Wednesday January 25 Ag News, Page 2

Committee Meets to Discuss NFU Policy

The National Farmers Union (NFU) Policy Committee held its first meeting last week in Washington, D.C., to begin the policy revision process for NFU's policy. This year's policy committee members are Dan McGuire of Nebraska (chairman), John Daughenbaugh of Colorado (Rocky Mountain), Jeff Eschmeyer of Ohio, Sarah Lloyd of Wisconsin, Jeremy Scherler of Oklahoma, David Teigen of North Dakota, and Gail Temple of South Dakota. They have gone through much of the 2011 policy book line by line to make suggestions for changes to be voted on by the delegates at convention.

The Policy Committee is critical to NFU since they are tasked with helping to create the grassroots policy that our organization advocates for during the course of the next year. As discussions for the 2012 Farm Bill heat up, it becomes even more important to ensure that our members make their voice heard so that we are advocating for the things they care about most. It is this process that makes Farmers Union a member-driven organization and seperates it from most other groups.

Staff members of other organizations presented their own policies and priority issues to the Policy Committee to ensure they have a broader working knowledge of the issues as they revise NFU's organizational policy. The group also heard from Dr. Daryll Ray of the University of Tennessee, who is conducting a study funded by NFU to determine the effects a system of farmer-owned reserves would have on crop prices and government payments to farmers and ranchers in the coming years. Doug McKalip, senior policy advisor for Rural Affairs for the White House Domestic Policy Council and Krysta Hardin, chief of staff for the U.S. Department of Agriculture, also spoke.

This is the first step of a two-part process. The second part will happen in March during NFU's convention. At the convention, any Farmers Union member may propose changes to the policy. The committee then considers those proposals and submits a final copy of the suggested policy to the state delegates at the convention for consideration and adoption. NFU's 110th Anniversary Convention will take place on March 4-7, in Omaha, Neb.



AFBF: Egg Legislation Replaces Science with Politics

The American Farm Bureau Federation strongly criticized a bill pushed by the Humane Society of the United States and the United Egg Producers to implement an agreement they reached to replace decades of science-based animal care practices with strict government control.

The flawed legislation, H.R. 3798, introduced by Rep. Kurt Schrader (D-Ore.), would set a dangerous precedent by establishing federally mandated egg production practices and banning a number of other proven science-based egg production methods, according to AFBF President Bob Stallman.

"This bill would result in mandated animal care standards based largely on the political goals of an animal rights group that seeks to eventually shut down animal agriculture by government mandate," Stallman said. "The bill ignores the science supporting the consensus among mainstream agricultural veterinarians, animal scientists and livestock producers. We see this legislation as an attempt by a radical animal rights group to legitimize a policy package that will undoubtedly be used to bully other livestock producers."

Other organizations joining AFBF in raising serious concerns about the bill include the National Cattlemen's Beef Association, the National Pork Producers Council, the National Chicken Council, the National Turkey Federation and the National Milk Producers Federation.

"The top priority of America's farm and ranch families is to raise healthy animals, which results in healthy food for our nation," Stallman said. "Our food supply is simply too important for scientifically proven production standards to be outlawed on any basis. We firmly believe that any approach to animal care that does not rely on the expertise of veterinarians and animal scientists collaborating with farmers, ranchers and other livestock producers--in short, the people who work with farm animals daily--is simply not justified."

According to Stallman, as science has provided improved animal care standards, techniques and tools over the years, farmers and ranchers have steadily and voluntarily adopted these improvements to enhance the welfare of their livestock and viability of their operations.

He says farmers and ranchers have a proven track record of improvement in animal care and that we do not need heavy-handed government mandates based primarily on the extreme political whims of animal rights activists.



Iowa to Welcome Chinese Vice President Xi Jinping

Gov. Terry E. Branstad and Lt. Gov. Kim Reynolds Monday welcomed the White House's announcement that Chinese Vice President Xi Jinping will visit Iowa as part of his visit to the United States next month. The vice president will also visit California and Washington, D.C.

Vice President Xi visited Iowa in 1985 as a Hebei Province party official, and was the director of the Feed Association of Shi jiazhuang Prefecture. Now, he is the Vice President and this year he will become the president of China.

During a trade mission to China last September, Gov. Branstad met with Vice President Xi, and discussed at length the vice president's 1985 visit. The vice president informed the governor that he was impressed with the hospitality and friendliness of Iowans, and named a number of the Iowans he met with.

During their conversation, the governor invited him to visit Iowa again.

"I want to thank Vice President Xi for taking me up on my offer to visit Iowa," said Gov. Branstad. "The strong relationship Iowa has with the incoming leader of China has economic benefits that are beyond measure. This is a tremendous opportunity for Iowa, and we will make the most of our time with Vice President Xi."

Lt. Gov. Reynolds noted the administration has already been in talks with Vice President Xi's office, and are working with them to coordinate a smooth visit.

"We want to highlight the best of what Iowa has to offer while the vice president is in our state," said Lt. Gov. Reynolds. "We are working with state officials and business leaders to ensure economic development is the top priority during Vice President Xi's visit."

The governor noted that once the schedule is finalized, a release announcing the schedule will be sent.



Fertilizer Prices Holding Steady

Retail fertilizer prices tracked by DTN appear to be moving into a calm period during the third week of January. For the first time since the second week of December 2011, no major fertilizer experienced a significant price reduction.  In month-to-month comparisons, average prices of seven of the eight major fertilizers were lower compared with the third week of December, but drops were slight. DAP had an average price of $667 per ton, MAP $717/ton, urea $555/ton, 10-34-0 $825/ton, anhydrous $796/ton, UAN28 $388/ton and UAN32 $439/ton.  At $661/ton, potash was slightly higher compared with the previous month.

On a price per pound of nitrogen basis, the average urea price was $0.60 per pound of nitrogen, anhydrous $0.49/lb.N, UAN28 $0.69/lb.N and UAN32 $0.69/lb.N.

Five of the eight major fertilizers are continuing to show double-digit increases in price compared with one year earlier. Leading the way higher is 10-34-0. The starter fertilizer skyrocketed in price last year. Despite a drop in recent months, prices remain 28% higher compared with the third week of January 2011.  Potash has jumped 16%, urea has increased 14% and both UAN28 and UAN32 are now 11% more expensive than a year ago.  Two fertilizers have seen just slight price increases compared with a year earlier. Anhydrous has now climbed 8% and MAP has increased 3% compared with last year.  DAP is actually 1% lower than a year ago.



Argentina Lowers Crop Forecasts

The unusually hot, dry summer baking Argentina's croplands has hit yields and pushed the government to trim its production forecasts.  The corn forecast was trimmed the most, with the government now estimating the crop at 23 million metric tons. While that will still mark a new record, it is down sharply from the government's early expectations of up to 30 million tons.

"The corn crop suffered the worst from the scant rainfall through December," the Agriculture Ministry said in its monthly crop report Monday.  Just 1% of the corn crop is in very good shape, 32% in good condition, 42% average and 25% in poor shape, the ministry said.

The developing soybean crop has also been hit by the drought, although to a lesser degree than corn.  The ministry cut its soybean forecast to 48.9 million tons from 52 million to 53 million tons seen last month.  Lower yields are expected, although increased rainfall could lead to a recovery, the ministry said.  About 54% of the soy crop is in good shape, 34% average and 12% in bad condition, according to the ministry.

The one bright spot was the wheat crop, with surprisingly high yields coming from the recently harvested crop.  The ministry raised its wheat forecast to 13.4 million tons from 12 million tons. That's down 15% on the year due to lower planted area.



Rains Bring Some Relief to Argentina

Argentine corn and soy benefited from soaking rains that were expected to continue in the weeks ahead, reviving hope that farmers can salvage a good part of crops parched by weeks of hot, dry weather.

The drought, which hit in December after months of below-average rainfall, had jacked up grains futures prices and raised concerns about global food supplies. Argentina is the second biggest exporter of corn and third largest supplier of soybeans, which serve as an important source of protein for the world.

"The weather should continue to normalize in the weeks ahead, with more regular rainfall in eastern and central parts of the country," the state-run National Institute for Agricultural Technology (INTA) said in a statement.

But the showers arrived too late for some grains fields scorched by the Southern Hemisphere summer sun. The government said the weather has already taken a toll on 2011/12 corn yields and soy production. This could crimp government tax revenue.

INTA data showed precipitation on Monday in leading farming provinces Buenos Aires, Cordoba, Santa Fe and Entre Rios. Most areas got between 10 and 50 millimeters, but some registered as much as 100 mm.

Local agricultural specialist Manuel Alvarado Ledesma predicts a 2011/12 soy harvest of 42 million to 43 million tonnes, about 20 percent under original forecasts. He and other private analysts expect this season's corn crop to be well under the record 23 million tonnes produced in 2010/11.

Hamburg-based oilseeds analysts Oil World said on Tuesday it has cut its forecast of Argentina's soybean crop by 1.5 million tonnes to 48.5 million tonnes. The same analysts predicted a harvest of 52.0 million tonnes in December.

Agronomist Susana Merlo, a former agriculture subsecretary, is predicting a 2011/12 corn harvest of between 17 million and 18 million tonnes and a soy crop of just 39 million tonnes.



Dairy Situation and Outlook
Bob Cropp, Professor Emeritus, University of Wisconsin Cooperative Extension

Record milk prices were set in 2011. The Class III price averaged $18.37 compared to $14.41 in 2010. The Class IV price averaged $19.04 compared to $15.09 in 2010. And the U.S. All Milk price averaged $20.14 compared to $16.26 in 2010. But, while milk prices were a record high so were feed prices which dampened returns over feed costs.

Milk production increased just 1.8% to 196.2 billion pounds in 2011 which was positive for prices. But, domestic sales were mixed. Fluid (beverage) milk sales declined about 1.5%, the second consecutive year of declines. Both cheese and butter sales showed growth. But, a major factor contributing to record milk prices was dairy exports. The period of January through November compared to a year ago showed exports of nonfat dry milk/skim milk powder up 15%, total proteins even, cheese up 33%, butterfat up 15% and lactose up 14%. On a total milk solids basis exports were equivalent to 13.3% of U.S. milk production compared to 12.7% in 2010.

Forecasts are for lower but yet favorable milk prices in 2012. The level of milk production, domestic sales and exports will determine the final prices. January began with butter, cheese and nonfat dry milk prices all lower than averages for December. The exception has been dry whey prices which continued to show strength. NASS average prices are used to calculate federal order prices. It looks like NASS average prices per pound for January could be near $1.59 for butter, $1.60 for cheese, $1.40 for nonfat dry milk and $0.68 for dry whey. Despite lower cheese prices the strong dry whey price will hold the January Class III above $17.00 to around $17.05 compared to $18.77 in December. The Class IV price will be close to what it was in December at $16.87. Cheese and butter prices on the CME continue to weaken which will push both February Class III and IV below $17.00. But, prices could start to strengthen by March or April, peaking out in October or November with prices for the year averaging $1.00 to $1.50 per hundredweight lower than 2011. But, this could easily change depending upon the actual level of milk production, domestic sales and exports.

Milk production may increase no more than 1.5% in 2012 which will be positive for milk prices. USDA forecasts a 1.3% increase. The average number of milk cows for the year may decline slightly, and while feed prices may average a little lower, prices will remain relatively high dampening increases in milk per cow. However, USDA’s milk production report for the month of December shows milk production picking up rather than slowing down. Milk production for the month of December was estimated to be 2.7% higher than a year ago for the 23 reporting states and 2.5% for the U.S. as a whole. U.S. milk production for the last quarter of the year was 2.3% more than a year ago. Milk production growth above 2% will put downward pressure on milk prices.

Both more milk cows and improvement in milk per cow are contributing to the increase in milk production. Compared to the previous month cow numbers declined in October and November but increased again by 12,000 head in December. December cow numbers were 0.9% more than a year ago. Milk per cow in 2011 which averaged just 0.9% higher for the year improved to an increase of 1.6% for December. Of the 23 reporting states 16 had added cows in December compared to a year ago. Most of the increase in cow numbers took place in the West with increases of 3.8% for Arizona, 1.7% for California, 1.2% for Idaho, 4.0% for New Mexico, 3.6% for Texas and 4.4% for Washington. In contrast, in the Northeast cow numbers were 0.2% lower for New York, 0.7% lower for Pennsylvania and unchanged for Ohio. Also in the Midwest cow numbers were1.9% lower for Iowa, 1.1% lower for Minnesota and unchanged for Wisconsin.

Compared to December a year ago Western states had strong production increases with increases of 3.6% for Arizona, 3.8% for California, 4.9% for Colorado 3.4% for Idaho, 2.0% for New Mexico, 4.1% for Texas and 4.7% for Washington. These strong increases compare to New York up just 0.2%, Pennsylvania 0.2% lower, Ohio up 0.9%, Iowa up 2.5%, Minnesota up 0.8% and Wisconsin up 2.6%.

With milk prices lower for the first quarter of the year and feed prices still relatively high returns over feed costs will be lower. Quality hay supplies are tight and hay prices are high. This situation may result in cow numbers declining for the winter months and slowing down the increase in milk production. If cow numbers don’t increase for the year, but with some improvement in milk per cow the increase in milk production for the year could still stay below 1.5% which would be positive for milk prices. But, if production increases more than this milk prices will likely not strengthen as much for the second half of the year as now forecasted depending upon domestic sales and exports.

Domestic sales may do better in 2012. Both the Consumer Confidence Index and the Restaurant Performance Index have improved which is positive for increased sales. U.S. dairy exports may be lower than 2011 but yet remain relatively strong. USDA is forecasting exports on a milk fat basis to be down 7.5% and on a slim-solids basis down 5.6%.

One factor that is positive going into 2012 for holding milk prices at more favorable levels is stocks of dairy products. In 2011 cheese production showed limited growth, domestic sales were favorable and exports higher tightening up cheese stocks. During the period of January through November of 2011 cheddar production was 3.0% lower than the year before and total cheese production was up just 1.5%. As of December 31st American cheese stocks were 4.8 % below a year ago and but still 7.4% higher than the 5-year average for this date. Butter production has been running well above year ago levels with the January through November period up 16.6%. December 31st butter stocks were 28.7% higher than a year ago but still 12% below the 5-year average for this date. Dry whey stocks are relatively tight with stocks 9% lower than a year ago. Nonfat dry milk stocks are about 141 million pounds compared to stocks of as much as 1.2 billion pounds back in 2003 and over 600 million pounds as late as 2004.