MARKET WATCHMARKET WATCH USDA report feeds the market bulls 2010 CORN PRODUCTION ESTIMATE LoweredFEED

USDA’s crop statisticians and agricultural economists poured the coal to the bullish fi re in the fi nal report on 2010 crop production. Yield estimates were reduced, ending stocks were reduced for both domestic and global crops and projected price ranges were raised. � e crop production and grain stocks reports contributed to signifi cant upward moves in the grain market as traders prepare for a battle to buy 2011 acres.

� e National Agricultural Statistics Service began its fi nal report on the 2010 crop by lowering the corn production estimate. � at was done with a combination of adjusting acreage up to 81.446 million and the yield down to 152.8 bushels per acre. � e combination resulted in a production

of 12.446 billion bushels, well under the 13+ billion estimates earlier in the growing season. December 1 corn stocks were estimated at a shade over 10 billion bushels, about 900 million bushels less than year-earlier estimates. � e domestic carryout at the end of the marketing year in August will be a 20-day supply.

� e total drop in corn production was 93 million bushels. � e USDA WASDE report cut 100 million bushels from its feed use estimates for corn, but raised ethanol use by 100 million bushels. � e ending stocks were estimated at 745 million, which puts the stocks-to-use ratio at 5.5 percent and the least since the 5 percent ratio in the 1995-1996 marketing year. � e price range for the marketing year was

raised 10¢ to $4.90 to $5.70. USDA said, “Heavy early season marketings of corn priced well below current cash price levels are expected to limit the upside potential for the weighted average price received by producers.” For the trading day, March corn closed up 24¢ to $6.31, with December up 12¢ to $5.60 per bushel

Globally, corn production is down by 4.7 million tons from the U.S. and Argentine crops, and global feed grain supplies will be down subsequently from lower production of several coarse grains.

Soybean production estimates were reduced by yield to 43.5 bushels per acre, but acreage was raised slightly to 76.616 million acres, and production was calculated at 3.329 billion bushels. � e 30-million-bushel cut from November was refl ected in the carryout, which is down to 140

million. December 1 soybean stocks were projected at 2.277 billion, pushing the carryout down to a two-week supply when the marketing year ends in August. For the trading day, March beans closed up 58¢ to $14.15, and November beans closed 35¢ higher at $13.08.

� e USDA balance sheet for soybeans shows a 46-million-bushel drop from November. Subsequently, the crush was lowered by 10 million bushels. However, USDA reported more protein and oil were being produced in the extraction process, so meal and oil production were left unchanged. USDA retained its 1.590 billion bushel estimate for exports. With the carryout declining to 140 million, the average price range was raised 50¢ to $11.20 to $12.20, and USDA added that early season marketings below those price levels will hold back the average for the year.

Globally, oilseed production will be down, both for soybeans and other oilseeds. � at is the result of the shorter U.S. and Argentine crops. Global ending stocks are also reduced because of those shorter crops.

USDA reported higher wheat exports than expected, due to reduced competition with lower foreign supplies of milling-quality wheat. � e 50-million-bushel boost in exports helped reduce ending stocks by 40 million bushels. Wheat stocks in the

COMMODITIES

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Booth DX1

Supreme hay ($/ton)

Jan. 14 Price 3-week change

Central CA $215 $5 UT $100-$125 NC

NV $180 $10

WA/OR $150-$175 $5-$10 CO $135-$150 NC

NM $185-$190 NC

TX $180-$220 $5-$15

Source: USDA National Hay, Feed & Seed Summary

Soybean meal* ($/ton)

Jan. 21 Price 3-week change

CA $418 $8

ID $420 $4 NM $405 NA

*Price quotes contributed by Western Milling, J.D. Heiskell and United Cooperative.

Corn* (in tons) (in bushels)

Jan. 21 Price 3-week change

CA $276 $9

ID $277 $9

NM $262 NA

Price 3-week change

$7.73 .25¢

$7.60 .26¢

$7.34 NA

Cottonseed* ($/ton)

Jan. 21 Price 3-week change

CA $326 $22

ID $327 $6 NM $245 NA

USDA report feeds the market bulls 2010 CORN PRODUCTION ESTIMATE Lowered

Stu EllisEditor and bloggerFarmgateblog.com

Quarterly Stocks report were not disappearing as quickly as expected. Ending stocks were reduced from 858 million to 818 million bushels. USDA said the marketing year average price would be $5.50 to $5.80 per bushel, with the midpoint of the range up 15¢ from the December supply-demand estimate. March wheat closed up 11¢ to $7.705 and July wheat closed 14.75¢ higher at $8.23.

Global wheat supplies were increased slightly, helped by higher production in Argentina and Brazil. � ere were signifi cant reductions in production estimates from the Eastern Russian drought and the Australian fl oods.

SummaryReductions in domestic corn and

soybean estimates were the primary movers of the market following USDA’s fi nal report on the 2010 U.S. crop. However, increased demand for short supplies, both domestically and globally, will keep a fi re under the market until 2011 acreage is known. Price estimates for corn and beans were raised by USDA, which said they would have moved higher, but early sales at lower prices will keep down the average. PD

—Excerpts from � e Farm Gate: Farmgate.uiuc.edu

Mar2011

May July Sept Dec Mar2012

Low

High

Settle$5.25$5.50$5.75$6.00$6.25$6.50$6.75$7.00

Mar2011

JulyMay Aug Oct DecSept MarJan2012

Low

High

Settle$300

$320

$340

$360

$380

$400

REGION

GAS DIESEL

Recent 3-week change

Yearly change Recent 3-week Yearly

change

East Coast $3.114 +.048¢ +0.363¢ $3.448 +.135¢ +0.525¢

Midwest $3.089 +.041¢ +0.408¢ $3.371 +.093¢ +0.537¢

Gulf Coast $2.959 +.061¢ +0.342¢ $3.366 +.14¢ +0.535¢

West $3.176 +.076¢ +0.348¢ $3.509 +.104¢ +0.562¢

California $3.349 +.062¢ +0.323¢ $3.562 +.092¢ +0.554¢

U.S. $3.104 +.052¢ +0.365¢ $3.407 +.113¢ +0.537¢

Mar2011

MayApr MarFebJune July Sept Oct NovAug Dec Jan2012

Settle$91

$92

$93

$94

$95

$96

FUTURES

ENERGY

High: $6.81 Low: $5.36

High: $390.40 Low: $325.20

High: $95.65 Low: $91.20

Corn (dollars per bushel)

Soybeans (dollars per ton)

Crude oil (dollars per barrel)

CornMarch ’11 contracts $6.28 +.20¢ $6.60/$5.95May ’11 contracts $6.37 +.21¢ $6.69/$6.04

JAN. 21 Avg. 3-week settle High/Low

Soybean mealMarch ’11 contracts $357.71 +$14.51 $388.50/$361.10May ’11 contracts $377.86 +$15.94 $390.30/$363.20

Source: U.S. Energy Information Administration, Jan. 24

Source: Chicago Mercantile Exchange data

Source: U.S. Energy Information Administration, Jan. 21

Issue 3 • February 8, 2011 Progressive Dairyman 9

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Refl ecting the increased worldwide demand for U.S. beef, dairy cow prices have gained in the last month as much $15.00/cwt. � e average dairy cow price for December 2010 averaged a little over $52.00/cwt, but by the third week of January 2011 dairy cows for slaughter sold

MARKET WATCHMARKET WATCH Beef Driving Dairy Cow Prices HigherMARKET WATCHCATTLE

Chris LehnerDirector of commoditiesEquity Cooperative Livestock Sales Association

between $51.00/cwt to $65.00/cwt. Heavier cows weighing near 1500 pounds with a good fl eshy cover were selling in the lower to mid $70’s with a few up to $79.50/cwt.

Dairy cow prices should remain strong as long as the choice to select beef spread continues to narrow

on a rallying fed cattle market. It indicates the strength in demand for the muscle cuts and for all ground beef products. In just one week from January 14th to January 21st dressed cow bids went from $120.00/cwt to $133.00/cwt. According to Rocky Olsen with Equity Cooperative

Livestock Sales in Stratford, WI, dairy producers looking for replacements have been competing with beef buyers at sales. Beef buyers have been buying top quality Holstein heifers weighing 1100 pounds to 1290 pounds for slaughter.

Empire Livestock - Burton MarketVernon, NY (800) 257-1819 (sale 1/20/11)

$1,300 NC

$1,200 NC

$1,050 NC

$950 $150

$350 $150

$700 $50

$1.10/lb$.15/cwt

$1.50/cwt$.30/cwt

N/T

Hilltop Dairy Auction MarketSavannah, NY (607) 699-7250(sale 12/17/10)

$1,500$100

$1,300NC

$1,200 $100

$1,200 $100

$500$100

$900 $50

$200 NC

$25NC

$650 $300

Mammoth Cave Dairy Auction, Inc.Smiths Grove, KY (800) 563-2131(sale 1/18/11)

$1,400 $40

$1,200 $10

$1,300 $320

$1,300 $300

$380NC

$520$5

$190$30

$95 $20

N/T

Equity Co-op LivestockStratford, WI (715) 687-4101Rocky Olsen (608) 434-4037 (sale 1/11/11)

$1,325 $25

$1,200 $100

$1,100 NC

$925 $125

$550 NC

$825 $145 $135 $950

Topeka Livestock AuctionTopeka, IN (206) 593-2522 (sale 1/18/11)

$1,485 NC

$910 $110

N/T $89$800

$100 $1,175 $175

N/T N/T$925 $10

Tri-State LivestockSioux Center, IA (712) 722-0681Mike Koedam (712) 470-0198 (sale 11/17/10)

$1,575 $25

$1,450 $125

$1,400 $200

N/T$1.13/cwt $.70/cwt

$.96/cwt $.10/cwt

N/T N/T N/T

Brush Livestock of ColoradoBrush, CO (970) 842-2801 (sale 1/6/11)

$1,625 $165

$1,560 $110

$1,480 $190

$1,475$165

$425$75

$735$40

$200$35

N/T$1060 $10

Chehalis Livestock MarketChehalis, WA (360) 748-3191 (sale 1/14/11)

$1,350 NC

$1,260 $90

$1,100 NC

N/T N/T N/T $100$40 NC

$900

Toppenish Dairy Replacement SalesToppenish, WA (509) 865-2820 (sale 12/17/10)

$1,350 $50

$1,250 $150

$1,225 $100

$800 $60

$.95/cwt $.20/cwt

$.70/cwt $.50/cwt

N/T N/T N/T

Sulphur Springs Livestock and Dairy AuctionSulphur Springs, TX (903) 885-7739(sale 1/113/11)

$1,325$75

$900 $100

$900 $100

N/T $440 $40

$700 $50

$175 $10

$85 $20

N/T

Tulare County SalesDinuba, CA (559) 591-0884 (sale 1/18/11)

$1,400$100

$1,300$50

$1,200$50

$1,100$150

$1.10/cwt $1.00/cwt $75$90

$50NC

$800NC

Escalon Livestock Marker, Inc.Escalon, CA (209) 838-7011(sale 1/12/11)

$1,400 NC

$1,300 $100

$1,000$150

N/T$1.10/cwt $.25/cwt

$.85/cwt $.25/cwt

N/T N/T$800

NC

Contact Judy about being included in Progressive Dairyman’s Market Watch! judy@progressivedairy.com • (208) 324-7513 NC = No change N/T = No test Decrease in price Increase in price

Log on to www.progressivedairy.com to get auction reports from more locations!

MARKETWATCH Top Springer

Top Average

Medium Holstein Springer

ShortbredsOpen

Heifers Light

Open Heifers Heavy

HeiferCalves

BullCalves

Breeding BullsJanuary 21, 2011

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NOTE: The colored bar represents cumulative year-to-date milk production. When it does not surpass the dotted line at the center of the box, it indicates state production is below the previous year’s total. When it does surpass the dotted line, it indicates production is above the previous year’s total.

Southwest Region2,246.1 +51,848 +3.6%

15,598.3 +3.8%62,857 101.4%

Northwest Region1,174.5 +7.91,817 +1.7%6,546 +6.4%

26,090 104.5%

MARKET WATCHMARKET WATCH West ADDs 13,000 cows in Q4MILK

Texas417 +2

1,750 +2.6%2,238 +3.9%

8,828 99.9%

Utah85 NC

1,730 +0.3%451 +2.7%

1,807 102.5%

Washington253 +1

1,879 +0.2%1,458 +5.2%

5,900 106.1%

Arizona183 +3

1,839 -0.8%1032 +8.7%

4,146 101.7%

California1,749 +21,862 +4.7%9,988 +3.8%

40,395 102.2%

Nevada28 NC

1,828 +3.3%157 +3.3%

620 101.5%

Oklahoma54 -1

1,377 +0.7%228 -4.6%

962 96.0%

Hawaii1.9 NC

1,081 +0.1%6.3 +18.9%

25.3 118.8%

Colorado122 +2

1,922 +3.7%719 +9.1%

2,816 99.2%

Montana14 NC

1,607 +1.3%69 -5.5%

289 96.7%

Wyoming6 NC

1,707 +7.2%31.4 +7.2%

120.9 121.3%

Alaska0.5 -.1

1,043 +28%1.6 +6.7%

7.1 118.3%

Idaho573 +3

1,832 +1.9%3,219 +6.6%

12,774 105.1%

New Mexico319 -1

1,992 +1.7%1,949 +2.3%

7,881 99.7%

Oregon121 +2

1,609 +2.8%597 +9.1%

2,376 105.7%

U.S. Total9,126 +41,699 +2.4%47,543 +2.8%

192,726 101.8%

Legend

Number of cows(in thousands)

Milk per cow(Q4 monthly avg.)

(in lbs.)Total milk

production (quarter)

(in millions of lbs.)

Year-to-date milkproduction (total)(in millions of lbs.)

Percentage of year-to-date production versus previous year-to-date

Quarterly change(in thousands)

Annual percentchange

Annual percentchange

90% 100% 110%

12 Progressive Dairyman Issue 3 • February 8, 2011

www.portales.com

New Mexico Ag Expo: February 22-23Portales, New Mexico

This great show is just around the corner. Make plans NOW to attend and experience

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East Coast Region2,246.1 -5.51,537 +3.2%

10,588 +2.5%43,281 100.8%

Midwest Region2,953 -41,636 +0.6%14,811 +0.4%60,498 101.8%

26 states BELOW their prior YEAR’s TOTAL MILK PROduction at end of 2010 Vermont

136 -31,494 +1.8%623 +3.3%

2,523 102.2%

Virginia95 NC

1,459 +0.5%425 +0.5%

1,723 99.3%

Wisconsin1,265 +21,637 +0.1%6,349 +0.7%

26,041 103.2%

Florida114 NC

1,424 +6.2%498 +7.1%

2,106 101.4%

Georgia77 NC

1,381 +0.2%326 +1.6%

1,390 99.6%

North Carolina44 NC

1,564 +1.4%211 +1.4%

862 97.5%

Maryland53 NC

1,514 +2.7%246 +0.8%

1,001 99.7%

New Jersey7.5 NC

1,435 +3.9%33 -8.3%

140 87.0%Delaware5 NC

1,370 +5%21 -12.5%

89 87.3%

Connecticut19 NC

1,527 +0.8%89 +3.5%

366 103.1%

Massachusetts13.5 -.5

1,377 +0.2%57 -3.4%

246 100.0

Rhode Island1.1 NC

1,482 +8.7%5 +8.7%

20.1 102.6%

South Carolina16 NC

1,345 -2.4%66 -10.8%

286 89.7%

Alabama11 NC

1,038 -2.8%35 -2.8%

157 95.7%

Mississippi16 NC

1,019 -3.4%50 -9.1%

223 89.2%

Louisiana19 NC

910 +1.0%53 -8.6%

235 86.1%

Illinois98 -2

1,551 +1.7%466 -1.3%

1,917 99.6%

Indiana170 +1

1,636 +1.3%853 +1.9%

3,456 102.2%

Iowa205 -2

1,696 +1.8%1,066 -2.9%

4,345 99.2%

Kansas121 +1

1,727 +0.4%641 +7.6%

2,504 100.6%

Nebraska58 NC

1,619 -1.0%288 -4.3%

1,168 97.1%

South Dakota90 -1

1,678 +2.2%463 -1.1%

1,884 99.6%

North Dakota20 -1

1,516 +5.0%93 +0.0%

382 99.2%

Michigan360 +1

1,842 +1.3%2,034 +3.0%

8,244 103.5%

Minnesota470 NC

1,536 -1.0%2,214 -0.8%

9,112 101.0%

Missouri96 -3

1,168 -0.1%334 -7.8%

1,445 92.2%

New York611 NC

1,681 +4.8%3,149 +4.6%

12,713 102.3%

Ohio270 NC

1,558 +3.2%1,290 +1.7%

5,248 101.1%

Pennsylvania541 NC

1,592 +2.3%2,642 +2.6%

10.731 101.7%

New Hampshire15 -.5

1,565 +1.4%72 +1.4%

298 101.7%

Maine32 NC

1,478 +2.4%145 -0.7%

587 98.5%

West Virginia10 NC

1,272 +2.6%39 +2.6%

159 98.1%

Kentucky77 -1

1,169 +4.1%276 -1.1%

1,167 97.9%

Tennessee51 -1

1,292 +2.3%202 -3.3%

850 93.5%

Arkansas12 NC

951 +2.5%35 -5.4%

153 93.3%

FREE!

Issue 3 • February 8, 2011 Progressive Dairyman 13

If this is the reaction of the milk markets to bearish news (milk production and cold storage), bring it on. Everyone in the trade is trying to get a handle on what has happened recently as a rally of historic proportions has unfolded since the beginning of January. All forward months have participated.

Right now there seems to be a lot of confusion, though butter prices remain at their highest levels ever for the month of January at $2.10 per pound while NFDM values have shot up more than 30 cents also since the beginning of the year. � e strength of the Class IV products has some convinced that more milk now will fl ow to the churn as opposed to the vat, which could ostensibly tighten cheese supplies. Add to that rumors of a major dairy provider coming up short on product, ideas that EU and Oceania milk production being constrained for the rest of the year, and sentiment that higher-trending feed prices will result in lower U.S. milk production down the road, has apparently created a perfect storm of buying. � is buoyant price action actually does fl y in the face of some rather bearish fundamental news that was released recently.

First, December milk production was up 2.8 percent in the top states and up 2.5 percent for the U.S. as whole. For all of 2010, U.S. milk production was up 1.8 percent, though it expanded at a 2.8-percent rate for the July-December period. � ough the December increase was maybe less than expected, the trade was quick to take note of a 16,000-cow increase just in the month of December, with the U.S. milk cow inventory now 54,000 higher than year-ago fi gures.

Nonetheless, the market is justifi ably concerned about the increase in national milk output the second half of last year that is well in excess of the average increase in milk and dairy

FebApr May June July Aug Sept Oct Nov DecMar2008

Feb Mar Apr May June July Aug Sept Oct Nov DecJan2009

Feb Mar Apr May June July Aug Sept Oct Nov DecJan2010

Jan2011

CA Class1 price

$8$10$12$14$16$18$20$22$24

MARKET WATCHMARKET WATCH Markets Buck Bearish USDA REPORTS Butter at All-Time January HighsDAIRY PRICES

Joel KarlinCommodity Manager & Market AnalystWestern Milling

Feb 2011: $15.89 High: $20.78 Low: $9.43Feb 2011: $16.88 High: $22.77 Low: $11.40 Fluid milk prices (in dollars)

Federal Class I price

Average price of a gallon of milk

Source: The Nielsen Company; Total U.S. - Supermarkets; dairy-refrigerated milk, 128-ounce size; four-weeks ending Dec. 25, 2010 vs same period one and two years ago.

$3.25

$3.34

$2.83

$2.78

$3.00

$2.97

December milk price (per gallon)

November milk price (per gallon)

December milk price

November milk price

2010

2010

2009

2009

2008

2008

Monthly change.09¢

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14 Progressive Dairyman Issue 3 • February 8, 2011

Jan2009

Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan2010

Feb Mar Apr May June July Aug Sept Oct Nov Dec

Futures2011

2012

$8

$10

$12

$14

$16

$18

Markets Buck Bearish USDA REPORTS Butter at All-Time January Highs

Class III (in dollars)

1/23/10

2/6/10

3/6/10

4/3/10

5/1/10

6/5/10

7/3/10

8/7/10

9/4/10

10/2/10

11/6/10

12/4/10

1/1/11

1/18/11

2009

$1.00

$1.25

$1.50

$1.75

$2.00

$2.25

$2.50 Jan 18, 2011: $2.10 High: $2.24 Low: $1.33Butter (weekly average in dollars)

1/18/11

1/19/11

1/20/11

1/4/11

1/5/11

1/6/11

1/7/11

1/10/11

1/11/11

1/12/11

1/13/11

1/14/11

12/30/10

12/31/10

1/3/11

$1.60

$1.70

$1.80

$1.90

$2.00

$2.10

$2.20

$2.30Butter prices remain at their highest levels ever for the month of January at $2.10

MayAprMarFeb Nov DecJune July Sept OctAugJan2010

2009

$0.750

$0.875

$1.000

$1.125

$1.250

$1.375

$1.500 Dec 2010: $1.30 High: $1.38 Low: $0.92 Non-fat dry milk1/30/102/6/10

3/6/10

4/3/10

5/1/10

6/5/10

7/3/10

8/7/10

9/4/10

10/2/10

11/6/10

12/4/10

1/1/11

1/22/11

2009$1.00

$1.20

$1.40

$1.60

$1.80

$2.00

1/20/11

1/21/11

1/4/11

1/5/11

1/6/11

1/7/11

1/10/11

1/11/11

1/12/11

1/13/11

1/14/11

1/18/11

1/19/11

12/31/10

1/3/11

$1.30

$1.35

$1.40

$1.45

$1.50

$1.55

$1.60

Jan 22, 2011: $1.51 High: $1.77 Low: $1.27Cheese (weekly average in dollars)

As for cheese, stockpiles at the end of the year totaled in excess of 1.026 billion pounds, the largest ever for the month of December and over 22.0 million pounds higher than the prior month.

product demand and the amount of cows that were added to the milking string.

� e December cold storage numbers hardly show strong dairy product movement over the holiday period, something many hoped for. � e specifi cs include end-of-year butter stocks at 81.9 million pounds and while that was the lowest December supplies since 2005, they did increase by close to 12.0 million pounds at a time when stocks are usually drawn down.

All of this would not ordinarily support milk prices at present levels, let alone spur a momentous rally, so other forces must be at work. A few thoughts

suggest that the market’s ability to hold on after the ostensibly bearish milk production report was released led to some new buying, though with the open interest fi gures declining, it may be more of a case of some well-entrenched shorts getting out of the market. Some say that maybe the funds have some interest in buying milk, though as mentioned before, the rise in prices has been accompanied by declining open interest fi gures, which is usually not a sign of a technically strong market.

A fi nal point is this recent price surge has given producers a chance to get some insurance in case prices do move lower. PD

Dec 2010: $13.83 High: $16.94 Low: $9.31

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Issue 3 • February 8, 2011 Progressive Dairyman 15