Dairy margins turn mixed
Dairy margins were mixed over the last couple of weeks, improving in nearby Q1 and Q2, while weakening slightly in Q3 and Q4, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC. From a historical perspective, forward margins still remain very strong in the second half of 2014, near the 90th percentile of the past 10 years.
Continued strength in milk futures, particularly nearby contracts, paced the margin improvement, but higher projected feed costs since the end of January weighed on deferred margins slightly. Milk prices continue to be supported by strong demand, with powder in particular pacing that strength. Nonfat dry milk (NDM) stocks ended 2013 at 133.1 million lbs., down 27.2% from 2012 and the lowest year-end stocks since 2006. Exports of NDM and SMP in 2013 totaled 1.2 billion lbs. which accounted for 58% of total production last year, a record export-to-production ratio.
On the feed side, USDA released the February World Ag Supply & Demand Estimates report, which showed corn ending stocks well below trade expectations. USDA increased corn exports 150 million bushels from January, which lowered ending stocks by the same amount down, to 1.481 billion bushels. The figure was 125 million bushels below the average pre-report estimate and outside of the range of expectations. USDA also increased their soybean meal export projection by 200,000 tons while raising the average price forecast from January.
California NFDM prices
The weekly nonfat dry milk powder report has been posted to the California Department of Food & Agriculture Dairy Marketing Branch website.
For the week ending Feb. 7, the average price was $2.0452/lb. on total sales of 11.73 million lbs.
For the week ending Feb. 14, the average price was $2.0360/lb. on total sales of 8.12 million lbs.
MMPA cancels dairy policy session
A “Dairy Policy Reform in the 2014 Farm Bill” session with University of Minnesota dairy economist Dr. Marin Bozic, scheduled for this Friday, Feb. 21 at 10:30 a.m. at the Lewiston Silo School has been canceled. The Lewiston School District is making up a snow day, so students will be occupying the facility.
If you are still interested in hearing Dr. Bozic, the Minnesota Milk Producers Association is planning a session on Friday, Feb. 28, 10:30 a.m., at the Pizza Ranch in Alexandria, Minn
Complimentary registration is provided by the producer and associate members at MMPA. Participants are invited to stay for lunch and Midwest Dairy Association’s District Meeting following the session. If you have any questions, contact Eir Garcia Silva by phone (763) 355-9697 or email firstname.lastname@example.org.
Will EPA reverse itself on ethanol mandate?
The U.S. Environmental Protection Agency (EPA) announced preliminary RFS rulemaking for 2014 on Nov. 15, 2013, and the proposal signaled a significant shift in EPA policy, Scott Irwin, University of Illinois ag economist. The most surprising and controversial aspect of the proposal was a write down of the renewable (ethanol) mandate from 14.4 to 13 billion gallons. The proposal has been the subject of heated debate since it was released and the EPA received over 15,000 comments before the official comment period ended on Jan. 28.
Biofuels groups have sent strong signals that they will mount a legal challenge if the final RFS rulemaking for 2014 includes the write down of the renewable mandate. The recent behavior of prices in the RINs market suggests the odds of the EPA reversing the proposed write down of the renewable mandate for 2014 in final rulemaking have increased sharply.
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