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Weekly Digest: Dairy herd contraction likely in 2019

Progressive Dairyman Editor Dave Natzke Published on 21 January 2019

Digest Highlights

Barometer: Dairy herd contraction likely in 2019

Agricultural producers participating in a Purdue University/CME Group Ag Economy Barometer survey overwhelmingly expect the dairy herd to contract during 2019. Based on survey results, 83 percent of respondents expect dairy herd contraction to take place during 2019 versus just 17 percent of respondents who expect the U.S. dairy herd to increase in the upcoming year.

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Similarly, more than 60 percent of respondents expect the beef herd to contract in 2019 compared to 37 percent of respondents who expect the herd to expand. This was almost a complete reversal compared to last year, when nearly 60 percent of respondents thought expansion likely and just 41 percent expected the herd to decline in upcoming 12 months.

The December 2018 survey was completed before the 2018 Farm Bill – which contained a substantially stronger federal safety net for dairy farmers – was signed into law, and prior to the partial government shutdown.

Concerns about economic conditions in production agriculture were also evident when producers were asked whether or not now is a good time to onboard a new generation into their family’s farming operation. Just 42 percent said now was a good time to bring a new generation into the business, in contrast to the prior two years when approximately half of respondents thought it was a good time to do so.

When a follow-up question was posed asking whether they expected five years from now to be a more favorable time to bring a new generation onboard, responses were more positive (65 percent).

The Purdue University/CME Group Ag Economy Barometer is a nationwide measure of the health of the U.S. agricultural economy. The index is based on a survey of 400 agricultural producers, with results updated on the first Tuesday of each month. Results of the January 2019 survey will be released on Feb. 5.

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Class I base price marginally better

The February 2019 Federal Milk Marketing Order (FMMO) Class I base price is $15.30 per hundredweight (cwt), up 18 cents from January 2019 and $1.05 more than February 2018.

Global Dairy Trade index jumps

Global markets posted a fourth consecutive increase and the largest improvement since August 2018. The index of Global Dairy Trade (GDT) dairy product prices rose 4.2 percent during the auction, held Jan. 15, after rising 2.8 percent on Jan. 2.

Prices for all major product categories were higher:

  • Skim milk powder (SMP) was up 10.3 percent to $2,405 per metric ton (MT).
  • Butter was up 4.6 percent to $4,262 per MT.
  • Whole milk powder was up 3 percent to $2,777 per MT.
  • Cheddar cheese was up 4.2 percent to $3,504 per MT.
  • The next GDT auction is Feb. 6, 2019.

Margins start January weaker, but there are signs of optimism

Dairy farmer income margins were weaker over the first half of January due to lower milk prices and relatively flat feed costs, according to Commodity & Ingredient Hedging LLC.

While Class III milk futures prices remained under pressure from large cheese inventories, Class IV futures prices strengthened from a firming powder market. Stronger Asian demand for milk solids appears to be the catalyst for recent strength in the GDT (see above) price of SMP, as European Union intervention stocks have steadily declined. At the current rate of sales, SMP intervention stocks will be completely depleted by June, which should support both spot nonfat dry milk and Class IV futures prices at the Chicago Mercantile Exchange.

Reports suggest a drought has reduced soybean yield expectations in Brazil.

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Cottonseed seeing renewed export, dairy interest

Like other dairy feedstuffs, price discovery is made more difficult by the government shutdown, according to Nigel Adcock with Cottonseed LLC.

Cottonseed LLC’s latest market update indicates there’s renewed buying interest from Korean traders and increased cottonseed usage in Midwest dairy rations, but aflatoxin levels are a concern with the Arizona cotton crop to start out 2019.

Adcock said a recent slippage in cottonseed prices may be due, in part, to improved availability of trucks and railcars. Market analysts suggest the USDA may need to reduce cotton harvest estimates, but the impact on cottonseed may not be large. Despite a high rate of abandonment of Texas dryland acreage, yields from cotton acreage under irrigation pivots are well above normal. There’s also a consensus cotton acreage will increase in 2019.

There are reports from Arizona of high aflatoxin levels this year, with many samples more than 20 parts per billion. This has led to some price discounting, but has also increased demand for Texas seed as a replacement for Arizona dairies.

STATES: Judge rules against Wisconsin dairy regulatory settlement

A Milwaukee County (Wisconsin) Circuit Court judge has thrown out a lawsuit settlement agreement protecting dairy farmers against regulatory overreach by the Wisconsin Department of Natural Resources (DNR). The ruling was issued on Jan. 11, by Judge William Pocan.

The settlement agreement had stemmed from an original lawsuit filed in late July 2017. In that lawsuit, Wisconsin’s Dairy Business Association (DBA) alleged the DNR has circumvented procedures to establish rules regulating farms for several years. The DBA complaint identified calf hutch/vegetative treatment areas (VTAs) and regulation of runoff of leachate from feed storage areas as examples of rules it said were promulgated and implemented without going through proper rule-making processes.

In reaching the deal in mid-October 2017, the DNR vowed to follow proper rule-making processes and rescind the blanket change in standards for vegetative treatment areas and calf hutches. Instead, the agency agreed to order changes on a case-by-case basis if a farm’s conditions warrant.

DBA agreed to drop a third claim related to a large farm’s duty to apply for a permit. The association had argued that the DNR was contradicting a state law by exceeding federal standards that require a specific type of permit only if the farm discharges nutrients to a navigable surface water. The DNR presumes all large farms have unlawful discharges and, therefore, regulates them as concentrated animal feeding operations (CAFOs) even if they’ve done nothing wrong.

Following the settlement agreement, several environmental advocacy groups filed a petition to block it. The legal challenge was filed in Milwaukee County Circuit Court by the Midwest Environmental Advocates, representing the Clean Water Action Council, Milwaukee Riverkeeper, Wisconsin Wildlife Federation and Friends of Central Sands. They challenged the settlement on the basis that the agreement changed DNR pollution permitting policies and rules without going through the official rule-making process.

New York OSHA inspections of dairy farms to continue

Occupational Health and Safety Administration (OSHA) inspections of New York dairy farms will continue in 2019, according to an email notice from the New York Dairy OSHA Team.

Despite earlier indications the program would not be renewed, the New York Dairy Local Emphasis Program (LEP) remains in effect, the notice said. LEPs are enforcement strategies designed and implemented at the regional office and/or area office levels.

The directive means unannounced OSHA inspections can still take place for dairy farms with more than 10 employees (not including immediate family members, at any time in the past 12 months).

The New York Dairy OSHA Team urged all owners and managers of farms with more than 10 employees to be in compliance with all safety requirements and up-to-date on safety programs and training.

Wisconsin sets CAFO meetings

The University of Wisconsin – Extension and Wisconsin DNR will co-host a series of CAFO update meetings throughout the state in early February. The meetings are specifically designed for Wisconsin Pollutant Discharge Elimination System (WPDES) permitted CAFO owners and managers, producers considering expansion, nutrient management plan writers and engineers.

The meeting agenda will provide an overview of low-cost options to meet permit requirements, describe how to effectively respond and communicate in the case of spills or emergency situations, offer tips for tile line system maintenance and discuss local best management practices for applying manure to cover crops. The meeting will also summarize the effects of recent administrative rule changes, and feature a DNR question and answer session.

Meetings will take place in Green Bay (Feb. 4), New London (Feb. 4), Manitowoc (Feb. 5), Fond du Lac (Feb. 5), Jefferson (Feb. 7), Dodgeville (Feb. 8), Marshfield (Feb. 12) and Rice Lake (Feb. 13). Each event is $35, or $45 after the early registration deadline, and includes breakfast or lunch.

More information on the meetings and individual meeting brochures can be accessed through the Conservation Professional Training Program.

INDUSTRY: Dairy aisle coming to online shopping

Online shoppers scanning recipes including dairy products will soon be able to walk down a virtual dairy aisle and put dairy products in their shopping cart, according to BusinessWire.

The “Shoppable Digital Milk Aisle” is being developed through a partnership between the Milk Processor Education Program (MilkPEP) and Chicory, a grocery technology company. Under the process, MilkPEP is utilizing Chicory’s Premium in-recipe ads to promote milk to recipe viewers in their network of over 1,000 influencer food sites. Any time a consumer views a recipe containing “milk,” an ad saying “shop now!” will appear.

With a click, the user will land on a digital milk aisle page, listing all of the real milk products and brands available in the user’s area. Initially, the Shoppable ads will either promote online shopping at Meijer or AmazonFresh, and will roll out to additional retailers following the test. Once the user selects their preferred product, the item will be automatically added into the user’s digital cart.

Environmental impact of Canadian milk production improves

The Dairy Farmers of Canada (DFC) released the findings of a study showing the industry’s environmental performance has improved and continues to have one of the lowest carbon footprints in the world.

The 2018 study was commissioned by the Dairy Farmers of Canada and conducted by Groupe AGECO, a firm specializing in agri-food economy and corporate responsibility. It compares the environmental performance of Canadian milk production in 2016 and 2011.

According to the study, the production of a liter of milk in Canada emits 0.94 kilograms of carbon dioxide, about one-third the global average. Canadian milk production was responsible for generating only 1.3 percent of Canada’s total greenhouse gas (GHG) emissions in 2016.

Carbon footprint, water consumption and land use associated with milk production have decreased by 7 percent, 6 percent and 11 percent, respectively, over the five-year period. As a result of improvements in animal nutrition, genetics and housing, milk production per cow increased by 13 percent since 2011.  end mark

Dave Natzke
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