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Milk Market Moos

Farm bill finish line?

The old Farm Bill was extended in December just ‘til the end of January to “wrap up.” Since then, the House and Senate have managed to sort through a pile of differences -- including an agreement to cut $9 billion from the Supplement Nutrition Assistance Program (SNAP), also known as “food stamps.”

What they haven’t agreed on is the dairy title, which money-wise makes up so small a part of the nearly $1 trillion package as to not even show up on a full farm bill pie chart.

The reason dairy is still being debated is fundamentally philosophical. It speaks to who we are as a nation and what kind of future dairy producers want for future generations.

The debate also transcends party lines because it is geographic, and the view of a producer may depend on his or her business model. More importantly, the debate continues because producers are largely opposed to the solutions being debated; or they have so little faith in those solutions that they shrug their shoulders at the government, and go back to work on things that really do make a difference in the bottom line.

I’ve written about Farm Bill dairy policy for decades. I’ve watched it change, morph and develop since the early 1980s when I started my dairy and livestock beat for a newspaper.

And the current debate? It’s been covered in this column and other articles since 5-year farm bill talks started 4 years ago.

Not only can’t the Senate and House agree on dairy policy, they do not even agree about whether or not they can agree.

At issue is supply management. Or as Speaker Boehner refers to it: “Soviet-style dairy policy.”

It seems odd to me to penalize a non-growing dairy that signed up for the bare minimum safety net (similar to what we have now in the MILC program). Why would they be forced to cut production or face penalties before their level of safety net even kicks in? This means farmers would have to PAY the government for insurance against the government-imposed penalties or forego any and all safety net.

Furthermore, the program would unfairly disadvantage milk that is worth more: high component, low SCC, high Class I usage, greater product innovation, you name it. Whatever makes one farm’s milk worth more -- be it quality, location or innovation -- that farm’s milk would be penalized at a higher level, even if that farm has not added cows or production.

Reps. Bob Goodlatte (R-Va.) and David Scott (D-Ga.) issued a statement last week reminding conferees that, “The House of Representatives’ resounding rejection of supply management provisions in the dairy title of the Farm Bill speaks loud and clear. More than 140 diverse groups have joined the 291 House members (including 95 Democrats) in voicing their opposition to supply management.”

Meanwhile, House Ag Chairman Frank Lucas is working on dairy compromise language that could change the formula for a dairy safety net to send a market signal to dairy producers that stops short of being a government-run supply management or supply control program.

Ranking Member Collin Peterson (D-Minn.) and colleague Debbie Stabenow (D-Mich.), chairwoman of the Ag Committee in the Senate, are on record saying they stand behind their Dairy Security Act.” Appearing inflexible in the face of the overwhelming House vote, the Senate is taking its lead from Peterson, making this look like a personality struggle between Boehner and Peterson.

“Nothing could be further from the truth,” said Rep. David Scott in a joint statement last week. “The overwhelming bipartisan vote count on the Goodlatte-Scott amendment, which passed 291-135 with 95 Democratic votes, was a clear and strong statement of the will of the entire House on this issue.”

We’ve been around and around the block in this debate. But for dairy farmers and industry folks who want to make one more call to their Senators or Representatives in D.C., maybe the question of what to say boils down to first asking yourself these questions:

Who are we as Americans? What about the growing export opportunities? What about price reform? Do we really want to add hundreds of pages of controlling regulation and USDA complexity to an industry already besieged by too much regulation and complexity? Will producers and consumers really be best served by more government involvement in dairy, when maybe the real answer lies in less government involvement?

These are not questions for me to answer. Ask yourselves these questions, and then talk with your representatives in Washington. Educate them on this issue before they head back to D.C.. A conference report may be ready when they return from recess at the end of January. But depending on what it says about dairy, the House may not approve it.

Butter’s back

After decades of foisting oleo or margerine on the public, consumers are midway to a revolt of sorts. The “whole foods” or “pure eating” movement has caused consumers to question foods that seem too highly processed or “fake.”

Then the news came of trans fats -- and the realization began to dawn that butter just may be not only better tasting, but better for you. (Some of us already knew that!)

Free of trans fats, and wonderfully pure in how it is processed, butter is a natural choice -- literally.

But there’s another aspect to this: the culinary trend and popularity of the Food Network has also given butter a boost.

Butter is not only better -- it’s back -- and consumers are eating more of it. Annual per capita butter consumption in the U.S. (now 5.6 pounds per person per year), has risen 25% in the last decade to a 40-year high, according to the American Butter Institute.

The U.S. is also exporting more butter. Part of the reason for butter’s comeback is the move to make European style butter.

Not only is European style butter the standard for export, it’s also the darling of the culinary community -- prized for its lower smoking point. European style butter is also a cultured dairy product, which means the health community embraces it.

Buttering up the market

While the CME butter price has soared to $1.77/lb (Wed., Jan. 15 close); the USDA Survey price (the one used to calculate Federal Order milk prices) is still back at $1.55/lb, where it was all through last year.

The CME Cheddar price has also skyrocketed well above the $2 mark -- pegged Wed., Jan. 15 at $2.20/lb for blocks and $2.16/lb for barrels.

After being above $2.10 for a few weeks, Grade A Nonfat Dry Milk slipped below it last week and was pegged Wed., Jan. 15 at $2.06/lb. Incidentally, the USDA Survey price (the one used to calculate Federal Order prices paid to farmers) never even came close to the world market or CME market price for powder. It has finally just broken $2. Imagine that.

Cattle crazed

The price paid by beef packers for cull dairy cows has surged through the holidays and stands a good $13 per hundred pounds liveweight above year-ago levels at the start of 2014.

The beef cattle herd is the smallest since 1952, and according to retired Penn State ag economist Lou Moore speaking to 250 farmers in Lancaster County, Pa. Wednesday, “it will take a long time to load that pipeline again. Packers are losing $100/head processing cattle because they can’t pass these higher prices fully on to consumers because ti would put beef too far out-of-line with pork and poultry.”

Consumer resistance to rising beef prices is the caveot to the current beef market, but the reduction in corn prices wll help put profitablity back into both beef and dairy. Look for more next week from Moore and financial expert Gary Sipiorski of Vita Plus, who also spoke at the Ag Financial Seminar for customers of National Penn Bank Wednesday.