A3o>Umcaster Farming, Saturday, April 1,1989
Milk Market News
BY TOM JURCHAK
Lackawanna Co. Agent
Nose Dive
SCRANTON (Lackawanna)
A drop of 37 cents in the Minne
sota-Wisconsin Price Series in
January was bad enough but it
took a real dive in February drop
ping an additional 64 cents to
$11.26 making a total loss of
$l.Ol since it peaked at $12.27 in
December. Further drops are pre
dicted to $ll.OO in March and
more after that. Estimates two
months ago of a total loss of $1.50
by Spring are beginning to sound
plausible. Earlier forecasts that the
M - W wouldn’t go down to the
new support price in April have
been abandoned. Now the bets are
on how far below the support price
it will go. The present support
price is $10.33 for 3.S percent but
terfat. During April, May, and
June it will be increased to $10.83
as part of the Drought Assistance
Act of 1988. However, if the M -
W drops $1.50 from its December
high of $12.27 it will be down to
$10.77 or six cents below the sup
port price.
Two things to keep in mind.
The support price is targeted on
the national average price for
manufacturing grade milk and not
mi the M - W price which is only a
two-state average used to deter
mine class prices in Federal Milk
Marketing Orders. The other thing
is that the support price was below
the M - W price in the Spring
months from 1981 to 1986. Not
just six cents below but anywhere
from 20 to 40 cents below the sup
port price. So it could happen
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again even though it hasn’t hap
pened in the last two years.
Cheese Buyers Dilemma
Much of the reason for the roll
er coaster ride in the M - W price
since last summer surrounds the
cheese problem. However, when
milk prices were going up SO cents
a month last fall it wasn’t viewed
as a problem by milk producers.
Only now that prices are dropping
60 cents a month do we begin to
wonder what’s happening. In fact,
the full impact of the situation
won’t be appreciated until it hits
the milk checks you receive start
ing in April. In a nutshell, what
happened was the buying of
cheese by dealas last summer and
fall for holidays in anticipation of
a drop in the milk supply from last
year’s drought. There never was a
drop in milk production in fact it
hit a record high last year but the
market price for cheese kept going
up because of the demand from
dealers.
Normally, there would have
been a lid on prices as the Com
modity Credit Corporation releas
ed its stocks of cheese when the
market price went up to 110 per
cent of the support price. This
time, however, there were no CCC
stocks of cheese because of the
giveaway program that got nearly
500 million pounds in 1987. So,
the market price was bid up to 118
percent of die support price and by
the end of December 92 percent of
the cheese in storage was owned
by commercial handlers. By then
the retail demand from holiday
sales was over and there they were
with all this cheese. So, they be-
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EQUIPMENT
5935 Old Philadelphia Pike
Gap. PA 17527
(717) 442-8134
gan to sell it off at lower prices in
January when it dropped 14.5
cents in one month. Barrel cheese
prices dropped an additional five
cents in February.
Now What
So, what would you do if you
were a cheese buyer? Sell your in
ventory now and gamble that you
will be able to buy cheese cheaper
during the Spring flush of milk or
keep what you have and gamble
that prices will not fall below the
support price in April, May and
June? One thing he can’t do is sell
his present inventory to CCC after
the support price for cheese goes
up to $1.20 in April because CCC
will only buy products manufac
tured after April 1 just to prevent
such a deal.
Apparently, most cheese buyers
are anticipating a real Spring flush
of milk that will send prices below
the new support price of $1.20 and
perhaps down to $1.15 which is
what it is now and what will be af
ter June 30. That means that CCC
will have to buy a lot of cheese in
the Spring to maintain the support
price. These CCC stocks could be
sold next summer if the market
price goes up again and buyers
would have cheese without the
storage cost. Of course, this would
work only if the CCC didn’t go
back to the giveaway program so
no stocks could accumulate. It’s a
gamble just like producing the
milk and the gamble you take
every year with the weather, feed
costs, herd health and market
prices. Hopefully, you will get
some of that SO-cent increase in
the Spring but the worst possible
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scenario would be prices so low
that you get little or none of the
50-cent increase in the support
price and CCC purchases would
increase enough to trigger another
50-cent cut in January. More and
more it looks like you’ll have to
depend on over order premiums to
make ends meet at the farm.
Milk Check Prices
As I said earlier, you won’t
really feel the effect of all this in
your milk check until April but
you ought to know now what’s
coming. The Uniform Price in Or
der 2 in January was only 23 cents
less than the high for last year of
$13.18 in November so it dropped
11 cents a month. February Uni
form Price of $12.25 was a drop of
40 cents from January’s $12.95.
Of course you can look at the
bright side and say that February
was 86 cents better than last year
but January was 92 cents better.
Certainly you expect price drops
Dairy Management
YORK Bovine somatotro
phin - one of the most controver
sial current issues of the world’s
dairy industry -- is the subject of
York County Holstein Associa
tion’s annual spring bam meeting.
The meeting will be held at 1
p.m., Wednesday, April S, at the
Ramsay Cooper family’s dairy
farm, west of Delta. Ramsay and
his son, Scott, milk 60 head of
registered Holsteins in their herd,
which will be on display during the
session.
Speaker is Dr. Larry Muller,
Penn State, with an update on the
state of the much-publicized soma-
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WALNUT BARN &
DAIRY
RD 2 Box 737
at this time of the year into the
Spring months but this year the
drops will be .greater than usual as
the M - W price indicates.
Certainly the increases in pro
duction nationally are adding to
the price declines but here in Or
der 2 you’re more ttym matching
the national average. Production
increases here are running about
three percent every month and
February, on a daily basis, was up
four percent If there is to be any
cutbacks in milk production, na
tionally or locally it hasn’t shown
up yet. In fact you’re making in
creases at a record rate in spite of
the lowest number of cows since
1872. In addition, the takeout pay
ments for the Louisville Plan will
start in March with 20 cents and
increase to 30 and 40 cents in
April, May and June. It doesn’t
look good from here but it may be
better to alert you now than sur
prise you in May.
totrophin hormone research and its
potential for the dairy industry.
The Cooper farm is accessible
from Route 74. Turn east onto
Rdute 851 at Paper Mill Farm
Restaurant. Turn left on first hard
road. Lay Road, travel to second
■intersection, just past the ball dia
mond, and turn left Cooper’s farm
entrance is the first lane on the
right. For additional information,
contact the Cooper farm at
717/456-5484.
All interested dairy producers
and related agri-business represen
tatives are invited to attend.
iT \
EQUIPMENT
Port Royal, PA 17082
(717) 436-9429
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