Digest Highlights

Federal Reserve cuts interest rate to near zero

In an emergency move related to the coronavirus, the Federal Reserve cut benchmark interest rates a full percentage point on March 15. The federal fund rate is now at a range of 0% to 0.25%, down from a range of 1% to 1.25% established less than two weeks earlier.

Natzke dave
Dave Natzke
Editor / Progressive Dairy

“The effects of the coronavirus will weigh on economic activity in the near term and pose risks to the economic outlook,” according to a statement by the Federal Open Market Committee (FOMC). “The committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

DMC margin forecast impacted by coronavirus

The USDA Dairy Margin Coverage (DMC) program outlook continues to change due to the coronavirus and its impact on domestic and global dairy markets.

The DMC Decision Tool estimates margin ranges and payment probabilities based on current milk and feed futures prices. While still forecast to top $10 per hundredweight (cwt) in February (the February margin is announced on March 31), the outlook gets murkier after that, potentially dipping below $9 in April through July.

As of the close of trading on March 13, DMC margins had close to an 80% probability of falling below the top insurable level of $9.50 per cwt between April-June 2020.

Advertisement

DMC production history update proposed

In early March, U.S. Rep. Tom Emmer (R-Minnesota) introduced legislation to modify the DMC program. The bill (H.R.6111) would allow dairy producers participating in the DMC program the option of making a one-time update to their milk production history. The bill has been referred to the House Committee on Agriculture.

With improvements made in the USDA’s dairy “safety net” transition from the Margin Protection Program for Dairy (MPP-Dairy) to the DMC program, one disappointing feature for many dairy producers was how milk production history was determined. Approved in the 2018 Farm Bill, DMC used the highest amount of milk produced annually during the years 2011, 2012 and 2013 as a baseline. In subsequent years, producers were allowed to adjust the production history to reflect any increase in the national average milk production.

If approved, the bill will help the DMC program become more reflective of a dairy operation’s current production and provide a more accurate representation when covering a producer’s DMC margin.

Canada approves USMCA

Canada’s Parliament approved the U.S.-Mexico-Canada Agreement (USMCA) on March 13, starting the clock on implementation. According to the U.S. Trade Representative (USTR) office, the three countries now have three months to finalize regulations governing the agreement.

A USDA fact sheet summarized “key achievements” to increasing dairy market access.

Dairy-RP featured in next Pennsylvania CDE ‘Protecting Your Profits’ webinar

Pennsylvania’s Center for Dairy Excellence (CDE) will host a monthly “Protecting Your Profits” webinar, March 25, beginning at noon (Eastern time).

The monthly update is led by Zach Myers, CDE risk education manager, and provides dairy financial and risk management resources via a conference call and webinar format. This month’s webinar will also feature Christine Brodeur, director of risk management for Dairy Farmers of America (DFA), discussing the Dairy Revenue Protection (Dairy-RP) program.

To participate in the webinar, connect to the CDE Protecting Your Profits website. Individuals who would prefer to connect via conference call can dial the following number: (866) 266-3378; conference ID: 717-346-0849#; passcode: 0849#.

There is no cost to participate in the Protecting Your Profit" program. Email Zach Myers for more information.

The webinar will start promptly at noon and last one hour. It will be recorded and posted on the CDE website for those who are unable to join the live session.

Dairy-RP: Q2 2020 sales period closed

The period to purchase Dairy-RP coverage for milk marketed during the second quarter of 2020 (April-June 2020) closed March 16 at 9 a.m. (Central time).

Quarterly sales periods generally close the 15th of the month preceding the upcoming quarter. If the end of quarterly sales period lands on a Monday, Tuesday, Wednesday or Thursday, the prices on that day are available from 3 p.m. on day the quarter ends through 9 a.m. the next business day.

If the end of quarterly sales period lands on a Friday, Saturday or Sunday, the prices from Friday extend through to 9 a.m. on the following Monday.

As of March 16, Dairy-RP coverage can be purchased for the upcoming five quarters:

  • Quarter 3 2020 (July-September 2020) – sales period closes June 15, 2020.

  • Quarter 4 2020 (October-December 2020) – sales period closes Sept. 15, 2020.

  • Quarter 1 2021 (January-March 2021) – sales period closes Dec. 15, 2020.

  • Quarter 2 2021 (April-June 2021) – sales period closes March 15, 2021.

  • Quarter 3 2021 (July-September 2021) – sales period closes June 15, 2021.

Dairy-RP is typically sold each day once coverage prices and rates are validated beginning at approximately 3 p.m. (Central time) and ending at 9 a.m. (Central time) on the next business day. On weekends, the prices from the previous date of sales (typically Friday) would extend through 9 a.m. on Monday (unless otherwise specified).

However, no sales are allowed on the day of major USDA dairy (milk production, dairy product production and cold storage) reports. Looking ahead, no sales will be offered on March 19 and 23.

Wisconsin Farmers Union cancels Dairyland Forum

The Wisconsin Farmers Union has decided to cancel the Dairyland Forum & Rally for Rural Wisconsin, which was set to draw presidential candidates and hundreds of family farmers and rural advocates to western Wisconsin on March 29.

The decision followed an emergency health declaration by Wisconsin Gov. Tony Evers and state Department of Health Services Secretary Andrea Palm, who recommended the cancellation of any events expected to attract of more than 250 people.

"Due to increasing concerns around the spread of the [coronavirus], we could not move forward on this event in good conscience," said Wisconsin Farmers Union Executive Director Julie Keown-Bomar.

UDFC seeks delay in QIP statute hearing

Citing concern over the spread of the coronavirus, members of the United Dairy Families of California (UDFC) are asking for a delay in a public hearing to consider a petition to suspend a statute implemented to create the state’s Quota Implementation Plan (QIP). The California Department of Food and Agriculture (CDFA) has scheduled the hearing for April 7-8, beginning at 8 a.m. each day, at the Visalia Convention Center, Visalia, California.

The Stop QIP Dairy Tax Coalition filed the petition, calling for suspension of a section of the California Food and Agriculture Code (Chapter 3.5), which would effectively terminate the QIP, also called the Quota Administration Plan (QAP).

Meanwhile, the UDFC continues to seek signatures for a separate petition seeking approval of a plan to establish a five-year sunset on the QIP.

More dairy meetings canceled due to coronavirus concerns

Fears related to the coronavirus are not only impacting dairy markets and exports, but also forcing the cancellation of several large dairy meetings.

  • Dairy Farmers of America, the nation’s largest dairy cooperative, postponed its annual meeting, scheduled for March 16-18 in Kansas City, Missouri. In accordance with DFA bylaws, a meeting of DFA’s delegates and farmer-leaders is being planned for later this year.

  • The Professional Dairy Producers Conference annual business conference, set for March 18-19, in Madison, Wisconsin, will now be held entirely online. Registration closes on March 17 at 5 p.m. Registrants can also access all recorded sessions, handouts and presentations on-demand, and then take a “walk” through PDPW’s premier suppliers' digital storefronts on PDPW Prime.

  • The Central Plains Dairy Expo, scheduled for March 24-26 in Sioux Falls, South Dakota, has been canceled.

  • The California Dairy Sustainability Summit, set for March 25-26 in Sacramento California, has been postponed.

  • The Wisconsin Public Service Farm Show, scheduled for March 31-April 2 in Oshkosh, Wisconsin, has been canceled.

  • An annual “Workshop for Dairy Economists and Policy Analysts,” originally set for April 22-23 in Baltimore, Maryland, will not be held.

USDA buys dairy products

The USDA’s Agricultural Marketing Service (AMS) awarded multiple bids for the delivery of dairy products for distribution through domestic feeding programs. Most deliveries are to be made between April 6 and July 1.

  • 4.9 million gallons of 1%, 2% and whole fluid milk in one-half gallon and gallon containers, at a total cost of $10.9 million: Winning bids came from Anderson Erickson Dairy, Des Moines, Iowa; Borden Dairy, Dallas, Texas; Dairy Farmers of America, Kansas City, Kansas; Darigold, Seattle, Washington; Dean Foods, Harvard, Illinois; Foster Dairy, Modesto, California; GH Dairy, El Paso, Texas; Hiland Dairy, Springfield, Missouri; Hollandia Dairy, San Marcos, California; HP Hood, Lynnfield, Massachusetts; Prairie Farms, Carlinville, Illinois; Royal Crest Dairy, Denver, Colorado; Shamrock Foods, Phoenix, Arizona; Turner Dairy Farms, Pittsburgh, Pennsylvania; and Upstate Niagara, Buffalo, New York.

  • 177,600 units of 1% and 2% fluid milk in one-half gallon and gallon containers, at a total cost of $439,416: Winning bids came from Dairy Farmers of America, Darigold, HP Hood, and Smith Brothers Farms, Kent, Washington.

  • 869,400 pounds of mozzarella string cheese from Miceli Dairy Products, Cleveland, Ohio: Delivered prices ranged from about $2.33-$2.39 per pound, with a total cost of $2 million.

  • 18.5 million pounds of evaporated and ultra-high-temperature milk, at a total cost of $7.47 million: Winning bids came from Gossner Foods, Logan, Utah; Industria Lechera De, San Juan, Puerto Rico; JEC Consulting & Trading Company, Charlotte, North Carolina; and O-AT-KA Milk Products, Batavia, New York.

Idaho: Wright to manage research dairy project

John Wright will serve as the University of Idaho’s (U of I) project manager for a new $25 million research dairy. The 2,000-cow facility, located near Rupert, Idaho, will become the nation’s largest research dairy.

Wright, who retired last year from a 41-year career of operating his own 400-cow dairy near Wendell, Idaho, will represent the U of I College of Agricultural and Life Sciences as the design work proceeds and when construction begins.

The university partnered with the Idaho Dairymen’s Association to buy land from the Whitesides family a year ago. The Idaho State Board of Education authorized design work on the project earlier this year, and construction is expected to begin in 2021. The first cows are expected to begin milking in 2024.

The research dairy will serve as the core of the Idaho Center for Agriculture, Food and the Environment, and will be paired with an Idaho Agricultural Discovery Complex, near Twin Falls, and a related focus on food processing research.

Vermont agencies present dairy marketing assessment report

The Vermont Agency of Agriculture, Food & Markets (VAAFM) and the Vermont Agency of Commerce and Community Development (VACCD) have outlined steps to guide the future economic viability of the state’s dairy industry.

The Dairy Marketing Assessment report points to a number of opportunities that could best leverage the state's recent selection and funding as one of the nation's dairy business innovation centers. VAAFM will receive $6.45 million over three years to focus on innovative dairy ideas and projects, with about half of the money distributed as grants to dairy farmers and value-added processors.

Heather Pelham, commissioner of the Vermont Department of Tourism and Marketing said, “High-quality local food and culinary experiences are at the heart of the Vermont experience for over 13 million visitors to the state each year. This report reminds us of the important role that high-quality dairy products, such as cheese and ice cream, play in maintaining that Vermont food experience and supporting Vermont’s brand associations with quality and authenticity.”

VAAFM Deputy Secretary Alyson Eastman believes these numbers point to a state economy that thrives from its rural communities. “The Dairy Marketing Assessment, coupled with the Vermont Dairy Innovation Center funding and innovative thinking, will give our Vermont dairy farmers the opportunity to improve market opportunities, create pathways for new products, help diversify their farms and address ongoing environmental challenges,” Eastman said.  end mark

Dave Natzke