Dairy’s best information and insights
Issue No. 372, July 2010
Farm Milk Price Improvement Finally at Hand
by Pete Hardin * Once schools open, keep an eye on cull cow on home-raised crops that have been harmed by
prices for likely sharp upwards movement. American weather events – it’s a tough calculation to shell out
Is the “Milk Price Famine of 2009-2010” final- families are on a “hamburger diet,” due to financial money for unanticipated grain and/or forage pur-
ly abating? concerns. The U.S. beef cattle herd has its lowest chases when milk prices are so low.
After 18 months of ruinous milk prices for animal numbers since 1952. High end cull prices for Problem is: Wisconsin is poised to make a LOT
dairy farmers, the U.S. dairy scene shows signs of fat dairy cows are ranging in the low to mid “60s” more milk and as that milk goes into cheese produc-
improving commodity prices and farm milk prices. (cents per pound, live weight) currently. We expect tion, it will hold down recovery of Class III (cheese)
We are hopeful that what appears to be a start to significant increases in cull prices in coming months. milk prices in USDA’s federal milk order program.
improving dairy commodity prices is for REAL. Those increases will help “retire” an increasing num- In Wisconsin, about 85-90% of all milk is processed
BUT, in these uncertain times, … there remain a few ber of milk cows from the nation’s dairy herd. into cheese. So Wisconsin’s glut of milk could very
qualifiers about which to worry – primarily, the likely stall bounce-back of Class III prices – hurting
nation’s struggling economy and consumers’ income * Supplies of nonfat dry milk are also tight in states like Wisconsin and Idaho.
levels. Why the optimism, after a year and a half of the U.S., even though prices for that commodity are
ruinous farm milk prices? slipping in recent days. U.S. milk powder output for
the year is below 2009 levels. Demand seems solid.
Cream Scarce, “Multiple” High
* Weather and crop events for this spring and
Fresh cream supplies across the U.S. are very
early summer are challenging dairy farmers’ short- * Not everybody who is milking cows right scarce and (almost) impossibly expensive. This
and medium-term ability to adequately sustain their now will survive. The accumulated financial and situation has persisted for the past four to six
animals’ normal nutrition. Wet weather has impaired emotional stress from the “Milk Price Famine of weeks. Ice cream manufacturers are slowing down
quality forage production in California, Idaho, many 2009-2010” leaves a significant number of U.S. summer production runs. Cheese plants want milk
portions of the Plains and Upper Midwest That same dairy farmers on the financial ropes. As dairies go fat to add to cheese vats to boost yields of vats to
wet weather has created a lot of uncertainty regard- out of business – voluntarily or otherwise – more which supplemental proteins –such as condensed
ing the 2010 corn and soybean crops. We don’t dairy cows will move to slaughter. Further, as milk skim and nonfat dry milk — have been added.
underestimate the ability of modern grain fields to prices improve and some disgusted dairy farmers Firms needing cream are finding it impossi-
bounce back. But the pounding from rain that major believe they can get a fair price for their dairy live- ble to obtain needed quantities. When available,
portions of the corn and soybean belt have taken has stock, more dairy farm premises will vacate the temperature issues with long-distance trailer
created some serious crop stress. milking animals. loads of cream are begin ignored. Prices for spot
East Coast dairy producers, ranging from Yes, at long last, it looks like farm milk prices purchases of cream, when available, are sky-high.
roughly the Florida/Georgia border up towards the will strengthen. But the dire legacy will leave bit- Spot cream is purchased on the basis of a
Pennsylvania/New York border, are coping with both terness in the memories of many U.S. dairy farm “multiple” atop the CME Grade AA butter price
serious drought conditions and, in recent days, families for decades – both the survivors and those for the day of purchase. For those unfamiliar: the
extreme heat. who have and will fall victim to this crooked, corrupt “multiple” is simply a number multiplied times
milk-pricing system. Ironically, when looking at the day’s CME butter price, after the milk fat
* The 2010 corn crop is highly variable. In prices consumers pay for their dairy products at content of the spot trailer load of cream is adjust-
some areas (higher ground planted early), this year’s supermarkets, the money has been in the market ed to 80% butter fat. Examples: when cream is
corn crop is spectacular. In other areas where plant- place all along. Problem is: that money, in a fair abundant, a common “multiple” might be 1.1. In
ings were delayed, germination and development are share, has not returned to the dairy producer. recent weeks, the cream “multiple” has
very uneven. Given widespread wet weather that’s The Milkweed cannot project how high future approached all-time peak levels: ranging from
plagued major portions of states from Nebraska to dairy commodity prices and farm milk prices will 1.6 or 1.7 … all the way up to a peak of 1.75.
Ohio (and parts north), the 2010 U.S. corn crop is a climb. We must filter challenges to coming months’ That’s expensive cream: do the math. If
tough call right now. milk production with a sensitive measure of the CME butter is at $1.70 per pound on a particular
pulse of the nation’s consumer economy – which is day and the multiple is 1.65, the load of cream
* Cream is very, very tight. (See related arti- in serious trouble. (adjusted to 80% milk fat) costs $2.80 on a pound
cle, pages 6-7 this issue.) The milk fat content of
of butter basis.
U.S. milk in 2010 is down in all areas of the coun- Grain & quality forage: costs rising Be sure to see John Bunting’s detailed
try. Demand for cream for cheese production, ice
The grain trade sees a “weather market” shaping look at U.S. milk fat production and demand
cream manufacture, and export are all stressing
up in 2010, due to damage from the wet weather that’s on pages 6-7 of this issue.
existing limited supplies of cream and butter. Given
poor carryover crops from last year and this sum- slammed the corn/soybean belt. In early July, corn
mer’s heat stress on dairy animals, don’t expect any and soybean prices started building strength as traders
quick “bounce-back” for U.S. farm milk’s butter fat see weather conditions not improving significantly. 07/10
content. To dairy producers – particularly those relying The Milkweed
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