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Industry concerned about suspension of Dairy Production Reports

By Jean Caspers-Simmet

Date Modified: 04/11/2013 9:10 AM

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The decision by USDA's National Agricultural Statistics Service to suspend Milk Production reports and the July Cattle Report is a growing concern for agriculture.

NASS said last month that it was suspending several statistical surveys and reports for the remainder of the fiscal year that runs through Sept. 30 due to reduced funding caused by sequestration.

In a letter to U.S. Secretary of Agriculture Tom Vilsack, Jerry Kozak, president/chief executive officer of the National Milk Producers Federation, said that the dairy and cattle reports "are all of vital importance to the U.S. dairy industry." He urged Vilsack to continue the monthly Milk Production report.

Robert Tigner, a University of Nebraska-Lincoln Extension educator and former Iowa State University Extension farm management specialist who does dairy market analysis, said without monthly milk reports, market observers have no aggregate data.

"We will be in the dark about milk production," Tigner said. "We will be able to infer some things when the Dairy Products reports come out and from Dairy Market News, but pricing milk in the futures market will be almost impossible. A lot of volatility will likely occur in Class III futures. Risk management is going to be more difficult for dairy producers and dairy processors."

Marin Bozic, a University of Minnesota dairy foods marketing economist, said the sequester was implemented agency by agency and line by budget line.

"That means very little flexibility in how government agencies can implement the sequester," Bozic said. "NASS was required to reduce spending by $8 million."

The monthly Milk Production Report contains state and national estimates of production, average number of cows and production per cow for the United States and 23-milk producing states, Bozic said.

"The Milk Production Report gives the most precise information that you can use to analyze where dairy prices are going to go," Bozic said. "If we have less information as to the amount of milk produced each month, our ability to forecast prices is lower. That will be reflected in futures prices."

Other options exist. Milk cooperatives control 80 percent to 90 percent of marketings. If they came together they could get pretty close on production.

"But there is no good reason for cooperatives to do this," Bozic said.

Another information source is to look at what producers pay into the checkoff to infer how much milk each state has produced.

"If the original reason for suspending the Milk Production report was to save money, any of these alternatives will end up costing us more money than the original report," Bozic said.

The best thing farmers can do is to convince cooperative leadership to put pressure on Congress to reinstate the report, Bozic said.

"There are mixed feelings about how suspension of the July Cattle Inventory Report will impact our estimates of the inventory," said Lee Schulz, ISU Extension livestock marketing economist.

The July report is a mirror image of the January Cattle Inventory Report, but January is a little more accurate and is a little closer on the number of revisions, Schulz said.

"That said when they take away a report that we've used for analyzing the markets and looking at inventory, it's a loss," Schulz said. "We do use those numbers as a benchmark especially when we go through times of expansion, liquidation or retraction. In these current times, that July report may be, arguably, a little more important because we see the decisions producers made between the beginning of the year and the midpoint as far as expansion."