October 2009 Dairy News Archives

Ag Prices Report

Dairy Markets Weekly Recap

(October 30, 2009) Cash cheese prices saw little change the last week of October as the temporary increased government purchases prices were likely returned to their previous levels on Halloween Day. The block cheese closed Friday at $1.51 per pound,  up a penny on the week but 9 3/4-cents below that week a year ago when they plunged 13 cents, to $1.6075. Barrel closed Friday at $1.4875, down a half-cent on the week and 19 3/4-cents below a year ago. Eleven cars of block traded hands this week and one of barrel. The NASS-surveyed U.S. average block price hit $1.4523, up 3.2 cents. Barrel averaged $1.4592, up 3 cents.

Butter closed at $1.41, up 6 cents on the week, but 27 1/2-cents below a year ago. Fourteen cars were sold. NASS butter averaged $1.2473, up 2.6 cents.

Cash Grade A nonfat dry milk gained a penny this week, closing at $1.3350, while Extra Grade remained at $1.27. NASS nonfat powder averaged $1.0345, down 1.2 cents, and dry whey averaged 32.64 cents per pound, up 0.6 cent.

There were no price support purchases on the week, leaving the cumulative total on nonfat dry milk at 132,276 pounds. That compares to 24 million pounds that week a year ago. Dairy Export Incentive Program bid acceptances included 462,966 pounds of anhydrous milk fat and 123,458 pounds of Cheddar cheese.

October Federal Order Class III Price Gains 71 Cents

(October 30, 2009) Farm milk prices took another badly needed jump. The Agriculture Department announced the October Class III benchmark milk price this morning at $12.82 per hundredweight, up 71 cents from September but still $4.24 below October 2008 and $5.88 below October 2007. That brings the 2009 average to $10.72, down from $17.84 a year ago and $17.66 in 2007. The Class IV price is $11.86, up 71 cents from September, but $1.76 below a year ago.

Class III futures contracts portend further gains to come. The November contract settled Thursday at $13.90 and December at $14.71. That would result in an $11.31 average for 2009, down from $17.44 in 2008 and $18.04 in 2007.

The four-week NASS-surveyed cheese price averaged $1.4110 per pound, up 5.9 cents from September. Butter averaged $1.2245, up 4.3 cents. Nonfat dry milk averaged $1.0270, up 6.1 cents, and dry whey averaged 31.83 cents, up 2 cents.

California's October 4a and 4b prices are scheduled to be announced on Monday but may be available this afternoon. We will post them as soon as possible.

U.S. Crop Harvest Has Been Slow
(October 30, 2009) The 2009 U.S. crop harvest has been slow, adding clouds to a dairy feed price picture that looked to be brightening just a month ago. Dairy Profit Weekly editor, Dave Natzke, reported Friday that we're at a point when the nation's soybean harvest should be winding down and the corn harvest should be more than half finished however, a cool growing season, followed up by a wet fall in many areas, has put farmers well behind normal in their harvest schedules.  

Based on USDA's Crop Progress report, less than half of U.S. soybean acreage and only about one-fifth the corn acreage has been harvested, according to Natzke, both running about 40 percentage points behind normal. The wet conditions are also raising concerns regarding mold growth in the field and, in the case of silage, frosted forages could hurt storage fermentation, negatively affecting feed quality, he warned.

Another factor in determining feed prices is demand. University of Illinois ag economist, Darrel Good, says China has been aggressive in buying soybeans but has backed off somewhat on corn purchases. However, demand for corn by the U.S. ethanol industry has been robust, he said.

“So, with eyes on the weather, harvest prospects and demand, corn and soybean futures prices have been on a roller coaster in October,” Natzke said. Despite being down from monthly peaks, December corn futures prices are about 50 cents per bushel higher than a month ago; with soybean meal futures prices up about $10 per ton. On a positive note, Natzke pointed out that, since April, U.S. average alfalfa hay prices have been running $30-$50 ton lower than the same month a year earlier, providing some feed price relief for farmers.

The old joke is that if you don't like the weather, wait a while and it will change, Natzke concluded. USDA’s Crop Production report will be released November 10 and that should give us a clearer view of the 2010 feed price picture. And, of more immediate interest, USDA will announce final monthly U.S. average feed prices on Friday afternoon, which will be used to determine September’s Milk Income Loss Contract program payment. 

The cows came from 154 accepted bids and represent about 517 million pounds of milk, according to National Milk’s Chris Galen in Thursday’s DairyLine. Added with the previous buyouts since December 2008, 252,000 cows representing 5 billion pounds of milk will have been removed, he said.

CWT economists had estimated, coming into 2009 that about 250,000 cows representing 5-6 billion pounds of milk would have to be removed from the market to bring supply and demand into balance and strengthen farm milk prices, according to a CWT press release.

CWT members in 33 states submitted 168 herd retirement bids, down from the 312 bids submitted in the last buyout, but Galen pointed out that this was the third such program this year so “we knew that there would be less demand,” this time and, if you factor in the previous programs, “that’s an enormous amount of milk that we’re removing so CWT has definitely done the heavy lifting, not only last year but especially in 2009, in the face of this terrible price trough to reduce the herd size to where prices can now start recovering.”

There were no surprises in this latest round, according to Galen. Most of the cows and milk removed was from the West, he said, where the pain has been most pronounced. Field auditors will begin visiting the farms whose bid was accepted to verify production records, inspect the herds, and tag each cow for slaughter. Those farmers will be notified no later than November 16 as to whether their bid was accepted, he said.

They also inform their visitors that a single three-ounce serving of beef will give them 51 percent of the protein they need each day and 38 percent of the zinc they need. Zinc aids in good memory and a good immune system, according to George.

That serving of beef also provides 14 percent of the iron one needs each day which helps fight anemia, and it provides the B complex vitamins and minerals that children need.

“That simple little three ounce serving, which is less than a quarter-pounder hamburger, only has 179 calories,” George said, “And yet it’s packed full of nutrients and this is the message we take to children and their parents so they understand the importance of animal protein in their daily diet.”

George also believes the beef check off is a wise investment even as a dairy farmer. “Ultimately our animals end up in this food stream,” he concluded, “And if we can’t keep our consumers consuming this product, we’re going to lose a very valuable revenue stream.”  

He believes the market will closely watch what’s happening in the European Union because of the elimination of export subsidies on skim milk powder, which used to be about 13 cents per pound. The Whole milk powder subsidy was halved, according to Gould, and is now just 10 cents per pound, and the butter subsidy was reduced from 44 cents to 26 cents, a drop of 18 cents.

That’s good news for U.S. producers, he said, as it makes U.S. dairy products more competitive, not only with the reduced export subsidies, but the U.S. dollar is falling in value relative to EU and New Zealand dollars and most major currencies, “so our exports are getting cheaper,” he said.

That could mean a reduction in the use of the Dairy Export Incentive Program by the U.S., according to Gould, which has been very active from July onward and significant tonnage was subsidized and exported.

A year ago, U.S. dairy exports were on fire and that situation could return. Gould pointed out that in June and July there was significant improvement in U.S. dairy exports and, in second quarter 2009, the U.S. was a net dairy exporter although that slowed in August for some commodities. Skim milk powder and lactose exports remained strong, he concluded, but “Things are looking up in terms of exports and that’s good news for U.S. dairy producers.”

This week in Dairy Profit Weekly
1) September milk production: September milk production in the 23 major dairy states totaled 13.9 billion lbs., down 0.7% from September 2008. The number of milk cows in those states was 8.34 million head, 168,000 head less than September 2008, and 32,000 head less than August 2009.  

2) DPW Trends 

•  The November federal order Class I base price is $12.86/cwt., up 51¢ from October and the highest since January 2009, but still $2.67 less than November 2008. Most November Milk Income Loss Contract program payment estimates range between 37¢-47¢/cwt., subject to the feed adjuster.

 • USDA’s National Ag Statistics Service estimated 236,500 culled dairy cows were slaughtered under federal inspection in September, down about 2,400 head from August 2009, but 13,000 more than September 2008.  January-September 2009 cull cow slaughter totaled about 2.148 million head, up about 230,200 head from January-September 2008.   

3) CDFA sets hearing date: The California Department of Food and Agriculture scheduled an emergency hearing, Nov. 9, in Sacramento , to consider changes to formulas impacting minimum milk prices in the state's milk marketing order.   

4) DPW Industry: Dairy Farmers of America is making a special cash payment totaling $8.8 million – equal to 30¢/cwt. – to be distributed to more than 10,600 members who marketed their milk through DFA during September 2009.  

5) DPW Washington: President Barack Obama signed a fiscal year 2010 ag appropriations bill that includes $350 million in emergency funding for dairy farmers. Three Midwest U.S. senators introduced  the Dairy COOL Act, which would extend mandatory country of origin labeling (COOL) to dairy products. 

Chocolate Milk Excellent Beverage After Exercise
(October 26, 2009) Our series of discussions with Dairy Management Incorporated CEO Tom Gallagher continued on Monday’s “DMI Update.” We discussed recent research which indicates that chocolate milk is an excellent beverage to consume after vigorous exercise as an energy replacement.  

Gallagher reported that several universities have even adopted chocolate milk in their training programs for their football and other sports teams. That word is spreading, according to Gallagher, and has become an excellent marketing tool.

He reported that health professional organizations have approved the concept however, because chocolate milk contains sugar, it sometimes comes under attack so the dairy check off has worked with processors and health professionals to reformulate so that most of the chocolate milk sold in schools only contains 25-26 grams of sugar. Previously, sugar content could be as high as 33 grams, he said.

The two fold strategy of the check off, according to Gallagher, is to market the research so consumers can understand what chocolate milk can do for them and secondly to make sure health professionals support the claim that it’s important to make flavored milk available to kids because it provides them the nutrients with very little sugar.

The challenge is to get the story straight on sugar, he concluded, and those who want the energy replacement benefit, like what they get from other beverages like a Gatoraid, can know that chocolate milk offers much the same benefit.

(October 23, 2009) Cash cheese prices started the week of October 19 on a down note but switched gears and ended Friday with the blocks trading at $1.50 per pound, up 7 cents on the week but 23 3/4-cents below a year ago. Barrel closed at $1.4925, up 6 1/4-cents on the week, but 19 1/4-cents below a year ago. Fourteen cars of block traded hands on the week and none of barrel. The lagging NASS-surveyed U.S. average block price shot up 5.4 cents, to $1.4201. Barrel averaged $1.4290, up 4 cents.

Cash butter jumped 10 3/4-cents on the week, closing Friday at $1.35, but that’s still 40 cents below a year ago. Thirty four cars were sold on the week. NASS butter averaged $1.2209, down a penny.

Cash Grade A nonfat dry milk closed the week at $1.3250 and Extra Grade closed at $1.27, both were up a penny on the week. NASS powder averaged $1.0460, up 3 cents, and dry whey averaged 32.02 cents, up 0.3 cent.

Uncle Sam purchased 132,276 pounds of nonfat dry milk under the price support program this week. He’s not doing holiday baking yet but is testing new bags.

Dairy Export Incentive Program bid acceptances included 1.16 million pounds of Cheddar cheese, 81,570 pounds of Mozzarella, and 2.4 million pounds of butter.

Federal Order Class I Milk Price Gains 51 Cents

2-week Product Price Averages:

CDFA Considers Adjusting State Pricing Formulas(October 23, 2009) California’s changing dynamics has prompted calls for increases in the state’s minimum milk prices paid to dairy farmers. The California Department of Food and Agriculture has scheduled a public hearing November 9, in response to dairy organization requests to consider adjusting state pricing formulas to boost farmer prices.  

Dairy Profit Weekly editor Dave Natzke reported Friday that two proposals have been submitted so far. The Alliance of Western Milk Producers requested a permanent 50 cents per hundredweight (cwt.) increase in the Class 1 price, and increases of 26 cents per cwt. for Class 2 and 3 milk.

Western United Dairymen requested consideration of a uniform 50 cents per cwt. increases to class 1, 2, 3, 4a and 4b for six months, beginning January 1, 2010.

Reasons behind the requests are two-fold, according to Natzke. Low milk prices and high operating costs have resulted in severe financial losses for dairy farmers. As a result, California cow numbers are down about 73,000 from a year ago, and milk production through the first nine months of 2009 is down about 4 percent compared to the same period a year earlier.

Lower milk volumes are apparently affecting milk processing plants, Natzke reported. USDA’s latest dairy product  report shows California’s total cheese and nonfat dry milk production was down from a year earlier, as milk supplies fell below manufacturing plant capacity.

A quick update on another story we've been following. President Barrack Obama has reportedly signed the fiscal year 2010 ag appropriations bill into law. That bill includes $350 million in emergency aid for U.S. dairy farmers. It will now be up to U.S. Agriculture Secretary Tom Vilsack to determine how $290 million of that will be distributed.

September Cold Storage
(October 22, 2009) September butter stocks totaled 230.2 million pounds, down 29.4 million pounds or 11 percent from August but 43.3 million pounds or 23 percent above September 2008, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued Friday afternoon. August butter stocks were revised down 3.6 million pounds.  

The American cheese inventory, at 607.1 million pounds, was down 12.7 million or 2 percent from August but 57.5 million pounds or 10 percent above a year ago. August stocks were revised down 1.7 million pounds.

Total cheese stocks amounted to 970.5 million pounds, was down 14.4 million pounds or 1 percent from August, but 136.3 million or 16 percent above those a year ago.

A More Level Playing Field
(October 22, 2009) The Agriculture Department has announced a recommended decision that the International Dairy Foods Association said “made milk price regulations consistent for all dairy producers, including producer-handlers.”  

National Milk’s Chris Galen called it a “very gratifying decision” in Thursday’s DairyLine but warned that it’s not yet final. The Federation had lobbied for this decision for most of 2009 and the issue is producer revenue, according to Galen.

He explained that, as farms become larger and some begin their own bottling operation, they’re able to enjoy an exemption from Class I regulations so producer-handlers don’t have to pay into the Class I pool which actually reduces revenue for all of the other farms in a given Federal market order.

USDA will maintain that exemption for bottlers that sell 3 million pounds per month or less, he said, but those who produce more will be treated like any other large bottler. “It’s not so much about regulating farms,” Galen argued, “It’s about regulating bottling operations that are so large that they’re only nominally farms.”

There’s only five or six such operations in existence today, Galen admitted, but “Because farms are getting larger and processors are getting larger, the potential is there for more of these producer-handlers to spring up, if we don’t change the regulations like USDA is going to do here to make certain that once they reach a certain threshold they’re treated like any other large fluid bottler.” “We’re just closing a loop hole and putting a more level playing field in place,” he concluded.

(October 21, 2009) Dairy farmers are looking to be efficient in every way possible and one area that’s easily overlooked is in the forage they grow. Pioneer took that message to attendees at this year’s World Dairy expo, according to Bill Mahanna, Global Nutritional Sciences Coordinator.

In an interview recorded at Expo and broadcast Wednesday, Mahanna said Pioneer also introduced a new silage inoculant, though he admitted that it may not have much application for the Midwest as it is grass based but it compliments Pioneer’s corn silage fiber digestibility product.

They also wanted to communicate to producers how to monitor their corn silage for the degree of processing and he demonstrated Pioneer’s infra red camera that takes thermo sensitive images of bunker silos faces to help manage them better. The goal, he said, is to “harvest as much as possible off of every acre and preserve that all the way through to the ration in the cow’s mouth.

As producers contemplate spring planting, Mahanna said it’s important for them to look at the data on the products they purchase, be it corn hybrids or alfalfa varieties. Examine the information, he said, the university trials, the company trials, and then consider the service that backs that up.

“We’re looking at more corn silage in the ration in many parts of the country,” Mahanna said, and one of the things Pioneer has been talking about is using “snaplege” ion the dairy ration, where they take the forage harvester and put a snapper head on it and “get double use out of it and not have to pay for combining and putting it through a tub grinder for high moisture corn.” “Consider the number of acres you might devote to those different crops next year,” he concluded, “How can we make milk the cheapest.” For more information, Mahanna says visit www.pioneer.com.  

Related link: Renewed Interest in Snaplage Displayed

California was down 6.4 percent, due to 73,000 less cows and a 45 pound drop per cow from a year ago. Wisconsin was up 5.2 percent, thanks to a 75 pound gain per cow and 5,000 more cows. New York was down 1.4 percent. Cow numbers were off 9,000 but output was unchanged. Idaho was down 2.3 percent, with a decrease of 7,000 cows. Output per cow was down 20 pounds. Pennsylvania was up 1 percent, on a 30 pound gain per cow but  6,000 less cows, and Minnesota was up 3.9 percent on a 45 gain per cow and 4,000 more cows.
 
The biggest increase was Indiana, up 5.8 percent, thanks to 2,000 more cows and 70 pounds more per cow. Wisconsin was next, followed by Ohio. The biggest decline occurred in Arizona, down 10.8 percent due to an 18,000 decline in cow numbers and a 20 pound drop in output per cow. Colorado was next, down 7.1 percent on a 30 pound drop per cow and 11,000 fewer cows. California followed with a 6.4 percent loss.

Market Talk with Mary Ledman
(October 20, 2009) The downfall in cheese prices continued Monday, with both the blocks and barrels losing another penny and a half. The market awaited Tuesday’s September Milk Production report but market analyst, Mary Ledman, Principal of Keough Ledman and Associates in Libertyville, Illinois, said in Tuesday’s DairyLine that Thursday’s Cold Storage report likely has more significance to traders as an indicator of the market going forward.  

She said she was surprised at the downturn in cheese but the march past $1.50 per pound was also a surprise. The tightening in nonfat dry milk, other milk powder, the whey complex, all those prices have increased, she said, and it’s difficult to imagine the cheese market under $1.40, given the strength of the powder market as well as the international markets at this point. “The recent downward breather in cheese prices may end up supporting the market longer term than if we had raced up to $1.60.”

She predicted that culling will increase through the fourth quarter and would have done so, with or without the current CWT herd removal. What will be interesting, according to Ledman, is if CWT gets as many submitted bids as in the past. The strengthening of the markets could cause producers to stay in the business longer.

When asked about current cheese demand, Ledman said cheese demand has been very good through this year. American style cheese is up over 4 percent, she said, other styles are approaching 2 percent, but she fears that a significant run up in cheese prices could impact demand in 2010 and we not keep this strong demand that we’ve experienced in 2009.  

(October 19, 2009) Dairy Management Incorporated CEO Tom Gallagher was back on Monday’s “DMI Update” and discussed lactose intolerance. He pointed out that lactose intolerance is “way overstated” and that dairy farmers and those interested in increasing milk consumption have “an enormous opportunity here.”

Studies that are 20 years old claim there may be 60 percent or more of the population that is lactose intolerant but the reality is it’s only 8-12 percent that may be lactose intolerant or sensitive, according to Gallagher.

The dairy check off is working with a key partner, Lactaid, who has an over 80 percent market share of lactose milk sold in the U.S. to “set the record straight” on how many people are lactose intolerant and make sure they understand that lactose free milk is real milk and has all the nutrients in milk.

Many people erroneously believe that lactose free milk lacks the nutrients of “real milk,” and that soy milk is just as good, but that is not true, he said, so the dairy check off will enter a three year agreement with Lactaid, that will improve milk sales for lactose free and other consumers of beverage milk, Gallagher concluded, and “We believe several billion pounds over a multiple year period can be added to consumption.”

(October 16, 2009) The cheese price roller coaster took a dip the second week of October, with the blocks closing at Friday at $1.43 per pound, down 7 1/4-cents on the week, and 36 cents below a year ago when they lost 9 cents. The barrels, after gaining 2 3/4-cents on Monday, gave it back Friday, to also close at $1.43, unchanged on the week, but 47 cents below a year ago. Twenty four cars of block were sold on the week and two of barrel. The NASS U.S. average block price jumped 5.6 cents, to $1.3661. Barrel averaged $1.3893, up 4.7 cents.

Butter closed at $1.2425, up a half-cent on the week but 49 3/4-cents below a year ago. Six cars were sold. NASS butter averaged $1.2310, up 2.5 cents.

Cash Grade A nonfat dry milk tacked on another 3 1/2-cents this week, closing Friday at $1.3150. Extra Grade closed at $1.26, up 4 cents. NASS powder averaged $1.0162, up a half-cent. Dry whey averaged 31.74 cents, up 1.6 cents.

Dairy Export Incentive Program bid acceptances included 145,504 pounds of Mozzarella cheese, 165,345 pounds of butter.

Debate Continues on How to Distribute $290 Million
(October 16, 2009) Financially struggling dairy farmers await President Obama’s signature on legislation passed by Congress but debate continues as to how to distribute the $290 million in discretionary emergency aid contained in the fiscal year 2010 agriculture appropriations bill.  

You’ll recall that Congress approved $350 million but designated $60 million to purchase cheese for food banks and feeding programs, leaving distribution of the remaining funds to the discretion of U.S. Agriculture Secretary Tom Vilsack.

Suggestions include everything from purchasing additional dairy products to raising product price support levels, or adding supplemental payments to existing programs, such as the Milk Income Loss Contract (MILC) program, according to Dairy Profit Weekly editor Dave Natzke in Friday’s broadcast.

The National Family Farm Coalition held a press conference Tuesday urging Vilsack to make direct payments to farmer. The Coalition warned that, unless the government changed the milk pricing system and enforced dairy processor antitrust measures, the emergency aid would do little to help farmers survive. The organization also called for legislation to establish a supply management program and a minimum milk price that covered farmers’ cost of production.

Western United Dairymen said distribution of emergency aid that does not consider production levels would be unfair to California farmers who tend to have larger herds and produce more milk. Under various scenarios outlined by Western United, distribution to California dairy farmers could range from about 3- 21 percent of the $290 million, or a range of $4,000-$35,000 per producer.

Dairy farmer members of Dairylea, the largest dairy co-op in the Northeast, received better news at their annual meeting this week in New York. CEO Greg Wickham forecast milk prices should increase steadily, hitting a blend price of about $16 per hundredweight by December, and $20 in the latter half of 2010. “That's good news, indeed, for dairy farmers suffering through this long stretch of low milk prices,” Natzke concluded.  

They will allow a few days for the bids to arrive at the accountant’s office and then CWT staff will work with the accountants to arrange the bids from the lowest to the maximum $5.25 per hundredweight and keep accepting bids until they either run out of bids or out of money.

Galen also previewed next month’s annual meeting under the theme, “Building Partnerships, Building Opportunities Now More Than Ever.” He admitted it will be a challenging meeting because it comes at a time when farmers have had a horrible 2009 financially, but there is light at the end of the tunnel and there’ll be a lot of discussion about long term ideas for the industry.

Partnerships will be a topic, according to Galen. Dave Brandon, CEO of Domino’s Pizza, will be one of the featured speakers along with some political figures, hopefully a senior USDA official, senior policy makers from the House or Senate, and there’ll be a presentation of the Federation’s “Foundation for the Future,” National Milk’s long term planning process which Galen said, “seeks to use the current dairy crisis to make necessary changes in the economic structure of the dairy industry.”  

(October 14, 2009) Dairy producers can find extra income from a program provided by the beef checkoff’s Beef Quality Assurance program. One such producer is Phoebe Bitler, a Pennsylvania dairy producer and Pennsylvania Beef Council member.

Referred to as a Market Cow and Bull Audit, Bitler reported in Wednesday’s DairyLine that the program looks at what the animals are going through. The team examines what kind of issues need to be addressed on each farm and the survey is conducted about every four years, she said, “So they have a track record to look at the animals that were coming in four years ago and see what we as producers have improved on and or we what need to continue to address.”

Injection location is one of the issues looked at, she said, and she reported that their last audit showed their dairy was experiencing some issues with lameness and body condition so that was addressed and she said that came about more by accident as they do not sell directly to a processor but go through an auction.

A checked received on a cow with really good body condition, termed a “white cow,” resulted in considerably more money, according to Bitler, so they’ve decided to “recondition” a number of their animals, removing them from the milking string and the daily stress that entails and, if it’s done a number of days before sending the cows to slaughter, they receive a higher price because of it. That adds to the bottom line, she concluded, 5, 10, or 15 cents more per pound.

(October 13, 2009) Downes-O’Neill dairy economist Bill Brooks says the barrel cheese market is getting pulled up with the block market and to narrow the spread because seasonally we’re at a time when there’s not a lot of demand for barrels but buyers are anticipating yearend holidays, a good demand time for products that come out of block cheese. That said; Brooks believes we’re starting to see some price resistance in cheese.

When asked by cash nonfat dry milk has been bid up to $1.29 per pound when the government has product in storage that’s a lot cheaper, Brooks replied that the government is not letting go of it and are using it to trade for other food products but a big factor is the lack of production in California where over 30 percent of the butter and over 50 percent of the powder is produced and their production has been down almost 4 percent from a year ago through August.

The domestic market is tight and the world market tightened, according to Brooks. Australia’s and especially New Zealand’s milk production at the beginning of their season wasn’t to the level they expected but that has since caught up and “they’ll be producing more milk down there.”

August U.S. dairy exports were at the highest of the year, according to the CME’s Daily Dairy Report but still 44 percent below a year ago. Skim milk powder exports were off 21.4 percent, indicative of global economics, according to Brooks, plus a rebound in production of nonfat powder throughout the world and even though things are improving economically, jobs are still a concern.

That has drawn traders back into the market, he said, as prices bottomed out but “When you’re still below last year’s levels and our milk production hasn’t dropped very much and we got used to moving that product offshore, a lot of it got backed up into the U.S. and sold to the government through the price support program or the DEIP.” That, plus the excess in the world market, produced a small uptick in dairy product imports, Brooks concluded “As sellers looked to our higher value market versus the world market and that ganged up on our milk price here.”

Dairy Checkoff Partnerships Includes Menu Development
(October 12, 2009) Dairy Management Incorporated CEO Tom Gallagher discussed dairy check off partnerships in Monday’s DMI Update. We started at McDonalds and he pointed out that, a year ago, he and his team realized dairy farmers were moving into an extremely difficult period regarding their bottom line so they sought partnerships that would, in both the short term and long term, increase dairy sales.  

McDonalds was introducing their “McCafe” campaign and was investing some $100,000 per store. Gallagher said “We felt if we could enter into an agreement with them in developing products they would put into the McCafe and make sure they were very dairy based and only dairy based, and use as much dairy as possible, that would be a big benefit to farmers.”

The dairy check off entered into an agreement with McDonalds to help in their menu development, not just for beverages but also includes some new cheese items, though he could not be specific due to confidentiality, but they will be introducing new items this year and over the next three years and McDonalds will put $1 billion over the next three years into marketing the McCafe concept and the milk-based beverages the check off helped develop.

“That’s great for farmers,” Gallagher said, although he admits there may be some stealing of market share from Starbucks or Burger king for example, but most of the additional milk that McDonalds will sell through this new promotion will be incremental and will stimulate the other quick service chains like Burger King, Wendy’s and others to follow suit and “result in enormous volumes of milk sales.”

(October 9, 2009) The block cheese price hit $1.5025 per pound the second Friday in October, up 6 3/4-cents on the week and the highest it has been since last December, but 37 3/4-cents below that week a year ago. Barrel closed Friday at $1.43, up a penny on the week, but 40 1/2-cents below a year ago. Only two cars of each traded hands on the week. The lagging NASS surveyed U.S. average block price slipped 0.3 cent, to $1.3106. Barrel averaged $1.3428, up 3.8 cents.

Butter gained a penny and then gave some back Friday, closing at $1.2375, up a quarter-cent on the week, but 46 1/2-cents below a year ago. Eight cars were sold. NASS butter averaged $1.2065, down 0.1 cent.

Cash Grade A nonfat dry milk closed the week at $1.28 per pound, up a dime on the week. Extra Grade closed at $1.22, up 7 cents. NASS powder averaged $1.0102, up 3.2 cents, and dry whey averaged 30.18 cents, down 0.1 cent.

There were no price support purchases on the week and the new fiscal year began October 1. DEIP bid acceptances this week included 3.3 million pounds of anhydrous milkfat, 176,368 pounds of Cheddar cheese, and 90,389 pounds of Mozzarella cheese.

WASDE: Milk Production Forecasts Raised|
(October 9, 2009) The Agriculture Department has again raised its 2009 and 2010 milk production forecasts due to higher milk per cow and a slower rate of decline in cow numbers in 2010. 2009 output is now predicted to hit 188.9 billion pounds, up 500 million from last month’s estimate. 2010 production is projected at 187.2 billion pounds, also up 500 million pounds from a month ago.  

Import forecasts were raised as butterfat and cheese imports are stronger than expected. Stronger world dairy prices and a weak U.S. dollar are expected to increase export demand for U.S. dairy products, according to USDA. The commercial fat basis export forecast was raised for 2010, and on a skim-solids basis, commercial exports were raised for both 2009 and 2010.

Net removals reflect adjustments in CCC and Dairy Export Incentive Program (DEIP) activities for nonfat dry milk (NDM), butter, and cheese. Firmer domestic and export demands are expected to support prices for cheese, whey, and NDM. However, butter prices are forecast lower as supplies remain large.

Class III prices for 2009 and 2010 were raised from last month and Class IV prices are raised for 2009. Look for the 2009 Class III price average to range $11.00-$11.10 per hundredweight, up from the $10.65-$10.85 projected a month ago. The 2010 average will jump to $13.85-$14.75, according to the report, up from the $13.75-$14.75 projected last month.

The 2009 Class IV is expected to average $10.35-$10.55, up from $10.10-$10.40, and the 2010 average is now $12.00-$13.00, up a nickel from last month’s projection. The all milk price is forecast at $12.35 to $12.45 per cwt for 2009 and $14.70 to $15.60 for 2010.

Dairy Profit Weekly Report with Dave Natzke
(October 9, 2009) Dairy Profit Weekly editor, Dave Natzke, was readying his snow shovel as he reported in Friday’s broadcast that snow was a possibility in Wisconsin this weekend, so news from sunny California was appropriate for his report this week.  

First, the California Superior Court for the County of Los Angeles awarded Dairy Farmers of America $14.3 million in its breach of contract lawsuit against Cacique Incorporated, a California cheese manufacturer. DFA alleged the company unlawfully terminated a milk purchasing contract on short notice and the court awarded damages for lost milk sales and additional costs to market and transport milk.

From the courthouse to the statehouse, Natzke reported that the Alliance of Western Milk Producers petitioned the California Department of Food and Agriculture for an emergency hearing to consider increasing the state milk marketing order’s Class 1, 2 and 3 milk prices. The petition seeks a 50 cent per hundredweight increase in the Class 1 price, and a 26 cent increase in Class 2 and 3 prices paid to farmers. In filing the petition, the Alliance noted that California milk production has declined for 11 consecutive months, and the state's dairy farmers continue to suffer from low milk prices and high feed costs.

California farmers attending this week’s Alltech Global Dairy 500 Conference, in Kentucky, shared a common bond with hundreds of dairy farmers from around the world, according to Natzke. He reported that, based on discussions with those farmers, it's apparent that dairy producers are similar no matter where they live and work. They're generally an optimistic group, he said, but all are suffering economically. Alltech founder and CEO Pearse Lyons estimated only about 2 percent of the world’s dairy farmers are profitable under today's conditions.  

(October 8, 2009) The financial relief that lawmakers in Washington have crafted for dairy farmers is being tied up by California’s Senators who have issues with making direct payments to dairy farmers because it benefits smaller producers over larger ones. National Milk’s Chris Galen said in Thursday's DairyLine that the argument is over the ratio of funding for dairy product purchases versus direct payments but he’s hopeful that can be sorted out and “get the money in the hands of producers in whatever form as soon as possible because there’s a great deal of need for it here as we head into the fall.”

The other news in terms of short term help for dairy farmers is CWT’s third herd retirement of 2009 and the fifth in the last 18 months. Bids must be submitted by October 15 and farmers must already be members of CWT in order to submit a bid and, if you had a bid accepted in the past, you are no longer eligible.

He said CWT hopes this will be the final push needed to bring the milk supply in line with demand and they believe there are other producers, due to the economic stress out there, that are interested in this program and is why CWT exists in the first place to help those farmers as well as those that want to remain in the business benefit from higher milk prices.

When asked why another herd removal is being run so quickly, Galen said they knew at the end of last year there was going to be a severe imbalance between supply and demand and CWT has been whittling that away in the herd removal of the winter of 2008 and the first two of 2009 but resources are still available, according to Galen, and there’s still a need within the dairy industry to further reduce supply so CWT will step up to the plate and trim production so we can have better alignment between supply and demand and stronger prices.

Processors Perspective: Add Yogurt to WIC Program
(October 7, 2009) There has been much discussion over the past few months about the various ways the federal government can provide emergency relief for dairy farmers.

Dairy processors weighed in on this discussion in Wednesday’s DairyLine with the International Dairy Foods Association’s Peggy Armstrong stating that , “When you take a look at how this funding could be used by one program, USDA's Women, Infant and Children’s program, or WIC, it's clear that this approach has long-term benefits for consumers, dairy producers and processors.”  

The WIC program provides nutrition education and retail food vouchers to almost 10 million low-income mothers, infants, and children, according to Armstrong, and airy products are a critical part of its nutritional food packages because they provide nine essential nutrients and the protein and calcium that are especially important for women who are pregnant and young children.

IDFA estimates that approximately $2 billion will be used by WIC participants to buy dairy products, Armstrong reported, however due to changes in the program, WIC does not allow yogurt to be included, despite a recommendation to do so from the Institute of Medicine. In 2008 USDA said it would cost an additional $88 million a year to allow for the yogurt purchases, which was not part in the budget.

“Today, we have the opportunity to use some of the emergency appropriation to add yogurt to the WIC program,” Armstrong said. “Offering yogurt as a dairy option for mothers that use WIC would introduce a whole new generation to its nutritional health benefits, increase demand for milk in many states, and help bolster long-term demand for dairy products among a segment of the population that so critically needs it.” “It is time to ask USDA to include yogurt as an allowable dairy product under the WIC program,” she concluded.

Market Analysis with Alan Levitt
(October 6, 2009) Monday’s cash dairy markets didn’t show much reaction to the Dairy Products report because it reflected what has already happened, according to market analyst, Alan Levitt, editor of the CME’s Daily Dairy Report.  

“It told us what I think we already knew,” Levitt said in Tuesday’s DairyLine. “More milk has gone into the cheese vat than in butter-powder so total cheese production was up 2.6 percent and August butter production was the lowest in three years, down 13.6 percent from a year ago,” and milk powder output was down 18 percent from a year ago and the smallest since September 2007.

Manufacturer stocks of nonfat dropped 54 million pounds, down 28 percent in July and August and are actually below a year ago for the first time in two years so that likely driving the powder market up.

Commenting on reports last week that legislation is making its way on Capitol Hill that would purchase dairy products for government feeding programs, Levitt said it depends on the timing and the particulars.

$60 million would go to purchasing cheese, he said, and would equate to about 40 million pounds and, if it’s all Cheddar and it’s all purchased at once, that would instantly short the market, he warned, and if it’s other varieties or is spread over a number of months, the impact could be lessened.

The total cheese inventory, as of August 30, was 105 million pounds above a year ago, Levitt reported, “So, if we took 40 million out of that, it will certainly help but the devil is in the details.”

He quickly added that, this might already be priced in the market as there have been rumors that some industry groups wanted USDA to buy 100 million pounds of cheese, so that might have already been a factor as the price has been climbing the last few weeks.

The CWT herd removal came as a surprise, according to Levitt. CWT has eliminated more than 175,000 cows in the last five months or 2 percent of the dairy herd, he said, “So that could be a bit significant, depending on whose left and how many more bids they get over the next two weeks.” “They’re kind of riding the tail end of the wave,” he concluded. “Milk production is already in decline so this is just going to piggyback on that but it’s certainly going to help bring things back into balance.”  

(October 2, 2009) Cash cheese prices moved a little higher the week of September 28 but uncertainty over what the government was going to do likely kept traders from venturing out very far.

The 40-pound blocks closed Friday at $1.4350 per pound, up 2 1/4-cents on the week, but 37 1/2-cents below that week a year ago when the blocks fell 13 cents to $1.81. The 500-pound barrels closed Friday at $1.42, up 4 1/4-cents on the week, but 37 1/4-cents below a year ago. Twelve cars of block traded hands on the week and four of barrel. The lagging NASS-surveyed U.S. average block price slipped 2.2 cents, to $1.3135. Barrel averaged $1.3046, up a penny.

Cash butter closed Friday at $1.2350, down 2 1/2-cents on the week and 51 cents below a year ago. Only three cars were sold on the week. NASS butter averaged $1.2076, up 3 cents.

Cash Grade A nonfat dry milk closed at $1.18, up 11 1/2-cents on the week, and Extra Grade closed at $1.15, up 14 cents. NASS powder averaged 97.78 cents per pound, down 0.7 cent. NASS whey averaged 30.26 cents, up 0.1 cent.

August Dairy Products Report Released
(October 3, 2009) The Agriculture Department’s August Dairy Products report puts butter production at 100.2 million pounds, down 14.1 million pounds or 12.3 percent from July and 15.7 million pounds or 13.6 percent below August 2008.  

Nonfat dry milk output amounted to 105.6 million pounds, down 26.4 million or 20 percent from July, and 9.6 million or 8.3 percent below a year ago.

Mozzarella cheese output totaled 274.2 million pounds, down 0.9 million pounds or 0.3 percent from July, but 13.9 million or 5.3 percent above a year ago.

Total Italian type cheese, at 349.8 million pounds, was up 0.5 million pounds or 0.1 percent from July, and 13.2 million or 3.9 percent above a year ago.

Cheddar production totaled 262.8 million pounds, down 4.3 million pounds or 1.6 percent from July, but up 5.6 million pounds or 2.1 percent from a year ago.

American type cheese amounted to 345.2 million pounds, down 7.2 million pounds or 2 percent from July, but up 5.4 or 1.6 percent from a year ago.

Total cheese output came to 849.5 million pounds, up 8.2 million pounds or 1 percent from July, and 21.2 million or 2.6 percent above a year ago. 

September Federal Order Benchmark Milk Price Jumps 91 Cents
(October 2, 2009) The September Federal order benchmark Class III milk price was announced this morning by USDA at $12.11 per hundredweight (cwt.), up 91 cents from August, $4.17 below September 2008, and 71 cents above the comparable California Class 4b cheese milk price. The Federal order Class IV price is $11.15, up 77 cents from August, but $4.30 below a year ago.

What a difference a year makes. The 2009 Class III average now stands at $10.49, down from $17.93 at this time a year ago, and compares to $17.55 in 2007.

Looking ahead, the October Class III futures contract settled Thursday at $12.72. November settled at $13.75 and December settled at $14.18. That would portend a 2009 average of $11.25, down from $17.44 in 2008 and $18.04 in 2007.

The 4-week NASS surveyed cheese price averaged $1.3522, up 9.2 cents from August. Butter averaged $1.1811, down 2.2 cents. Nonfat dry milk averaged 96.64 cents per pound, up a dime, and dry whey averaged 29.79 cents, up fractionally from August.

DFWT supports the Dairy Price Stabilization plan, according to Quesnel, although they are not limited to it but believe it has the greatest amount of legs behind to move forward. They envision the plan being governed by a group of dairy farmers and others affiliated with the dairy industry, that would use market tools to predict what demand will be and then match our supply to meet it thus send correct market signals to dairy farmers. 

The plan is not a base quota plan, she said, as it would not discourage growth but rather encourages responsible growth and that is the direction our industry needs to head because this 2 percent surplus plays such a role on the price on the rest of the milk that we're selling and that's an unsustainable practise for our industry. For more information, log on to www.dairyfarmersworkingtogether.org. 

September Milk Feed Ratio is 1.93
(September 30, 2009) The September Milk-Feed Price Ratio is 1.93, up from August's revised estimate of 1.78, according to USDA’s “Ag Prices” report issued this afternoon, and compares to 1.90 in September of 2008. 
 
The All Milk Price was estimated at $12.70 per hundredweight, up 70 cents from last month's estimate, but $5.50 below a year ago. Corn averaged $3.32 per bushel, down a penny from August, and $1.69 below a year ago. The soybean price, at $9.85 per bushel, was down 95 cents from August, and also 95 cents below a year ago. Alfalfa baled hay was $110.00 per ton, down $1.00 from August, and $65.00 below a year ago.

The National Milk Producers Federation announced the initiative's guidelines and principles last year at World Dairy Expo in Madison. This year they held a news conference to discuss how the industry is going to demonstrate to customers and consumers that dairy animals are being well cared for. 

A comprehensive animal care resource manual was unveiled, as well as a quick reference user guide and some other materials that will be used to help educate farmers, processors, retailers and consumers about the best practices in animal care. 

"We will use these materials to reach out to the entire marketing chain, particularly for those companies that may want to demonstrate their animal care commitment," according to NMPF's Chris Galen.

Galen said it's a  corroboration of what most dairy producers are already doing. "A lot of this is not heavy lifting or rocket science." We are in an environment where food production is increasingly under the spotlight and there is concern from some consumers where food comes from, who processes it, and who produces it. "We need to have this new dairy FARM national program to demonstrate the on-going commitment that dairy farmers have to animal well-being."

Producers can expect an on-farm evaluation process next year by the farms and marketing entities who choose to take part. A trained veterinarian, extension educator or a co-op field staff person would go through the guidelines on the farm. In 2011, a third party verification will take place, where a small sampling of farms will be visited by someone who's not affiliated with the farm to demonstrate that the program is working. 

"Those are things that still have to come," Galen said, and "this week's unveiling was a huge step in the National Dairy FARM program," he concluded.