July 2010 Archived Dairy News

(October 29, 2010) The October Milk-Feed Price Ratio is 2.23, down from September's revised estimate of 2.38, according to USDA’s “Ag Prices” report and compares to 2.11 in October of 2009.

The All Milk Price was estimated at $18.30 per hundredweight, up 60 cents from last month's estimate, and $4.00 above a year ago.

Corn averaged $4.78 per bushel, up 78 cents from September, and $1.17 above a year ago. The soybean price, at $10.70 per bushel, was up 72 cents from September, and $1.27 above a year ago. Alfalfa baled hay was $118.00 per ton, up $1.00 from September, and $9.00 above a year ago.

Unity and Consensus Emphasized At Joint Annual Meeting
(October 29, 2010) While the country seems deeply divided politically going into next Tuesday’s elections, "unity" and "consensus" were themes emphasized this week’s joint annual meeting of National Milk, the National Dairy Promotion and Research Board, and the United Dairy Industry Association in Reno, Nevada.

It was the 14th joint annual meeting of the three organizations according to Dairy Profit Weekly editor, Dave Natzke, in Friday’s broadcast, and quite possibly the most pivotal in its history. In addition to presentations on dairy promotion activities and partnerships, a lot of time was devoted to explanation and discussion of National Milk’s “Foundation for the Future” federal dairy policy proposal, including a "town hall" style meeting to open the program, and in presentations by National Milk chair Randy Mooney and President & CEO Jerry Kozak.

Dairy consensus was a major theme of both sessions, Natzke reported, with National Milk leadership asking dairy farmer delegates and others in the dairy industry to unify behind what they hope is a fundamental change in U.S. dairy policy in the 2012 Farm Bill.

As we have reported in the past; the Foundation for the Future proposal would eliminate large components of current dairy policy, including the Dairy Price Support and Milk Income Loss Contract programs, replacing them with a Dairy Producer Margin Protection program, to help producers protect against low milk prices and/or high feed costs through both base and supplemental insurance programs.

The proposal includes a Dairy Market Stabilization Program to take steps to balance supply and demand by reducing milk payments in surplus situations; and calls for reforms in the Federal milk marketing order program.

“Foundation for the Future is one of several dairy policy proposals being offered as the result of the devastating economic situation dairy farmers have faced for the past two years, Natzke said. “In urging consensus among dairy farmers, Mooney and Kozak stressed the plan, as a complete package, is a compromise that serves all dairy farmers equally, while probably just as important, is politically practical and passable, no matter which party comes into power on November 2.”

One important element of the future is the CWT program and CWT CEO, Jim Tillison, reported in Thursday’s broadcast that the CWT Committee met on Monday and decided that the emphasis for the rest of 2010 and in 2011 should be on its export assistance rather than additional herd removals.

Dairy economist, Dr. Peter Vitaliano, believes the export assistance can be as effective, if not more effective, than the herd retirement programs have been, according to Tillison, and producers themselves have said they prefer selling more dairy products than removing milk production.

National Milk’s Board affirmed the decision, Tillison reported, and carryover funds will be used toward that end. The board authorized a 2-cent per hundredweight assessment on CWT members with the cavatiot that 75 percent of U.S. dairy producers participate in the program, he said, so an emphasis will be made on signing up new members.

Thursday was the first day of the general session and started with a town hall type meeting addressing National Milk’s “Foundation for the Future” dairy policy proposal to answer all of the questions attendees have.

“People need to understand what all of the elements of the program are,” Tillison concluded, “And once they do that, they pretty much have gone on board saying that this is the new direction that the dairy industry should take.”

(October 27, 2010) Dairy producers are very important beef producers, according to John Freitag, Executive Director of the Wisconsin Beef Council. We talked about it at the recent World Dairy Expo where they exhibit every year and that conversation became Wednesday’s “Beef Board Update” on DairyLine Radio.

That was the message at World Dairy Expo, according to Freitag. There’s a lot of ways that dairy producers interact with consumers via milk and dairy products, he said, but 22 percent of U.S. beef is produced by dairy farmers, “So we’re talking to them about their role in producing beef for the consumer and what we have to do to maintain the confidence of the consumer in our product.”

When it comes to dairy producer benefits from the beef check off, first and foremost is research, according to Freitag, who cited the new beef cuts that have come out of the chuck that are now being offered as well as some new cuts out of the round that were developed this year; meat that in the past was ground chuck or chuck roast and “now we’re making steaks out of and some plants are actually taking these cuts and merchandizing them to the consumer so we’ve added value to that dairy cow as well as the beef cow and market bulls.”

He admitted that dairy producers at Expo regularly asked him why they have to pay the beef check when they sell a dairy heifer to a neighbor or a baby calf. The law states that you have to pay a dollar every time that animal changes possession, Freitag said, “So we’re just educating producers about the check off, how it works, and the benefits they receive from it.”

(October 26, 2010) There wasn’t much reaction to Friday’s Cold Storage data in the cash dairy markets in the final Monday of October. Butter remained at $2.1850 per pound, where it’s been since October 7, and has only dropped a nickel since its peak, according to Dr. Robert Cropp, emeritus professor at the University of Wisconsin at Madison in Tuesday’s DairyLine.

He pointed to the latest data showing butter stocks were down 43 percent from a year ago while butter production was only up slightly, so he believes butter will hold for the next week or two as holiday orders are filled.

Buyers and butter producers are hesitant because of concern over inventory values losing ground, according to Cropp, but sales are good, though he sees prices dropping to the $1.70 or below by November or the end of the year.

It’s a different story for cheese. The block price has lost a little over a dime in the last two weeks but cheese stocks have built a little. September stocks were not up a lot from August, which Cropp called “encouraging,” but they’re higher compared to a year ago, when you look at the total cheese inventory which is the same amount that we had in 1984, Cropp cautioned, “so that’s pretty high.”

Buyers are waiting to see how low prices go. He doesn’t see cheese prices rebounding as we get closer to the holidays and looks for prices to fall to about $1.55-$1.60 per pound by the end of the year. He doesn’t expect a rebound then until second quarter 2011.

(October 25, 2010) The dairy check off’s “Fuel Up to Play 60” campaign remains a popular program in U.S. schools. Pennsylvania dairy producer Paula Meabon, who also chairs the National Dairy Board, reported in Monday’s “DMI Update” that the National Dairy Council (NDC) and the National Football League have teamed up to make this program what it is.

Meabon pointed out that the NDC has been in schools since 1915 so it brings the nutrition aspect to schools and schools know that the NDC is reputable. The NFL brings “star power”, according to Meabon so the program effectively teaches kids that, not only do they need nutrition, they need 60 minutes of exercise. And, the USDA is part of the campaign, Meabon said, because it works into their plan for healthier U.S. kids.

Meabon said they hope to get the program into every school in the nation. The campaign is in its second year and is currently in 64,000 schools out of 96,000 in the nation, with 55 million kids. The program is currently reaching 36 million kids, she said, “So this is a big initiative and we want to get everyone involved.”

State and regional DMI staff contact schools to sell them on the program, according to Meabon, who called the effort “phenomenal,” because the state and regional groups work in a unified marketing plan with DMI. She also encouraged dairy producers to contact their local schools to make sure “Fuel Up To Play 60” is part of their curriculum.

(October 22, 2010) September butter stocks totaled 129.8 million pounds, down 25.5 million pounds or 16 percent from August and 98.1 million pounds or 43 percent below September 2009, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued this afternoon. August revised butter estimates were raised nearly 3.5 million pounds.

The September American cheese inventory, at 635.6 million pounds, was unchanged from August, but 39.4 million pounds or 7 percent above a year ago. August revised estimates were raised nearly 8.9 million pounds.

Total cheese stocks amounted to over 1.046 billion pounds, up 5 million pounds or 1 percent from August, and 62 million pounds or 6 percent above a year ago. August revised estimates were raised nearly 5.7 million pounds.

Dairy Market Weekly Recap
The cash dairy markets headed lower following the higher than expected Milk Production report and was anticipating Friday afternoon’s preliminary September Cold Storage report. Block cheese added to the previous week’s 3-cent decline, closing Friday at $1.6675 per pound, down another 7 1/4-cents but still 16 3/4-cents above a year ago. Barrel closed at $1.68, down 5 1/4-cents on the week, but 18 3/4-cents above a year ago. Fourteen cars of block traded hands on the week and 15 of barrel. The NASS-surveyed U.S. average block price hit $1.76, up a penny, and barrel cheese averaged $1.7649, up 0.8 cent.

Butter closed at $2.1850, unchanged since October 6 and 83 1/2-cents above a year ago when it jumped almost 11 cents to $1.35. One car was sold last week. The NASS butter average hit $2.1815, down 2.9 cents. Nonfat dry milk averaged $1.1838, up 1.6 cents, and dry whey averaged 36.27 cents, down 0.1 cent.

November Federal Order Class I Base Up 66 Cents
(October 22, 2010) The November Federal order Class I base milk price was announced this morning by the Agriculture Department at $17.24 per hundredweight, up 66 cents from October and $4.38 above November 2009. That put the 2010 Class I base average at $15.21, up from $11.25 in 2009, and compares to $18.23 in 2008. The Class IV advanced pricing factor remained the “higher of” in driving the Class I value.

The two-week NASS-surveyed U.S. average butter price hit $2.1942, up 7.4 cents from October. Nonfat dry milk averaged $1.1755, up 4 cents. Cheese averaged $1.7695, up 9.5 cents, and dry whey averaged 36.34.

Latest Dairy Outlook Issued
(October 22, 2010) Milk production is expected to continue to rise in 2011 according to the USDA’s Livestock, Dairy, and Poultry Outlook issued this morning. However, higher expected feed prices will likely limit producer profits. Domestic demand, especially for cheese, remains strong. Although world prices favor U. S. exports, they are expected to decline in 2011, more steeply on a fats basis than on a skims solids basis. Milk prices in 2011 are expected to remain near 2010 levels.

In the 2010/11 crop year; the U.S. Department of Agriculture recently lowered corn production and ending-stock forecasts. Prices are expected to average $4.60 to$5.40 per bushel in 2010/11. In contrast, soybean meal prices are not expected to differ much in 2010/11 from last year. The soybean meal price is forecast at $290 to $330 per ton this year compared with $311 the last crop year.

The expected higher corn price will push the benchmark 16-percent protein mixed-dairy ration over $8 per hundredweight (cwt) in 2011, up from about $7.30 per cwt in 2010.

Although milk prices in 2011 are forecast to remain near this year’s level, higher feed prices are expected to squeeze producer margins, impacting the size of the dairy herd in 2011. The U.S. dairy herd is expected to advance to 9,155 million cows next year, up about 0.4 percent from the 2010 projected average.

However, during the year, incentives to expand the herd will diminish. Milk per cow is also expected to advance, rising to 21,405 pounds, up 1.3 percent from this year’s expected output per cow. Growth in milk per cow is expected to slow as higher feed prices take hold. The result for the year will be nearly a 1.7-percent rise in milk production in 2011 to 196 billion pounds.

Domestic demand for dairy products, cheese especially, has been firm through

2010, and demand is expected to remain strong into 2011, at least in the first half of the year. Domestic commercial use on a milk-equivalent fats basis is projected to finish 2010 at 1.4 percent above last year and forecast to rise another 1.6 percent in 2011. On a skims-solids basis, domestic commercial use is expected to finish 2010 nearly 1 percent below 2009. However, commercial use is forecast to snap back in 2011, rising nearly 2.5 percent above 2010.

The relative strength of commercial use on a fats basis is a result of strong cheese demand moving much of the added milk production to cheese production this year. Meanwhile, butter production has lagged last year’s levels every month until August when butter production edged ahead of year-earlier production.

Butter production is likely to recover into next year due to additional milk production and favorable prices.

Milk-equivalent dairy imports are projected down in 2010 to 4.1 billion pounds, fats basis, and to 4.5 billion pounds, skims-solids basis. Next year, the trend continues, as imports are likely to fall to 4.0 billion pounds, fats basis, and 4.3 billion pounds, skims-solids basis. Higher export totals are expected in 2010: 6.6 billion pounds, fats basis, up from 4.1 billion last year, and 29.3 billion pounds, skims-solids basis, up from 22.4 billion pounds in 2009. However, exports are forecast down in 2011.

Exports are projected to decline to 5.4 billion pounds on a fats basis and 28.3 billion pounds on a skims-solids basis. A gap between U.S. and international prices still favors U.S. exports and discourages imports in 2010. Next year, exports may be pressured by increased production in other exporting countries and several trade issues.

Relatively strong demand for dairy products in both 2010 and 2011 should be countered by continued rising milk production to keep milk prices near current levels into 2011. Cheese prices are expected to average $1.550 to $1.560 per pound this year. Continued firm cheese demand could strengthen prices somewhat further in 2011.

Next year, cheese prices are expected to average $1.540 to $1.630 per pound. Butter prices are expected to moderate in 2011, as increased milk production should make more milk available for butter and powder production. The butter price is expected to average $1.720 to $1.750 per pound this year and $1.505 to $1.625 per pound in 2011.

Nonfat dry milk (NDM) prices are forecast higher in 2011, as domestic demand improves and exports remain firm. NDM prices are expected to average $1.155 to $1.175 per pound in 2010, with a slightly higher average price of $1.175 to $1.245 per pound next year.

Whey prices are projected to average 36.5 to 37.5 cents per pound this year and to remain virtually unchanged next year at 35.5 to 38.5 cents per pound.

All milk prices are expected to average $16.45 to $16.55 per cwt in 2010 and remain about the same next year, averaging $16.00 to $16.90 per cwt in 2011.

Class III milk prices are expected to average $14.65 to $14.75 per cwt in 2010 and climb slightly to $14.50 to $15.40 per cwt next year. Class IV prices could drop a bit, averaging $15.10 to $15.30 this year and $14.35 to $15.35 per cwt next year.

Encouraging News in Latest Trade Numbers
(October 23, 2010) There was more encouraging news in the latest dairy trade numbers. Dairy Profit Weekly editor Dave Natzke reported Friday that August exports were estimated at $347 million, up 9 percent ($30 million) from July and 78 percent ($152 million) more than August 2009.

Monthly imports, at $242 million were up 17 percent from July and 27 percent more than August 2009. Dairy exports have surpassed imports every month this year, yielding a trade surplus of nearly $750 million so far in 2010.

Probably as important as the dollar value to dairy farmers is the volume of products exported, because that reduces the inventory of domestic production. August exports of every major product category were higher, led by nonfat dry milk, skim milk powder and whey protein exports, all up at least 30 percent. Cheese exports were up 95 percent from a year ago, Natzke reported.

August 2010 dairy product exports were equivalent to 14 percent of U.S. milk solids production during the month (bringing the Y-T-D percentage to 12.2 percent), while August imports as a percent of milk solids production were just 3.4 percent.

U.S. dairy cattle also remain in strong demand, according to Natzke. Another 1,454 female dairy cattle were exported in August, bringing the 2010 total to more than 22,000 head, more than four times the number exported during the same period in 2009, and a new record high.

The USDA’s smaller crop harvest projections have pushed the outlook for dairy feed prices higher. I asked Dave if that would be an incentive for dairy farmers to cull more cows?

He answered, “Higher grain prices add stress to milk production costs, increasing the likelihood of culling, as well as keeping a lid on overall beef production. That, combined with an increase in beef exports and a decline in beef imports, should keep cull cow prices strong for the foreseeable future.”

He reported that, through the first nine months of 2010, U.S. cull cow prices (beef and dairy cows, combined) averaged about $55.70 per hundredweight, or about $10 per hundredweight more than 2009.

(October 21, 2010) USDA’s lowered corn crop estimate and the EPA’s decision to allow higher ethanol percentages in gasoline for certain motor vehicles has, pardon the pun, fueled higher feed prices for farm livestock. National Milk’s Chris Galen said the developments underscore the need for future dairy policy to consider the cost of production and not just the price of milk.

The dairy price support program and the MILC safety net was based on a milk price level that was set before the upward pressure on feed costs, Galen said, and is why National Milk continues to lobby for its “Foundation for the Future” proposal. The Federation program is less about the price of milk per se, according to Galen, and more about margins, which NMPF defines as the difference between the feed cost and the milk price.

Most of the other policy proposals being considered concentrate on controlling the supply of milk. Galen admits that the Foundation proposal includes market management to “make certain that the right signals are sent when they need to be sent regarding supply and demand.”

But he quickly added that the Federation’s plan makes provision to “protect producer margins for a situation like now where, as the cost of production increases, focusing just on milk prices isn’t going to cut it in the future.” For more information, log on to www.futurefordairy.com

(October 20, 2010) Downes-O’Neill dairy broker Dave Kurzawski, speaking in the next day’s DairyLine, said “There’s a lot of pessimism in the market place right now, certainly in the futures market, and the trade is waiting for more price weakness.”

He adds that the futures have already priced in a substantial discount, citing the November Class III contract as an example, running about a dime below the current spot cheese price. He added, “If we don’t get down to a low $1.60 price very shortly, that November futures contract is going to have to come back up.”

He believes there’s been a lot of emotion in the marketplace and he reported that some “under grade cheese” has been floating around in the country and that’s surprised some.

Cheese demand has slipped a little, according to Kurzawski, but we don’t know how much and “right now there’s a little more pessimism in the market than optimism in the futures.”

Concern over rising feed prices is another factor and, when asked what this means for a dairy producer’s risk management strategy, Kurzawski replied, “If they can’t lock in a profit and bring that profit home to the dairy, then they can’t do much.”

He recommends letting the emotions play out in the market right now and “See what happens in the spot cheese market over the coming days and if we don’t see any more pressure on the spot market, or at least a 10 to 15 cent decline in the spot market in the short term, you will have a recovery bounce on Class III futures and when that happens, there may be some better margins out there.”

Corn prices, as of Tuesday, were slipping a little, he said, “but there’s still a lot of ground to cover,” so he recommends producers “play it very cautiously and if you can’t lock in a profit margin then you can’t really do anything at all.”

Production per cow in the 23 major States averaged 1,729 pounds for September, 54 pounds above September 2009.

The number of milk cows on farms in the 23 major States was 8.37 million head, 31,000 head more than September 2009, and 4,000 head more than August 2010.

California production was up 7.3 percent from a year ago, with 22,000 fewer cows. However, output per cow gained 150 pounds. Wisconsin was up 0.5 percent, thanks to 6,000 more cows. New York was up 3.6 percent, on 6,000 fewer cows but output per cow was up 50 pounds. Idaho was up 8 percent, on 25,000 more cows and a 60 pound increase per cow. Pennsylvania was up 2.5 percent. Cow numbers were unchanged but output per cow was up 40 pounds. Minnesota was down 1.5 percent, despite 1,000 more cows., however there was a 25 pound loss per cow.

The biggest increase was in Arizona, up 13.1 percent. Idaho was next, up 8 percent, and Colorado was third highest in milk production, at 7.7 percent.

The biggest decline was in Missouri, down 6 percent, due to 7,000 fewer cows, but output per cow was up 15 pounds from a year ago. Illinois was next, down 2.6 percent with 3,000 fewer cows, but output per cow was up 5 pounds. Florida and Minnesota were tied for third lowest at 1.5 percent.

(October 19, 2010) The block cheese price continued to erode Monday as the markets awaited Tuesday afternoon’s preliminary September milk production estimate from the USDA. Downes-O’Neill dairy economist Bill Brooks said in Tuesday’s DairyLine that “holiday sales at the price levels that we had last week and going into the end of October were high enough to meet all of the supplies that we were producing. He said we started to see some cracks in the block market last week and this week as well as in the butter market the week before last.

Butter has stabilized because he doesn’t believe butter manufacturers and those who own butter are under quite as much pressure as far as supplies are concerned, like what it looks like we’re starting to see in cheese.

Cheese prices are still above a year ago, he said, and buyers were looking for a break. The market felt a little top-heavy and wanted to see that price climb before they commited for holiday sales and so far that lack of buying seems to be spilling into the spot market and starting to cause some weakness.

Brooks said it’s possible that che ese prices could stage a small rebound as we get closer to the holidays. If we see a strong break in price, back down to the $1.50s, we could see a small rebound as buyers return to the market but if the price continues to gradually slide, he’s not convinced buyers will step in enough to push the price back up.

“For strong buying to come back in now that we’ve seen a break, last week on barrel a little bit now in the blocks,” Brokos said, “Buyers are going to be very choosey about when they step in and it’s going to take a strong decline for them to really step back in large volumes.”

This portends lower milk prices ahead for dairy producers who are also facing rising feed prices. It’s a rock and a hard place, Brooks said, and USDA’s latest crop yield factors “put a wrench in the works for livestock producers and then you have so much investment money looking for the best return out there and commodities right now are probably one of the better returning investments that folks have even though we were seeing some weakness Monday with harvest pressure and things like that.”

“Unfortunately we don’t see that type of price bump up in dairy because of the way our markets are structured,” he concluded. “We have to rely on the end user, ultimately the consumer out there, to push our prices up as opposed to getting an artificial bump up from investment capital.”

(October 18, 2010) What is your carbon footprint? In other words, how much carbon emission are you generating? The dairy industry found out during its Life Cycle Analysis and the results were recently announced.

Some of dairy’s biggest customers like Wal-Mart and McDonalds are asking for the data, according to Pennsylvania dairy producers Paula Meabon, who also chairs the National Dairy Board. Meabon said dairy did very well in Monday’s “DMI Update,” but quickly added, “Dairy farmers have always been sustainable.”

Some 500 dairy farms and 50 dairy processors were involved in the study and included 210,000 trips to processing plants, according to Meabon. The study indicated that U.S. dairy accounts for just 2 percent of the carbon footprint, substantially below the United Nation’s Food and Agriculture Organization’s estimate of 18 percent.

“Dairy has a great story,” Meabon said. “We know we do but it has to be economically, socially, and environmentally responsible and we have to do that and we have as dairy farmers and now that we have our carbon footprint of 2 percent, everyone should be very proud of what we’re doing and tell the story.”

Dairy Market Weekly Recap
(October 15, 2010) There was little reaction to the report in the cash dairy markets, at least until Friday. The block cheese price closed at $1.74 per pound, down 3 cents on the day and the week, but still 31 cents above a year ago. Barrel closed at $1.7325, down a quarter-cent on the week, but 30 1/4-cents above a year ago. Three cars of block traded hands on the week and none of barrel. The NASS U.S. average block price hit $1.7502, up 1.1 cent. Barrel averaged $1.7567, up 0.7 cent.

Butter finished Friday at $2.1850, unchanged on the week, and 94 1/4-cents above a year ago. Nothing traded. NASS butter averaged $2.2106, down 0.4 cent. NASS nonfat dry milk averaged $1.1586, down 0.6 cent, and dry whey averaged 36.4 cents, down 0.1 cent.

DPW: Update on Court Cases
(October 15 2010) Dairy Profit Weekly editor Dave Natzke gave DairyLine listeners an update Friday on some court cases involving some prominent players in the dairy industry, namely the nation’s largest dairy processor, Dean Foods, and the largest dairy cooperative, Dairy Farmers of America (DFA).

Last week, a U.S. District Judge in Wisconsin ordered prosecutors to turn over identities and information of individuals interviewed in preparation for the filing of an antitrust lawsuit against Dean Foods. That suit, filed by the U.S. Department of Justice and Attorneys General in Wisconsin, Michigan and Illinois, alleges Dean’s 2009 purchase of two fluid milk bottling plants from Foremost Farms, a Wisconsin-based dairy cooperative, was an effort to monopolize the regional fluid milk market.

In a separate antitrust case in U.S. District Court of Tennessee, a judge ruled in early September that a lawsuit brought by southeastern U.S. dairy producers can continue under “class action” status. That suit alleges Deans, as well as DFA and others, conspired to monopolize fluid milk markets in the Southeast. Another hearing on that case is scheduled for Dec. 10.

In late September, a U.S. District Judge in Minnesota denied a motion by DFA for summary judgement of a case involving alleged manipulation of cheese and Class III milk futures prices by former DFA employees on the Chicago Mercantile Exchange dating back to 2004.

In a related case, also in September, Pizza Hut, one of the nation’s largest pizza restaurant chains, filed a lawsuit against DFA, also alleging cheese price manipulation. Pizza Hut owners filing the suit charge DFA’s trading activities kept cheese prices artificially high, raising the pizza chain’s ingredient costs.

In December 2008, DFA and former executives agreed to pay the U.S. Commodity Futures Trading Commission $12 million in civil penalties related to CME trading activities, without admitting or denying guilt, Natzke reported.

(October 14, 2010) The dairy industry will gather in Reno, Nevada October 26-28 for the joint annual meeting of National Milk (NMPF), National Dairy Board, and the United Dairy Industry Association. The theme this year is “Creating a Path To Prosperity” and NMPF’s Chris Galen reported in Thursday’s DairyLine that attendees will hear what has happened in the past 12 months and a preview of what may lie ahead.

An extensive focus will be on NMPF’s “Foundation for the Future” dairy policy proposal and Galen says they hope to get a sense as to what kind of sentiment there is on the part of their membership and “where things go from here.”

One of the main speakers will be Jim Wiesemeyer, Senior Vice President, Policy and Trade Issues for Informa Economics Incorporated. Wiesemeyer writes about farm programs and policy and will address the implications of the upcoming election; the possible changes Congress and its impact on the next Farm Bill.

A town hall type meeting will allow attendees to interact with NMPF staff on other issues that NMPF is involved with but may not get the attention that economic issues do. Galen said there are several other challenges such as animal welfare, environment, and food safety that need to be covered.

Activities of the dairy checkoff programs will also be spotlighted, according to Galen, who reported that this will be the 13^th joint annual meeting with the check off organizations.

NMPF occasionally works with the check off organizations on some issues, he said, such as the child nutrition and the Child Nutrition Act which Congress has yet to pass.

(October 13, 2010) New York veal grower Jurian Bartelse believes in the beef check off. He talked about it in a recent interview, parts of which aired in Wednesday’s DairyLine. Bartelse’s operation is state of the art and his knowledge of group housing, record keeping, and traceability are “industry leading” and boasts that, with his operation, one can trace “from the dairy to the plate,” something that consumers find important these days.

Bartelse says he’s unable to tell how many times a week he explains what veal is or how it’s raised because tours are conducted regularly on his farm via the Beef Checkoff. He emphasizes that, “With the power of the checkoff, we’ve been successful at telling our compelling story one tour at a time.”

The Checkoff’s focus in Wisconsin is having groups of culinary students visit modern veal facilities and usually includes a veal meal, according to Bartelse, and that’s been done in New York as well.

But, the key program of the Beef Checkoff is promotion, according to Bartelse, because it “does the most to help build demand for veal.” Promotion receives most of the checkoff’s funding, as decided by the joint veal committee, on which he serves, and, “with the majority of the veal growers in agreement, promotion of veal is achieved with a strategy in mind called ‘Veal Go To Market,’ which is a three year plan with a simply goal, to sell more veal.”

This year’s retail focus centered on Columbus Day and veal was made the official meat of the day and included some competition which will send the winner to Italy. The checkoff was also represented in New York’s Columbus Day parade with veal sampling, recipe cards, and general information about veal given out.

The Foodservice part of the business is served by a new website at www.vealfoodservice.com and includes new recipes, veal 101 information, nutrition information, and more.

New chains are adding veal to their menus, according to Bartelse, as a result of checkoff funded promotion. He said that “dairy producers only see the $1 assessment when they market an animal but they’re not totally aware of the work and effort going on behind the scenes with that money.”

Research is another vital function of the checkoff, he said, and “covers many different aspects from nutrition to new cuts, to new methods of production which are ever more important in a world that seeks greener foods and greener production practices, and helps promote the fantastic lean nutritious and economical protein we raise on our farms across the country.” “The checkoff is a “universal voice for what we do,” he concluded, “And producers can get involved at a grassroots level.”

A big drop in corn yield and production estimates in USDA’s October’s crop report caught the industry by surprise on October 8. Insiders blame poor, late-season weather conditions across much of the Corn Belt. USDA forecast corn production at just under 12.7 billion bushels, down 3.8 percent from the 13.2 billion forecast last month and lower than last year’s record 13.1 billion bushels.

There was little reaction to the report in Monday’s cash dairy markets though barrel cheese inched down a quarter-cent, the first loss since September 2, but the Class III dairy futures did react.

The report portends higher feed prices for dairy farmers that haven’t been able to get coverage for their corn and protein needs going into 2011, according to market analyst Mary Ledman, Principle of Keough Ledman and Associates Inc. of Libertyville, Illinois.

Speaking in Tuesday’s DairyLine, Ledman said Class III futures responded in sympathy to the report. “The 2011 gains were the highest we’ve seen in weeks,” she said, adding that “The October and November Class IIIs moved up nicely the last couple weeks but we didn’t see much movement in those Class III prices in the second half of 2011. Clearly the shortage in the corn crop, the rising corn prices is elevating Class III futures, particularly the second half of 2011.”

When asked if the slippage in barrel cheese was a sign of things to come she replied, “I think it’s a sign that end users aren’t anxious to put cheese away at the current price levels.” Most end users anticipate greater milk production seasonally, according to Ledman, “And typically that’s the case in the second half of October and November, seasonally increasing milk prices as well as seasonally increasing components.”

Ledman warns that “If you add the seasonality factor of milk production plus the milk checks that dairy producers are going to see in October, November, and December it’s hard to imagine not having a strong increase in milk production due to the seasonality and the price incentive for producers.”

People who under consume dairy products are at a greater risk
(October 11, 2010) People who under consume dairy products are at a greater risk for heart disease, diabetes, and poor bone health, according to the government’s Science Advisory Committee. Dairy Management Incorporated’s Dr. Gregg Miller talked with me at World Dairy Expo about the latest dietary guidelines.

Reporting in Monday’s “DMI Update,” Miller said the committee continues to recommend milk and dairy products as a food group, three servings every day for those nine years and older and emphasize the need to get kids in good milk drinking habits because kids who are good milk drinkers are good milk drinkers as adults but we are not consuming enough milk as adults.

Miller admits that concern remains over the fat and sugar issue, with recommendations that saturated fat intake be reduced as well as sodium and added sugar and even lowered the recommendations on saturated fat so there are some concerns there but we certainly know that all dairy foods can be fit into a healthy diet and he pointed out that there is an acknowledgement that some fat is necessary in the diet, especially in younger children.

Miller said it’s exciting to see dairy products looked so favorably upon when, five years ago, you would have not imagined that low dairy intake would be associated with an increased risk of heart disease.

The science behind these claims is a result of research, much of it funded by dairy check off dollars that might not otherwise have been conducted. The research shows there’s difference between milk fat and saturated fat in terms of the risk of heart disease and it’s finally being made known by this report. He said we need more research but he’s excited about the future for dairy products.

(October 8, 2010) Cash dairy trading got interesting the first week of October as butter took a dip for the first time really since early May. It closed that Friday at $2.1850 per pound, down a nickel on the week, but still 94 3/4-cents above a year ago. Nothing was sold all week. The NASS-surveyed butter price hit $2.2148, down slightly. NASS powder averaged $1.1645, up 1.5 cents and dry whey averaged 36.47 cents, up 0.2 cent.

Block cheese closed at $1.77, up a penny on the week, and 26 3/4-cents above a year ago. Barrel ended at $1.7350, unchanged on the week, and 30 1/2-cents above a year ago. Three cars of block and two of barrel traded hands on the week. NASS block cheese averaged $1.7392, up 1.4 cents, while the barrels averaged $1.7499, up 2.3 cents.

Getting Answers To Price Volatility
(October 8, 2010) Volatility has become a “farmstead” word, if you will, and associated with milk prices the past decade and several policy options are being considered to address it. Dairy Profit Weekly editor Dave Natzke reported Friday on some information presented by a subcommittee of USDA’s Dairy Industry Advisory Committee last month which showed dairy farm income margins compared to operating costs ranged from a high of $6.22 per hundredweight in 2004, to a loss of $2.28 for every hundredweight of milk sold in 2009. Primarily in response to the disastrous year of 2009, many federal policy changes have been proposed.

Three well-known dairy economists, Scott Brown with the Food and Agricultural Policy Research Institute; Cal-Poly dairy economist Charles Nicholson; and Mark Stephenson, from the University of Wisconsin at Madison, presented their economic analysis at last week’s World Dairy Expo, as well as to the USDA Dairy Industry Advisory Committee last month.

According to their analysis, three proposals getting the most attention, the Dairy Price Stabilization Plan, also known as the Costa-Sanders bill; the Marginal Milk Pricing program proposed by Agri-Mark; and National Milk Producers Federation’s Foundation for the Future program, would all reduce market volatility to some extent, Natzke said. Their analysis also compares potential impacts on milk prices and milk price variability, the amount of milk produced, federal government dairy program expenditures and dairy exports.

Other ideas being floated but not receiving as much attention so far would be amending current tax laws to allow dairy farmers to establish farm savings accounts, with no limits of the dollars deferred from year to year; and establishment of lines of credit that would allow cooperatives and others to offer margin protection tools to their dairy farmer milk suppliers.

“Most controversial of all the proposals, of course, is implementation of supply management programs,” Natzke said.

USDA’s Dairy Industry Advisory Committee meets in Washington October 12-13 to further discuss dairy policy options, according to Natzke, “But with Congress home campaigning for November 2 elections and a full slate of other issues facing the "lame duck" session of Congress when it returns in mid-November, any dairy policy changes probably won’t happen until the 2012 Farm Bill.”

(October 8, 2010) The Agriculture Department, in its monthly World Agricultural Supply and Demand Estimates report issued this morning again raised its 2010 milk production estimate from last month “as higher milk per cow more than offsets lower cow numbers.” The 2011 forecast was reduced “as higher feed prices are expected to slow the rate of growth in cow numbers and milk per cow compared with last month.”

Look for 2010 milk output to hit 192.8 billion pounds, up 100 million pounds from last month’s estimate, and compares to 189.3 billion in 2009. 2011 output is now projected at 196 billion, down 200 million pounds.

Import and export forecasts were unchanged. Fat basis stocks were reduced for 2010 as stocks of butter are forecast to be tight. Skim solids stocks are unchanged.

“Continued strength in demand for cheese and relatively tight supplies of butter support higher forecast prices for 2010 and 2011, according to USDA. Price forecasts for nonfat dry milk (NDM) were raised for 2010 and 2011 as supplies are tighter. The 2010 whey price forecast was increased slightly but is unchanged for 2011.

Both Class III and Class IV price forecasts for 2010 and 2011 were raised due to the higher product prices. The 2010 Class III average is now projected to range $14.65-14.75 per hundredweight, up from the $14.50-$14.70 expected a month ago, and compares to only $11.36 in 2009. The 2011 average is now predicted at $14.50-$15.40 and compares to last month’s estimate of $14.40-$15.40.

Look for a 2010 Class IV average of $15.10-$15.30, up from last month’s projection of $14.90-$15.20, and compares to $10.89 in 2009. The 2011 average is now estimated at $14.35-$15.35, up from $14.25-$15.35 expected last month.

The all milk price is forecast to average $16.45 to $16.55 per cwt for 2010 and $16.00 to $16.90 per cwt for 2011.

Proposed Legislation Could Help Dairies Get Work Force They Need
(October 7, 2010) U.S. dairy farmers will be able to use a federal visa program to access immigrant workers if legislation introduced last week in the senate ever becomes law. National Milk’s Chris Galen reported Thursday that having an adequate work force “has been one of the big issues for us in the dairy industry and yet the whole issue of immigration reform has been a real hot potato and will probably decide some elections in November.”

National Milk supports anything that will help insure an adequate work force so it was pleased to see this bill which expands the H-2A visa program to dairy employers. The existing program is really meant to bring in migrant workers to work in the fruit and vegetable industries however it’s also open to goat and sheep herders so National Milk is trying to extend it to include dairy employers. Dairy doesn’t employ seasonal workers, he said, because it’s all year round but they would be able to use the H-2A visa program under this legislation.

“This is not comprehensive reform of immigration laws, Galen admitted, it’s not the Ag Jobs bill which we still support but it is a rifle shot designed to address at least part of the work force challenge that dairy farmers have.”

There is no comparable legislation in the House yet and lawmakers have left Capitol Hill to campaign at home but Galen hopes it can be dealt with when they return and there’s even some talk of broader, comprehensive immigration reform being tackled by the lame duck session of Congress in November, he said.

(October 7, 2010) IDFA’s Peggy Armstrong gave the “Processors Perspective” in Wednesday’s DairyLine, reporting that, in August, the Food and Agricultural Policy Research Institute issued research findings on the proposal to require national adoption of higher nonfat-solids standards for fluid milks, which have been required under California state law for decades.

According to the report, the added milk solids, limits consumer choices, raises milk prices, and unnecessarily increases costs for government-run nutrition and feeding programs. Armstrong added that “Contrary to encouraging low-calorie options in the marketplace, the added solids will increase the calories per serving of milk.”

One key conclusion of the report, she said, is that such a policy change would result in an average increase of 17 cents per gallon in the retail price of fluid milk products due to the added cost of the additional nonfat solids. The report notes that "Fluid milk processors will have additional capital costs for storage tanks and other equipment that will be necessary to handle the increased need for nonfat solids."

“Higher standards for nonfat solids in milk have not increased consumption in California,” Armstrong argued, “In fact per capita fluid milk sales are lower in California than in the rest of the nation.”

“IDFA believes that dairy policy proposals that could reduce milk consumption and limit exports are not good for the future of the U.S. dairy industry,” she concluded. “Instead we need proposals that focus on ways to make our industry more competitive with other beverage choices in our domestic markets and ways to promote exports in the growing world market for dairy products.”

(October 5, 2010) The first Monday in October dairy trading saw the cash butter price lose 2 cents. It’s been above $2 for six weeks, according to Alan Levitt, editor of the CME’s Daily Dairy Report. Speaking in Tuesday’s DairyLine, Levitt reported that a bid came in at $2.15 and may have been a “line in the sand that buyers aren’t going to let this complete collapse.” He added that “Some of this is psychological, that’s how the market goes. When it starts going down, then people back off and wait to see how far it’s going to go.”

Futures have been anticipating a drop for quite a while, he said. November butter futures are below $2 and December is below $1.80, he said. “Prices have been very well supported up until now but the futures are indicating that we might see a price decline.”

Russia's announcement last week that it was closing its borders to imports may also be a factor, according to Levitt, but he added that “it’s been tricky this year.” Milk production has been up nearly 3 percent the last few months and that level is expected to be maintained into 2011, according to Levitt, “So the best hope for sustaining these strong prices is continued export strength.”

The May to July data shows that over 13 percent of U.S. milk solids were sold overseas, which he pointed out is a record level, “So it’s going to hinge on how strong the world markets are and right now they’re pretty good.”

Global demand is strong, he said, buyers have been pretty aggressive in booking some of the early season Oceania production, and prices have moved steadily higher the last couple months. Butter and powder are up 10-15 cents, though he cautions that Oceania production is increasing seasonally/ “It’s a matter of how high these prices can go and how long demand can be sustained at these price levels,” he concluded.

Mozzarella cheese output totaled 294.3 million pounds, up 2.6 million pounds or 0.9 percent from July, and 21.7 million or 7.9 percent above a year ago.

Total Italian type cheese, at 366.2 million pounds, was up 1.9 million pounds or 0.5 percent from July, and 20.4 million or 5.9 percent above a year ago.

Cheddar production totaled 265.5 million pounds, down 10.6 million pounds or 3.8 percent from July, but 0.8 million pounds or 0.3 percent above a year ago.

American type cheese amounted to 354.5 million pounds, down 13.9 million pounds or 3.8 percent from July, but 7.4 million pounds or 2.1 percent above a year ago.

Total cheese output came to 880.6 million pounds, down 1 million pounds or 0.1 percent from June, and 29.9 million pounds or 3.5 percent above a year ago.

Nonfat dry milk output, at 120 million pounds, was down 11.8 million pounds or 9 percent from July, but 13 million pounds or 12.1 percent above a year ago.

Latest Ag Prices Report
The September Milk-Feed Price Ratio is 2.24, up from August's revised estimate of 2.37, according to USDA’s “Ag Prices” report and compares to 2.00 in September of 2009.

The All Milk Price was estimated at $17.20 per hundredweight, up 50 cents from last month's estimate, and $4.20 above a year ago.

Corn averaged $4.34 per bushel, up 69 cents from August, and $1.09 above a year ago. The soybean price, at $9.94 per bushel, was down 16 cents from August, but 19 cents above a year ago. Alfalfa baled hay was $117.00 per ton, up $1.00 from August, and $8.00 above a year ago.

Dairy Exports Suffer Some Setbacks
(October 4, 2010) U.S. dairy exports continue to suffer some setbacks. We talked about them with the U.S. Dairy Export Council’s (USDEC) Margaret Speich at World Dairy Expo and that interview aired Monday on DairyLine’s “DMI Update.”

Cheese exports have been strong, particularly to Mexico, however some obstacles have arisen from the Mexican government as well as China, and Russia, banning imports of U.S. dairy products.

We recently reported on the Mexican issue regarding retaliatory tariffs being placed on U.S. imports in response to some trucking issues that the U.S. government has failed to comply with under the NAFTA agreement. Speich said the USDEC is encouraging the White House to fully comply with those NAFTA obligations.

China threatened to close its markets on May 1 on a technical issue dealing with dairy health export certificates, according to Speich. She reported that “Were close to resolution on that as well.”

The most recent incident is one we learned of the week of World Dairy Expo involving Russia. The U.S. government is gathering information on the issue and analyzing the official Russian announcement, however, it appears that Russian borders were closed to all commodities from all countries that have not met its demands to establish a list of plants registered as meeting Russian requirements for the commodity being produced in that plant.

This includes U.S. dairy products and Speich said this is another technical issue that they have been working to resolve for the past 3-4 years and “will continue to make sure that they are resolved as quickly as possible.”

The situation demonstrates the importance of the U.S. dairy industry having an entity like USDEC that can deal with trade issues like this or it can rely on the government to resolve them. Don’t hold your breath for that to happen.

Speich said “We are the only dairy organization that works on these issues. Our forte in fact is resolving technical issues that come up and impede our ability to do trade with other countries.”

Dairy Market Weekly Recap
(October 1, 2010) Cash dairy prices were pretty quiet the last week of September. The 40-pound Cheddar blocks closed Friday at $1.76 per pound, up a penny on the week, and 32 1/2-cents above a year ago. The 500-pound barrels closed at $1.7350, unchanged on the week, and 31 1/2-cents above a year ago. No cheese was sold in the cash market all week. The NASS-surveyed U.S. average block price hit $1.7250, up 1.9 cents from the previous week. Barrel averaged $1.7267, up 2.1 cents.

Cash butter closed Friday at $2.2350, up a half-cent on the week, and a dollar above a year ago. Nothing sold all week. NASS butter averaged $2.2150, up 2.9 cents. NASS powder averaged $1.1494, up 1.4 cents, and dry whey averaged 36.26 cents, up 0.1 cent.

Looking ahead, Class III futures settled Thursday as follows: October $16.62, November $15.92, and December $15.05. That would result in a 2010 average of $14.52, up from $11.36 in 2009 and compare to $17.44 in 2008.

The four-week, NASS-surveyed cheese price averaged $1.7016, up 9.9 cents from August. Butter averaged $2.1570, up 30.6 cents. Nonfat dry milk averaged $1.1383, down 1.7 cents, and dry whey averaged 36.15 cents, up fractionally.

COMMODITY	Sept 2010	Aug 2010	July 2010
Class II Milk Price	$17.60 cwt.	$16.98 cwt.	$17.10 cwt.
Class II Butterfat Price	$2.4114 lb.	$2.0406 lb.	$1.9034 lb.
Class III Milk Price	$16.26 cwt.	$15.18 cwt.	$13.74 cwt.
Class III Skim Price	$8.13 cwt.	$8.35 cwt.	$7.36 cwt.
Class IV Milk Price	$16.76 cwt.	$15.61 cwt.	$15.75 cwt.
Class IV Skim Milk Price	$8.65 cwt.	$8.80 cwt.	$9.44 cwt.
Butterfat Price	$2.4044 lb.	$2.0336 lb.	$1.8964 lb.
Nonfat Solids Price	$0.9608 lb.	$0.9780 lb.	$1.0493 lb.
Protein Price	$2.3057 lb.	$2.3788 lb.	$2.0515 lb.
Other Solids Price	$0.1647 lb.	$0.1647 lb.	$0.1700 lb.
Somatic Cell Adjustment Rate	$0.00085 per 1,000 cells	$0.00080 per 1,000 cells	$0.00073 per 1,000 cells

PRODUCT PRICE AVERAGES	Sep 2010	Aug 2010	July 2010
Butter	$2.1570 lb.	$1.8508 lb.	$1.7375 lb.
Nonfat Dry Milk	$1.1383 lb.	$1.1557 lb.	$1.2277 lb.
Cheese	$1.7016 lb.	$1.6031 lb.	$1.4567 lb
Dry Whey	$0.3615 lb.	$0.3590 lb.	$0.3641 lb.

The bills promote the dairy price stabilization program as outlined by the Holstein Association and California's Milk Producers Council, and a number of other national organizations, according to St Pierre, and "controls volatility through a mechanism that farmers can use to produce when the market allows us to produce and grow when the market encourages us to grow. It also allows us to cut back when those markets aren't there."

The legislation differs from others by focusing on the one issue of production management, St Pierre said, and "doesn't add to any kind of a government program or insurance program," nor does it address Federal order reform. There may be a place for those, she admits, but "we're really focused on the one issue we think we can put into effect prior to the farm bill and that is production management."

When asked about those who maintain that no new dairy policy will be considered until the new farm bill debated begins, St Pierre responded, "I think it's a real shame because there is legislation there, sponsored by Senators Leahy and Sanders (of Vermont) and Patty Murray (Washington State) plus others that are coming on board. St Pierre says, "If dairy farmers can come together and work out some of the differences, this could be in place in 2011."

September California and Federal order Milk Prices Jump
(September 30, 2010) California’s September 4b cheese milk price is $15.48 per hundredweight, up $1.09 from August and $4.08 above September 2009. The 4a butter-powder price is $16.61, up 92 cents from August, and $5.53 above a year ago.

The September Federal order Class III milk price was announced this morning by the U.S. Department of Agriculture at $16.26 per hundredweight (cwt.), up $1.08 from August, $4.15 above September 2009, and 78 cents above California’s comparable 4b cheese milk price.

The 2010 Class III average now stands at $14.07, up from $10.49 at this time a year ago, and compares to $17.93 in 2008. The September Class IV price is $16.76, up $1.15 from August, and $5.61 above a year ago.

State by State	Milk Cows Change from Sept. 2009	Output Per Cow Change from Sept. 2009	Milk Production Change from Sept. 2009
Arizona	+15,000	+60 lbs.	+13.1%
California	-22,000	+150 lbs.	+7.3%
Colorado	+5,000	+65 lbs.	+7.7%
Florida	-1,000	Unchanged	-1.5%
Idaho	+25,000	+60 lbs.	+8.0%
Illinois	-3,000	+5 lbs.	-2.6%
Indiana	+1,000	+25 lbs.	+2.2%
Iowa	-5,000	+40 lbs.	-2.3%
Kansas	+7,000	+10 lbs.	+6.8%
Michigan	+4,000	+25 lbs.	+2.6%
Minnesota	+1,000	-25 lbs.	-1.5%
Missouri	-7,000	+15 lbs.	-6.0%
New Mexico	Unchanged	+35 lbs.	+1.7%
New York	-6,000	+75 lbs.	+3.6%
Ohio	-8,000	+50 lbs.	+0.5%
Oregon	+5,000	+45 lbs.	+7.1%
Pennsylvania	Unchanged	+40 lbs.	+2.5%
Texas	-1,000	+35 lbs.	+1.7%
Utah	+2,000	+10 lbs.	+2.7%
Vermont	+5,000	-30 lbs.	+1.5%
Virginia	-1,000	+25 lbs.	+0.7%
Washington	+14,000	+25 lbs.	+7.2%
Wisconsin	+6,000	Unchanged	+0.5%
23 State Total	+31,000	+54 lbs.	+3.6%