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Page 2 • Dairy Star • Second Section • Saturday, August 25, 2012

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Page 8 • Dairy Star • Second Section • Saturday, August 25, 2012

The “Mielke” Market Weekly

By Lee Mielke

It’s Still Above a Year Ago? July milk production was not down as much as expected. The Agriculture Department’s preliminary estimate is 15.52 billion pounds in the top 23 states, virtually unchanged from June but up 0.8 percent from July 2011. The 50-state total, at 16.6 billion, was up 0.7 percent. Revisions added 2 million pounds to the June 23-state estimate, now put at 15.5 billion, 1.1 percent above a year ago. July cow numbers, at 8.5 million head, were down 7,000 from May but 41,000 more than a year ago. Output per cow averaged 1,826 pounds, up 6 pounds from a year ago. California production was down one percent despite a 13,000 cow increase but output per cow was down 35 pounds. Wisconsin was up 4.4 percent on a surprising 65 pound gain per cow and 7,000 more cows. Idaho saw a half percent increase on a 20 pound gain per cow while cow numbers were off 3,000. New York was up 1.9 percent, thanks to a 35 pound gain per cow. Cow numbers were unchanged. Pennsylvania was down 1.5 percent due to a 10 pound loss per cow and 5,000 fewer cows. Minnesota was up 1.1 percent on a 25 pound gain per cow but cow numbers were down 2,000 head. Other states of interest included Michigan, up 4.1 percent on 10,000 more cows and a 25 pound gain per cow. Missouri was up 4.7 percent on an 85 pound gain per cow, though cow numbers were off 2,000 head. New Mexico was down 2.7 percent due to a loss of 45 pounds per cow and 2,000 fewer cows. Texas output took a 2.4 percent decline on a 65 pound loss per cow but cow numbers were up 5,000 head. Washington State saw a 4.4 percent decline on a 35 pound drop per cow and 4,000 fewer cows. Daily Dairy Report (DDR) analyst Mary Ledman reported in her website’s Daily Dairy Discussion that many analysts expected July output would show a decline. Year to date, the 50 state output is up 2.7 percent, according to Ledman, however she pointed out that cow numbers continue to decline and while the June count was lowered, July numbers were not as low as some expected. Ledman blamed the contraction on margins and lack of protability rather than draught and heat impacting cows, citing Wisconsin as an example. A year ago Wisconsin had a lot of heat and humidity but this year there was more heat than humidity, she said, but “dairy producers have done a good job in mitigating the heat conditions.” She also pointed to the increases in Michigan and Minnesota. Turning to the West, she pointed to declines in California, New Mexico, and Texas and said producers who are buying feed are really struggling plus milk prices in those regions and states tend to be less than those east of the Rockies. The Alliance of Western Milk Producer’s Bill VanDam wrote in his August 17 newsletter that “The pattern the last 4 months is remarkable as the state moved from near record gains to a negative 1 percent in July.”

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He said “The lack of plant capacity in the state which triggered production controls by the cooperatives and others is one part. The drought caused prospect of higher feed prices is a second factor. Low prices are gradually being replaced by better prices which should encourage producers to return to normal production patterns.” He adds that MILC payments add as much as $1.74 per cwt to prices paid to Minnesota and Wisconsin producers on all their milk. By now California producers are getting nothing because they have used up the annual 2.985 million pound limit several months ago. There are too many unknowns to predict with condence but for over 40 years (with only one signicant exception) milk volumes have increased in spite of volatile prices and changing costs. Because of that history one would be wise to prepare for more milk in the future,” he concluded. And, while we’re in California, you’ll recall last week I mentioned the California Dairy Campaign has oated the idea of joining the Federal Milk Market order. Western United Dairymen (WUD) has scheduled a September 20 program to discuss it at the Tulare Ag Center. We’ll keep you posted. Cheese price increases have fueled interest in securing inventory before anticipated further price increases, according to USDA’s Dairy Market News. Demand for Labor Day retail specials and lling the pipeline for school openings have added to immediate interest. Hot weather across much of the U.S. has impacted milk volumes available for processing and cheese plants are paying premiums in some cases to secure additional milk for cheese making. USDA reports that churning across the country is mixed as butter producers implement various strategies when it comes to cream offerings and availability. Overall butter demand is fair. Retail orders are stable as grocery store shopping patterns are starting to pick up. Checking the cupboard; the latest Cold Storage report’s preliminary data shows July butter stocks at 232 million pounds, down 5 percent from June but 24 percent above July 2011. American type cheese totaled 634 million pounds, up 1 percent from June but 2 percent below a year ago. Total cheese stocks are 1.04 billion pounds, unchanged from June and 4 percent below a year ago. Dairy product sales, including butter, often realize a spurt in demand at this time of the season, according to USDA. On the other hand, food service orders are easing. As the Labor Day Holiday approaches, which is often referred to as the unofcial end of the summer vacation season, food service orders for resort and vacation areas of the country adjust their buying patterns, often reecting slower customer trafc through their operations. Butter exports continue with the assistance of the Cooperatives Working Together (CWT) program which accepted two requests for export assistance this week to sell 127,868 pounds of cheese to customers in Asia and the South Pacic. The product will be delivered through September 2012 and raised CWT’s 2012 cheese exports to 73.8 million pounds plus 56.6 million of butter and anhydrous milk fat to 33 countries on four continents. The Agriculture Department announced the September Federal order Class I base milk price at $17.59 per hundredweight, up $1.04 from August but still $4.19 below September 2011 and equates to about $1.51 per gallon. That brings the 2012 Class I average to $16.50, down from $19.23 at this time a year ago and compares to $14.83 in 2010 and $10.95 in 2009. The University of Wisconsin’s Dr. Brian Gould does not anticipate an MILC payment to producers for the month or the foreseeable future, depending what Congress does, policy wise.

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The AMS-surveyed butter price averaged $1.6877 per pound, up 16.3 cents from August. Nonfat dry milk averaged $1.2518, up 9.3 cents. Cheese averaged $1.7545, up 7.6 cents, and dry whey averaged 53.5 cents, up 4.1 cents. Speaking of policy; Dairy Prot Weekly (DPW) reports that a court ruling apparently paves the way for increased ethanol use. The U.S. Appeals Court for the District of Columbia Circuit sided with the Environmental Protection Agency (EPA) and its partial waiver approval for E15 ethanol (15 percent ethanol/85 percent gasoline) fuel for model year 2001 and newer light duty vehicles and all ex fuel vehicles. This represents nearly two-thirds of all vehicles on the road and almost 75 percent of vehicle miles driven. Food, auto engine and oil renery industry trade associations had challenged the approval of E15. The food industry said E15 approval would lead to higher corn and food prices. Auto engine makers said E15 could open them to lawsuits if engines malfunctioned. Since the initial waiver ling in March 2009, vehicles were tested using E15, health effects data on E15 was collected and approved, and a rst-of-its-kind misfueling mitigation plan was required and approved in order for retailers to offer E15. Currently, the market for ethanol conned to E10 blends has been saturated, according to the Renewable Fuels Association. Allowing ethanol blends of up to E15 for 2001 and new vehicles, as well as increasing the availability of higher level ethanol blends up to E85, will open more markets to the domestic renewable fuels industry. The impact won’t be immediate, says DPW. Only one Kansas retailer offers E15, and there are a limited number of blender pumps available. Meanwhile; the EPA opened a 30-day comment period on a request seeking a temporary waiver of Renewable Fuel Standard (RFS) volume requirements. The standard, which mandates the amount of ethanol that must be used annually, has been seen as a driving force behind reduced corn supplies and higher prices for dairy cattle feed. Dairy, livestock and food industry representatives, joined by more than 100 members of Congress and several state governors, have requested a temporary waiver to the standard. EPA has 90 days to decide whether a waiver should be granted. And California’s Department of Food & Agriculture has turned down a hearing request to consider changes to the pricing formula for milk used in cheese production, and a request for an emergency increase of 50 cents per hundredweight on all classes of milk produced in the state. Dairy farmers had sought the changes, in part as a means to help cover skyrocketing feed prices. California’s ag secretary Karen Ross is forming a task force to look at the dairy pricing structure and come up with long-term solutions. National Milk has joined nearly 40 other farm and ranch organizations to raise public awareness of the need for Congress to pass a new farm bill before current farm programs expire in September. The coalition, called Farm Bill Now, comprises associations and coalitions representing commodity crops, livestock, specialty and minor crops, energy and biobased product groups, farm cooperatives and nancial groups, as well as the nation’s two largest farm groups, the American Farm Bureau Federation and the National Farmers Union. Details are posted at www.farmbillnow.com. And, a petition was circulated this week from Editor Pete Hardin of The Milkweed asking USDA Agriculture Secretary Tom Vilsack to use his authority to call an emergency hearing to consider raising minimum milk prices paid to farmers, as they deal with one of the worst cost-income squeezes in history. Details are posted at www.themilkweed.com.

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Out of the different options for what to do now with farm policy, doing nothing should not be one of those. At least, it’s not an option that benets taxpayers, farmers, or even our federal legislators on Capitol Hill. After plowing enormous effort this year into creating a new and better farm program, rst in the Senate, then in the House, the path forward for lawmakers is now very murky. Congress made major progress earlier this summer when the House Agriculture Committee approved a bill in July that closely resembles the version of the Farm Bill By Jerry Kozak that passed the full Senate in June. CEO NMPF But the process hit a huge pothole after that, with the House leadership deciding not to bring the Ag Committee’s bill to a vote. Instead, they initially tried to gin up support for a one-year extension of the current farm bill. But after NMPF and other farm groups objected, the House then passed a disaster aid package on Aug. 2nd that does essentially no good for most dairy farmers. This is a completely different approach than that taken by the Senate, and with Congress now in recess for more than a month, farm policy is stuck in limbo. What’s worse, between the political parties’ two conventions this summer, and pressures to focus on campaigning rather than governing this fall, it’s unclear when the Farm Bill will get the attention to bring it to fruition. We need to make certain that this politically-driven inertia, while not unusual just months before a major election, doesn’t derail the work that’s been accomplished so far. The new bill, both in the Senate and House, is smart policy and smart politics: both versions save the government money compared to the status quo. Passing a nal bill will be a boon to taxpayers, and represents another opportunity to chip away at the federal decit at a time when budget and economic issues are the big concerns for our nation. And it’s hard to believe that, especially in a year when the Corn Belt is suffering the worst drought in half a century, Congress will ignore farm country issues, and votes, mere months before a pivotal election. Let me also briey address why the Dairy Security Act provisions in both bills are also the only choice for farm policy going forward. The Senate has already approved a new safety net for dairy farmers that provides them margin insurance – both a basic program, as well as a supplemental level – that offers better protection than that offered by the current MILC program, and the price support program. Those who want this insurance offering – and it’s an opportunity, not an obligation, to enroll in the program – will be asked to temporarily trim their milk output when conditions are poor as part of the market stabilization element of the measure. The Senate, both at the Committee level, and in the full body, saw this program as a reasonable approach to improving risk management for dairy farmers, while reducing taxpayer costs – and, critically, reducing the potential risk to taxpayers. The market stabilization element reduces the cost of the program by helping prevent prolonged periods of poor margins that will generate signicant USDA insurance payments to those enrolled in it. In the House, however, a failed attempt was made in the Agriculture Committee by Reps. Bob Goodlatte and David Scott to strip out the market stabilization program. This approach would have gutted the insurance protection of dairy title by putting more risk and more cost onto the backs of farmers. It would have increased their out of pocket costs, reduced the amount of milk they could insure, and perhaps most appallingly, it would have zeroed out any ability to indemnify new milk production during the lifespan of the farm bill. For those who profess to be concerned about the future growth of the U.S. dairy sector, this last provision alone should be a deal-breaker, so let me repeat it: any farmer who would bring on new milk production during the veyear span of the bill would not be able to insure any of that growth. This to me is really “supply management.” Just as the MILC program doesn’t offer protection to the majority of the current milk supply because of its tight production cap, this watered-down margin insurance program would not offer insurance coverage to a single pound of any expanded milk output beyond a farm’s original base. It’s a de facto quota system that would severely hamper the ability of our industry to be the healthy, growing, future-oriented business that we all say we desire. This is why any future attempt to ght this battle again needs to be defeated, and why when Congress does turn its focus to the Farm Bill, they need to preserve the version already approved by the House Agriculture Committee. Choosing to do nothing is not leadership, nor a choice that makes sense.

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Dairy Star • Second Section • Saturday, August 25, 2012 • Page 15

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Dairy Star • Second Section • Saturday, August 25, 2012 • Page 31

DAIRY STAR WEATHER OUTLOOK 7-DAY FORECAST FOR SE SOUTH DAKOTA/SW MINNESOTA/NW IOWA SATURDAY

SUNDAY

MONDAY

TUESDAY

WEDNESDAY

Variable clouds with a t-storm possible

Brilliant sunshine

Bright sunshine

Plenty of sunshine

Mostly sunny

80/84 60/64

81/85 53/57

85/89 60/64

82/86 60/64

82/86 59/63

THURSDAY

AccuWeather.com

WEEK AHEAD TEMPERATURE OUTLOOK August 25 - August 31

FRIDAY

Very warm with A mix of clouds sunny intervals and sun

88/92 57/61

80/84 55/59

THURSDAY

FRIDAY

7-DAY FORECAST FOR CENTRAL MINNESOTA SATURDAY

SUNDAY

MONDAY

TUESDAY

WEDNESDAY

30-DAY REGIONAL OUTLOOK

Variably cloudy with a t-storm possible

Mostly sunny

Nice with a full day of sunshine

Bright and sunny

Plenty of sun

Cloudy and very warm with showers

Partly sunny and very warm

80/86 59/65

79/85 53/59

76/82 49/55

80/86 56/62

77/83 55/61

84/90 55/61

84/90 52/58

The last 30 days have marked a bit of a shift in the weather pattern that had dominated the region for much of the summer. Temperatures over the last week or two have generally averaged 4-8 degrees below average. Unfortunately, precipitation patterns have not changed for the better and we remain below average on rainfall for the past month. While we still start this period with a frontal system that will provide some rainfall and continued below-average temperatures, much of the first half of the upcoming 30-day period will feature plenty of sunshine and near- to above-average temperatures. Temperatures across the Dakotas, Minnesota and Iowa are expected to be above average for the next 30 days with below-normal precipitation.

WEEK AHEAD PRECIPITATION OUTLOOK August 25 - August 31

7-DAY FORECAST FOR SE MINNESOTA/NE IOWA SATURDAY

SUNDAY

MONDAY

TUESDAY

WEDNESDAY

THURSDAY

FRIDAY

Variable clouds with a t-storm possible

Partly sunny with a t-storm possible

Sunshine

Plenty of sun

Bright and sunny

Warm; partly sunny, then mostly cloudy

Partly sunny and very warm

79/83 61/65

79/83 58/62

77/81 57/61

78/82 58/62

78/82 56/60

86/90 63/67

84/88 52/56

Forecasts and graphics provided by AccuWeather, Inc. ©2012

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8-25-12 2nd section