June-July risk management calendar: No holidays

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Dairy risk management doesn’t take vacations, although it can take federal vacations. Here is an overview of the current conditions and the risk management schedule for the early summer of Progressive dairy products.

Dairy Market News: Milk Supply

The USDA has delayed the release of the May Milk Production Report until last weekend due to the new federal holiday on June 15. Check back later for a summary to be released Monday afternoon, June 21. Due to the report’s delay, Dairy Revenue Protection (Dairy-RP) coverage will not be available after markets close on June 21.

According to the USDA Dairy market news for the week ending June 18, the northeast milk supply is fairly stable in the northeast and the mid atlantic milk production is stable. Class I sales are stable to slightly lower. Although the school year is over, local dining programs are available for the summer.

Milk production in the Southeast continues to decline. Class I sales are somewhat mixed, with some bottlers ordering additional milk supplies for their immediate needs, while others have reduced milk loads.

In the Midwest, milk supplies for the spring hunt have lasted all season, even with a noticeable increase in temperatures in recent weeks. Finding takers for extra milk has been daunting. Last year’s milk spot prices were 75 cents to $ 2 compared to Class III, compared to-$ 6 to – $ 4 under Class III for the week ending June 18.

Western milk supplies remain plentiful. The transportation problems plaguing the country, including significant shortages of freight and tankers, are worse in the West. Central California has been warned of potential water cuts, and more widespread cuts are expected. USDA contacts report that, so far, June production tends to increase year over year and decline slightly from last month.

Milk production in the Pacific Northwest is strong but starting to decline in some areas, following typical seasonal patterns. Overbase programs are in place to help control the milk supply.

Dairy margins weaken from June

Dairy margins continued to deteriorate through the first half of June, as continued weakness in milk prices more than offset the impact of stable to weaker feed markets, according to Raw Material and LLC Ingredient Coverage. While demand for dairy products remains quite strong in domestic and export markets, increased milk production is putting pressure on prices. The recent intense heat in the western and northern plains may begin to moderate milk production throughout the summer.

Click here or on the calendar above to see it in full size in a new window.

Risk management options

  • Milk-RP: Dairy-RP coverage is generally available for milk produced four or five quarters in the future. Dairy-RP is available daily except statutory holidays and USDA reporting days which may impact the markets (see calendar). Dairy-RP is also not available on days when applicable futures contracts increase or decrease the limit.
  • LGM-Dairy: The last scheduled monthly sales period for Livestock Gross Margin for Dairy Products (LGM-Dairy) is Friday June 25th. With the new crop insurance year starting July 1, LGM-Dairy’s sales are shifting to weekly. The price discovery period for LGM-Dairy is Tuesday through Thursday of each week. LGM-Dairy factors are calculated using the average closing prices of Chicago Mercantile Exchange (CME) Class III milk, corn and soybean meal futures on those days. The policy sales period will begin Thursday at 4:30 p.m. and end at 9:00 a.m. (2:00 a.m. Central Time) on Friday. Unlike Dairy-RP, which is not available on the day of major USDA dairy reports (milk production, cold storage, or dairy), LGM-Dairy is available weekly, even if a sales window falls. the day of a USDA report. Coverage is available for 12 months, excluding the first month. You must select coverage in two month increments to obtain a premium grant from the USDA Risk Management Agency (RMA). Subsidized premiums range from 18% to 50%. For example, a zero deductible policy has an 18% premium subsidy. A deductible of 50 cents per cwt has a subsidy of 28% and the deductible of $ 1 per cwt (cwt) has a subsidy of 48%. Premiums are due at the end of the coverage period. There are no transaction fees.

LGM-Dairy and Dairy-RP insurance policies are sold and issued only through private crop insurance agents. A list of crop insurance agents is available online using the RMA Agent Locator.

DMC Update 2021

The USDA will release the May 2021 Dairy Margin Coverage (DMC) program and potential indemnification payments on June 30. Until April, DMC compensation payments had been distributed each month of 2021, totaling $ 446.1 million as of June 7. Agriculture Secretary Tom Vilsack has announced additional details regarding USDA pandemic financial assistance for dairy farmers to be implemented within 60 days. The announcement included a mention of the long-awaited DMC additional payments for small and medium-sized producers.

A COVID-19 relief bill signed late last year included language directing the USDA to allow smallholder dairy farmers to update their historical milk production credentials and receive an additional DMC payment on a portion of any increase in milk production, up to the Level I cap of 5 million pounds of milk per year. According to the USDA, the expense for additional DMC payments is approximately $ 580 million. It is expected that the additional payments to eligible producers will be retroactive to January 2021 and end at the end of 2023.

Other resources

  • The CDE “Protecting Your Profits” webinar will take place on June 23. Although Class III milk futures prices have declined since last month, Dairy-RP still deserves consideration, according to Zach Myers, head of risk education at the Pennsylvania Center for Dairy Excellence (CDE). . He will discuss market volatility and risk management strategies in his monthly “Protect Your Profits” webinar on June 23, starting at noon (Eastern Time). Jud Heinrichs, dairy nutritionist at Penn State University, will also discuss managing high feed costs. Prior registration is not necessary. To participate in the webinar, click here or by phone: (646) 558-8656. When prompted, enter Meeting ID 848 3416 1708 and Passcode 474057.
  • Farm Credit East will host its “2020 Dairy Farm Summary & 2021 Mid-Year Dairy Outlook” webinar on June 23 starting at 11 a.m. (Eastern Time). Chris Laughton, editor of the report, will review and discuss the year that has been for dairy. Going forward, Jeremy Forrett, Director of Crop Growers LLP, will discuss risk management options for current market conditions, and finally, Catherine de Ronde of Agri-Mark will present a price and market outlook for the latter. semester 2021. Click here for registration information.
  • Marin Bozic, dairy economist at the University of Minnesota, provided a milk and feed market outlook webinar with Northwest Farm Credit Services in early June.
  • Find a summary of Rabobank’s Global Dairy Quarterly here. end mark
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