AgDay Daily Recap - December 28, 2011

December 28, 2011 01:59 AM

DECEMBER 28, 2011

Good morning. Soaring feed expenses put a big dent in the year's strong milk prices. And as we quickly approach 2012, many in the dairy sector see volatility in the coming year. Our reporting partners at Dairy Today say compared to the past two years, many U.S. dairy producers saw an improved and even profitable turnaround in 2011, as milk prices rose to near-record levels and exports resumed their strong pace. But high feed costs took a big bite from the positive milk prices. According to Jim Dunn - professor of Ag Economics at Penn State - 2011 is the highest for dairy feed costs since they began record-keeping. He says total operating costs for U.S. dairies rose every month from January through November, reaching $17.06 per hundredweight. Feed costs alone accounted for nearly $14.50 per hundredweight. Dunn calculates this year's feed increase at 8.5% higher than in 2008. And one big difference this year - compared to previous years - is that corn prices have stayed relatively high since January.

In addition to high corn costs, some dairy producers have struggled with forage availability this year. Several key dairy regions, struggled with weather problems. In the northeast for example, storms and flooding caused by hurricane Irene impacted the quality and availability of home-grown feed for producers in New York and Vermont. In Texas - it was the drought. Severe dryness was also a problem in the southeast. We recently toured Sweetwater Valley Dairy in Loudon County, Tennessee. Producer John Harrison runs about 1200 heifers, a thousand dairy cows, and produces 20 million pounds of milk. He says dryness took a toll on his forage options. He discussed the challenges with our partners at dairy today. Harrison they're usually able to grow 80% of the forage for the herd. Typically most of the corn has been used as feed, but with the current prices it's difficult not to sell it for grain.

Meanwhile, another scandal is rocking China's dairy industry. Safety regulators say contaminated animal feed caused the high levels of cancer-causing afla-toxin in milk. Afla-toxin is a naturally occurring fungus and is often associated with damaged grain brought-on by drought. The afla-toxin was tracked down to two of the largest dairies in China. Dairy food safety is a hot button item in China. In a 2008 scandal, melamine-infected milk sickened hundreds of thousands of children, with six deaths attributed to the scandal. 21 people were subsequently tried and sentenced as result, and two milk company officials were executed.

Meanwhile, Chinese premier wen Jiabao has urged officials to share profits from the development of rural land with the millions of farmers who have to give it up. During a meeting this week, Wen said china should strive to promote the modernization of agriculture. He says it's just as important as urbanization and industrialization. Wen's speech comes a week after southern Chinese officials gave-in to protesting villagers after a two-week standoff with police over a land dispute.

In Agribusiness Weekly corn export sales surged - just in time for the end of 2011. Our partners at AgWeb say net export sales in the week ending December 15th, climbed 42% from the previous week. Corn prices have retreated a bit in the past couple of weeks. AgWeb analysts say it appears buyers felt it was a value right now. Plus, dry weather in parts of South America might curb yields, so buyers hope to cover some of their needs. Argentina farmers have been struggling with hot and dry weather just as the corn crop is pollinating. And overall patterns show a drier-than-normal trend.

Mark Gold

If your refrigerator is like ours, it's jam-packed with Christmas leftovers. And of course, we have another "big food" weekend coming up with New Year’s. If you're going to be storing that much food, you need to take precautions to do it safely. In this report from the University of Tennessee, Chuck Denney - who doesn't like missing meals - has some storage tips - including one you probably never thought of. How about that - gravy "cubes". Tammy says you don't need to invest in expensive food storage containers, but they do need to have a proper seal. Up next, we'll take a look at food costs in 2012.

In food and your family this morning, food prices climbed steadily in 2011. U.S. consumer food prices rose more than 6% last year. So what can shoppers expect in the new year? USDA's Bob Ellison has more.

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