Washington Dairygrams - January 25, 2013


As printed in our January 25, 2013 issue...

A FARM BILL EXTENSION was rolled into year-end fiscal cliff legislation. It extended three dairy programs until September 30: the Dairy Export Incentive (DEIP), forward contracting and dairy product price supports.

IT ALSO RESURRECTED MILC or the Milk Income Loss Contract program. MILC will use the pre-September 2012 feed cost adjuster of $7.35 per cwt. and 45 percent production payment levels through August 31.

IMPACT WILL BE MINIMAL based on futures markets. Since the legislation is retroactive, there would be a 2-cent payment for October 2012. February payments are projected at 39 cents and shrink to 3 cents by July. A 2.985-million-pound production cap will remain in place through August.

IT’S BACK TO THE STARTING GATE for a long-term farm bill. That process will include less money for ag. See our Editorial Comment on page 62.

THE LIFETIME ESTATE TAX EXEMPTION of $5 million for individuals became permanent via federal legislation. It will be adjusted annually for inflation. Estates over $5 million will pay a 40 percent tax rate.

CREDITORS FORCED GOLDEN GUERNSEY to file Chapter 7 bankruptcy in early January. The Waukesha, Wis., fluid milk plant owned by OpenGate Capital of Los Angeles, Calif., listed more than 200 creditors.

THE U.S. DEPARTMENT OF JUSTICE forced Dean Foods to sell Golden Guernsey in August 2011 after a highly publicized antitrust case. Dean Foods had acquired the plant from Foremost Farms USA Cooperative.

SOUTHEAST MILK LITIGATION PAYOUTS will take place over a five-year period. In all, 6,165 farms will receive payments which will average $13,000 per farm or 10 to 12 cents per cwt. for eligible milk.

AN $19.25 ALL MILK PRICE was the most recent estimate for 2013. The midpoint is up 90 cents over the last four months. January to September Class III futures fell nearly 40 cents since Christmas to an $18.25 average.

U.S. DAIRY EXPORTS remained on pace to cross the $5 billion threshold for the first time. However, November’s sale volume was the lowest level in over two years — 13 percent below a year ago; down 8 percent on a cash basis.

DAIRY FARM EQUITY still hadn’t recovered from losses incurred during 2008 and 2009. In 2011, equity levels stood at $92.1 billion, according to the USDA. This is $1.3 billion shy of 2007’s watermark of $93.8 billion.

BRIEFLY: Just over $10 billion in indemnity payments were issued by crop insurance companies to cover losses from last year’s drought. Cattle futures hit a record $1.3385 per pound in early January trading. An additional 177,000 dairy cows were culled in 2012 when compared to the previous year. Exports of bred dairy heifers were down 44 percent through November 2012 when compared to 2011. Turkey was down 36,700 head; Mexico dropped 9,400; Russia rose 7,500.

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