February 2010 Archived Dairy News

February Milk Feed Price Ratio is 2.38
(February 26, 2010) The February Milk-Feed Price Ratio is 2.38, up from January's revised estimate of 2.31, according to USDA’s “Ag Prices” report issued Friday afternoon, and compares to 1.51 in February of 2009. 
 
The All Milk Price was estimated at $15.90 per hundredweight, down 20 cents from last month's estimate, but $4.30 above a year ago. 

Corn averaged $3.45 per bushel, down 21 cents from January, and 42 cents below a year ago. The soybean price, at $9.40 per bushel, was down 39 cents from January, and 14 cents below a year ago. Alfalfa baled hay was $111.00 per ton, down $2.00 from January, and $30.00 below a year ago.

Position Yourself With Options Positions
(February 26, 2010 Matt Mattke, Market 360 advisor at Wisconsin-based Stewart Peterson Incorporated reacted to DairyLine’s recent web poll which showed respondents, by a two to one margin, rejected the use of dairy options and futures trading.  

Mattke said he found the results surprising and the first question that came to his mind was why these people will not use options and futures to manage some of their price risk for 2010.

He offered three possible explanations. One is a lack of knowledge and understanding of how they work and therefore feel they could be more harmful than beneficial. Is it bad past experiences or is it the inability to get a hedge line of credit funding from the bank to do the marketing and use these tools.

One comment that was left by a producer was that we haven’t seen the damage caused by 2009 yet so why lock 2010 in at a loss.

Mattke said that’s one big advantage of using futures and especially options positions. “You can position yourself so that you don’t have to lock in a loss,” he said. “You can set yourself up to have your loss minimized in the event that the overall economic environment that we’re in causes another downturn in prices.”

Looking at past milk market cycles we should be on the road to recovery for 2010, Mattke reasoned, “but there’s really no guarantee.” “We’re in an economic environment the milk market has never experienced in the 16 years it’s been around,” he said, “So when we make the statement that 2010 has to be better and has to offer profitable prices, that’s how bad 2009 was, we’re betting that because 2009 was so bad, profit levels have to return in 2010.”

He added the caution “When we make a bet, one thing we all can agree on is that sometimes they pay off and sometimes they don’t and, if that idea that 2010 is going to be better is wrong and doesn’t pay off, it would sure be nice to have some options positions in place that hedge that bet and minimize the loss while still keeping you able to participate on the up side in the event that 2010 is a good year and we see some better opportunities than what we’ve seen so far.” For more information, call Matt at 1-800-334-9779.

Dairy Market Weekly Recap
(February 26, 2010) Cash cheese prices lost more ground in the final week of February. The blocks closed Friday at $1.34 per pound, down 7 1/4-cents on the week, but are still 16 1/2-cents above a year ago when the blocks plunged 13 1/2 cents, to $1.1750. Barrel cheese closed Friday at $1.29, down 8 3/4-cents on the week, but 11 cents above a year ago.  

The losses were on top of the previous week’s declines of 9 1/4 and 6 3/4-cents respectively. Thirty one loads of block traded hands on the week and 15 of barrel. The lagging NASS-surveyed U.S. average price on block cheese gained 0.4 cent, hitting $1.5059. Barrel averaged $1.5005, down 0.9 cent.

Butter closed February at $1.4050 per pound, up 4 1/2-cents on the week, and 25 1/2-cents above a year ago. Thirteen cars sold on the week and the NASS butter price averaged $1.3407, down a penny . NASS nonfat dry milk averaged $1.0697, down 7.2 cents, and dry whey averaged 39.46 cents, down 0.1 cent.

Slaughter Report
(February 26, 2010) The Agriculture Department’s latest Livestock Slaughter report issued this morning shows about 232,000 cows were culled under Federal inspection in January, up 1,000 head from December and unchanged from January 2009.

The Agriculture Department announced that organic dairies will be required to pasture cows a minimum of 120 days per year or about four months out of the year and that 30 percent of their feed intake must include pasture grown forage.

The decision will be final in June, he said, and is the latest salvo in an on-going battle over defining certain organic practices but is really aimed at keeping larger farms from obtaining the organic status.

While there is a minimum 120 day threshold to keep cows out on pasture, Galen said, “If you live in a more temperate part of the United States like certain parts of the Southwest or California, the expectation is that the cows will be out on pasture most of the year, if not all 12 months, and that may present some management challenges, particularly during the cold, rainy months.”

Organic has previously been defined to a certain extent by what it is not, Galen said. There are no antibiotics used, no growth hormones, no pesticides, etc., and now the definition is leaning toward the types of feed the cows are given, how they’re handled, and where they’re housed.

The organic niche has grown rapidly but Galen believes the growth has leveled off. He cited the recent USDA study of organic operations that Dave Natzke discussed last week, and reported that about 200,000 of the 9.1 million head of dairy cattle in the U.S. are considered organic producers and represent about 1.4 percent of U.S. dairy production.

“Even though the category has grown, it’s still a very small niche,” he concluded, “And the purpose of this rule is to exclude, often times larger farms, so that will make it hard for the organic category to continue growing at least in terms of production.”  

(February 24, 2010) Dairy producers need to work with beef producers says Idaho dairyman, Tom Dorsey. Speaking in Wednesday’s broadcast, Dorsey said dairy farmers rely on the beef market because “that’s where we go with our cows that are no longer good for milk and it creates a large share of our income.”

That underscores the importance of “getting the word out and communicating with the consumer about the quality and the healthiness of the product that we are producing,” he said.

Dorsey called on his fellow producers to “continue on in the direction they’re moving, realizing that, whether you’re producing beef on the range or beef in the dairy lot we have to all realize that we’re headed for the same place.”

“We’re really working together,” he said. And “We need to continue to work together and promote our product and not have division amongst the ranks and get the word out and tell our story.”

He said there are a lot of people who are interested in the humane treatment of animals and “we need to be able to tell these people that we are treating our animals with respect because, if we don’t, we have no business left.”

People are concerned about drug usage, Dorsey said, but he finds it interesting that “people don’t mind going to the doctor or taking a child to the doctor when they’re sick but, for some strange reason they think antibiotics are terrible and we shouldn’t use them on animals. We need to be able to convey our story that it is humane, that drugs are used in prescription form and under direction of a veterinarian.”

Dorsey says he’s confident he’s getting his money’s worth in the beef checkoff and sees it as an effective way to advertise and “get our story out.” It’d be very difficult to do this on an individual basis, he concluded.

(February 23, 2010) Cash cheese prices lost more ground the first day of trading in the final week of February. The University of Wisconsin’s Dr. Brian Gould pointed out in Tuesday’s DairyLine that the Class III futures market was headed down in the weeks prior and the March to July settlements on February 19 were down an average of 39 cents from the previous Friday and the August to January contracts were down 26 cents, reflecting the high level of cheese stocks out there but also what’s going on in milk production.

Cow numbers were down 2.4 percent from January 2009 in Friday’s report, Gould admitted, however milk per cow was up 1.9 percent, the net result was a drop of only 0.6 percent and that’s a big concern for the industry, with all those heifers out there that are available at a relatively inexpensive price. The decline in milk production may be short-lived, he warned.

Another interesting point from the data is the regional differences, according to Gould. Milk production was down in California, Colorado, Arizona, New Mexico, and Texas were all down significantly, whereas the Upper Midwest continued its dramatic increase. Wisconsin, for example, was up 4.7 percent, he said, and, while a lot of that was output per cow, there was no decrease in herd size.

Gould gave no estimate on how low cheese will go, admitting that he thought $1.49 would be but he’s been shown wrong on that. He suggested listeners go to his website “Understanding Dairy Markets” at http://future.aae.wisc.edu/ to see what the implied cheese value is, based on that day’s contributing futures prices.  

(February 22, 2010) January butter stocks totaled 169.8 million pounds, up 36.8 million pounds or 28 percent from December but 6.7 million pounds or 4 percent below January 2009, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued this afternoon.

The American cheese inventory, at 595.3 million pounds, was up 10.3 million pounds or 2 percent from December and 61.9 million pounds or 12 percent above a year ago. December revised estimates were lowered nearly 1.8 million pounds.

Total cheese stocks amounted to 980.1 million pounds, up 14 million pounds or 1 percent from December, and 98.4 million or 11 percent above those a year ago. 

Dairy Partnerships Drive Dairy Sales

(February 22, 2010) Dairy Management Incorporated’s Joe Bavido was back for part III in our discussion on 2009 dairy partnerships and innovation and how they drove dairy sales for farmers and began with growing ingredient sales at foodservice.

Bavido reported that the dairy check off worked with Starbucks to facilitate a third flavor in the Vivanno Smoothie line, which uses whey protein and fluid milk. These smoothies account for more than 3.7 million pounds of whey protein and 550 million pounds of fluid milk annually, according to Bavido.

The check off also continues to work with individual processors, schools, and foodservice chains to ensure that consumers have the fluid milk products they want, when, and where they want them, according to Bavido. Today, more than 70,000 restaurants across the country and 11,000 schools offer white and flavored milk in single-serve, plastic, resealable bottles.

He also reported that the National Dairy Council, which is the nutrition education and research arm of the dairy checkoff, “maintains and grows support for dairy’s nutrition and health benefits by working with health and marketplace leaders.” He mentioned specifically the partnership with the NFL and the “Fuel Up to Play 60” campaign as an example of “combating childhood obesity by encouraging schools to implement physical activity and good nutrition, including dairy.”  

Production per cow in the 23 major States averaged 1,782 pounds for January, 30 pounds above January 2009. The number of milk cows on farms in the 23 major States was 8.32 million head, 191,000 head less than January 2009, but 4,000 head more than December 2009. 

2009 Annual Milk Production down 0.3 Percent from 2008: 
The annual production of milk for the U.S. during 2009 was 189 billion pounds, 0.3 percent below 2008. Revisions to 2008 production decreased the annual total 10 million pounds. Revised 2009 production was up 61 million pounds from last month's publication. 

Production per cow in the U.S. averaged 20,576 pounds for 2009, 181 pounds above 2008. The average annual rate of milk production per cow has increased 13.1 percent from 2000. The average number of milk cows on farms in the U.S. during 2009 was 9.20 million head, down 1.2 percent from 2008. There was no revision to the average number of milk cows for 2008.

State by State Percentages: California was down 2.4 percent, due to 72,000 less cows but production was up 30 pounds per cow from a year ago. Wisconsin was up 4.7 percent, thanks to a 70 pound gain per cow and 5,000 more cows. New York was down 1.3 percent. Cow numbers were off 14,000 but output was up 15 pounds per cow. Idaho was up 1.5 percent, with a decrease of 4,000 cows, but output was up 40 pounds per cow. Pennsylvania output was down 1.7 percent from a year ago, with 9,000 less cows, and Minnesota was up 3.6 percent on a 50 gain per cow and 2,000 more cows.
 
The biggest increase was Washington state, up 5 percent followed by Wisconsin and Minnesota. The biggest decline occurred in Colorado, down 10.4 percent due to a 13,000 fewer cows and 10 pounds less production per cow. Arizona was next, down 10.9 percent with 22,000 fewer cows. Kansas was next, down 8 percent followed by Arizona, down 7.5 percent.  

Dairy Market Weekly Recap
(February 19, 2010) Cash cheese prices headed south in the President’s Day holiday shortened week as the markets awaited Friday afternoon’s January Milk Production report. The blocks closed Friday morning at $1.4125 per pound, down 9 1/4-cents on the week, but still 10 1/4-cents above a year ago. The barrels closed at $1.3775, down 6 3/4-cents on the week, but 10 3/4 cents above a year ago. Fifteen cars of block traded hands on the week and 12 of barrel. The NASS U.S. average block price hit $1.5024, up 2.7 cents. Barrel averaged $1.5098, down 1.6 cents.  

Butter lost a penny Tuesday, then jumped a nickel, but gave back 2 on Friday to close at $1.36, up 2 cents on the week, and 25 3/4-cents above a year ago. Twenty eight cars were sold. NASS butter averaged $1.3503, down 4.2 cents.

Cash Grade A nonfat dry milk finished the week at $1.12, up 1 1/2-cents, while Extra Grade held all week at $1.24. NASS nonfat dry milk averaged $1.1417, down 0.3 cent, and dry whey averaged 39.6 cents, up 0.6 cent.  

March Federal Order Class I Down 50 Cents
(February 19, 2010) The March Federal order Class I base milk price was announced this morning by the Agriculture Department at $14.34 per hundredweight, down 50 cents from February but $4.91 above March 2009. The Class III advanced pricing factor was the “higher of” in driving the Class I value and the base was above the trigger so there will be no MILC payment to producers. The Class I base has averaged $14.74 per hundredweight so far in 2010, up $2.78 from this period in 2009.   

The two-week NASS-surveyed butter price averaged $1.3701 per pound, up 3.5 cents from February. Nonfat dry milk averaged $1.1431, down 17.7 cents. Cheese averaged $1.5174, down 4 cents, and dry whey averaged 39.28 cents, up fractionally.

2-week Product Price Averages:

Organic is Growing But Still a Small Part of U.S. Dairy Farming
(February 19, 2010) USDA has conducted what is believed to be the most comprehensive survey ever related to "organic" food production in the U.S. Dairy Profit Weekly’s Dave Natzke, reported Friday that the survey counted about 14,500 "organic" farms in 2008, of which about 2,000 were dairy farms selling milk. There were just over 200,000 organic cows, producing about 2.75 billion pounds of milk in 2008.  

The USDA survey doesn't reveal all individual state numbers to avoid disclosing individual organic farms, but in terms of herd numbers, the leading states were Wisconsin (479); New York (316); Pennsylvania (225); and Vermont (179). 

California had the most organic cows, at about 35,300 head, followed by Wisconsin ( 25,916); Texas (18,854); New York (17,43)1; and Oregon (16,290). California topped the list for milk production, at about 500 million pounds, followed by Wisconsin (329.0 million lbs.); Texas (284.2 million lbs.); and Oregon (261.1 million lbs.)

The U.S. milk price averaged about $18.29 per hundredweight in 2008, but organic producers enjoyed higher average prices, at about $27.21 per hundredweight. However, production costs were also higher.

To put things in perspective, while "organic" may be growing, it’s still a small part of U.S. dairy farming. "Organic" dairies represent about 3.5% of U.S. dairy herds, 2% of all U.S. cows, and about 1.5% of all milk produced in 2008.

In a related topic,  USDA clarified rules covering pasture in organic dairying. USDA said animals must be on pasture at least 120 days per year, and must get a minimum of 30% of daily feed intake from pasture during the grazing season. The final rule won't be published until June, and won't become effective until mid-October.

Compared to November indications, soybean exports are driving the higher overall U.S. forecast as record domestic production, reduced competition to date from South America, and strong Chinese demand have led to record recent sales. Cotton exports are also forecast higher due to stronger prices, greater global demand, and less competition from other suppliers.

Meanwhile, dairy and livestock exports are forecast up, more than compensating for lower poultry exports. Corn is forecast lower due to greater competition from other feed supplies, such as distillers dried grains (DDGs). U.S. wheat exports are also lowered due primarily to greater competition from Canada and Russia. Increased exports of DDGs are forecast, in part due to soaring demand from China, Mexico, and Canada.

The fiscal 2010 export forecast for livestock, poultry, and dairy products is raised $200 million to $20.1 billion as moderate gains in beef, pork, and dairy outweigh reductions in broiler meat. The dairy export forecast is up 7 percent largely due to firm global dairy prices impacting export values. A longstanding drought in Australia and the recent development of drought in northern New Zealand could lend further impetus to world market prices if the drought impact deepens.

Antibiotic Use Generating Attention on Capitol Hill
(February18, 2010) A few weeks ago National Milk’s Chris Galen responded to an ABC News Nightline story that gave the dairy industry somewhat of a black eye in animal care. In Thursday’s broadcast, Galen responded to yet another attack, not on dairy directly but on the use of antibiotics in animal agriculture by CBS News.

This new story focused primarily on the pork and poultry industry, according to Galen, who added that the major media is being very critical on a number of fronts in production agriculture.

Antibiotic use is also generating a lot of attention on Capitol Hill, Galen reported. Next week there’ll be a briefing of Congressional staff on the use of antimicrobials in farm animals, he said, and National Milk will testify.

“This is an issue that’s not going to go away,” Galen warned, “There’s actually legislation in Congress right now that would greatly restrict sub-therapeutic use of antibiotics in farm animals and I think that is something that we defiantly need to be concerned with.”

There were actually two CBS stories. The first one focused on the U.S. pork industry, according to Galen, and the second one looked at the Danish pork industry.

The first one featured a representative of the Pork checkoff program, telling how antibiotics are used in U.S. swine and, while it also touched on poultry, it did not focus on beef or dairy cattle, Galen said, “But certainly the dairy industry does have a dog in the fight regarding antibiotic use and that’s why we are very involved in efforts to educate lawmakers that they not do anything too hasty in a rush to judgment that would remove useful tools for dairy farmers to make certain they have the healthiest cows possible.”

These most recent new reporting underscore the need for agricultural interests to have the means in place to respond appropriately to these challenges.

The fact that both stories were so close in timing is “a trend that’s going to continue as there’s a lot more scrutiny where food comes from today versus a few years ago,” Galen concluded. “We have to play both defense and offense to make certain we get our best foot forward and we need to have programs in place that demonstrate that farmers are committed to animal care and producing  safe food.”

(February 17, 2010) Downes-O’Neill dairy broker Dave Kurzawski reacted in Wednesday’s broadcast to DairyLine’s latest web poll where respondent, by a two to one margin reject the use of dairy options and futures trading.

When asked if that was a result of the failure of dairy brokers or the dairy media to educate dairy farmers, Kurzawski replied, “I don’t think so. I think that it’s still very new to most dairymen and most end users of dairy products.”

He explained that, “In the mid 1980s, the support price and so forth kept a moderate volatility and most dairymen happy but those have been removed for the most part and as a result you have a real volatile market and new need for some type of risk management for some dairymen and some end users.”

He gave corn as an example, pointing out that corn trade volume far out numbers dairy trade volume, “but they’ve had a 150 years head start.”

To change this, Kurzawski said it requires “a process of educating as best we can.” He said there are many good brokers across the country that are trying to explain how these markets work and figure out what the bottom line is for dairymen.” There’s no overnight fix, he said, and he doesn’t believe it’s options and futures trading is necessarily for every dairyman but he believes “it’s an education process that takes longer than 15 years.”

One of the comments left on our website poll charges that most of the dairy farmers this individual talked with who had tried this new tool had lost money.

Kurzawski said he would have to delve further into each instance to know what happened but, “If you take a producer who does nothing and one that actively manages his price risk over the course of five years, I would never guarantee that one would be better off than the other. They’re probably going to be about average, but I will tell you this, the reason a producer uses these tools, be it forward contracting, futures, or options, is to mitigate or lessen price volatility.”

Right now, farmers don’t know what they’re going to get next month for their milk, argued Kurzawski. “This is a way to insure that they have an idea of what that milk will bring them and bring that profit back to the dairy.”

He added that “there are hedge losses and spec losses but they’re totally different things so from a standpoint of a five year hedge plan, you’re probably not much better off than anybody else that hasn’t been doing it but you would have been able to weather a year like 2009 a whole lot easier than most folks.”

“If the majority of the customers that we deal with had been losing money instead of mitigating risk and insuring profit margins over the years,” Kurzawski concluded, “We would have been out of business a long time ago.”

Market Analysis with Bill Brooks
(February 16, 2010) The market is anticipating some erosion, according to Downes-O’Neill dairy economist Bill brooks, in Tuesday’s DairyLine. He was referring to the two days of decline in the barrel cheese market last week and pointed out the 6-cent spread between the block and barrel price.  

He added that there has been wide spreads a fair amount of the time in the recent past and wouldn’t be surprised to see that repeated but the general consensus is for steady to lower prices for the holiday-shortened week.

January was not a good month for cheese manufacturers, according to Brooks. He blamed the lag’s impacts on the Class III milk price and said, if you’re a cheese manufacturer and can’t generate revenue out of your whey stream, you only had 3 to 18 or 19 cent per hundredweight return, if you sold your block or barrel cheese at the CME average and was paying for milk at the Class III level.

That 18 cents won’t cover operating costs, he said, and while they didn’t lose money on every hundredweight of milk brought into the plant, they came pretty close. Of course, farmers hearing that would likely reply, “I should be so lucky.”

There’s more strength in the block market than anticipated, Brooks said, but “January won’t be a month where we see strong cheese production and that has helped keep the supply demand situation a little tighter than what most folks would have thought it being right now.”

Brooks expects Friday’s January Milk Production report to be very similar to December’s, down by less than 1 percent. He also pointed to the large heifer inventory although he admitted that it will take some time for those animals to enter the milking string but warned that the opportunity to rebound in production could be much quicker than anyone thought for this year.

He looks for Friday’s March Federal order Class I milk price to come in at $14.30 per hundredweight. That would be a 54 cent decline from February but would be $4.87 above March 2009.  

(February 15, 2010) Dairy Management Incorporated’s Joe Bavido continued his series on the dairy check off partnerships of 2009 in Monday’s “DMI Update.” He highlighted the McCafe specialty beverages resulting from a multi-year partnership with McDonalds and said that, while they are referred to as a coffee beverage, they feature 40-80 percent milk and are available at 14,000 restaurants across the country.

McDonalds also launched its Third Pounder Angus Burgers, three new burger options that include two slices of cheese. That will result in an additional six million pounds of cheese sold, according to Bavido.

Dairy producers also partnered with milk processor HP Hood and its Lactaid brand to make innovative milk products available to the nearly one in four Americans that have either left or are at risk for leaving the milk category due to actual or perceived lactose intolerance. Bringing these lapsed consumers back to milk could mean an additional 2.5-5 billion pounds of milk each year, according to Bavido.

Another new product that was launched in 2009 as a result of a partnership with General Mills Yoplait brand was to develop a new line of frozen fruit and yogurt smoothies that use an innovative yogurt chip technology and requires eight ounces of milk. The company said the new yogurt smoothie was among its most successful new product tests ever.

(February 12, 2010) Cash dairy prices have the full attention of farmers, bankers, and processors as the “recovery” appears to be slowing, even though cash block cheese closed the second week of February at $1.5050 per pound, up 1 1/4-cents on the week and 26 1/2-cents above that week a year ago. Barrel closed Friday at $1.4450, down 2 3/4-cents on the week but 21 1/2-cents above a year ago. Four cars of block traded hands on the week and six of barrel. The NASS-surveyed U.S. average block price gained 2.5 cents, hitting $1.4750. Barrels averaged $1.5258, up 2.3 cents.

Butter closed at $1.34, up 1 1/4-cents on the week and 23 3/4-cents above a year ago. Eleven cars sold. NASS butter averaged $1.3912, down 1.3 cents.

Cash Grade A nonfat dry milk closed Friday at $1.1050, down 4 1/2-cents on the week. Extra Grade held all week at $1.24. NASS powder averaged $1.1448, up 1.2 cents. Dry whey averaged 39 cents per pound, up 0.1 cent.

Feed Costs May Be Another Cloud On Dairy's Horizon
(February 12, 2010) Dairy Profit Weekly Editor Dave Natzke warned in his Friday report that feed costs may be another cloud on dairy’s horizon. He reported that USDA's World Agricultural Supply and Demand Estimate report issued Tuesday indicates somewhat lower stocks of both corn and soybeans, as more of each crop goes toward energy production.  

A record amount of ethanol was produced last November, Natzke said, and November-December corn use for ethanol was up 16 percent from the same period a year earlier. And, the recent Environmental Protection Agency announcement of final rules for biodiesel mandates is expected to pull more soybeans into biodiesel production.  

On a brighter note, Natzke said, “The good news for dairy farmers is that we haven't seen a big price impact on those major dairy feedstuffs,” USDA’s latest Ag Prices report indicates that while hay prices rose slightly in January, corn and soybean prices were down from December. And while corn futures prices have been trending mostly higher since February 1, 2010 average futures prices are still down about 30 cents per bushel since early December and soybean meal futures are down $25-$40 per ton.  

There is even more “silver lining” via a global dairy perspective from Rabobank, one of the world's largest agricultural lenders, which says the recent downturn in dairy prices is more of a market correction to prices that were rising quickly, rather than the return to a dairy sump.  

Milk production in nearly all dairy exporting regions, including the European Union, United States, Argentina, Australia and New Zealand was trending lower in the last quarter, Natzke said, furthermore, according to Rabobank’s monthly Agribusiness Review, a wildcard to global dairy prices will be China, which discovered additional melamine contamination problems in its domestic production, and could increase that country's activity in the import market. 

The administration will seek a state by state system, according to Galen, however National Milk still favors a mandatory national animal identification program and one that employs radio frequency technology and 48 hour traceability across the food chain.  

Galen said it’s unsure how USDA will proceed from here other than they will be working with fifty state governments and “hopefully end up with something that has some national uniformity as opposed to a patchwork quilt.”  

Livestock organizations will be part of the process, he said, along with state governments that regulate animals and livestock. The Federation believes a national ID program is “an important part of a collective insurance policy in the event of an animal disease emergency,” Galen said, “So we think this is a setback but there’s still widespread recognition within USDA and Congress that something needs to be done.  

It may not be called a national animal ID system, he admitted, but “hopefully they can come up with something new, a better mousetrap, that will enable us to do what we need to do to protect the infrastructure of the livestock industry.”  

Reacting to the snow in the DC area, Galen said it’s unprecedented, having three huge snowstorms, two in the last five days, and “the city is reeling under the onslaught of 2-3 feet of snow.” “We’re looking forward to spring,” he concluded.  

Beef Quality Assurance: Paying Attention to Injection Sites
(February 10, 2010) The beef checkoff, through the Beef Quality Assurance program, provides dairy farmers with helpful tips on getting more value out of their animals. New Mexico dairy producer and past director of the New Mexico Beef Council, Luke Woelber, talked about it in Wednesdays Beef Board Update.  

Woelber said the checkoff is a constant and reminder and training of our employees as to the proper injection sites. He talked about how hard, financially, 2009 was for dairy farmers and how he looked how to get every cent out of every part of his operation and by paying attention to such things as injection sites they can get a better price for cull cows.

That's not a primary source of income, he admitted, but its still a source of income and by doing things right and proper we can maximize that return.

Woelber employs 22 workers and trains them in a hand on fashion about 95 percent of the time he or one of his managers is around the dairy to train on the job. There are about two to three days a week where injections are given, he said, and one of the dairy's management people is there to show and monitor employees in injection procedures.

Woelber still believes the beef check off is a good investment, even in hard economic times, and said, We do get a better price for our beef (because of it).

Tuesday’s report reflected USDA’s estimates for fourth-quarter 2009 production and the 2010 estimate was raised due to a higher-than-expected January 1 dairy replacement heifer estimate.

“Herds are not expected to decline as rapidly as forecast last month,” the report said, “boosting milk production.” 2009 output is now pegged at 189.3 billion pounds, up 100 million pounds from last month’s estimate. The 2010 estimate, at 188.9 billion pounds, was raised by 500 million pounds.

Dairy exports on a skim-solids basis for 2010 were raised, reflecting higher sales of cheese and nonfat dry milk. Import forecasts were lowered for 2010. Fat and skim-solids ending stocks were estimated higher for 2009 and stocks for 2010 were raised in the face of higher production.

Cheese and butter price forecasts for 2010 were little changed from last month. The Class III milk price estimate was raised due to higher forecast whey prices but the Class IV forecast was lowered reflecting weaker nonfat dry milk prices.

Look for a 2010 Class III range of $14.90-$15.60 per hundredweight, according to USDA, up from the $14.75-$15.55 range predicted a month ago. The 2009 average was $11.36. Look for a Class IV price of $13.95-$14.74, down from the $14.70-$15.60 estimate last month. The 2009 averaged was $10.89. The all milk price is forecast at $16.20 to $16.90 for 2010.  

Market Analysis with Alan Levitt

(February 9, 2010) Cash cheese prices were unchanged in the first day of trading the second week of February but butter slipped three quarters of a cent and Grade A powder was down a nickel. Market analyst, Alan Levitt, in Tuesdays DairyLine said So much of what happens in the dairy markets of course is psychology and it seems like the market sentiment has turned in the last few weeks. Some of the optimism that we had a month ago seems to be fading, he said.

Heavy inventories are overhanging the market, according to Levitt, there's a post holiday slowdown in orders and it appears that the strong demand that we saw earlier was perhaps more out of concern for scarcity later in 2010 and now buyers are more comfortable with the prospects ahead. There's also a huge supply of replacement heifers waiting in the wings, he said, indicating that national production may be able to rebound quickly in 2010, and some of the farmers who survived the 2009 debacle are more eager to ramp up production again and that may bring back the milk supply faster than some of us had thought and is forcing us to revisit our forecasts of tight supplies later in the year.

Another factor that fueled optimism was the export potential but Levitt pointed out that we have a weaker global market as supply pipelines have been refilled and overseas buyers have backed off a bit and international prices have slipped 10-20 percent in the last two months and that's weighing heavily on U.S. prices.

Levitt warned that, if global markets don't come back in 2010, there's little chance that U.S. markets are going to be able to recover to the levels that we thought we would see even just a month ago.

Is there any silver lining in this dark cloud? Levitt said yes, there are some bullish fundamental factors in the market and hope remains that well see a tight supply after the spring flush.

Decembers total cheese production was down a tenth of a percent, the first down turn in 21 months. Cheddar cheese output was off 8.3 percent from the year before and output was down in all four major producing states, Wisconsin, Idaho, Minnesota, and California. Butter production was down in December, along with nonfat dry milk, so production is pulling back, he concluded, but we seem to be in a lull right now but maybe when we get past the spring flush, things will be a little bit more buoyant.  

(February 8, 2010) Dairy Management Incorporated’s Joe Bavido began a new series on Monday’s “DMI Update, looking at how the various check off partnerships and innovation drove dairy sales in 2009. He began with what he called the “partnership to create a Legend.”

It began with Domino’s Pizza to help revitalize the pizza category and build cheese sales, according to Bavido, and in February, Domino’s introduced its American Legends pizzas, six specialty pizzas that featured up to 40 percent more cheese than its traditional pizzas. He reported that Domino’s invested four to five times the amount of money that dairy farmers funded and, due to the campaign’s success, other chains have also increased their pizza percentages.

In another pizza example, national and local dairy check off organizations worked with industry partners to create a school pizza that will meet the increasingly restrictive school nutrition guidelines, while also meeting kid’s taste demands.

Pizza is the most popular entrée in schools, Bavido said and, as part of this project, the check off involved Domino’s in a pilot program in selected cities to supply these reformulated pizzas to the schools. It’s still in the testing stage, he said, but shows a lot of promise. Best of all, schools are always looking for ways to cut costs, Bavido concluded, and “This may be one way that, not only can that goal be met, but also the increased nutrition that cheese offers on the pizzas.”

(February 5, 2010) The cash cheese market weakened the first week of February, sending shivers to farmers and their bankers. With Super Bowl demand behind us it remains to be seen what happens next. The cash block price closed the first Friday of February at $1.4925 per pound, down 2 1/4-cents on the week, but still 33 1/2-cents above that week a year ago.

The barrels closed at $1.4725, down 3 1/4-cents on the week, and 32 1/2-cents above a year ago. Only one car of block traded hands on the week and two of barrel. The NASS-surveyed U.S. average block price fell 1.4 cents, to $1.4502, while the barrels gained 2.6 cents, averaging $1.5024.

Cash butter started the week losing 2 cents, then gained almost 4 cents, but gave back 2 on Friday to close at $1.3275, down a quarter-cent on the week, but 22 1/2-cents above a year ago. Twenty four cars traded hands on the week. NASS butter averaged $1.4039, up 1.9 cents.

Cash Grade A nonfat dry milk closed the week at $1.15, down 4 cents, and Extra Grade held all week at $1.24. NASS nonfat dry milk reversed gears, averaging $1.1328, up 4.1 cents, following the previous week’s 19.6-cent loss. Dry whey averaged 38.94 cents, up 0.3 cent.

Class III Milk Price Reverses Gears

(Feb. 5, 2010) The benchmark Federal order farm gate milk price reversed gears following five consecutive monthly gains. The Agriculture Department announced the Class III milk price this morning at $14.50 per hundredweight (cwt.), down 48 cents from December, $3.72 above January 2009, and $1.78 above California’s comparable 4b price.

Class III futures portend additional declines ahead. The February contract settled Thursday at $14.05. March settled at $13.57, April $13.36, May $13.55, June $14.21, July $15.00, August $15.25, with a peak at $15.52 in September before beginning its seasonal retreat.

The Federal order Class IV price is $13.85, down 1.16 from December, but $4.26 above a year ago, and 10 cents above California’s comparable 4a price.

The four-week, NASS-surveyed cheese price averaged $1.5374 per pound, down 6 cents from December. Butter averaged $1.3610, down 8.5 cents. Nonfat dry milk averaged $1.1929, down 9.3 cents, and dry whey averaged 38.80 cents, up 2.1 cents.

(February 5, 2010) Dairy Profit Weekly editor Dave Natzke reported in Friday’s program that a new USDA report indicates there are more dairy replacement heifers ready to take their place. The agency’s semiannual cattle inventory report shows 9.1 million cows in U.S. herds on January 1, 252,000 less than a year ago, and yes, that is helping to bring milk production down a bit.

However, the same USDA report notes there are about 4.5 million dairy replacement heifers in U.S. dairy herds, or about one heifer for every two cows, according to Natzke. That's up 106,000 from a year ago. Of that total, about 2.9 million are expect to have a calf in 2010, up 32,000 from a year ago, and start producing milk and Natzke warned that “The higher number of heifers could slow the decline in the size cow herd and milk production.”

Switching gears, World Ag Expo takes place February 9-11, in Tulare, California and Western DairyBusiness’ Dairy Profit Seminars will be held daily but in a new location, a new center in the dairy area of the World Ag Expo grounds.

Seminars will include speakers and panel discussions on a wide range of issues, including air and water quality and manure management regulations, milk supply management,  agricultural credit conditions, feed additives and economics, the anti-animal agriculture movement, labor, and the growing farmstead and specialty cheese industry.

(February 4, 2010) National Milk’s Chris Galen, in Thursday’s DairyLine, addressed last week’s ABC Nightline program which was critical of how animals are treated on U.S. dairy farms. He said they knew that it was going to be a negative, critical story from the time they started working with ABC on it last year but NMPF wanted to provide some perspective on the so-called evidence of abusive practices.

“Going forward, National Milk has to defend practices on dairy farms that are defensible,” Galen charged, “And we have to criticize practices which are not defensible and, most importantly, we have to have the wisdom and the discretion to understand the difference.”

Galen told reporter Brian Ross that certain things depicted in the videos which had been collected by undercover animal rights sympathizers are not defensible and are not standard operating procedure but some things need to be done.

One example, according to Galen, is dehorning, a practice which is crucial to animal safety as well as those who care for them.

He admitted there are proper and improper ways of doing this but the idea that it is somehow bad for the animal is “just completely nuts because obviously an animal with horns is a threat not only to its herd mates but also to people who work with the cows.” Those are the messages we have to continue developing and disseminating, he said.

Tail docking was another practice pictured and it appeared the cow was in pain when it was performed. Tail docking should not necessarily be illegal, Galen countered but, if it is used, it should be done properly and that includes the necessary use of analgesics or anesthetics, depending on the age of the animal.” “You don’t know exactly what happened before or after the videos were shot,” he concluded, “But from what we could tell, there were not best practices used.”

(February 3, 2010) Congress is debating the need for stricter food safety laws and is considering legislation that includes a loop hole that has the potential to undermine the image of dairy as safe and wholesome, according to Ruth Saunders, Vice President for Policy and Legislative Affairs at the International Dairy Foods Association. Speaking in Wednesday’s DairyLine, Saunders reported that pasteurized milk and dairy products “set the gold standard in food safety.”

Government statistics show that dairy is safer than all other food groups in the relative rates of food-borne illness, according to Saunders, except for unpasteurized fluid milk sold directly to consumers.

“Unfortunately, the recent rise in consumption of raw milk and the resulting rise in dairy outbreaks is tainting the food safety record of all dairy,” Saunders charged, “So IDFA and the National Milk Producers Federation have joined forces to close the raw milk loop hole in the pending food safety legislation”

“Our aim is simple,” she said. “We will continue to discourage states from allowing raw milk sales directly from farm to consumer, but in those states where it is legal, require facilities that sell raw milk directly to consumers to be subject to the new law and potential new fees of the Food and Drug Administration just as all pasteurized milk handler s must abide by them.”  

She warned that “the growing demand for fluid raw milk is increasing the number of food borne illness outbreaks and has the potential to give all dairy products a black eye with consumers.”

Pasteurization is recognized worldwide as one of the most effective food safety tools available, Saunders said, and when properly conducted, it is the only way to ensure that milk is free from disease-causing microorganisms. 

“We have proposed a simple legislative solution,” Saunders concluded, “Require that any new federal food safety requirements apply equally to states that allow raw milk sales; and clarify that all farms and plants that operate under the pasteurized milk ordinance are already meeting the new food standards.” “In other words, FDA should direct any new regulations and fees to raw milk, the source of the real threat,” and she encouraged listeners to let Congress know that they want the new food safety legislation to apply to raw milk providers.  

Nonfat dry milk output amounted to 126.4 million pounds, up 25.2 million or 25 percent from November, but 28.9 million or 18.6 percent below a year ago.

Mozzarella cheese output totaled 290.1 million pounds, up 8.7 million pounds or 3.1 percent from November, and 10.1 million or 3.6 percent above a year ago.

Total Italian type cheese, at 373.1 million pounds, was up 10.1 million pounds or 2.8 percent from November, and 9.2 million or 2.5 percent above a year ago.

Cheddar production totaled 259.9 million pounds, up 12 million pounds or 4.8 percent from November, but down 23.4 million pounds or 8.3 percent from a year ago.

American type cheese amounted to 349.4 million pounds, up 18.6 million pounds or 5.6 percent from November, but down 9.5 million pounds or 2.6 percent from a year ago.

Total cheese output came to 862 million pounds, up 18.4 million pounds or 2.2 percent from November, but 1.1 million pounds or 0.1 percent below a year ago. 

Market Analysis with Mary Ledman
(February 2, 2010) There was a “fire sale” on nonfat dry milk the weeks of January 18 and 25, according to Mary Ledman, Principal of Keough Ledman, and Associates in Libertyville, Illinois, in Tuesday’s DairyLine. She was referring particularly to last week’s 19.6-cent plunge to $1.09 per pound in the NASS-surveyed powder price.  

The California weighted average price of $1.0542, published last Wednesday, was the driving force behind that, according to Ledman, and she looks for low powder prices for at least the next two weeks but added, “We could be somewhat hopeful that this low priced inventory is out and higher prices are on the horizon.” The downturn also put downward pressure on the whey protein concentrate market and Class III futures, according to Ledman.

On a brighter note Ledman pointed out that the cash cheese market has been fairly steady of late and, while Monday’s slippage sounds counter to that, we now have a more normal block-barrel spread and she believes the cheese market will flirt with that $1.40 level but she doesn’t see prices going much below that.

When asked about demand; Ledman reported that American cheese commercial disappearance in the September to November 2009 period dropped 1.2 percent. Prior to that, sales were up over 4 percent through August.

She quickly added that CME block Cheddar through October averaged less than $1.25 per pound and there were tremendous promotional activities through the first half of the year. “Clearly, when the cheese market goes above $1.50 per pound, those promotional activities tend to evaporate,” she concluded.

U.S. Dairy Exports Have Improved
(February 1, 2010) U.S. dairy exports have improved in recent months, according to the U.S. Dairy Export Council’s Margaret Speich. Speaking in Monday’s “DMI Update, Speich said this is good news for dairy farmers. She reported that November saw 2009 highs in volumes of cheese, butterfat and whey.  

Overall value was up 2 percent  in November vs. prior year, she said, and the first positive showing in more than a year. In October and November, more than 11 percent of U.S. milk production went into products for export, according to Speich, a figure more in line with what we saw during the 2007-08 boom period.

“Global dairy markets strengthened significantly in the second half of 2009,” speech said. “We saw prices of most commodities nearly double in six months but, heading into 2010 the markets are in a pause mode.”

Buyers are cautious, she said. “Pipelines have been rebuilt for the most part, and now everyone wants to see how the spring flush unfolds in the United States and Europe.”

But she adds that there is concern about supply, because milk production in Oceania is running below expectations. “It’s a balancing act,” Speich explained, “Suppliers want to be careful not to panic and run the price too high and kill demand.”

USDEC projects U.S. dairy exports (by volume) will be up 7-12 percent in 2010 after being down 15-20 percent in 2009, she concluded. “Heading into the new year, we continue working with members to capitalize on the recovery in global dairy demand.”