What's up and what's not in this new year? Here is what’s happening to some key commodities and developments that could affect Kings County for better or worse.
Gasoline prices in California are up about a dime to $2.78 since Christmas says Gas Buddy with the lowest price locally at both Costco and Arco at $2.31. Meanwhile, rising oil prices are likely to mean higher gasoline prices this new year says AAA. Oil’s sister fuel,natural gas, is higher as well.
After diving as low as $1.50 per MMBTU last spring, natural gas prices are up to near $4 this past week before falling a few cents as the SoCal Citygate price stands at $3.92 with PG&E a few cents higher. Industrial prices are in the $7.60 range and up more than $2 this past year. The abundant commodity is used to generate 34 percent of the fuel needs for state power plants, heat our homes and factories and provide heat for baking and processing ag products as well as farm greenhouse heating.
The U.S. dollar rose to its highest level in 14 years against a basket of major currencies this week after a report showed strong growth in U.S. manufacturing in November. The dollar index hit 103.8, the highest level since December 2002, with the trend accelerated by declining currencies currencies across the globe. The stronger dollar makes it harder for U.S. companies to sell their products overseas including California’s ag industry.
Kings farmers are expecting more imported water this year after President Obama signed a bill last month loosening restrictions on pumping water south of the delta.This legislative development is in addition to rising reservoirs in the past 6 months that make it likely both Shasta and San Luis Reservoir may fill this spring, the first time in years. Suddenly local watershed conditions are favorable as well, as the NWS Hanford predicts “more than a foot of precipitation” is possible in the Sierra this weekend.
More rain than snow in the Sierra is worrying scientists after the new year snow survey found about half as much snow water as normal. They say it casts a shadow on the state that's hoping to dodge a sixth straight year of drought although this weekend’s deluge will clearly up that number. The Union of Concerned Scientists argue that “climate change means California’s current water system is becoming obsolete” adding that “many of these reservoirs are only allowed to fill to about 80 percent of their capacity before they are required to release stored water in order to avoid dam failure or flooding. That means that early, heavy rains often cannot be effectively captured for later use”
A network of groundwater storage systems, including here in Kings County, may be part of the answer.
Reached Wednesday Kings dairyman Joaquin Contente remarked that his farm ”was getting tons of rain making a big mess around the cows.” But “we’ll take all we can.”
This past year has not been a kind one to Kings County dairy farmers. For the year prices were down about 4 percent compared to 2015 according to CDFA. Through the first half of 2016 Kings dairies produced about 1 percent less milk than the year before.Prices are break even at best for many - even though feed costs are down.
Now U.S.D.A. is predicting an upturn in prices in the new year in the range of $16.30 to $17.20 per cwt - some 75 cents more than predicted by U.S.D.A. just a month ago.
Buoying dairy prices is the increase in demand for both butter and dry powder at year's end. By this time, most years butter prices are typically down from the holiday rush, but not this year. CME butter is near $2.30 lb compared to $1.57 in early 2015. Some say this is thanks to McDonalds increasing use of butter in all their recipes but clearly - the popularity of butter everywhere- has surged in recent years.
The holidays are a big time for baking and this year even bigger says COO of Land O Lakes Beth Ford. "Consumers continue to make the switch to butter from other products, continuing a several-year trend," she said. "Over the last two years alone, our demand on a pound basis is up 15 percent from just two years ago."
But dry milk product is up too with NFDM (dry milk) priced at $1.03 lb compared to 0.74 cents a year ago.
“It’s definitely a positive trend,” says dairyman Joaquin Contente.
Still, dairies need exports to help support prices.
U.S. dairy exporters face “significant challenges” in the global marketplace, particularly in the export of cheeses, according to Dairy: World Markets and Trade, which was released a few days go by U.S.D.A.’s Foreign Agricultural Service. U.S. cheese exports peaked at 368,200 tons in 2014 and are now forecast to reach 280,000 tons (617 million pounds) in 2016 and 286,000 tons (631 million pounds) in 2017.
A key issue facing the U.S. dairy industry is the “sharp strengthening” of the U.S. dollar vis-a-vis the euro, which has been undermining the competitiveness of U.S. exporters, the report explained.
Santa Maria farmer and former mayor Abel Maldonado met with President-elect Donald Trump at his Palm Beach resort Dec. 28 to discuss Maldonado’s potential nomination as U.S. Agriculture Secretary, according to several newspaper reports. Maldonado was lieutenant governor to Arnold Schwarzenegger from 2010 to 2011 after being elected to the California Assembly in 1998 and the state Senate in 2004. He lost a bid for Congress. California is the leading ag state and locals welcome a native Californian in the key position. He would be one of the few Latino nominees in the Trump administration.