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
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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