Exports Crucial As Milk Production Grows
U.S. dairy farmers, thanks to warm weather and great cull cow prices, are growing milk production at an astounding rate. Fewer cows in the hospital string and better, younger cows replacing those culled have pushed production in many parts of the country to record highs.
Fortunately, the CWT Export Assistance Program is a major factor in finding export markets for the products that are offsetting the market pressures from that additional milk.
First Quarter 2012 Results
The first quarter of 2012 has been very active. Nine CWT member cooperatives have submitted a total of 334 export assistance bids for consideration — 244 for Cheddar, Monterey Jack and Gouda cheese and 90 for 82% butter. After reviewing each bid (including a thorough economic analysis of both the domestic and world market fundamentals involved) , CWT ultimately agreed to provide assistance on 37.8 million pounds of cheese and 33.3 million pounds of butter in the 231 bids accepted. The product will go to 23 countries in Africa, Asia, Central America, Europe and the Middle East.
As can be seen from the following pie charts, the destinations for cheese as compared to butter are quite difference. While the significant quantities of cheese are being exported to Asia, the amount of butter being exported there is quite small. However, Africa and the Middle East are recipients of significant quantities of both cheese and butter.
What is also important is that on a milk equivalent butterfat basis, these exports equal 1.075 billion pounds of milk. That means CWT-assisted export sales are equal to 60 percent of the increase in milk production for the first two months of the year.
Whole Milk Powder added to eligible product mix
CWT’s Export Assistance Operating Procedures (see www.cwt.coop, Export Assistance tab, How to bid) lists those products eligible for Export Assistance as approved by the CWT Committee. CWT’s management team determines when support for these products will be the most effective in achieving CWT’s basic goal — generating a positive impact on producer prices.
Effective April 16th, CWT began accepting requests for assistance for Whole Milk Powder. This was the result of a thorough economic review of market fundamentals and the potential return on investment for dairy producers.
Assisting member cooperatives in building export markets for whole milk powder is a very cost effective way to export both milk fat and nonfat (skim milk) solids. The fact is that the world wants whole milk powder, as evidenced by the emphasis put on it by New Zealand’s export monopoly Fonterra.
As is currently done when CWT receives bids for assistance in exporting Cheddar, Monterey Jack, Gouda and butter, whole milk powder bids must be submitted by noon each Wednesday. CWT economists review each request received to determine if the level of assistance per metric ton requested is economically justified by market fundamentals. If it is, the bid is accepted. If it determined that it is not, CWT offers the member the level of assistance that is economically justified on following Thursday afternoon. Members have until the following Monday to accept the counter offers.
The assistance level granted is not paid until CWT receives documentation showing that the product has been delivered to the end customer in the destination country.
Investors in CWT Growing
The number of cooperatives and individual producers investing in CWT continues to grow. A total of 36 cooperatives have committed to investing two cents per hundredweight of member milk marketed. Two coops — Swiss Valley Farms and White Eagle Cooperative — have joined CWT since the first of the year. A full list of CWT member cooperatives is available on the CWT website -www.cwt.coop.
In addition, 119 individual dairy farmers producing nearly one billion pounds of milk have signed on to support CWT for 2012 and 2013. They recognize the value of having a system that both tightens domestic supplies and expands the market for their milk beyond America’s shores.
The world market is growing at a rate eight to ten times faster than the U.S. market. The CWT Export Assistance Program is a good investment for dairy farmers as well as for cooperatives not yet interested in expanding into the export market. By growing markets and, thus, increasing demand for dairy products, all producers and all cooperatives benefit from what CWT does.