Al6-Lancaster Faming, Saturday, May 27, 2000 GRAIN. CATTLE, HOG. & MILK BFP FUTURES MARKETS Markets Courtesy of Chicago Board and Mercantile Exchange Closing Bids: Thursday, May 25,2000 Com Daily Prices As ofThursday, 25 May Symbol:C 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 Total 05/24/00 Soybeans Daily Prices As ofThursday, 25 May Symbol:S 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 Total 05/24/00 Oats Daily Prices As ofThursday, 25 May Symbol:o Open High 05/25/00 JUL 00 1170 1192 05/25/00 SEP 00 1240 1250 05/25/00 DEC 00 1310 1314 05/25/00 MAR 01 1354 1354 05/25/00 MAY 01 1394 Total 05/24/00 Weekly Dairy By Ken Bailey Penn State University May 19, 2000 April Milk Production up 3.7 Percent <rd milk for 20 states was 12.4 bil lbs=2o -Cow numbers continue to increase -CME at. :ed new Class IV contract -Fed ami After months of bad news it's good to have something positive to say. We planted corn in Pennsylvania about three weeks ago and have hoped for rain ever since The Northeast is still struggling to regain subsoil moisture lost to last years devastating drought. We had a temporary respite; this morning the rams came! USDA announced this week that April milk production for 20- select states totaled 12.4 billion pounds, up 3.7 percent from these same states a year ago. Production per cow in April averaged 1,598 pounds, 44 pounds higher than a year ago. And the number of cows on farms continued to increase. Cow numbers for 20-select states totaled 7.79 million head, 66,000 head more than April 1999 Volume Open_lnt 63933 468098 Volume Open_lnt 56000 196409 Volume 2076 Open_lnt 17167 Market Outlook and 12,000 head more than March 2000. The states with the highest production gams in April were as follows - Indiana (13.5%), Idaho (11.9%), New Mexico (10.0%), Kentucky (8.7%), Virginia (6.2%), California (6.1%), Ohio (5.7%), Arizona (4.7%), Vermont (4.4%), and Pennsylvania (2.9%). All but one of the top-10 states for milk production growth were above the 20-state average of 3.7 percent. States with the lowest milk production growth rates for April were Michigan and Florida (0%), Minnesota (0 7 %), New York (0.8%), Wisconsin (0.9%), Missouri and Washington (1.5%), and Texas (1.7%). The Chicago Mercantile Exchange announced that they would begin trading Class IV futures and options contracts later in the summer (http://www.cme.com/news/00- 70milk.html). This is very good news for the dairy industry since it will provide better coverage for dairy producers that want to protect their milk price. "We are adding Class IV milk contracts to complement the dairy products currently traded on the CME," said Tim Brennan, CME Board member and Chairman of the Agricultural Products Oversight Committee. "These Chge -40 -40 -36 -44 -42 Last 1152 1210 1282 1350 1394 Low 1144 1210 1274 1350 1394 Live Cattle Daily Prices As of Date 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 Composite Volume 05/24/00 18561 Lean Hogs Daily Prices As ofThursday, 25 May Date 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 05/25/00 Composite Volume 05/24/00 14051 Lumber Daily Prices As of Date 05/25/00 JulOO 28970 29510 28860 05/25/00 Sep 00 29500 29670 29300 05/25/00 Nov 00 29520 29730 29420 05/25/00 Jan 01 0 30350 29750 Composite Volume Open_lnt 05/24/00 1055 3238 contracts will provide a valuable hedging tool for dairy producers and processors." Up until now, most dairy producers and buyers/users of milk had two contracts to deal with price risk: the Class 111 contract (the old BFP contract) and a butter contract. The Class 111 contract was popular for dairy farmers since three out of four class prices under federal orders varied with the Class 111 contract. The butter contract had some following, but it was cash settled and that made some people nervous. What would a dairy farmer or an ice cream maker do with a truckload of neatly wrapped boxes of butter? The popularity of the Class 111 contract became uncertain January 1 due to the new changes Table 2. Milk Production and Cow Numbers for 20-select States, by Month Milk Cows 1998 1999 Month 7.728 7,716 7.709 7,713 7,719 7,718 7.709 7.708 7,701 7,695 7,697 7.708 Annual 7,710 7,735 17,500 18,104 134,930 140,029 Source: USDA, Milk Production report. Thursday, 25 May Open High 6755 6765 6740 6757 7025 7037 7197 7210 7350 7355 7565 7570 7370 7370 Jun 00 Aug 00 Oct 00 Dec 00 Feb 01 Apr 01 Jun 01 Openjnt 117081 Open High Jun 00 JulOO Aug 00 Oct 00 Dec 00 Feb 01 Apr 01 Jun 01 JulOl 6825 6850 6755 6800 6565 6600 5760 5810 5600 5640 5670 5695 5540 5540 0 6275 0 6220 Open_lnt 60811 Thursday, 25 May Open High Low in federal order reform. In fact, everything changed. The Class 111 price continued to move with the cheese price. But the Class IV price moves with the butter price since nonfat dry milk prices are at support levels. And, the Class II price moves with the Class IV price. The Class I price is the tricky one; in some months it will move with the Class IV price, in others the Class 111 price. For dairy producers that are in federal orders with high Class I, 11, and IV uses, the new Class IV contract will be a valuable tool. I can see dairy farmers using both contracts (Class 111 and IV) each month depending on the percent milk use in their order. For more information on the Class IV contract and how it will work, see the chat room transcript at the Downes-O'Neill website Milk per Cow 1998 1999 2000 2000 7765 7766 7774 7786 Chge Last Low -25 + 10 +8 unch +5 +5 -15 6742 6750 7030 7192 7355 7570 7370 6725 6712 6995 7180 7340 7560 7370 Low Chge Last 6755 6730 6545 5740 5590 5670 ’5540 6270 6215 unch Chge Last +5BO + 190 +2O -70 29360 29460 29450 29750 (http://www.dairy.nu/). And finally, the Federal Reserve this week raised short term interest rates by a half a point. This rate hike will result in higher interest costs to consumers who up until now have been charging up everything on their credit cards and contributing to a strong U.S. economic expansion. The problem is, however, that all that growth was leading to signs of inflation. The Fed wanted to get ahead of inflation and decided on a half point increase rather than their usual quarter point increase. This move can be viewed as both good and bad news for dairy farmers. Higher interest rates and a slow down in consumption of dairy products is obviously bad. But inflation is very very bad! More interest rate hikes could be possible down the road if signs of inflation continue Milk Production 1998 1999 2000 11,327 10,394 11,678 11,579 12,011 11,396 11,314 11.124 10,672 11.125 10,829 11,481 1,578 1,505 1,631 1,598 Prev. Openjnt 30539 43637 23119 8551 4394 4359 2482 Prev. Volume 7844 6375 3284 742 172 133 10 Prev. Openjnt 18771 16456 11360 6568 5612 1511 512 38 Prev. Volume 6776 4410 1625 745 409 65 17 Prev. Open_lnt 2381 547 300 10 Prev. Volume 691 208 151 12,256 11,691 12,679 12,441 11,679 10,804 12,228 11,998 12,447 11,737 11,610 11,534 11,200 11,549 11,315 11,928
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