Al6-Lancaster Farming, Saturday, June 9,2001
GRAIN. CATTLE. HOG,
&MILKBFP
FUTURES MARKETS
Markets Courtesy of Chicago Board and Mercantile Exchange
Closing Bids: Thursday, June 7,2001
Corn
99 3/4
207
214 1/2
218 1
Soybeans _____ .
| [ ■ LojAigi^^^Cl
I Q3;3HI 60 1/21466 1/2 458 l/2i
551 461 f
JpK it 461 462 461 1/2 Unch
IWlAuff 45! 453 456 3/4 1 456 [456 1/4| +l6
4451 450 442 1/2 448 446 1/2 447 1/4 +34
445 1/2 449 442 1/4 446 1/2 445 1/2 446 +24
11111 l 453 4561~ 450 454 453 1/2 453 3/4 +24
3jBK ~459 463 1/2 457 1/2 461 461 +26
[MmSi 463 468 1/2] 4631 466 465 1/2 |465 3/4 +l6
468472 1/2 468 470 1/2 470 1/2 +26
475|476 3/4j~ 474 ( 476 476 +l2
515 515 jjjjjj shhmhi^hi
Soybean Meal
rs
Weekly Dairy Market Outlook
Ken Bailey
Penn State
USDA Tilts
Butter-Powder
Support Prices
• Nonfat dry milk falls 10.32
cents to $0.90/pound.
• Butter increases 19.99 cents
to $0.8548/pound.
• Cheese prices remain un
changed.
USDA announced on May 31,
2001 an adjustment in the Com
modity Credit Corporation
(CCC) purchase prices for dairy
products under the dairy price
support program. The support
price for nonfat dry milk was
lowered 10.32 cents per pound
to $0.90 and the support price
for butter was raised 19.99 cents
per pound to $0.8548. The
cheese price was left unchanged.
This change in the price sup
port program was anticipated.
Last year (fiscal year 2000), the
CCC purchased about 48. per
cent of domestic production of
nonfat dry milk. And as of April
1 this year the CCC reportedly
had 772 million pounds of
213 1/
216
216 1/2
220 1/2
227 3/4
31 1/2
234 1/2
37 3/4
241
244
245
246
250
254
264 1/2
65 1
262 1/2
nonfat dry milk on hand. That is
equal to year’s worth of domes
tic use! The government was
clearly stockpiling surplus
powder and had no plans for its
use.
The dairy price support pro
gram was created in the early
19S0s to support the manufac
turing price of milk at a speci
fied level that changed over
time. The 2001 Appropriations
Bill extended the price support
program through calendar year
2001 at the 2000 support price of
$9.90 per CWT. By supporting
the manufacturing price of milk,
the USDA essentially provides a
floor to farm-gate milk prices.
The support price program
works by offering to purchase
surplus amounts of cheese,
butter, and nonfat dry milk at
specified prices. These prices are
computed in relation to the
$9.90 support price for milk. On
January 1,2001, USDA used the
formulas from the federal orders
to compute CCC purchase
prices at $1.1314 per pound for
block cheese, $1.0132 for nonfat
213 1/2
217 1/4
220 1/2 n
228
227 3/4
234 1/2
241 1/2
241
245
251 1/2
250
265 1/2
263
Unch
220
228
Unch
234 1/2
241 1/4
Unch
245
250 3/4
Unch
265 1/2
263
Oats
dry milk, and $0.6549 for butter.
The price support program
has a direct impact on farm-gate
milk prices. last year cheese
prices fell below the GCC pur
chase price for cheese. Very few
cheese plants in the West
wanted to sell cheese to the gov
ernment. Nonetheless, it did
provide a psychological support
to cheese. That in turn kept the
Class 111 price of milk from free
falling below $8.57 per CWT.
That provided minimum sup
port to all federal orders that
had Class 111 sales.
The price support program
had a very high level of support
for nonfat dry milk at $l.Ol per
pound. In fact, many in industry
argued it was “too high.” This
distortion in prices resulted in
very limited commercial use for
nonfat dry milk. Imports of Milk
Protein Concentrates, or MFC’s,
increased into the U.S. in reac
tion to the high price of nonfat
dry milk.
The high powder price also
unintentionally raised the Class
IV price of milk used for nonfat
dry milk and butter production.
That’s because of the formula
for Class IV defined in federal
order reform. A higher Class IV
Lean Hogs
Daily Prices As of
Date
Jun 01 6935 6960 6917 6952
Jul 01 6760 6775 6697 6762
Aug 01 6500 6515 6450 6482
Oct 01 5460 5485 5435 5467
Dec 01 5165 5195 5140 5160
Feb 02 5250 5260 5250 5255
Apr 02 5255 5285 5240 5240
May 02 6100 6102 6060 6060
Jun 02 6202 6227 6202 6227
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
Composite Volume Open_lnt
06/06/01 6574 43389
Live Cattle
Daily Prices As of
Date
Jun 01 7412 7420 7370 7392
Aug 01 7355 7375 7317 7350
Oct 01 7540 7540 7495 7515
Dec 01 7592 7600 7560 7575
Feb 02 7587 7590 7572 7575
Apr 02 7740 7747 7722 7730
Jun 02 7360 7375 7360 7375
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01
Composite Volume Openjnt
06/06/01 28785 115974
Pork Bellies
Daily Prices As ofThursday, 7 June
Date Open High Low Last Cl
Jul 01 8050 8220 8010 8075 +5B
Aug 01 7890 8085 7890 7927 +55
Feb 02 7365 7380 7340 7375 +6O
Mar 02 0 7370 7370 7370 +l6B
06/07/01
06/07/01
06/07/01
06/07/01
06/07/01 May 02 0 7360 7360 7360 +l5O 0 4
Composite Volume Openjnt
06/06/01 583 2269
price also raised the Class II and
Class I prices. Thus producers in
federal orders with significant
sales of milk used for Class I, 11,
and IV purposes (that is, the
Northeast and Southeast) re
ceived high and stable farm-gate
milk price thanks to the support
price for nonfat dry milk.
The farm price impact of this
adjustment is not as clear as
some might argue. On the one
hand, the National Milk Pro
duces Federation, a group that
represents cooperatives, re
leased a report that this move
will lower the Class IV price by
$0.90 per CWT and reduce
dairy farm income nationwide
by $BlB million. This analysis of
course assumes that nonfat dry
milk prices will fall 10.3 cents
per pound to $0.90 for the rest of
the year.
It is likely that this will not
occur because the export market
for powder is very tight right
now. Europe has very limited
supplies of powder because of
the outbreak of food and mouth
disease. World prices for nonfat
dry milk are close to $1 per
pound.
And, because of the price ad
justment by USDA, U.S. prices
are now very competitive in
world markets. Thus world
trade will likely keep nonfat dry
milk prices from dropping the
full 10.3 cents.
Thursday, 7 June
Open High Low Last Chge
1795
2641
1446
408
187
26
- Thursday, 7 June
Prey,
Open High Low Last Chge y olume
2790
5171
8237
6642
5881
56
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What we do know is that the
rise in the butter CCC purchase
price will have no impact on the
domestic price of butter. That’s
because the Grade AA butter
prices at the Chicago Mercantile
Exchange are trading at levels
well in excess of the new CCC
purchase price. Who would
want to sell butter with a market
value of $1.91 per pound to the
government for $0.8548 per
pound?
The futures markets at the
Chicago Mercantile Exchange
reacted immediately to the news
from USDA. Class IV futures
prices fell 40-50 cents per CWT
for the months June 2001 Sep
tember 2001. Class IV prices,
however, are still at very favor
able levels, peaking at $14.95
per CWT in August 2001. And
this market reaction does not
represent the final word on the
ultimate price impacts.
USDA chose a very favorable
time to make an adjustment that
most in the industry knew
would ultimately have to take
place. Milk prices are high and
climbing even higher. Powder
production in the U.S. is likely
to be below a year ago. And the
international market is looking
for an alternative source of
powder. USDA’s only other
choice would have been to build
more underground storage in
Kansas City!
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