Milk
BY TOM JURCHAK
LACKAWANNA CO.
AGENT
What Goes Up
SCRANTON (Lackawanna)
No one predictede the meteoric
rise of $1.94 in the Minnesota -
Wisconsin Price Series from April
to December last year sojt
shouldn’t be a surprise when it
unexpectedly dropped like a rock
in January. Certainly it was
expected to fall seasonally as it
always does at this time of the
year but at a more gradual rate
than the 37 cent tumble it took in
January. But then it did go up as
much as SO cents in September so
what goes up that fast can come
down that fast.
And just as it was mainly the
cheese price that took the M - W
price into orbit it was cheese that
brought it back down. Cheese
prices fell 4.5 cents the second
week of January and another 4.25
cents the following week. That
was enough to signal trouble
ahead but when they dropped
another 5.75 cents the third week
it was clear that they had reached
their apogee, the flight was over
and they were headed back for a
landing. When you add up all the
price drops it was a total of 14
cents from $ 132 to $ 1.18 a pound.
That’s only three cents above the
$1.15 support price for cheese.
How Come?
Reasons for the sudden drop
brought a variety of reactions.
Everything from requests for a
federal investigation to a normal,
seasonal reaction were heard from
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Market News
the industry. The most acceptable
explanation was that the industry
over reacted from what they
expected in milk supplies as buy
ers were looking ahead to the usu
al demand increases for the end of
the year holidays. They were
hedging against an expected drop
in milk production last fall from
the drought of last summer. As
you know now, there was no drop
in milk production. In fact it
increased two percent over the last
quarter of 1987 and 1988 finished
with a new record high.
So, after building up invento
ries of cheese last fall in expecta
tion of lower milk supplies that
never came, cheese buyers now
want to sell off their stocks rather
than buying more so the market
price drops. However, they still
have to look ahead to next spring
when the support price for cheese
will increase five cents a pound.
That will happen because the
Drought Assistance Act, passed
by Congress before they knew
what the effect might be, will
increase the support price by 50
cents from April to June. That’s
the normal time for building
inventories of hard dairy products
so handlers are betting now,
because of your past milk produc
tion record, that there will be the
usual spring flush to provide pro
ducts to carry them through the
summer demand. We’ll see.
Lesson To Learn
If there’s nothing else you learn
from all of this, it should be the
importance of cheese prices in
your milk check. Assuming you
v:
JIM’S SURGE
SALES & SERVICE
SHARTLESVILLE FARM
SERVICE
Dala Wangar
RD 1, Hamburg, Pa.
Ph: (215) 485-1025
215 Oak Bottom Rd.
Quartyvilla, Pa.
Ph: (717) 755-1833
understand the importance of the
M-W price to your federal and
state milk marketing orders it
should be apparent that when but
ter and powder prices stay the
same and only cheese prices
change the effect is so dramatic.
Some industry analysts feel that
cheese prices represent 85 percent
of the M-W and from the changes
in the last six months I’m inclined
to believe them.
When you consider that the
average yield is 10 pounds of
cheese from 100 pounds of milk
that 14 cent drop in the cheese
price in January could mean $1.40
drop in the milk price. If the high
powder prices,- now 20 cents
above the support price, offset the
low butter prices, now two cents
below the support price, then it
should be clear that the numbers
on your milk check may be turn
ing on the price of cheese. With a
50 cent increase in the support
price from April to June the sup
port price on cheese will increase
from the present $1.15 to 51.20.
With the present market price at
$l.lB that doesn’t leave much
room for a further drop but there’s
nothing to prevent it from falling
below this support price. This has
happened in the past because
“make allowances” have not been
changed since 1980 in spite of
increased processing costs. How
ever, it’s still a combination of
butter, powder and cheese prices
that determine the M-W. That’s
the reason you’re seeing only a 37
cent drop from $12.27 in Decem
ber to $11.90 in January but cer
tainly you can expect further cuts
in the next few months probably
down to the new support levels by
April.
In spite of the sudden drop in
cheese prices it’s not all that bad.
Even with the M-W at $11.90 it’s
still 99 cents higher than a year
ago and still $1.07 above the sup
port price of $10.83 for 3.5 milk
that will be in effect from April to
June. Because the M-W sets the
Class 1 price two months in
advance it will continue increas
ing in Order 2 from $14.43 in
December to peak at $14.82 in
February. That’s the highest since
January 1985. The Pennsylvania
Milk Marketing Board has con
tinued their Drought Relief Order
to August 31 adding $1.05 to the
price of Class 1 milk paid by
1989 Commercial
NEWARK, DE An updated
tree fruit production guide for
commercial growers is now avail
able from University of Delaware
Cooperative Extension.
The 1989 edition of the guide
features up-to-date chemical treat
ments and spray schedules for
apples, peaches, pears, plums, and
sweet and sour cherries. The guide
contains a table for keeping spray
records and a table listing the
number of days to wait between
last application and harvest Gen
eral guidelines for orchard nutri
tion are also included.
Copies of “1989 Commercial
Tree Fruit Production Recommen
dations” are available for $8 each
and can be picked up at county
Extension offices in Newark,
• No Cross—Four individual chambers
prevent bacterial organisms from
spreading from quarter to quarter.
• High Capacity—Vacuum stability
(First with Surge) and Good Cow Milk
ing are not sacrificed for isolated quar
ter milking.
PEN W.
HOSTETTER
RD 2, Annvillo, Pa.
Ph: (717) 867-2590
Lancaster Farming Saturday, March 11,1989-D29
Not All Bad
• Visability—Milk flow is eas
ily recognized from each in
dividual quarter. Durable,
lightweight design for thou
sands of cow milkings.
• Easy Handling—The
RX Unit is compara
ble to any conven
tional claw-type unit.
LONGACRE
ELECTRICAL
SVC. INC.
Bally, Pa.
Ph: (215) 545-2281
BRANDT’S FARM
SUPPLY
Ml E. High SL
Elizabethtown, Pa.
Ph: (717) 367-1221
handlers. Premiums of all kinds
from handlers and cooperatives
will become a more important part
of your milk check as market
prices decline.
And finally, the uniform or
blend price in Order 2 was 512.95
for January. Only 12 cents less
than December but 92 cents better
than last January you’re still way
ahead of last year. Prices higher
than a year ago should continue
into the spring flush helped by that
50 cent increase in the support
price from April to June. What
happens after that depends on feed
prices, the weather and cow num
bers. January receipts in Order 2
have already increased three per
cent over last year. If this con
tinues, and it is likely, the first part
of 1989 will be the best part.
Tree Fruit Guide
Dover and Georgetown. To order
by mail, please send your check
payable to University of Delaware
to one of the following county
Extension offices:
New Castle County Extension
Office
032 A Townsend Hall
University of Delaware
Newark, DE 19717-1303
Kent County Extension Office
Lochmeath Plaza
4601 S. DuPont Highway
Dover, DE 19901
Sussex County Extension Office
University of Delaware
Research & Education Center
R.D. #2, Box 48
Georgetown, DE 19947
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