The Milk A
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TOM JUHCHAK
County Agent
A Trickle Starts
September 17, 1984 - The effects
of decreases in milk production
and increases in commercial
demand in recent months have
now begun to trickle down into
farmer’s milk checks The one and
two cent increases in the Min
nesota-Wisconsin Price Series
from April to June have now in
creased to 12 cents in July and 23
cents in August, pushing the M-W
to $12.30 which is the highest since
last November. However that
August M-W price won’t show up at
the farm until October’s check, so
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you can be sure of even more in
creases this fall. Of course, the
price that pays the bills is the
uniform or blend price that is paid
to producers shipping to regulated
handlers, and for August milk it
was $l3 39 in Order 2 That was 55
cents more than July and $1 10
more than June but, while there
was improvement in the market, it
wasn’t quite that good. You have to
remember that during that period
you changed from paying into the
Louisville Plan fund, to taking out
of the fund. In June you paid 40
cents a hundred; in July there was
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LF 9/4/84
nothing in or out, and in August you
got back 36 cents from the fund.
However, if you omit the effects of
the Louisville Plan, your price at
the farm still improved 26 Cents
since June compared to a drop of
33 cents from January to May.
Certainly the season of the year
makes a difference in these price
changes and we normally expect
higher prices in the fall than in the
spring, but even when we compare
them to the same June to August
period of a year ago we’re still
doing a little better. That’s why I
said a “trickle” has started
because from all accounts of what
you hear from falling production
and increasing sales you might
have expected too much too soon.
Certainly there will be more im
provement in the months ahead,
but keep your eye on the M-W price
each month because that’s the
mover for class prices in all
Federal Orders. After that your
price is determined largely by how
much is sold as Class I for fluid use
and how much goes to Class II or
manufacturing uses.
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marketing but you’re still not out
of the woods back at the farm.
There is improvement over last
year, and hopefully it will continue
into next year. The Class I price in
August was 41 cents below last
year and Class II was down 18
cents, but in spite of this your blend
price was down only 18 cents. This
should tell you something about the
higher Class I utilization which
came from a 2.8 per cent increase
in fluid sales but, more im
portantly, a five per cent drop in
milk receipts by Order 2 handlers.
This pushed the Class I utilization
for August to 40.6 per cent, which
was the highest for the month since
1980. -
Future Uncertain
Nationally, we’re getting more
price BANG from increasing
commercial demand than
decreasing production and
eventually this will get down to local
producers through the M-W
price, but right now in the nor
theast we seem to be getting higher
prices from decreasing production
than from increased sales
Decreasing production is expected
to continue through the winter, but
not at a rate to give us better farm
prices if we depend on that alone.
Even this trend to lower produc
tion could be reversed very quickly
with higher milk prices and lower
grain prices. More importantly, I
believe, is the demand pull from
increasing commercial sales and
how long that can be maintained
through the winter and into next
year. That’s what makes the
immediate future uncertain even
before we get to the question of
what happens when the Diversion
Program ends next spring.
We have come to give most of the
credit for the increasing demand
on improved economic conditions
nationally This would include less
unemployment, better wages,
stable or lower interest rates and a
few more things you could think of
We also give some credit for in
creased demand to the lower
prices of dairy products when
compared to other foods at the
retail level The question then is
how long can these factors con
tinue to improve 7 If something
happens to the general economy,
such as an auto workers' strike or
lay offs in basic industries like
steel or mining, we could be in
trouble with dairy sales Of course,
if you have faith in Reaganomics
you may not feel that this is a
problem If dairy products are a
retail bargain, even this may not
last with decreasing supplies,
particularly for fluid milk and soft
products Butter and cheese prices
can’t rise much more until
government stocks are sold
It’s also a fact that there is not
one supply demand situation for
the entire dairy industry There
are separate and different
situations at each level in the
marketing chain from producer to
consumer and from one
geographic area to another. Most
of the recent demand increase has
come at the wholesale level of the
industry and that can’t last unless
more is “consumed” at retail. We
also know that production has
dropped more in the southeast
region and they’re "demanding"
more milk from other areas, but
how long will that last until
southeast producers start to meet
their market needs’
Much of the hope for answers to
all these questions lies in the in
creased advertising and promotion
programs, but these take time to
work and the results may not be
the same in all markets.
Thanks, Hoard’s Dairyman
I don’t mind when producers
take out their frustrations on me,
privately or publicly, when they
feel that the problems of the dairy
industry are caused by Congress;
consumers; USDA; handlers;
coops (members or non mem
bers); other regions; milk quality;
advertising (or lack of it); or any
other place they choose to put the
blame, but when they give it to
Extension I get up-tight because
I’m one of them. Of course, I’m not
the only Extension agent that gets
this. Anwne working on dairy
programs nas heard 'it. While it’s
no problem to defend Extension
programs, the answers are often
considered biased when made by
an Extension agent. So that’s why I
would like you to read the editorial
on page 1024 of the September 10
issue of Hoard’s Dairyman ( the
one with the bull list) titled “Some
would rule out Extension
programs.” If you don’t have a
copy I’ll send you one if you
request it through your county
Extension agent.
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