The Milk
Cheek
TOM JURCHAK
County Agent
Decreases and Increases
Decreases in milk production
and increases in demand for
cheese have moved up the Min
nesota-Wisconsin Price Series 22
cents to $11.91 for November.
Production nationally dropped
for the fourth consecutive month in
October with the severest cut of all
to date of four percent below last
year.
Weather in the south and mid
west is still cutting production per
cow with averages up only 11
pounds per cow compared to 30 to
40 pounds earlier in the year.
We still have three months left in
the second disposal period of the
Dairy Termination Program and
six months more for the final
period so additional cuts in total
production are expected next year.
Only about three-fourths of the
cattle in the program have been
sold or exported so far.
While milk production was
dropping, cheese sales are running
seven percent over 1985 and last
year they were six percent over
1984. Per capita sales of cheese
that were at 23 pounds last year
are expected to increase to 50
pounds by 1995 according to some
analysts.
Increases in the M-W were ex
pected in November but the 22
cents surprised most estimators.
That $11.91 makes it 72 cents better
than last year and 93 cents better
than in May. It’s doubtful that you
can squeeze another increase out
of the M-W in December with
butter prices falling and a 25 cent
drop ip the support price coming in
January. That 25 cent cut in the
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support price means that Com
modity Credit Corporation will be
paying about three cents a pound
less for cheese so handlers want to
clean up their inventories before
the end of the year.
Tax Management
Speaking of the end of the year,
dairymen should take a close look
at the changes in the new Tax
Reform Act for 1987 with an eye to
saving themselves a lot of money
by adjusting some sales and
purchases while they still have a
chance.
The changes in capital gains
may help you decide when to sell
some cull cows especially if you
are not in the Dairy Termination
Program. Those DTP herds have
an extension on the capital gains
treatment to September but only
for them, not all dairymen.
Animals sold before the end of the
year may add only 40 percent as
much taxable income as animals
sold after December 31. You need
to look also at the effect of income
averaging on your sales and
purchases because this is the last
year that it will be available.
Enough information on the
changes coming next year have
been circulated in the farm press
so everyone must be aware of them
but if you haven’t taken a good,
hard look at them yet you better
before it’s too late.
Look Alike
If you are shipping to an Order 2
handler and you think your
November milk check looked the
same as the October check you
were right. Well it probably wasn’t
exactly the same but the Uniform
We wish you and yours a holiday season filled with
happy hours. And a 1987 New Year filled with happy days.
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LANCASTER FORD TRACTOR INC.
r Phone:7l7-569-7063
Price in Order 2 for November was
13.05 the same as it was in October.
Class prices went up, all right,
with the recent increases in the M-
W. The Class I price moved from
$13.88 to $14.10 and Class H from
$11.75 to $11.97 but your Class I
utilization dropped 1.6 percent to
44.7 and you got 18 cents less from
your Louisville Plan pay back.
On a daily basis there was less
milk in the pool in November but
you lost Class I sales with the
closing of schools over the
Thanksgiving holiday. In addition
there were only four weekends in
October and five in November.
That’s important because handlers
don’t process Class I milk over
weekends. It’s surprising how
much the school closings and
processing schedules affect Class I
sales.
However, your $13.05 in
November was still 75 cents better
than last year and that 22 cent
increase in the M-W will push your
Class I price to $14.46 in January
and that’s 98 cents better than this
year.
That Class I price of $14.46 for
January looks pretty good when
compared to $13.29 last April in
Order 2 but it’s really the same
price that you got in April 1985. So,
if you got $14.46 during the spring
flush of 1965 why shouldn’t you get
it in the spring of 1987? When you
got $13.29 last April you sold 400
million pounds of Class I milk in
Order 2 and when you got $14.46 in
April 1985 you also sold 400 million
pounds of Class I milk. A dif
ference of $1.17 or nearly 9 percent
in the price had no effect on sales.
Now we know that the demand
for fluid milk is inelastic, which
means we can change the price a
lot before we affect sales, and in
this example a 9 percent increase
made no difference.
The point is, that the differences
in Class I prices in the same
market over the last two years
have not affected the sales of fluid
milk so why not keep the Class I
price at the higher level all year?
You’ll be reaching that level
when the January price goes to
$14.46 and the only way to keep it
there is by adding over-order
One of the Joy:
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1655 Rohrerstown Road
Lancaster, PA
Hang On To It
THANK YOU
THE FRIENDLY RELIABLES
Lancaster Fanning, Saturday, December 20,1986-A37
premiums to keep it from dropping
as it will in the spring. To do that
every producer who is not a
member of a milk marketing
cooperative will have to join one
organized specifically to negotiate
over-order premiums in the 11
state region from Maine to
Maryland.
If you do that, you will control a
supply of 28 billion pounds of milk,
the largest in the country, that will
give you the market muscle to
negotiate Class I prices based on
market conditions locally rather
than the market conditions for
manufacturing grade milk in the
Mid-west.
Membership in this new
cooperative has reached 90 percent
and more in most states but
Pennsylvania producers are
lagging far behind and your milk is
needed to make it work.
Tight Supply
Milk supplies in Order 2 are
much tighter than in other areas.
While production is down four
percent nationally, it is down over
6 percent in Order 2 and over 5
percent in the Northeast. The
Market Administrator has
scheduled another meeting of
handlers on Dec. 22 in Syracuse to
determine if a “call provision” will
be exercised to require a minimum
percentage of Class I utilization by
all pool plants in January and
February.
The same “call provision” was
United States Sell Surplus
Dairy Products Overseas
WASHINGTON - Melvin E.
Sims, general sales manager of the
U.S. Department of Agriculture’s
Foreign Agricultural Service,
today announced a sale by the
Commodity Credit Corporation of
4.4 million pounds of nonfat dry
milk valued at $1.36 million to the
Egyptian Procurement Office of
the Arab Republic of Egypt.
CCC sold the nonfat dry milk.
Flory Mill Exit Off
Route 283
considered in November and
December but never activated so
similar action now means that the
tight supplies in Order 2 are ex
pected to continue into the new
year.
However, this does not mean
that milk prices won’t go down
after the first of the year because
your prices are set by conditions in
other markets as explained
earlier. However, it does mean
that because supplies are tight in
your market it provides a good
opportunity for negotiating over
order premiums for you if you join
the bargaining cooperative now
while prices are up.
This is not a referendum of
producers to determine if the
majority are in favor of over-order
premiums and if approval is given
it will happen. This is a real
membership contract that will cost
you nothing but give you the extra
income from over order
premiums.
Producers who don’t sign a
membership contract will not
receive the extra income when
premiums are negotiated. They
will get only the minimum prices
provided by the federal orders in
their market and no more. You
have to decide if you want the
extra income that the no cost
membership can provide or if
you’re satisfied with the minimum
prices you’re getting now.
It only pays if you join.
part of its surplus inventory
acquired under the CCC dairy
price support program at a price of
$6BO per metric ton delivered free
along side vessel at U.S. ports of
export. Deliveries will be made in
December with payment in U.S.
dollars, Sims said.
As of Nov. 21, CCC’s total un
committed inventory of nonfat dry
milk was 559.3 million pounds.
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