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July 2012 Archive for Dairy Talk

RSS By: Jim Dickrell, Dairy Today

Jim Dickrell is the editor of Dairy Today and is based in Monticello, Minn.

Is the Speaker In the House?

Jul 27, 2012

The drought that spans the nation’s mid-section and into the northeast will have ramifications for dairymen across the country. Is John Boehner listening?

The drought that spans the nation’s mid-section and into the northeast will have ramifications for dairymen across the country.

Feed availability will be critical to those at the drought’s epicenter; feed affordability will be crucial for everyone else.

Already, we’re hearing of entire herds being sold for beef in Missouri. “I think we could lose up to a third of our dairy cow numbers," says Missouri Dairy Association (MDA) President Larry Purdom and a dairy farmer from Purdy.

“Some are just giving up. Yesterday I saw three herds sell out at the Springfield livestock auction and two more herds were ready to go,” Purdom said July 25. For the full story on Missouri, click here.

In Wisconsin, Dan Undersander, a University of Wisconsin-Extension forage specialist, is urging dairy producers that will be short of forage to consider planting an emergency crop of corn or small grains yet this year. That’s almost unheard of this far north, but desperate times call for emergency measures. And that’s assuming—no, flat out hoping—there will be enough moisture to germinate and sustain a second seeding.

South Dakota Extension Dairy Specialist Alvaro Garcia says soybeans and sunflowers can be harvested as emergency forage. For more on that, click here.

For those producers who are purchasing all of their feed, the situation isn’t any better. I plugged a few numbers into a Nebraska Extension spreadsheet to look at per cwt. of milk feed costs and breakeven milk prices.

If I use $8/bu. corn, $510/ton soybean meal and $250/ton hay for a 24,000 lb./cow herd, feed costs jump to $16/cwt. of milk produced and the breakeven milk price jumps to about $22.50/cwt. For a 20,000 lb./cow herd, feed costs shoot to $17.75/cwt. of milk and the breakeven milk price skyrockets to $25/cwt.

Out west, the California Department of Food and Agriculture’s (CDFA) decision July 20 on the Class 4b whey hearing will offer—at best—a dime’s worth of relief to the 4b price. Even that was a political decision by Karen Ross, CDFA Secretary. The CDFA hearing panel actually recommended no increase in the whey factor value. Click here for more detail on the ruling.

An analysis of milk and feed prices by Rob Vandenheuvel, general manager of the California Milk Producers Council, shows that California’s feed prices are actually a percent or two lower than the all-feed price average of the rest the country. Where California is disadvantaged most is in milk price, which typically is $1.45/cwt. less than the all-milk price for the rest of the country. For more on this analysis, click here.

In the end, California producers might have the toughest row to hoe over the next 15 to 18 months as everyone waits for the 2013 crop to come in. They will have as high of feed prices as everyone else but lower milk prices. With many California dairies still bereft of equity from 2009, California might join Missouri in unprecedented herd liquidations.

The only hope is passage of a farm bill with immediately retroactive margin insurance or massive emergency drought assistance from the federal government. One estimate I’ve seen for dairy alone is $2 billion. Is Speaker of the House John Boehner (R., Ohio) listening?


The Dairy Farm Bill Debate Gets Real

Jul 12, 2012

The real fight will come when it reaches the floor of the House.

The run-up to last Wednesday’s House Ag Committee farm bill mark-up finally provided enough detail to get beyond the processors’ rhetoric of supply management, rising consumer prices and depressed dairy imports.

Earlier in the week, the details of the Bob Goodlatte (R-Va.)/David Scott (D-Ga.) amendment were released. Here, finally, was the “anti-Foundation for the Future” plan that proponents argued would cure all.

Here’s what the Goodlatte/Scott amendment would do:

• Offers catastrophic $4 margin protection insurance for all producers on 80% of their historic production and 80% coverage of historic base for supplemental coverage. The original bill would offer supplemental coverage up to 90% of a farm’s production base.

• Premiums for the supplemental coverage under Goodlatte/Scott are slightly less for producers with less than 4 million lb. of annual production between $5 and $6 of supplemental coverage.

• Premiums for the supplemental coverage are about 3¢/cwt. higher at each level of margin insurance for producers with more than 4 million lb. of annual production, starting with a 3¢/cwt. premium for $4 margin insurance. (Under the original bill, there is no charge at the $4 margin.)

• Unlike the original bill, there’s a one-time sign-up at the beginning of the program—for both the basic, catastrophic coverage and the supplemental coverage. The original bill would allow producers to sign up for the supplemental coverage annually.

• There is also no step-up in the farm’s production base. In the original bill, the supplemental coverage is on a farm’s most recent production.

• There is no market stabilization program requiring producers to cut production or forfeit part of their milk checks when margins contract.

• Finally, the Congressional Budget Office (CBO) estimates the Goodlatte/Scott amendment will save taxpayers $47 million over 10 years compared to $38 million under the original bill.

Once the Goodlatte/Scott amendment was made public, there was a flurry of press releases—including claims by the National Milk Producers Federation that the amendment provides no catastrophic coverage when margins drop below $4. That proved untrue.

Nevertheless, the amendment failed 29-17. That came as little surprise, even to lobbyists for the International Dairy Foods Association. They knew both the chairman, Frank Lucas, (R-Okla.) and ranking minority member Collin Peterson (D-Minn.) were opposed. But the point is, they were able to get the amendment introduced—and even more importantly—budget scored by CBO.

The real fight will come when the farm bill reaches the floor of the House. Majority leader John Boehner (R-Ohio) vowed earlier this spring that the farm bill will not include a market stabilization program for dairy. The Goodlatte/Scott amendment offers him—and others opposed to market stabilization—an out. Plus it provides greater budget savings—though $9 million isn’t even a flea on a fly on an elephant’s butt when it comes to the farm bill’s $995 billion baseline.

National Milk will argue that the original Foundation for the Future plan will shorten periods of low margins because the market stabilization program requires producers to curtail production during those periods.

Analysis by Mark Stephenson, a University of Wisconsin dairy economist, suggests that volatility will be reduced under Goodlatte/Scott the more farms that participate. It achieves that by taking $2/cwt. off peak prices and saving $1/cwt. off the lows. Plus, he says, Goodlatte/Scott shortens the price cycle by a year at high levels of participation. (In fairness, though, Stephenson’s analysis is comparing Goodlatte/Scott to the current baseline—not to what might occur under Foundation for the Future.) For Stephenson’s analysis, click here.

Dairy producers now have a clear choice. They can opt for more coverage, greater flexibility, higher costs and increased complexity of an in-and-out market stabilization program under the original bill. Or they can choose less coverage, less cost, less flexibility and less complexity with Goodlatte/Scott.

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