A32-Lancasttr Farming, Saturday, January 27,1990
THOMAS JURCHAK
Lackawanna Co. Ext. Agent
SCRANTON (Lackawanna
Co.) — Like a fighter giving it all
he’s got right up to the last bell,
the Minnesota-Wisconsin Price
Series was good for one more
increase and one more record high
price before the year was over.
Certainly, 1989 will be remem
bered as the year that the
Minn.-Wis. price set a new record
high four times in four consecu
tive months. Even after most fore
casters were betting that it would
peak in November, it came
through with another 24-cent
increase to $14.93 for December.
While not as great as the 73- to
82-ccnt increases of the previous
three months, the 24-cent jump
wasn’t too shabby when a
decrease was expected.
But don’t be too hard on the
forecasters. 1989 was a year in
which most factors in the dairy
industry went counter to look
established trends foe a variety of
unpredictable events. Just hope
that they don’t discard their crys
tal balls because they have done a
good job in the past and we’ll need
them even more in the future.
Just enjoy the thought that the
Minn.-Wis. has gone from $10.98
in March to $14.93 in December
for total increases of $3.95 in nine
months. Jhat is in addition to the
premiums you have received in
varying amounts for several diffe
rent reasons.
You ended the year with the
Minn.-Wis. $2.66 higher than last
December and an average for the
year of $12.36 that was $1.33
higher than 1988. However, that’s
not a very good comparison
because the average Minn.-Wis. in
1988 at $11.03 was the lowest in
10 years, so you had a lot of catch
ing up to do. You would have to
go back to 1983 to find an average
Minn.-Wis. that was higher than
1989.
The nice thing about 1989 was
that you did it without any Diver
sion Program or Dairy Termina
tion Program or even from a sup
port price except for the help it
provided in buying butter that had
to be made to sell the skim powder
in export markets.
What next? That’s the same
question you’ve been asking for
six months while prices kept
going up to record breaking levels
with record breaking increases.
This time, however, there are too
many signs pointing to a lower
Minn.-Wis. than can be ignored. It
looks like the end of the line.
The question now changes from
“when will it drop” to “how much
and how far.”
Again, the forecasters are hav
ing trouble because we expect
changes in both supply and
demand as we begin the new year.
On the demand side, there’s no
question that cheese prices will
fall because they already started
down. In the first week of January
they dropped over eight cents
from $1.54 to $1.46 and, if you
believe that cheese prices influ
ence the. Minn.-Wis. more than
butter or powder prices, be ready
for a drop in January.
Powder prices, that peaked at
$1.50, were down to $1.35 in
December and are now hovering
around the support price of 97
cents. Butter is still a problem and
the support price is the market
price.
Which brings us to the not
unexpected cut of 50 cents in the
support price from $10.33 to
$9.88 for milk testing 3.5 percent
butterfat
The Commodity Credit Corpo-
1989
Milk Prices Soar, 1990 Outlook Questionable
ration purchased 9.1 billion
pounds of milk equivalent in
calendar 1989 and projected
purchases of eight billion pounds
in 1990 if the support price was
not changed. Even with the
50-cent cut, CCC purchases are
expected to reach 7.4 billion
pounds in 1990 calculated on a
milk fat basis.
Using total milk solids rather
than milk fat only, the projected
purchases would be 3.6 to 4.4 bil
lion pounds of milk equivalent.
However, since CCC buys butter,
powder and cheese (not milk) they
have to convert that support price
of $9.88 to purchase prices for
these products.
Because butter is in surplus and
powder is not, they put the entire
50-cent cut on butter and dropped
it more than 11 cents to $1.09 a
pound. Powder prices were
unchanged at 79 cents. Cheese
prices were reduced 4.5 cents to
$l.ll which is still well above the
market price of $1.46.
But, just because the support
price was dropped to $9.88, that
doesn’t mean that the Minn.-Wis.
will go that low. What makes the
crystal ball cloudy now is the
supply side. Much of the reason
for the record high prices was low
er milk production particularly in
the upper Mid West and in the
Northeast.
Blame for the low production is
generally given to poorer quality
and shorter supplies of forage. On
the other hand, we’re looking at
the best milk price -- feed price
ratio seen in several years and
someone is going to start using
grain to replace some forage sup
plies and/or quality.
Drops in milk production per
cow have reduced supplies even
more than the number of cows this
winter. Milk production will come
back at these prices but the ques
tion is how soon. The turn-around
in supply is expected to start this
winter but won’t really pick up
steam until late spring.
The next question is where will
this production come from? Some
states never slowed down last year
and 1989 was the first time in
three years that you haven’t set a
national milk production record.
But look out 1990.
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x'
let’s get the last word on 1989
prices at the farm.
Uniform or blend price for
December in Order 2 was $15.47,
or 19 cents more than November
and $2.40 more than last year.
That 19 cents doesn’t seem like
much, but the November blend
price was increased by 28 cents
from a Louisville Plan pay back,
the last one for the year.
Adding the 28 cents to the 19
cents shows a market price
improvement of 47 cents. The
average blend price for the year
was $13.10 in Order 2 and that
was $1.23 more than 1988.
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Monthly increases over last
year’s prices will continue
through the first half of 1990. It’s
the second half where you may
begin to fall behind.
County Extension dairy agents
in Pennsylvania now have avail
able a video tape; “Pricing under
federal milk marketing orders in
Pennsylvania.” That, along with
some handout material, is avail
able for presentation to small
groups of dairy farmers who want
to leam the basics of milk pricing.
If you’re interested talk to your
local Extension agent or call me at
717-963-6842.
Lippincott Building
Suite 200
227 South Sixth Street
Philadelphia, PA 19106
Local: (215) 664-8403