MILC payments on the horizon as milk prices continue to fall
Due to high feed prices, there is a possibility that Milk Income Loss Contract payments (MILC) might start with milk that was shipped in February.
An earlier preliminary estimate indicated that the payment for February would be 27 cents per hundred to dairy farmers who have established their eligibility.
An up-to-date calculation, however, by University of Wisconsin-Madison dairy economist Brian Gould puts the February numbers right at the borderline on whether they would be a payment or not. As of midweek, however, Gould's numbers indicated a potential MILC payment of 44 cents per hundred for March, 87 cents for April, and close to $1 per hundred for May and June of 2012.
No official announcement will be made until the end of March because of the time needed to tabulate the February feed costs.
According to the MILC formula, payments are made when the Federal Milk Marketing Order 1 (Boston) Class I fluid milk price for a month is below $16.94 per hundred (not the case for February), or when the feed price adjustment yet to be certified for the month is plugged into the formula is great enough to authorize a payment.
A bit of optimism was injected into the market on the year's bonus day (Wednesday, Feb. 29) with increases on the Chicago Mercantile Exchange in the spot market prices for Cheddar cheese, the Class III milk futures for nearby months, and the futures prices for dry whey.
On an unfilled bid to buy one carload of Cheddar barrels, the price rose by 2 cents per pound on Wednesday to close at $1.50. Cheddar blocks tacked on 1.5-cent for a closing price of $1.4875 per pound after a spot market day of three carload sales, an unfilled bid, and an uncovered offer to sell one carload.
The spot market price for AA butter was up by .25-cent to $1.3975 per pound on Wednesday. This was the result of a busy market day with four carload sales and an unfilled bid to buy five carloads.
Dry whey futures prices were in green ink territory through noon on Wednesday with increases for every month from March through October of 2012. The downward slope in prices continues, however, with March at 59 cents per pound, April at 50 cents, and the latter months of 2012 at just over 40 cents per pound.
On the down side, non-fat dry milk prices continued to sink. Grade Extra lost another 2 cents per pound to close at $1.2775 on Wednesday as the result of an uncovered offer to sell, while Grade A remained at $1.2875 per pound.
With only two trading days remaining, the February Class III futures stood at $16.07 per hundred on Wednesday. The March futures gained 14 cents to $15.54 and April's were up by 25 cents to $15.45. Class III futures remained in the lower half of the $16s per hundred for the second half of 2012.
Early this week, Cooperatives Working Together announced the acceptance of a package of 20 bids from Dairy Farmers of America, Darigold Cooperative of Seattle, United Dairymen of Arizona, the Michigan Milk Producers Association, and the Maryland and Virginia Milk Producers Cooperative for export bonus payments on a total of 2.489 million pounds of Cheddar, Gouda and Monterey Jack cheese, and 3.053 million pounds of butter to countries in Asia, Central America, North Africa and the Middle East by June 2012.