By Jim Dickrell
The dairy news from Washington, Copenhagen and New York last week was (mostly) positive for beleaguered dairy producers, as they count their Christmas blessings in a few days and hope for a much brighter 2010.
• From Washington, USDA finally released details of the $290 million Dairy Economic Loss Assistance Payment (DELAP) program last Thursday. If you haven’t heard by now, the program will pay dairy producers 32¢/cwt for milk produced between February and July 2009 times 2. The production cap is 6 million lb. per dairy per year.
The production cap, at 20,000 lb./cow, equates to about a 300-cow herd. Complaints from out West, most notably California, are that the production cap is too low. But keep in mind that if USDA had shared the dollars equally, the payment rate would have fallen to about 15¢ or 16¢/cwt. on an annualized basis.
That means that all herds with less than 600 cows, roughly speaking, would receive less under the equalized payment than with the announced 32¢/cwt. payment. Who is more deserving: Small or large herds? USDA opted to go with strength in numbers—more smaller farmers and more political support from Midwest and Northeast Congressmen.
My suggestion: Don’t look a gift horse in the mouth and cash the check—whatever the amount is.
• From Copenhagen, U.S. Ag Secretary Tom Vilsack announced a memorandum of understanding (MOU) with the Innovation Center for U.S. Dairy to cut greenhouse gas (GHG) emissions by 25% by 2020. Important note: The effort will be voluntary. It also will not create new funding sources for emission-reducing efforts. But it will allow USDA to both target and expedite existing USDA programs such as EQIP and REAP toward greater energy savings.
Dennis Haubenschild, a Princeton, Minn., dairy producer, was excited by the news. “It’s the best news I’ve heard this year,” he told me last week. Haubenschild and his family (spouse Marsha and sons Tom and Bryan) have been operating a methane digester for the past decade. They are also trying to develop hydrogen cell fuel technology from the surplus methane produced by their digester to produce fuel and fertilizer. But that effort has stalled from lack of funding. USDA’s MOU could jump start those efforts and dozens of other projects around the country.
USDA is hoping more methane digesters will be built on dairy farms over the next decade. Today, fewer than 150 are producing gas. As more digesters come online, the technology will be refined so that smaller herds can benefit as well.
• And from New York (City, that is), Rabobank economists held a news briefing last Friday that suggested the world and U.S. economies are rebounding. That’s good news as the world’s consumers transition from their enforced frugality of 2009 back to more and better consumption in 2010. “The worst appears to be over, and we’re unlikely to return to pre-recession spending patterns through 2010,” says Steve Rannekleiv who specializes in the food retail sector for Rabobank.
“As the domestic and global dairy economies begin to show signs of life in the latter stages of 2009 and into 2010, dairy demand growth has the potential to tip the fine balance between demand and severely constricted supply, which could lead to much higher farm-gate milk prices….” Rabobank also reports in its 2010 Outlook publication.
Rabobank cautions, however, continued volatility in global economies and energy markets is also a threat. Use of risk management tools, which worked well for those who employed them in 2009, will be critical.
On the feed side, Rabobank economists are predicting corn prices will return to the $4/bu. level, thanks to the resurgence in both ethanol (due to higher oil prices) and corn exports. But a large Brazilian soybean crop means soybeans could dip to $9/bu. or less in 2010. And if Congress fails to re-enact the energy tax credit for biodiesel, an additional 165 million bushels of beans could be freed up for feed as well.
So that’s the mostly good news from here, just east of Garrison Keillor’s Lake Wobegone. Happy Holidays to all!
—Jim Dickrell is editor of Dairy Today. You can reach him via e-mail at email@example.com.
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