.50 per ton jump in soybean meal and a $9 per ton increase for alfalfa hay compared to March.
Based on projections from the Program on Dairy Markets and Policy, MPP-Dairy margins could dip below $6 per hundredweight in May through July 2016, turning above $8 per hundredweight in October.
Read the full Progressive Dairyman article.
Also read: Dairy safety net in need of patches
Organic premiums: Their history
USDA released a report in May 2016, titled “Changes in Retail Organic Price Premiums from 2004 to 2010.”
The study defined the organic price premium as the difference between the organic price and the nonorganic price when all other factors are equal. It found eggs and dairy products generally had the highest premiums, while fresh produce has the widest spread of premiums.
As the title suggests, the latest price data is from 2010.
May global dairy price index rises slightly
Global consumers paid slightly more for dairy products in May, according to the latest United Nations’ Food and Agriculture Organization (FAO) Food Price Index.
Registering the first month-to-month increase since last October, the May 2016 FAO Dairy Price Index increased 0.4 percent from April. It remains 24 percent below May 2015.
The dairy index includes global average prices for butter, cheese, and skim milk and whole milk powders.
The FAO Food Price Index is a measure of monthly changes in international prices of a basket of five food commodities – cereal, vegetable oil, dairy, meat and sugar. While the overall FAO Food Price Index rose 2.1 percent in May 2016, it’s still 7 percent less than a year ago.
April cull cow prices inch up; culling rate behind a year ago
U.S. average cull cow prices rose slightly in April, reaching the highest point since November 2015, according to the USDA/NASS Ag Prices report.
April 2016 cull cow prices (beef and dairy combined) averaged $81.50 per hundredweight, up $1.50 from March, but $31.50 per hundredweight less than April 2015.
The pace of dairy cow culling remained behind a year earlier. For the week ending May 21, dairy cows slaughtered under federal inspection totaled 50,500, bringing the year-to-date total to 1.206 million. That's about 16,100 head less than during a similar period in 2015. PD
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Dave Natzke
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