Update Highlights

Canada paying dairy farmers $1.75 billion in trade compensation

Canada’s federal government will pay its dairy farmers about $1.75 billion ($ Canadian) over eight years to compensate for the financial impact of dairy market concessions contained in recent trade agreements. Agriculture and Agri-Food Minister Marie-Claude Bibeau made the announcement during a visit to a dairy farm near Compton, Quebec, Canada, in mid-August.

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Dave Natzke
Editor / Progressive Dairy

The announcement follows ratification of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Payments will be made through the Canadian Dairy Commission.

Of the total amount, $345 million will be paid to Canada’s nearly 11,000 dairy farmers in the first year, in the form of direct payments in proportion to their quota. For example, the owner of a farm with 80 dairy cows will receive a payment of $28,000 in the first year.

The federal government will continue to work with the Dairy Farmers of Canada to determine terms and conditions for future years.

Another trade agreement granting dairy market concessions, the U.S.-Mexico-Canada Agreement (USMCA), has not yet been ratified by the U.S. or Canada.

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July DMC margin, indemnity payment to be announced on Friday

The USDA’s end-of-month Ag Prices report, which includes factors used to calculate monthly Dairy Margin Coverage (DMC) program margins and indemnity payments, is released Aug. 30.

Based on projections from the Program on Dairy Markets and Policy website, the July margin will be at or near $9.50 per hundredweight (cwt), the top insurable margin under DMC. That means any July indemnity payment will be minimal.

Read also: Dairy Margin Coverage enrollment period enters final 3 weeks

USDEC: On Labor Day, share how dairy means jobs

If you’re meeting with non-farm friends over the Labor Day weekend, you might want to use the backyard cookout or other activity as a “teachable moment” about the dairy industry. The U.S. Dairy Export Council (USDEC) Dairy Exporter Blog offers a GotDairyJobs link to a variety of information sources – including fact sheets and videos – on jobs, tax revenue, GDP, exports and more, all showing how dairy helps drive the economy.

September Class I base price down 4 cents

The September 2019 Federal Milk Marketing Order (FMMO) Class I base price is $17.85 per cwt, down 4 cents from August, but still the second-highest monthly price since January 2015. It is up $3 from September 2018. Through the first nine months of 2019, the Class I base price is $16.51 per cwt, up about $1.93 compared to the same period a year ago.

July 2019 dairy cow slaughter picks up

The pace of U.S. dairy cull cow slaughter picked up in July. Federally inspected milk cow slaughter was estimated at 256,800 head during the month, 25,600 head more than June 2019 and 17,000 head more than July 2018, according to the USDA’s Livestock Slaughter report.

So far this year, dairy cull cow slaughter has averaged about 10,500 per day (weekdays and Saturdays), 600 head more per day than January-July 2018. At 1.89 million head, January-July 2019 slaughter is about 86,600 ahead of the same period a year ago. The year-to-date 2019 total is the highest six-month total to start a year since 1986, the year of a federal whole-herd buyout program.

The higher culling rate continues to have an impact on the size of the U.S. dairy herd. The USDA’s latest Milk Production report estimated U.S. dairy cow numbers at 9.31 million head in July 2019, down 82,000 head from the year before. Read: Milk production growth stagnant as cow numbers slip to 42-month low

As in previous months, heaviest culling is in the Upper Midwest. A breakout of July 2019 dairy cull cow slaughter estimates in major dairy regions follows:

  • 69,400 head in an area including Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin
  • 59,700 head in Arizona, California, Hawaii and Nevada
  • 44,800 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia
  • 28,000 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas

Dairy margins started August stronger

Dairy margins continued to strengthen over the first half of August following a sharp drop in feed costs and milk prices that were mostly flat, according to Commodity & Ingredient Hedging LLC.

The USDA’s August Word Ag Supply and Demand Estimates (WASDE) report was considered extremely bearish for the corn market. The USDA raised the corn yield forecast to 169.5 bushels per acre, with production and ending stocks pegged well above the industry’s pre-report estimates. The corn market dropped 48 cents per bushel (11.5%).

The milk market was supported by positive fundamentals, with limited growth in production in July and a continued decline in cow numbers. Combined milk output through the first five months of the year in the European Union, U.S., Oceania and Argentina was 1.7 billion pounds less than 2018, a decline of 0.6%. A severe heat wave across Europe has crimped summer output.

What’s in your mailbox?

May 2019 “mailbox” milk prices for selected reporting areas in all FMMO areas averaged $17.39 per cwt, up 30 cents from the April 2019 average and $1.69 higher than May 2018 average.

Mailbox prices in May ranged from a high of $18.73 in the Florida reporting area to $16.06 in the Michigan reporting area. California’s average was not available.

The mailbox price approximates the net price received by dairy farmers for milk after adding any premiums and deducting costs associated with hauling and marketing.  end mark

Dave Natzke