U.S. farmers received about 17.4 cents for every $1 spent by consumers at the retail level. Dairy margins held relatively steady over the last half of August. California's October 2016 Class 1 minimum milk prices slipped from a month earlier, but remain higher than a year ago.
‘Farmer’s share’ of retail food dollar remains about 17 percent
Based on July 2016 price estimates from USDA, U.S. farmers and ranchers received about 17.4 cents for every $1 spent by consumers at the retail level. More than 80 cents per $1 went for marketing, processing, wholesaling, distribution and retailing, according to the National Farmers Union.
A producer’s share of a gallon of fat-free milk, selling for $3.89 at retail, was $1.43.
In July, the producer’s share of a pound of top sirloin steak, selling for $9.89 at retail, was $1.92.
View the National Farmers Union Farmer’s Share infographic.
Dairy Margin Watch: August ends steady
Dairy margins held relatively steady over the last half of August, with lower milk prices offset by cheaper feed prices, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging LLC.
Projected margins remain above the 80th percentile of the past 10 years, and close to the 90th percentile in deferred second quarter 2017.
Milk prices were pressured by increased production and heavy dairy stocks in cold storage.
July milk production totaled 16.8 billion pounds, up 1.4 percent from 2015, and June production was revised to 16.7 billion pounds, an increase of 1.6 percent from the previous year.
Meanwhile, natural cheese in cold storage on July 31 totaled 1.276 billion pounds, an increase of 26 million pounds or 2 percent from June, and greater than the average June-July increase of about 1 percent over the past 10 years. The July figure also represented an increase of 9.86 percent or 114.555 million pounds from 2015 and a record for the month of July.
Butter stocks of 333.123 million pounds reflected a counter-seasonal increase over June of 4.974 million pounds or 1.52 percent although stocks typically decline just over 3 percent between June and July. The butter stocks figure also represented an increase of 78.776 million pounds or 31 percent over 2015.
On a positive note, feed costs continued to moderate with corn prices dropping to fresh contract lows as the market reacts to the latest estimates for record yield and production this season. Soybean meal prices likewise dropped to their lowest levels since April.
Visit the Margin Manager website.
California Class 1 milk prices pull back
California's October 2016 Class 1 minimum milk prices slipped from a month earlier, but remain higher than a year ago. Through the first 10 months of 2016, Class 1 North and South prices remain about $1.64 per hundredweight (cwt) less than the same period a year ago.
USDA will announce the October 2016 federal order Class I base price on Sept. 21.
Class 1 North ($ per cwt)
October 2016 – $17.77
September 2016 – $18.12
October 2015 – $17.37
January-October 2016 – $15.98
January-October 2015 – $17.62
Class 1 South ($ per cwt)
October 2016 – $18.04
September 2016 – $18.39
October 2015 – $17.64
January-October 2016 – $16.25
January-October 2015 – $17.90
Source: California Department of Food and Agriculture
August global dairy price index jumps
Global consumers paid more for dairy products in August, according to the latest United Nations’ Food and Agriculture Organization (FAO) Food Price Index.
The August 2016 FAO Dairy Price Index increased 8.6 percent from July, and is up 14 percent compared to August 2015. Prices rose for all the dairy commodities that compose the Index, in particular for cheese, whole milk powder and butter. The latest increase confirmed a notable change in market sentiment, as falling milk production in the European Union (EU), coupled with an unexceptional opening to the dairy year in Oceania, pointed to tighter export supply prospects than had been earlier anticipated. Skimmed milk powder quotations were muted, supported by large EU intervention stocks, which were seen as a potential future source of supply.
Globally, the FAO Food Price Index – a measure of monthly changes in international prices for five major commodities – cereal, vegetable oil, dairy, meat and sugar – rose 1.9 percent from July, and is now almost 7 percent higher than a year ago.
Negative dairy margins expected to continue in Illinois
Lower milk prices resulted in negative economic returns for Illinois dairy producers in 2015, a trend expected to repeat in 2016, according to figures summarized by University of Illinois agricultural economists in cooperation with the Illinois Farm Business Farm Management Association.
The average net price received per 100 pounds of milk was $17.35 per hundredweight (cwt), which was less than total economic costs of $19.17 per cwt.
On a per-cow basis, total returns from milk were $4,053, compared to the total cost to produce milk of $4,463 per cow. Total returns from milk per cow were the lowest since 2010; 2014 was the highest on record at $5,730.
The net returns per cow in 2015 were a negative $410. Total returns have exceeded total economic costs two out of the last ten years.
Restaurant Performance Index posts modest increase
Although same-store sales and customer traffic levels remain somewhat uneven, the National Restaurant Association’s Restaurant Performance Index (RPI) registered a modest increase in July. The RPI stood at 100.6 in July, up 0.3 percent from June.
The RPI consists of two components – the Current Situation Index (measuring current trends) and the Expectations Index (measuring restaurant operators' six-month outlook) – and tracks the health of, and outlook for, the U.S. restaurant industry.
For the third consecutive month, restaurant operators’ reporting of same-store sales was a mixed bag, with nearly equal numbers reporting monthly increases and declines.
The primary driver of the modest RPI gain in July was positive capital expenditure levels, an indication the future overall outlook remains positive, according to Hudson Riehle, senior vice president of research for the National Restaurant Association.
WhiteWave schedules October vote on Danone merger
The WhiteWave Foods Company will hold a special stockholder meeting, Oct. 4, to consider and vote on a proposal to merge with Danone S.A. Under the proposal, Danone will acquire WhiteWave for $56.25 per share in an all-cash transaction. WhiteWave’s board has recommended that stockholders vote in favor of the merger with Danone.
The company’s leading North American brands include Silk, So Delicious and Vega™ plant-based foods and beverages, International Delight and Land O Lakes coffee creamers and beverages, Horizon Organic and Wallaby Organic premium dairy products.
Danone owns Activa, Oikos, Dannon and the world's largest organic yogurt brand, Stonyfield. Its proposed $10 billion purchase of WhiteWave would combine Stonyfield with Wallaby, a rapidly growing organic yogurt label, and with Horizon, the nation's largest organic milk brand, giving Danone a large share of the U.S. organic dairy market.
The Cornucopia Institute, an organic industry watchdog group, has asked the U.S. Department of Justice and Federal Trade Commission to block the merger. Cornucopia argues the acquisition would have a serious anti-competitive effect on the organic yogurt and organic fluid milk markets in the U.S.
USDA cuts importer representation on National Dairy Board
Importer representation on the of National Dairy Promotion and Research Board (NDB) will be reduced to one. USDA proposed the reduction, down from two, last April. The final proposed rule was published Aug. 12.
U.S. dairy producer representation will remain at 36.
USDA determines the number of importer representatives on the NDB board every three years. Representation is determined by the comparing the average volume of dairy imports to volumes of domestic dairy product production.
NDB program activities are financed by a mandatory 15-cent per hundredweight assessment on all milk marketed commercially in the U.S. Importers pay a 7.5-cent per hundredweight assessment on milk, or equivalent thereof, on dairy products imported into the U.S.
USDA to charge TQR administrative fee
USDA announced it will charge an annual $250-per-license administration fee for companies importing dairy products under the 2017 tariff-rate quota (TRQ) system. The licenses are required for companies importing dairy products subject to the TRQ. Under TQR, imports up to a specified amount are subject to a low-tariff rate and all those exceeding the quota receive a higher tariff rate. The application window for an import license ends Oct. 15, 2016. 
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Dave Natzke
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