The March Cold Storage report is out this afternoon and USDA announces the May Federal order Class I base milk price. We will post complete details here as soon as possible. 

Dairy cow slaughter numbers continue well ahead of last year's pace, at the same time the number of cows in the nation's milking herd continues to grow. Dairy Profit Weekly’s Dave Natzke looks at the numbers and the reasons on tomorrow's DairyLine broadcast and Dr. Mike Hutjens has his weekly “Feed Facts” program in our second half.

Fly Season is Upon Us

(April 20, 2011) Flies are a pesky part of dairy farming but, unlike rising and falling milk prices, flies can be controlled and one successful method was our topic in Wednesday’s DairyLine. We talked about ClariFly, a feed through larvicide that’s put into ration supplements and fed daily to controls flies on the feed and in the manure, according to Rick Short, regional sales manager for Central Life Sciences.

ClariFly can be fed to beef and dairy cattle at all stages of life from veal calves to lactating cattle, he said, and is even included in milk replacer. The process begins 30 days before the last frost in the spring, according to Short, and is fed until 30 days after your first frost in the fall.

“The old timers used to say we need a hard frost to kill all the bugs,” Short said, but “That’s not actually an accurate statement especially where flies are concerned because, when flies hatch out, they will hatch out in the manure before it gets very cold and, when they hatch out, they will grow very very slowly and then when spring rains and warm weather comes they hatch out as adults.”

ClariFly can go in pelleted or extruded feed, Short said, it’s a very stable molecule and mainly works on house flies and stable flies. Stable flies are the blood suckers, he said, so cattle can lose blood and the flies can transmit diseases, in fact the house fly can transfer over 60 diseases so, other than just the bother of flies to people and cattle, you can also likely reduce incidences of disease. For more information, log on to www.centralflycontrol.com.

Market Correction Anticipated
(April 19, 2011) A more typical block-barrel cheese price spread was restored in Mondays cash dairy market trading. Mary Ledman, Principle of Keough Ledman, and Associates, Inc. reported in Tuesdays DairyLine that cheese prices are about normal for the flush period of the year. She warned that, while it hurt to see the market tumble 40 to 50 cents in the last couple weeks, We're getting too far away from the butter-powder price. She expects a correction in mid May or June resulting in a more narrow spread between the Class III and Class IV prices.  

When asked about the strength in butter, with the price back up to $2 per pound, Ledman responded, The butter market is really a global market and that $2 a pound price level is pretty consistent with the global market for the past two years. She added that its an indication that the U.S. is a player in that market and reported that, through February about 7 1/2 percent of U.S. butterfat was exported.

Fresh from a trip to China, Ledman reported that she visited both large and small dairies as well as rural communities, and dairy farms with more than a thousand head. Milk checks are running $30-$35 per hundredweight, she said, and they investigated potential investment opportunities there.

We were told that the rent per acre would be about $800, Ledman said, So I came away recognizing that China is not a low cost producer in milk nor do I expect them to be any time soon. She believes China will be a good export market, short to mid-term and possibly long term, because she believes China will put its agricultural resources in the pork or poultry industry versus dairy.  

(April 18, 2011) The dairy check off-led “Fuel Up to Play 60” campaign and the Gen YOUth Foundation partnered with the Washington Post to host a childhood obesity summit on February 15. Dairy Management Incorporated Joe Bavido said in Monday’s “DMI Update” that the “Weighing in on America’s Future Childhood Obesity” summit highlighted successful programs that are working in the fight.

Some 160 health and nutrition officials attended, along with academia, media, and business leaders  and provided insight on childhood obesity through panel discussions and question and answer sessions, according to Bavido, and several dairy producers attended, representing the National Dairy Council.

Chef Carla Hall, a Gen YOUth board member, prepared a school cafeteria style lunch which Bavido said, showcased how a healthy meal can meat dietary guidelines, include dairy, and do it within a school budget. The meal was prepared at a cost of $2.32 per plate, he said, and attendees thought it was “tasty and good.” To learn more about the event, log on to the Washington Post website at http://washingtonpositive.com/conferences/obesity.  

“When the world wants dairy products, it's finding U.S. farmers are a good source, and that's helping the nation’s trade balance,” Natzke reported on Friday’s DairyLine.

USDA’s latest dairy trade report estimates February exports at $348 million, up 4% from January and 55% more than February 2010.

In the December-February sales period, export volumes of milk powders were up 150% compared to a year ago, with sales to Southeast Asia especially strong. 

Cheese exports in the first two months of 2011 totaled more than 85 million lbs., equivalent to 5% of total U.S. cheese production during that period, the highest percentage on record.

On the import side of the dairy trade ledger, February imports were estimated at $214 million, up about  2% from January, and about 8% more than a year earlier. 

Through the first five months of fiscal year 2011, exports were estimated at $1.7 billion, up 55% from the same period in FY ’10, while imports were estimated at $1.2 billion, up about 9% from the same period in FY ’10. The result is a $516 million trade surplus.

Looking at it another way, February dairy exports were equivalent to 13.4% of U.S. milk solids production for the month, while imports represented just 2.6% of total solids production, near historic lows.

While global dairy product sales increased, foreign sales of U.S. female dairy cattle declined. February exports were estimated at 1,322 head, down from 6,840 head in January. The two-month total, however, is still well ahead of the record-setting pace of last year. Turkey was again the leading market for U.S. dairy cattle, followed by Mexico and Canada.

Dairy Outlook: Feed Prices Expected to Remain High
(April 14, 2010) The Agriculture Department warns in its latest Livestock, Dairy, and Poultry Outlook issued this morning that feed prices are expected to remain high throughout 2011. However, milk production is expected to continue to rise, based on slightly higher cow numbers and increased output per cow.  

Milk equivalent exports on both a fats and skims solids basis will trail last year, according to the Outlook, but are still significant enough to help support prices above 2010 levels. Forecast increases in commercial domestic use should also provide support prices as exports could weaken later in the year.

Feed prices are also expected to remain high by historic standards. Corn prices are forecast at $5.20-$5.60 a bushel in 2010/11. Corn producers indicated intentions to plant 4 million acres more corn according to the Prospective Plantings report released last month. The forecast corn price is well below reported spot prices in central Illinois. This is because USDA forecasts reflect expected National Agricultural Statistics Service (NASS) prices received by farmers. Early season forward contracting of corn prices means the NASS farm price lags prevailing cash market prices.

Soybean meal prices are forecast to average $340-$360 a ton for 2010/2011. Soybean acreage is expected to be down slightly this spring from last year’s record. Last month’s quarterly grain stocks report showed corn stocks down

15 percent from last year and soybean stocks also down by only 2 percent from last year. The expected expanded planting of field crops could support higher alfalfa hay prices. The outcome for dairy producers is continued high feed prices.

The latest Milk Production report shows U.S. milk cow numbers for January and February in surveyed States above the corresponding period last year, as is milk per cow. In contrast, the Livestock Slaughter report shows dairy cow slaughter continuing ahead of a year ago, and high manufactured beef prices have increased prices for cull cows. These data suggest that replacements exceed culls nationally and that freshening of the national herd continues. The U.S. dairy herd will likely increase fractionally in 2011 to 9.165 million head, up from 9.117 million last year.

Milk per cow is also forecast to rise this year, but by only a near-trend 1 percent compared with a 2.8 percent year-over-year increase last year. The small increases in herd size and milk per cow will move up production to 195.9 billion pounds of milk in 2011.

Milk equivalent imports are forecast at 3.7 billion pounds for the year on a fats basis and 4.8 billion pounds on a skims-solids basis. Imports on a skims-solids basis are virtually unchanged from 2010. Milk equivalent exports on a fats basis are forecast to total 7 billion pounds for 2011; this is a decline from 2010’s totals, but the April 2011 forecast was increased from the March forecast based on stronger than expected exports of butterfat and cheese. Milk equivalent exports on a skims-solids basis are forecast at 31.3 billion pounds, a small decline from 2010.

The April skims-solids export forecast was increased from the March forecast due to the high level of nonfat dry milk (NDM) shipments registered in January. For the second half of 2011, exports may weaken relative to the first half as increased competition from Oceania is expected to erode the competitive U.S. position. Nevertheless, the relative weakness of the U.S. dollar and strong global demand will help maintain exports at a strong pace.

Domestic commercial use is expected to rise on both a fats and skims-solids basis in 2011. Expected continued economic recovery underpins the forecasts. Commercial use on a fats basis is forecast to rise by nearly 1.8 percent in 2011 over 2010, the strongest year-over-year rise since 2006. Skims-solids commercial use is set to rise by 2.7 percent in 2011 after falling by an equal amount in 2010, making skim-solids commercial use in 2011 the same as in 2009.

Major dairy product prices are expected to go higher in 2011 compared with 2010, but 2011 price forecasts for cheese and butter were revised downward this month from the March forecast. Both cheese and butter prices have weakened recently, and cheese stocks have been relatively high. NDM prices are virtually unchanged from last month’s forecast, based on expected continued strong exports.

Cheese prices are forecast to average $1.665-$1.715 per pound for the year, and NDM prices are projected to average $1.375-$1.415 per pound. The butter price is expected to average $1.735-$1.815 per pound for the year.

Whey prices are forecast to average 41-44 cents per pound. High NDM prices may be providing some support for whey prices.

Milk price forecasts will be higher this year than last, but the Class III price forecast was lowered slightly this month from March projections. The Class IV price, raised fractionally from last month based on stronger NDM prices, is estimated to average $17.05-$17.65 per cwt. This will average above the Class III price, which is expected to average $16.10-$16.60 per cwt. The all milk price is forecast to average $18.15-$18.65 per cwt in 2011.

Market Talk with Alan Levitt
(April 12, 2011) The cash cheese market continued to show strength to start the week. Blocks were up a penny to $1.60, while the barrels inched up a quarter-cent to $1.5425.

“The tone of the cheese market has shifted a little bit and we’re starting to see that play out in the futures markets as well,” Alan Levitt, editor of the CME Daily Dairy Report said.

Milk futures have hit new highs for August 2011 through January 2012. Up until now, cheese market activity has mostly been on offers. Towards the end of last week it appeared buyers became more aggressive and sellers were scarce. We didn’t see any offers at all Monday with both blocks and barrels moving up on unfilled bids.  

“I don’t want to get people too excited, but it almost feels like we’ve hit a bottom and maybe ready to turn higher,” Levitt said Monday.

He added that the current prices may be a decent level for buyers to build stocks again after holding back a bit the past month.  

Levitt said another reason we may have seen the bottom is the current values for cheese, butter, nonfat, and whey. Current calculations show the Class IV at $19.50 and the Class III at $15.50.

“That’s too wide of a spread, that’s never proven to be sustainable,” he said. In California, that spread is even wider, “So something has to move.”

Spot butter was unchanged yesterday, holding at $1.9725. “It’s possible the prices are going to drop after Easter…but so far the butter market seems to be pretty well supported,” he said.

Nonfat prices are fading a little bit, but there’s still steady support from an overseas market. “Maybe just like we saw cheese prices run up in January and February to try and catch up with butter, we may be on the threshold of another rally in cheese as well,” Levitt concluded.

Businesses Express Desire to Support Gen YOUth Foundation
(April 11, 2011) Dairy Management Incorporated’s Joe Bavido talked about the “Fuel Up to Play 60” campaign last week. He was back Monday to discuss the Gen YOUth Foundation. He explained that, with the excitement and momentum generated by the Fuel Up to Play 60 program, businesses such as Domino’s Pizza, Kraft foods, LALA-USA, and Leprino Foods approached the National Dairy Council expressing a desire to financially support it.  

“In the spirit of collaboration, the Gen YOUth Foundation was launched to work with schools, communities, and business partners,” Bavido explained, “To develop and support programs to create lasting change in child health and wellness arena.”

The foundation is governed by a board of directors that includes Alexis Glick, former financial executive and media personality and former Surgeon General Dr. David Satcher, former NFL football player and Fox Sports commentator Howie Long, and Purdue University Foods and Nutrition Department head, Dr. Connie Weaver.

Its mission is to combine all efforts in pursuing a sustainable solution to the childhood obesity epidemic and to insure that America’s kids have access to health and wellness information. For more details and to get involved in the Gen YOUth, log on to www.genyouthfoundation.org.  

World Ag Supply and Demand Estimates

(April 8, 2011) There's lots of “non-dairy” activity in Washington that will affect dairy farmers, including the Congressional repeal of a tax reporting provision in last fall’s health care reform law. Dairy Profit Weekly editor Dave Natzke reported Friday that, when health care reform became law last year, it required businesses, including dairy farms, to file an IRS 1099 form on any company they did more than $600 worth of business in a year.

For farmers that would have applied to every company providing such things as custom cropping, feed or other supplies in excess of $600 annually, according to Natzke, and although the law wasn't effective until 2013, opponents feared it would create a paperwork nightmare for farmers. Now passed by both houses of Congress, the repeal bill goes to President Obama for his signature.

In other money matters, Natzke reported that, while we don’t have a 2011 federal budget, this week House Budget Committee chair Paul Ryan of Wisconsin unveiled his fiscal year 2012 budget plan. The plan would cut farm program spending by $30 billion over the next 10 years, Natzke said, reforming direct payment and insurance programs. “It's still early in the budget process,” Natzke said,  “And House Ag Committee chair Frank Lucas said any changes to ag spending would not take effect until after the 2012 Farm Bill is completed.”

In a related report released this week, University of Illinois ag economists noted farm program spending has become a frequent target of budget cutters, but they said the federal government now spends more in interest payments each year, than it spends on these farm programs.

And finally, a bipartisan group of lawmakers has asked federal financial leaders to provide an end-user exemption from Commodity Futures Trading Commission margin requirements, under the Dodd-Frank Wall Street Reform and Consumer Protection Act. While some market traders take speculative positions in commodity markets to make money, others, such as farmers, use futures markets to reduce financial risks by locking in prices for both inputs and the products they sell.

(April 6, 2011) In the wake of the nuclear accident in Japan, the Environmental Protection Agency (EPA) took precautionary measures and moved up the timing on its routine monitoring of milk, water and select other products for detecting levels of radiation. Last week the EPA reported that extremely low levels of radiation were found in milk samples collected in California and Washington State.

The International Dairy Foods Association’s Peggy Armstrong, talked about it in Wednesday’s “Processor’s Perspective,” stating that, “As we try to sort through what all this means for milk drinkers and for the dairy industry, it’s important to understand that for the past 50 years, the EPA has regularly tested precipitation, air, milk, and drinking water for radiation levels. They use these monitoring tests to ensure public safety.” 

Because of the nuclear accident in Japan, the EPA and many state agencies have increased their monitoring and several tests have indicated “minuscule levels” of radiation in fluid milk, which FDA and EPA say do not pose a health concern. 

In a joint statement, EPA and the Food and Drug Administration (FDA) underscored that the trace levels found in the samples are more than 5,000 times lower than the intervention thresholds set by the FDA, far below levels that would cause any concern for public health. A person would need to drink 4,227 8-ounce glasses of the sampled milk to receive the same amount of the radiation exposure he or she would get in a single chest x-ray, Armstrong said.

The upshot is that milk is safe, but “more importantly independent and government experts say milk is safe to drink,” Armstrong said, “so we should continue to consume it with confidence.”

This reassurance is very important to the dairy industry, Armstrong said. “We have been monitoring the situation and working closely with federal and local government agencies to make sure we maintain a safe milk supply.”

“Consumer safety is the highest priority for dairy farmers and dairy food companies,” Armstrong concluded, “And the U.S. dairy industry will continue to work closely with federal and state government agencies so that we can continue to provide milk that is wholesome, safe, and nutritious.” The EPA and FDA have information on their websites and FDA’s toll-free consumer information line has a person to talk to during business hours. The number is 1-888-723-3366.

Market Talk with Brian Gould
(April 4, 2011) The bleeding continued in the cash dairy markets Monday with block cheese prices losing another penny and three quarters and barrels down 2 cents. Butter and Grade A nonfat dry milk were also down 2 cents. 

The University of Wisconsin’s Dr. Brian Gould said in Tuesday’s broadcast that he long anticipated in the downfall of cheese but was hesitant to predict how low it will go. Looking at the futures price on Class III, butter, and dry whey, and the imputed cheese value coming out, Gould said “either the cheese value has to come up or those futures have to come down because there seems to be a disconnect of about 10 or 15 cents over the near term over what the current cash market is.” Gould also said he was surprised at butter dropping, given that stocks are fairly low. 

Once again we see volatility demonstrated in the dairy markets and the reason risk management tools being sought after. Gould has been a strong advocate of the Livestock Gross Margin insurance program for dairy. The program has been very successful, perhaps too successful, because, unless Congress authorizes additional funding, no more contracts will be offered until October. 

Gould called it a “wealth of riches,” in that there has been a lot of interest in it but USDA’s Risk Management Agency has run out of funds for this fiscal year. 

As of the March contract offering for this insurance year, which starts in July, 46.1 million hundredweights in the U.S. insured, representing about 2.4 percent of the U.S. milk supply. That’s a lot of activity, he said, three quarters of a billion dollars of gross margin being protected. 

He said he’s concerned that we keep momentum going. “This is a success story in terms of the utilization of a risk management tool by both large and small dairy farmers across the U.S. For more information, Google “Understanding Dairy Markets.”  Statistics Powerpoint

Mozzarella cheese output totaled 274.2 million pounds, down 34 million pounds or 11 percent from January, but 15.1 million or 5.8 percent above a year ago.

Total Italian type cheese, at 352.2 million pounds, was down 36.2 million pounds or 9.3 percent from February, but up 21.8 million or 6.6 percent from a year ago.

Cheddar production totaled 242.9 million pounds, was down 31.9 million pounds or 11.6 percent from January, and 1.5 million or 0.6 percent below a year ago.

American type cheese amounted to 328.8 million pounds, down 30.5 million pounds or 8.5 percent from January, but 8.4 million pounds or 2.6 percent above a year ago.

Total cheese output came to 807.1 million pounds, down 79.8 million pounds or 9 percent from January, but up 31.8 million pounds or 4.1 percent above a year ago. 

Nonfat dry milk output, at 109.6 million pounds, was down 7.4 million pounds or 6.4 percent from January, and 8.2 million pounds or 6.9 percent below a year ago. 

Fuel Up to Play 60 Gaining Popularity
(April 4, 2011) The “Fuel Up to Play 60” program is gaining in popularity but Dairy Management Incorporated’s Joe Bavido says he still gets questions from farmers about it. Speaking in Monday’s “DMI Update,” he said it’s an in-school nutrition and physical activity program launched by the National Dairy Council and the National Football League with support from the Agriculture Department.  

The program encourages kids to consume nutrient-rich foods, including dairy products, and engage in physical activity for at least 60 minutes per day, he said, because over a third of American children are either overweight or obese.

The program is driven locally in some 70,000 schools and is designed to engage kids to take action to improve their own health. It can be customized to individual schools, according to Bavido, is grounded in research done on youth, and includes in-school promotional materials and student challenges.

Dairy producers are encouraged to check with their local schools to see if “Fuel Up to Play 60” is part of its curriculum and attend any local event such as the visit of a pro football player. Doing so “goes a long way to help farmers understand,” he concluded.

California's March Class 4 Prices Released
(April 1, 2011) California’s 4b cheese milk price was announced this afternoon by the California Department of Food and Agriculture at $16.76 per hundredweight, down 16 cents from February, $5.63 above a year ago, and $2.64 below the comparable Federal order Class III price. The 4a butter powder price is $19.06, up $1.18 from February, and $6.22 above a year ago.  

Market analyst Alan Levitt tells DairyLine that California uses the CME block cheese price instead of the NASS-surveyed prices. Blocks crashed in mid month, thus the drop in the March 4b price. That won’t show up in the Federal order Class III price until April. Also, rising whey prices have no bearing on the California 4b price so there will be a growing disparity there. Class III gets a nice boost from whey, California’s 4b does not.

(April 1, 2011) The Agriculture Department announced the March Federal order Class III benchmark price this morning at $19.40 per hundredweight (cwt.), up $2.40 from February, $6.62 above March 2010, and equates to about $1.67 per gallon. This is the highest it has been since June 2008 however it appears to be the peak for 2011.

Looking ahead, Class III futures settled Thursday, with the April contract at $16.71, May $16.70, June $16.86, July $17.40, August $17.70 and September at $17.78. The 2011 Class III average now stands at $16.61, up from $13.85 at this time a year ago and $10.18 in 2009.

The March Class IV price is $19.41, up $1.01 from February and $6.49 above a year ago.

The four-week NASS-surveyed cheese price averaged $1.9722 per pound, up 22.7 cents from February. Butter averaged $2.0591, down almost a penny. Nonfat dry milk averaged $1.4945, up 1.2 cents, and dry whey averaged 45.78 cents, up 3.4 cents.

(April 1, 2011) "Crop wars" may be coming to an acreage near you. That's not an April Fool's joke. Many crop marketing analysts are portraying the 2011 planting season as “acreage wars,” with high commodity prices pitting corn, soybeans, wheat and cotton against each other for valuable space.

Two of the more highly anticipated USDA reports were released on Thursday, with the latest Grain Stocks report estimating current grain inventories; and a Planting intentions report providing a glimpse of what farmers intend to plant this spring. Dairy Profit Weekly editor Dave Nazke detailed the reports Friday.

Indications are that corn is the early leader in the battle for acreage, Natzke reported. USDA forecasts growers intend to plant more than 92 million acres of corn in 2011, up 5 percent from last year and 7 percent more than 2009. If realized, it would be the second largest area planted to corn since 1944, behind only 2007’s 93.5 million acres, Natzke said.

Soybean planted area for 2011 is estimated at 76.6 million acres. While down 1 percent from last year, it would still be the third largest on record. 

Looking at grain stocks, corn stored in all positions on March 1 was estimated at 6.5 billion bushels, down 15 percent from a year ago; while soybeans inventories totaled 1.25 billion bushels, down 2 percent.

Estimated corn acreage came in somewhat higher than many market analysts had predicted, but corn inventories came in slightly lower. Soybean acreage and stocks estimates came in slightly lower than many forecasts, so we'll probably see some futures price reaction as the week closes.  

Turning our attention to legal matters, Natzke reported that Dean Foods has agreed to sell a milk processing plant in Waukesha, Wisconsin., to settle a federal antitrust lawsuit filed in the U.S. District Court. Under the settlement, Dean has 90 days to sell the plant, which it purchased from Foremost Farms dairy cooperative in 2009. The lawsuit, filed by the U.S. Department of Justice and Attorneys General in Wisconsin, Illinois and Michigan, alleged Dean’s ownership of the plant presented antitrust concerns.