January 2011 Archived Dairy News

(January 31. 2011) California’s January 4b cheese milk price was announced this morning by the California Department of Food and Agriculture at is $12.49 per hundredweight, up 27 cents from December but 23 cents below January 2010. The 4a butter powder price is $16.49, up $1.82 from December and $2.74 above a year ago. Comparable Federal order prices are announced by the USDA on Friday morning.
CDFA

January Ag Prices Report
(January 31, 2010) The January Milk-Feed Price Ratio is 1.79, down from December's estimate of 1.98, according to USDA’s “Ag Prices” report and compares to 2.33 in January of 2010.

The All Milk Price was estimated at $16.20 per hundredweight, down 50 cents from last month's estimate, but a dime above a year ago.

Corn averaged $5.37 per bushel, up 55 cents from December, and $1.71 above a year ago. The soybean price, at $12.60 per bushel, was up $1.00 from December, and $2.81 above a year ago. Alfalfa baled hay was $121.00 per ton, unchanged from December, but $10.00 above a year ago.

Smart Slice Pizza Enters Some Schools
(January 31, 2011) Where did your dairy check off dollars go last year? Dairy Management Incorporated’s Joe Bavido continued his series from last week, answering the question. We left off talking about Domino’s Pizza which has entered some schools around the country with what it calls its “Smart Slice” pizza.

Bavido called it a “tasty kid-approved” pizza that uses reduced fat mozzarella cheese along with other ingredients to meet increasingly stringent school nutrition guidelines. He said it’s very popular and is now available in more than 1,000 schools.

Another area the dairy check off was involved with was exports which greatly rebounded in 2010, according to Bavido. U.S. dairy exports are expected to approach 13 percent of U.S. milk solids, he said, up from 9 percent in 2009, and 11 percent in 2008. The 2010 record exports were assisted by the dairy check off funded U.S. Dairy Export Council, according to Bavido.

Getting back to the schools; Bavido listed the “Fuel up to play 60” campaign as another achievement of the dairy check off in 2010. It’s partnered with the National Football League and the USDA and more than 70,000 schools have this program as part of their curriculum and that represents 36 million students.

“The program helps protect and promote dairy’s place in the school environment as public health leaders consider ways to provide healthier food offerings,” he concluded.

(January 28, 2011) Cash traders ignored the Cold Storage numbers as rising feed prices appear to be driving the market higher. Block cheese closed the last Friday in January at $1.7350 per pound, up 21 cents on the week and 22 cents above a year ago. It has gained 23 1/2-cents in the last six sessions. Barrel closed Friday at $1.7050, up 19 1/2-cents on the week, and 20 cents above a year ago. The big gains only attracted one sale of block on the week and three of barrel. The lagging NASS-surveyed U.S. average block price hit $1.3949, up 4.8 cents. Barrel averaged $1.4191, up 4 cents.

Butter slept through the whole week, holding at $2.10, where it’s been since January 7^th. That’s 77 cents above that week a year ago when butter lost almost 14 cents. NASS butter averaged $1.9954, up 18.9 cents.

Cash Grade A nonfat dry milk closed Friday at $1.6575, up 13 1/2-cents on the week, and the highest it has been since January 2008. It has gained almost 39 cents since the first of the year. Extra Grade closed at $1.60, up 11 cents on the week. It has gained 37 1/2 cents since the first. NASS powder averaged $1.2598, up 0.4 cent, and dry whey averaged 39.53 cents, down fractionally.

Federal Dairy Policy Issues Major Focus at Forum
Dairy processors gathered in Miami this week for the International Dairy Foods Association’s annual Dairy Forum and federal dairy policy issues were a major focus of discussion, according to Dairy Profit Weekly editor Dave Natzke.

“With signs of an economic recovery, but tighter federal budgets ahead, dairy provisions of the 2012 Farm Bill are now the focus,” Natzke reported, and in her annual address, IDFA’s president and CEO Connie Tipton said the dairy industry is at a crossroads in federal policy. Tipton called 2009 a "Great Depression" for dairy farmers, with large losses of income and equity but she warned that “short-term economic pain should not direct longer-term dairy policy.”

Tipton said price volatility was the biggest issue facing both processors and farmers, and that current policies increase that volatility. To help change the course, Tipton said IDFA supports simplifying the federal market order system and improving margin insurance and risk management programs for farmers.

Tipton and National Milk Producers Federation’s Jerry Kozak appeared together to provide processor and producer views on dairy policy. And, while the two segments of the industry are closer to agreement on many issues than ever before, one area where they face a possible collision course is over supply management, according to Natzke.

National Milk’s Foundation for the Future (FFTF) proposal would withhold a percentage of milk payments from farmers who surpass their base production, at times when farmer income margins are small, as a market signal to reduce milk production.

IDFA used the Dairy Forum to unveil a study showing the economic impact of the plan, had it been in place in the past decade.

It showed about $626 million would have been deducted from U.S. dairy farmers’ milk checks during the period, with producers in the Midwest and Northeast among the hardest hit.

Kozak countered that the deductions would be working in concert with income margin insurance payments, offsetting the overall income declines suggested by IDFA’s study, Natzke concluded.

Speaking in Thursday’s broadcast, Galen said there’s going to be competition between freezing domestic spending for five years as the President talked about, or cut other programs and “that will put a lot more pressure on those in the farm business,” Galen said, because farm programs are always mentioned when cuts are proposed

Galen said National Milk will remind lawmakers that farm programs already saw cuts the last couple of years but as new dairy policy is developed, in particular as the Federation moves ahead with its Foundation for the Future proposal, “we have to be mindful that there’s not going to be more money to work with, at best it will be static, and quite possibly will be less.” He said they are well aware of that and will have to deal with it.

The President mentioned a couple other priorities that National Milk has, namely immigration reform. “He talked about it last year and it didn’t go anywhere in 2010,” Galen said, “So we probably won’t hold our breath on that.”

The President also talked about the free trade agreements with South Korea, Panama, and Columbia, all which NMPF supports, according to Galen.

There was only one mention of farming or rural America that Galen counted and that was the need for more high speed wireless networks in rural areas, a good thing, Galen concluded, but “the big theme was economics and that will likely be the big battle ground on Capitol Hill this year and will be a challenge for us as we move forward with new dairy policy.”

(January 26, 2011) Dairy producers particularly in the western part of the U.S. will read about their beef check off dollars at work in an ad appearing in some of their favorite dairy magazines like Western DairyBusiness. It appears under the title “My beef checkoff can promote beef to consumers at the retail level.”

We talked about it Wednesday with Bill Dale, executive director of the California Beef Council. Dale said they work with retailers in California and Nevada, using in store promotions that include a variety of components, depending on the retailer. He added that they work with retailers of all sizes.

The retailers feature an increased number of beef cuts for a two week period in their sale circulars and that’s supported by on air radio promotion funded by check off dollars to drive consumers to the stores. The radio commercials highlight the beef sales and the value that beef has to offer.

The recent promotion included a price break, according to Dale, be it on a roast or steaks, and was very successful. More than 98,000 pounds of added sales occurred at the 117 California stores and 15 stores in Nevada. Dale said they ask the retailers to track their beef sales before and during the two week promotion to determine if a spike occurred.

(January 25, 2011) Monday’s cheese traders appeared to ignore the December Cold Storage numbers. Cash block jumped 61/4-cents, to $1.5875 per pound, on a single trade and an unfilled bid. Barrel gained 5 1/4 and hit $1.5625, on a bid, while butter traders fell back to sleep, with the price holding at $2.10.

Market analyst Mary Ledman, also Principal of Keough Ledman and Associates Inc. in Libertyville, Illinois, told DairyLine in Tuesday’s broadcast that “The market seems to be having its own identity at this point.” She said the butter/powder complex is “driving the pricing bus,” and “there seems to be a slot here that cheese must follow,” but she fears it may be based upon “pretty shallow information rather than supply demand fundamentals.”

Butter stocks are up from November, she said, but still about 50 million pounds less than a year ago so clearly there’s a supply demand fundamental that’s supporting a strong butterfat market, both in the U.S. and globally.

Demand for skim milk powder globally is also strong, she said, but cheese is in a different situation. She pointed out that only about 20 percent of U.S. cheese exports are Cheddar and that’s what’s traded at the Chicago Mercantile Exchange. Ledman warned that this market could “over heat itself and then we have a correction which could be painful.”

When asked if the fact that total cheese stocks being over a billion pounds is a concern, Ledman replied that she doesn’t really look at total cheese stocks because they include cheese in aging programs like Parmesan that’s only three months of age rather than the full term.

She watches American cheese stocks which are more similar to what’s sold at the CME. Those stocks are significantly higher than a year ago, she said, and will likely exceed prior year levels through May. “They are discounting the stocks and looking just at the current milk situation,” she concluded, “And you have the cheese market chasing the butter/powder market.”

Cheese prices are also strong because of Super Bowl and we could see that “painful correction,” as Mary Ledman put it, once that demand is met. That said I have to congratulate my favorite team, the Green Bay Packers, on their victory Sunday. Looks like the Super Bowl will be filled with “cheese heads” and “Steelheads.”

The work was done mostly through the Innovation Center and the five committees that work through it and encompass health and wellness, consumer confidence, globalization, sustainability, and research and insights.

More than a billion pounds of additional milk was sold in 2010 through partnerships, according to Bavido, and McDonalds was one of the largest and, thanks to support from the dairy checkoff, dairy is probably more prominent than ever in the world’s number 1 restaurant chain.

New offers there included frappes, smoothies, specialty coffees, Angus burgers, and Angus snack wraps, which include a good amount of cheese.

Domino’s Pizza continues to work with the checkoff on revitalizing the pizza category, Bavido reported, and Domino’s realize that the most critical ingredient for taste and quality. Their latest introduction is the American Legends Wisconsin 6 Cheese Pizza that uses 82 percent more cheese than a regular one-topping pizza. Bavido will be reporting more highlights in future DairyLine programs.

December Cold Storage Report
(January 21, 2011) December butter stocks totaled 81.9 million pounds, up 12 million pounds or 17 percent from November but 51.1 million pounds or 38 percent below December 2009, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued this afternoon.

The December American cheese inventory, at 632.6 million pounds, was up 7.3 million pounds, or 1 percent from November, and 47.6 million pounds or 8 percent above a year ago.

Total cheese stocks amounted to over 1.026 billion pounds, and was up 22.4 million pounds or 2 percent from November, and 59.4 million pounds or 6 percent above a year ago.

Dairy Market Weekly Recap
(January 21, 2011) Cash 40-pound block cheese suffered a temporary relapse, dropping 2 1/2 cents Wednesday but gained it back on Friday to close at $1.5250 per pound, unchanged on the Martin Luther King holiday shortened week, and 4 1/2-cents above a year ago. The 500-pound barrels closed at $1.51, up 3 1/2-cents on the week, and a half-cent above a year ago. Fourteen cars of block traded hands on the week and seven of barrel. The NASS-surveyed U.S. average block price inched up 0.1 cent, to $1.3471. Barrel averaged $1.3787, up 0.3 cent.

Butter held at $2.10 for the ninth consecutive session, 63 1/4-cents above a year ago. Eleven cars were sold. NASS butter averaged $1.8065, up 13.6 cents.

Powder remains a hot commodity. Cash Grade A nonfat dry milk closed Friday at $1.5225, up 9 cents on the week, following a 10 1/4-cent jump the previous week. Extra Grade closed at $1.49, also up 9 cents on the week. NASS powder averaged $1.2560, up 3.2 cents and dry whey averaged 39.56 cents, up 0.9 cent.

Federal Order Class I Price Up 69 Cents
(January 21, 2011) The Agriculture Department announced the February Federal order Class I base milk price this morning at $15.89 per hundredweight, up 69 cents from January, and $1.05 above February 2010.

That equates to about $1.37 per gallon. Compare that to what consumers are paying at retail.

The two-week NASS-surveyed butter price averaged $1.7407 per pound, up 10.8 cents from January. Nonfat dry milk averaged $1.2423, up 2.75 cents. Cheese averaged $1.3757, down 10.8 cents, and dry whey averaged 39.15 cents, up 1.3 cents.

The Class IV advanced pricing factor was the “higher of” in driving the Class I value and National Milk’s Roger Cryan predicts there will be an MILC payment to producers of about 55 cents per hundredweight.

(January 21, 2011) A proposed settlement in an antitrust class action lawsuit between northeast dairy farmers and Dean Foods has run into legal objections. Dairy Profit Weekly editor Dave Natzke reported in Friday’s broadcast that the lawsuit announced last December involved dairy farmers against major dairy co-ops and processors in the Northeast and called for Dean Foods, the nation’s largest fluid milk processor, to pay $30 million into a fund for dairy farmers.

It also required Dean’s to buy milk from sources other than the co-defendants in the suit, Dairy Farmers of America (DFA) and Dairy Marketing Services (DMS), a milk marketing joint venture between three northeast dairy co-ops (DFA, Dairylea, and St. Alban’s).

Two objections to the proposed settlement were filed in the U.S. District Court of Vermont this week. One was filed by a group of about two dozen individual dairy farmers, and the second was filed by DFA and DMS, who charge the proposed settlement pits dairy farmer members of their organizations against other dairy farmers, imposes damages on their members, and could work to lower milk prices paid to all Northeast dairy farmers.

While the settlement has been portrayed as a win for Northeast dairy farmers, DFA/DMS contend that $10 million of the $30 million settlement will go to attorneys, sharply reducing payments for farmers, Natzke reported.

Of greater concern is the potential impact on future milk prices, according to the co-ops. Under terms of the settlement, Dean’s must purchase up to 1.8 billion pounds of milk over a 30-month period from sources other than DFA/DMS.

The co-ops contend they are better able to negotiate higher milk prices for farmers, and are able to save milk transportation and handling costs, returning more money to farmers through over-order premiums. The co-ops allege Dean’s could negotiate lower prices for milk it buys from less efficient milk suppliers, and then use those lower prices to leverage even lower prices for DFA/DMS milk.

According to DFA/DMS estimates, under terms of the settlement, the average payment to dairy farmers would be about $1,500. They contend a nickel decline in the milk price as a result of the settlement would reduce income for a farmer with 300 cows by about $3,400.)

Any final approval to the settlement is likely months away, according to Natzke. In the meantime, DFA and DMS remain defendants in the antitrust lawsuit, and they say they will continue fighting it in court, he said.

One of the stipulations is that schools only offer low fat or fat free milk and the real kicker, according to Galen, is that if they serve flavored milk, which is primarily chocolate milk but can be others like strawberry, it can only be fat free.

The Federation has some concern that USDA may kick out flavored milk, something that has already happened in some local school districts.

That is not being proposed right now, he admitted, but USDA is saying that, flavored milk must be fat free and no milk can be higher than 1 percent fat.

National Milk is closely monitoring this issue Galen said, because “we don’t want to throw the proverbial baby out with the bath water and have kids not consume needed milk products because they don’t like the fat content.

The guidelines also attempt to reduce overall fat and sodium levels and that could impact the amount of cheese and pizza served to kids. Pizza is a very popular food for kids and Galen said we have to watch what the impact of this might be on cheese consumption.

Milk production in the U.S. during the October-December quarter totaled 47.5 billion pounds, up 2.8 percent from the October-December quarter last year. The average number of milk cows in the U.S. during the quarter was 9.13 million head, 36,000 head more than the same period last year.

California production was up 2.7 percent from a year ago, with 14,000 fewer cows. However, output per cow gained 65 pounds. Wisconsin was up 0.7 percent, thanks to 6,000 more cows, and output per cow was up 5 pounds.

New York was up 4.6 percent, with output per cow up 75 pounds. Idaho was up 4.9 percent, on 24,000 more cows and a 10 pound increase per cow. Pennsylvania was up 1.8 percent. Cow numbers were up 3,000 and output per cow was up 20 pounds. Minnesota was unchanged.

The biggest increase was in Colorado, up 10.9 percent. Arizona and Oregon shared the second biggest increase, up 8.1 percent.

The biggest decline was in Missouri, down 7.9 percent, due to 8,000 fewer cows. Iowa was next, down 2.4 percent with 8,000 fewer cows, but output per cow was up 25 pounds. Illinois had the third lowest, down 0.6 percent.

(January 19, 2011) Higher feed prices will pressure producer margins in 2011, limiting any increase in milk production, according to the Agriculture Department’s latest Livestock, Dairy, and Poultry Outlook issued this morning.

Both imports and exports are projected below last year’s totals, especially for fats. Exports of powder and whey continue to be strong, but higher global output will likely limit exports.

Cheese supplies appear adequate to meet expected demand, and butter prices should ease over the course of the year as stocks rebuild. Class IV prices will likely average above Class III prices and the all milk price will remain near the 2010 price, according to USDA.

The latest USDA forecasts indicate rising feed prices for the 2010/11 crop year.

The corn price is forecast to average $4.90 to $5.70 per bushel, and the soybean meal price is forecast to average $320 to $360 per ton. These latest price forecasts represent an increase from last month’s forecasts.

Positive processor margins for ethanol and strong exports will contribute to the higher price. Supplies of corn are expected to be lower as yield per harvested acre is expected to be lower than in 2009/10, despite higher planted acreage. Supplies of soybeans and soybean meal are also forecast to be slightly lower than in 2009/10.

Meanwhile, the most recent Milk Production report indicated that estimated U.S. milk production rose 2.7 percent in November on a year-over-year basis. Cow numbers also continue to rise on a year-over-year basis. However, herd size was unchanged in November from October. This situation suggests producers may be responding to lackluster feed-price ratios that persisted in 2010 and are likely to worsen in 2011 due to higher expected feed prices.

USDA’s Cattle report, which will be released January 28, will provide an early indication of producer intentions regarding dairy heifer retention. The current forecast calls for cow numbers to average 9.1 million head in 2011, the first annual increase since 2008. High cow slaughter and heifer prices that are about unchanged from last year suggest little incentive for herd expansion.

The availability of heifer replacements at modest prices could provide an opportunity to some producers for herd freshening, which could be a cost-reducing strategy with higher feed prices in the offing.

Milk per cow is projected to rise 1.3 percent this year over last to 21,425 pounds. Total milk production in 2011 is expected to reach 195.5 billion pounds, compared with 192.8 billion pounds for 2010.

Milk equivalent exports for 2011 are forecast at 6.4 billion pounds on a fats basis and 30.7 billion pounds on a skim-solids basis. Although representing a retreat from 2010 exports, these forecasts have been raised from last month largely on improved skim-solids basis exports.

U.S. dairy product prices are below international prices and a weak dollar relative to foreign currencies makes U.S. dairy products attractively priced. Global demand should be higher in 2011, especially in Asia and South America, because economic recovery in those regions has been stronger than in Europe and the United States. What remains to be seen is the scope of recovery in milk production in Oceania.

U.S. imports of dairy products will trail last year’s totals and have been adjusted downward. Imports for 2011 are forecast at 3.9 billion pounds on a fats basis and 4.7 billion pounds on a skim-solids basis. The same fundamentals that make U.S. exports attractive on the world markets weaken the U.S. import market.

Butter stocks remain very tight, and consequently, butter prices are expected to remain high relative to recent years but to average below 2010 levels. Butter prices are expected to decline in the second half of 2011 as foreign production eases global tightness and more milk to move to Class IV uses due to adequate domestic supplies of cheese and strong export demand for nonfat dry milk (NDM). Butter prices are forecast to average $1.545 to $1.655 per pound in 2011.

Market Talk with Dave Kurzawski
(January 19, 2011) The powder and dry whey markets are tight and that’s been the case for a few months, according to Downes-O’Neill dairy broker Dave Kurzawski in Wednesday’s DairyLine. Things really got tight relative to demand in the past few weeks as demand picked up in the opening weeks of 2011.

“We knew about the tight stocks but now we have fresh demand coming in trying to pick those stocks away,” Kurzawski said. Prices are firm as dry whey is in the mid 40-cent range and “this is really the leader of the dairy complex right now.”

Butter had a run up to $2.10 a couple weeks ago, he said, however it’s relatively quiet right now, but skim milk powder and whole milk power on the world market is seeing sizable demand and that’s impacting the markets in Chicago.

This has created quite a price disparity between the Class III and Class IV and is one of the reasons Class III futures have been up so solidly the last few weeks, Kurzawski said, “in part due to sympathy with the Class IV market which is trading in the high $17s to over $18.”

“As to the Class IIIs, as much we may want to stay in a mid $14 cheese equivalent price, given where cheese settled today, the futures definitely have to comply a little bit with what they see as a firming Class IV situation, and what has been a firming Class IV situation,” Kurzurski said. That, he said, has “pulled the Class III futures into this bull market that we’re currently in right now.”

When asked for dairy producer hedging advice, Kurzawski said he believes the markets are “a little over cooked” right now on both Class IV and Class III although the spot market is starting to respond.

“You have to look at profit margins,” he said, “and if you have some profit margin right now, go ahead and lock some of that up, otherwise you look at put options as a worst case scenario floor price insurance program.” For more information, call Dave at 1800-231-3089.

(January 18, 2011) Cheese is “going along for the ride with some of the other products,” is how market analyst Alan Levitt put it in Tuesday’s DairyLine. Levitt, also editor of the CME’s Daily Dairy Report, said “cheese doesn’t really seem short but no one is willing to sell it on the CME so bids keep pushing prices higher.”

Butter is the real puzzle, he said, because there’s no precedent for $2 butter in January. He suspects that will “ration demand because ultimately it seems like buyers will push back.” “Ice cream makers and food companies that use butter as an ingredient will have a hard time continuing to pay this kind of money for butter,” he said. He admitted that butter inventories are very tight but “ultimately something’s got to give.”

Dry ingredients are moving up in price as well, according to Levitt, mostly on anticipation of shortages and buyers getting anxious.

When asked if that is a result of drought in New Zealand, Levitt said “yes when it comes to ingredients.” He later told DairyLine that milk supply forecast are being revised lower and buyers are nervous that New Zealand has overcommitted for the year. “International markets are real strong,” he said, “so there is anticipation that buyers will look more and more to the U.S. for their ingredients.” He believes people are just nervous about where the supply is going to be in 2011.

Wednesday afternoon the Agriculture Department will issue its preliminary December Milk Production report. Levitt expects output in the 50 states to be up about 2.5 percent from a year ago, which would put 2010’s total up 1.8 percent from 2009, a “nice bounce back,” he said.

But he warned that 2011 is shaping up to be a very challenging year. He pointed to USDA’s forecast of a 1.4 percent increase in milk output over 2010 but said he thinks it will be closer to a half percent, adding the caveat; “It’s always dangerous to under estimate dairy farmer’s ability to produce but I just don’t see much growth this year.”

He bases that on weekly slaughter numbers being up 15-20 percent from the previous year. Corn futures since December have been running at new highs almost every day, he said, citing July corn futures at $6.62 as an example, calling it “almost inconceivable and something’s gotta give.” “2011 is shaping up to be a year of significant volatility, he concluded, “because these relationships just are sustainable.”

(January 17, 2011) Efforts by the U.S. Dairy export Council (USDEC) and dairy industry suppliers to boost commercial sales through food aid are bearing fruit. Margaret Speich, of the U.S. Dairy Export Council, reported in Monday’s “DMI Update” that a draft report commissioned by the U.S. Agency for International Development (USAID) recommended adding dairy, specifically whey protein concentrate 80 (WPC-80% protein), to fortified foods that are made for children suffering from malnutrition.

USDA will also buy ready-to-eat meal replacements fortified with U.S.-produced nonfat dry milk and WPC-80 for the first time. These products will be used in international food aid administered by USDA, the Foreign Agricultural Service, and USAID.

“These two developments show expanded use of our high value dairy ingredients in what is essentially a new commercial channel for the U.S. dairy industry,” Speich said, and follow last summer’s breakthrough for dairy ingredient use in food aid, when the Office of Food for Peace approved WPC-80 and WPC-34 to be used in programs administered by USAID, change petitioned by USDEC.

A couple of U.S. companies and USDEC members have been very active on their own in this field, she said, and have developed capacity over the past year to meet the emerging demand of this channel.

“We think the food aid channel does provide and will provide opportunity for sustainable, commercial sales for U.S. dairy products,” Speich concluded.

(January 14, 2011) Excitement in the cash dairy markets intensified the second week of 2011 as the rising butter price appeared to pull cheese prices higher as well. A lot of eyes are “down under,” on the flooding in Australia which is driving up powder prices.

Cash Cheddar block closed January 14 at $1.5250 per pound, up 16 cents on the week, and 11 cents above that week a year ago. Barrel closed at $1.4750, up 13 1/4 on the week, and a penny above a year ago. No block was traded on the week but 19 cars of barrel found new homes. The lagging NASS-surveyed U.S. average block price dropped to $1.3457, down 2.9 cents. Barrel averaged $1.3762, down 2.5 cents.

Cash butter held all week at $2.10, 57 1/2-cents above a year ago. Four cars traded hands on the week. NASS butter averaged $1.6702, up 2.3 cents.

Cash Grade A nonfat dry milk ended the week at $1.4325, up 10 1/4-cents. Extra Grade closed at $1.40, up 6 cents. NASS powder averaged $1.2224, up a half cent, and dry whey averaged 38.70 cents, down 0.1 cent.

Crop Reports Point To Reduced Inventories and Higher Prices
(January 14, 2011) The Agriculture Department issued three major crop reports this week that, Dairy Profit Weekly editor Dave Natzke said, gives us a barometric reading of how much pressure feed prices will put on dairy farm profitability this year.

USDA released its final 2010 U.S. Crop Production report, along with latest Grain Stocks and World Ag Supply and Demand reports, and all point to reduced feed inventories and higher prices for dairy farmers, Natzke reported.

The Crop Production report put the 2010 corn crop at 12.4 billion bushels, down 9 percent from 2009 and the soybean crop was estimated at about 2.3 billion bushels, down 1 percent from a year ago. In addition, the Grain Stocks report estimated corn in storage is down 8 percent from a year ago, with soybean inventories down 3 percent. The corn stocks-to-use ratio is projected at just 5.5 percent, the lowest ratio in 15 years, according to Natzke.

Combined with lower available supplies, the World Ag Supply & Demand report raised projected use of major crops and, as a result, marketing year average farm-level prices also raised.

2010-11 marketing-year average corn prices were raised 10 cents on both ends of the range, to $4.90-$5.70 per bushel. The U.S. soybean price, projected in a range of $11.20-$12.20, is up 50 cents; and the soybean meal price was projected at $320-$360 per ton, up $10.

The Crop Production and Grain Stocks reports provided insights on other major dairy feedstuffs. USDA said corn silage and dry hay harvests were smaller than previous estimates, and last year’s totals, Natzke said.

There was a glimmer of good news: USDA raised the cottonseed harvest estimate, and said harvest of other haylages and green chop feeds were up.

“The end result,” Natzke warned, “while dairy product and milk prices have been improving somewhat, higher feed prices could offset any improvements to dairy farmers’ bottom lines, especially during the first half of 2011.”

(January 13, 2011) The first steps toward resolving a NAFTA trucking dispute with Mexico have been taken. A so-called “initial concept document” has been released by the U.S. Department of Transportation which will allow long-haul, cross-border Mexican trucking. The dispute resulted in Mexico imposing tariffs on key exports to that country from the U.S. and hurt the U.S. ability to compete.

The tariffs are legal under the NAFTA Agreement, according to National Milk’s Chris Galen in Thursday’s broadcast, because the U.S. has not been incompliance with its NAFTA commitments to allow Mexican trucks to deliver products to U.S. destinations.

The concept document deals with things like licensing and highway safety, according to Galen, who reported that Mexican authorities appear to be encourage by this action and have announced that they will not expand the current list of tariffs which could have eventually impacted dairy exports to that country as well as other commodities.

Switching to another trade issue; Galen reported that a free trade agreement with South Korea awaits President Obama sending it up to the Hill for Congressional approval. Galen said the agreement would be good for the U.S. dairy industry and result in more sales of U.S. cheese and whey products in particular.

South Korea is an expanding, more Westernized country with increasing buying power, he said, “so it’s a great opportunity, exactly the type of opportunity we need to be pursuing with our trade agreements and we’re hoping that right minds will prevail in Congress and we’ll get it approved this year.”

(January 12, 2011) U.S. milk production estimates for 2010 and forecast for 2011 was unchanged from last month in the Agriculture Department’s latest World Agricultural Supply and Demand Estimates report issued this morning. 2010 milk output is expected to total 192.8 billion pounds, unchanged from last month’s estimate, and compares to 189.3 billion in 2009. The 2011 estimate remained at 195.5 billion.

Ending stocks for 2010 were reduced due to expected low stocks of butter and nonfat dry milk (NDM) at the end of the year. Imports for 2010 and 2011 were reduced due to low U.S. prices relative to those internationally coupled with a weak U.S. dollar. Skim-solids basis exports were raised as NDM exports are expected to be supported by tight world supplies into mid-2011. Fat basis exports for 2010 were lowered from last month on weaker-than-expected exports of butterfat.

Butter, NDM, and whey prices are forecast higher, but the cheese price forecast was lowered. Tighter beginning stocks support a higher butter price forecast while generally strong exports of NDM and whey will support higher prices, according to USDA.

The cheese price forecast was reduced from last month on moderate demand. The Class III price forecast range is reduced as the lower forecast cheese price more than offsets the higher whey price forecast. Look for the Class III price to average $14.35-$15.15 per hundredweight, down a dime from last month’s projection, and compares to $14.41 in 2010, $11.36 in 2009, and $17.44 in 2008.

The Class IV price forecast was raised as both the butter and NDM price forecasts were raised. Look for a 2011 Class IV average of $14.90-$15.80, up 40 cents from last month’s estimate, and compares to $15.09 in 2010, $10.89 in 2009, and $14.65 in 2008. The all milk price is forecast to average $16.10-$16.90 for 2011.

(January 12, 2011) Beef and dairy farmers in Idaho and Washington gave something back to their states this past holiday season in what they called the “Beef Counts” program, supported by the beef checkoff. George, Washington (yes that is an actual town) dairy producer Dave Boon, reported in Wednesday’s Beef Checkoff Update that it’s a multi faceted program that brought beef to the tables of the less fortunate. Farmers donated a calf or cash equivalent to the program and the beef was offered at over 200 food pantries, soup kitchens, churches, and partner agencies.

Partnered with the Idaho Food Bank and Second Harvest in Washington, the program also relayed the nutritional benefits and the necessity for lean beef protein in the human diet while promoting a positive image of the beef industry. Over $80,000 was raised through cash and cattle donations in Idaho and $78,000 in Washington State.

He said it appears that 2011 may repeat what happened in 2010 with cheese “moving sideways and bouncing around a little bit.” He said that the price will get to a point where demand gets cut, prices will have to come back down and then we’ll repeat the process at least for the next few months, given current cheese inventory levels and the fact that we typically build stocks at this time of the year. He doesn’t see anyone adding to those heavy inventories so it’s doubtful we’ll see any run away cheese price right now.

Meanwhile, butter has its “normal cast of characters, fear and greed,” according to Brooks, mainly fear spurred by last week’s global dairy trade auction, even though it’s a market that calls for delivery two or three months from now when Australia and New Zealand are coming to the end of their production season. There’s a strong bump up there, he said, and that spills into the U.S. market and has pushed our butter price between Europe’s and the Oceania price.

There’s concern about how much butter we can export at $2.10, he warned, definitely a concern on the domestic side if that export market goes away. People are concerned about that and, while our history of having butter above $2 is fairly limited, the history that we do have shows that when we get above $2 we stay there for at least a couple of months and sometimes as many as four months.

We could very well be above $2 as we go into the Easter holiday which is late this year, Brooks said, and a lack of sales around Easter because of the substantially higher price this year versus last year could very well be the thing that pushes that down if you’re just looking at the domestic market.

If the international market steps in and takes away that butter, Brooks says manufacturers may not be overly concerned about the domestic market. Producers will be happy with the pay prices that will result from that, he concluded, because the high Class IV price will filter through to Class I and Class II prices as well.

DMI Update
(January 10, 2011) Last week Dairy Management Incorporated’s Joe Bavido reported on improvements made to the dairy checkoff website designed primarily for dairy producers at www.dairycheckoff.com, so they can learn how their check off investment is working to grow sales of U.S. dairy products.

This week Bavido reported on changes made in the checkoff website designed for consumers, www.dairyfarmingtoday.org, to educate them on how America’s dairy farmers care for their animals and the land and provide safe and nutritious dairy products

The sight aims to help dairy producers and others tell dairy’s story, Bavido said, and remains a top search engine at Yahoo and Google, with more than 2,000 external web links.

New features include “A Day in the Life” page in the “Life on the Farm” section that demonstrates how farmers care for their animals and the land and manage their businesses.

Traffic to the site goes in spurts, he said, but greatly increases whenever there is something in the media that brings attention to the farm. The goal is to tell consumers what a good job farmers are doing, he concluded.

(January 7, 2011) Cash dairy trading was uneventful the first day of 2011 but got exciting as the week progressed. Higher than expected prices in Fonterra’s global dairy trade auction Tuesday and concern over rain in California’s dairy producing region lit a fire under butter and powder prices particularly.

Butter has become a hot commodity and closed the first Friday of 2011 at $2.10 per pound, up 43 cents on the week, and 75 1/2-cents above a year ago. It took a 20-cent price hike on Thursday to finally attract a seller. It was the biggest single-day gain since November 8, 2004, according to market analyst Alan Levitt, who reports the largest single-day jump ever was 51 1/4-cents, interestingly on November 8, 2000. Only two cars actually traded hands in the first week of 2011. The lagging NASS-surveyed butter price averaged $1.6469, up 0.4 cent.

Cash Grade A nonfat dry milk closed the week at $1.33, up 6 cents. Extra Grade gained 11 1/2-cents and closed at $1.34. NASS powder averaged $1.2172, up 7.6 cents. .

Block cheese closed Friday at $1.3650 per pound, up 2 1/4-cents on the week, but 4 1/2-cents below a year ago. Barrel finished at $1.3425, up a quarter-cent on the week, and 9 cents below a year ago. Thirteen cars of block traded hands on the week in the cash market and 21 of barrel. The NASS U.S. Cheddar blocks averaged $1.3753, down 4.9 cents. Barrel averaged $1.4012, up 1.1 cent.

Antibiotic Use Under Greater Scrutiny
(January 7, 2011) Antibiotic use on livestock farms is coming under greater scrutiny from government regulators, consumers and activist organizations. Dairy Profit Weekly editor Dave Natzke talked about it on Friday.

He pointed out that antibiotics have a role in producing a safe and healthy food supply, both in treating sick animals, and in low, non-therapeutic levels to prevent diseases and reduce the potential of low-grade infections impacting animal growth and performance.

But, some of those uses are drawing more public attention, he said, and reported that, in New York this week, a bill was reintroduced that would ban the non-therapeutic use of antibiotics, also called antimicrobials, in livestock and poultry. That bill is similar to federal legislation, introduced in the past by New York Democratic Rep. Louise Slaughter, according to Natzke, who stated that Slaughter has been a vocal advocate of increased federal oversight and regulation of antibiotic use in food animal livestock production.

In addition, recent reports indicate the U.S. Food & Drug Administration (FDA) is asking at least one pharmaceutical company to voluntarily withdraw non-therapeutic use of its products, and, in a pilot program, is stepping up monitoring of antimicrobial use on dairy farms.

Concerns of this and other measures include the potential of drug residues in meat or milk that could lead to adverse impacts on human health, as well as the potential for antibiotic resistance.

And, while the incidence of drug residues in meat and milk is very, very low, dairy and livestock organizations take it very seriously and are taking proactive steps to reduce those problems even further, he said.

The National Milk Producers Federation’s Farmers Assuring Responsible Management, or FARM program (FARM -- http://www.nationaldairyfarm.com/) includes creation and distribution of a dairy farmer drug residue prevention manual.

And, in a new initiative underway, veterinarians and pharmaceutical companies are creating education and management guides to help farmers avoid drug residues in the milk and meat they produce to feed a growing world population.

(January 6, 2010) The new broom has arrived in Washington with new leadership in the House of Representatives. The leadership is the same in the Senate however Democrats have a much slimmer margin and President Obama is back from vacation.

“It’s going to be a different dynamic in Washington,” said National Milk’s Chris Galen in his weekly Thursday DairyLine program. The new House Republicans will first try to repeal the healthcare reform bill that passed last year, he said, but it doesn’t appear that will go anywhere.

The next big question, according to Galen, is how far they go with budget cuts. A lot of the focus during the campaigns last year was on federal spending, Galen said, and “It look like there’s going to be a much more serious effort in both the House and Senate to trim federal spending.” That, he said, will affect how they look at a variety of domestic programs, including farm programs.

When asked what the shift from Democratic rule to Republican rule means for government programs, Galen said the dynamic will be different in the House while Democrats still control the Senate but “any legislation, including what we’re trying to do with our Foundation for the Future program, has to be bipartisan. It has to pass a Republican House, a Democratic Senate, and then be signed by a Democratic President.”

Anything that is “overly partisan on either side of the aisle, is not going to be successful,” Galen warned, and that presents a challenge and opportunity to look for bipartisan solutions that will obtain support from both parties.

In closing, Galen reported that President Obama will likely sign the recently passed Food Safety bill but “the irony is that it doesn’t look like there’s going to be a lot of funding to pay for how it’s implemented.” That gets back to previous comments about Congress trimming federal spending and that may impact this legislation because there may not be money available to pay for its provisions.

Antibiotic use on livestock farms is coming under greater scrutiny from both government regulators and consumers. Tomorrow on DairyLine, Dairy Profit Weekly editor, Dave Natzke, details the latest developments, including some proactive steps that dairy farmers and their organizations are taking to address the issue and we kick off our brand new "Field Facts" program with Dr. Mike Hutjens of the University of Illinois in our second half.

Many Dairy Producing Areas Have New Representation in DC
(January 5, 2011) This week, 96 new members will be sworn into the House of Representatives, 87 Republicans and 9 Democrats. The Senate will have 15 new members, 12 Republicans and 3 Democrats. It was the topic for this month’s “Processor’s Perspective” on Wednesday.

The International Dairy Foods Association’s Jerry Slominski said “It’s a common saying that elections have consequences and the Republican wave this past November will surely have consequences for the dairy industry.” He pointed out that a large number of the new legislators are from rural areas and many dairy-producing areas now have new representation in Washington.

Although the delegation from the largest dairy state, California, remains much the same, nearly every other top dairy state witnessed a significant shift from Democratic to Republican representation, Slominski reported.

On the East Coast, Pennsylvania elected a Republican Senator to replace a Democrat as well as four new Republican Congressmen and New York saw its Republican delegation increase from two to seven.

Across the Midwest dairy states, four Democratic Senators were replaced by Republicans. Wisconsin, for example, elected Republican Senator Ron Johnson as well as two new Republican Congressmen. Upper Minnesota and South Dakota are now represented by Republicans as well, he said.

Out West, several dairy areas also switched to the Republicans. Eastern Colorado, Eastern New Mexico, Western Idaho, South Dakota, Southern Washington and Central Arizona are examples, according to Slominski.

Looking at the House Agriculture Committee, 15 Democrats, mostly freshmen, lost their jobs and have been replaced with newly elected Republicans, Slominski said, and “While often the generals remain after the troops have been replaced, that will not be the case this year.”

Republican Frank Lucas of Oklahoma now leads the House Agriculture Committee and Michigan’s Debbie Stabenow is the new Chairman of the Senate Agriculture Committee.

“I’m not going very far out on a limb to predict that these new representatives will rely more on free markets in their approach to issues,” Slominski warned, “They will be more open to free trade agreements, and will be less likely to see new programs or regulations as a solution to our nation’s problems.” “These changes in Congress come at a critical time for the dairy industry,” he concluded, “And will surely have an impact on the upcoming farm bill.”

This is a pretty quiet week as far as USDA reports are concerned. Monday, the California Department of Food and Agriculture announces its February Class I milk prices. USDA issues its monthly World Agricultural Supply and Demand Estimates report on Wednesday morning. We will post complete details at here as soon as possible.

(January 4, 2011) Cheese trading was uneventful the first day of 2011. The 40-pound blocks held at $1.3425 per pound and the 500-pound barrels held at $1.34. Dr. Bob Cropp, Emeritus Professor at the University of Wisconsin at Madison, said in Tuesday’s broadcast that prices may stay close to where they are however a more typical 3-cent spread between the two has to be re-established, but it’s possible that prices will strengthen a little more due to demand for the upcoming Super Bowl.

He adds the caveat that, with milk production where it’s at and the amount of cheese in storage, we won’t see much enhancement, and price will likely stay below $1.40 until the end of February or first part of March.

Butter, on the other hand, jumped 2 cents Monday and hit $1.69. Butter stocks are half what they were a year ago, according to Cropp, sales have been pretty good, and it appears the export market will hold up.

There is more cream available and the November Dairy Products report will tell us more but he suspects butter production is up. Stocks are tight, he said, but seasonally, supplies will build so he doesn’t see prices much higher than the current level, not at least to the summer and fall period.

Looking ahead in 2011, Cropp pointed to milk production which has been running over 2 percent and close to 3 percent above the previous year. It may take a while to slow that production, he said, but high feed prices and milk prices below $13 will mean the return over feed costs will be tight and production should slow.

“Cheese sales may hold up and export demand may be good as well,” Cropp concluded. “The first half of 2011 may take awhile for that production to slow but I think the second half we could have a pretty good price rally.”

Mozzarella cheese output totaled 299.7 million pounds, up 7.7 million pounds or 2.7 percent from October, and 20.6 million or 7.4 percent above a year ago.

Total Italian type cheese, at 380.8 million pounds, was up 11.6 million pounds or 3.1 percent from October, and 21.8 million or 6.1 percent above a year ago.

Cheddar production totaled 264.1 million pounds, down 9.5 million pounds or 3.5 percent from October, but 15.1 million pounds or 6.1 percent above a year ago.

American type cheese amounted to 350.3 million pounds, down 12.7 pounds or 3.5 percent from October, but 18.7 million pounds or 5.6 percent above a year ago.

Total cheese output came to 889.6 million pounds, down 2.3 million pounds or 0.3 percent from October, but 50.1 million pounds or 6 percent above a year ago.

Nonfat dry milk output, at 115.4 million pounds, was up 210,000 pounds or 0.2 percent from October, and 13.2 million pounds or 13 percent above a year ago.

California December Class 4 Prices Announced
(January 3, 2011) California’s 4b cheese milk price was announced this afternoon at $12.22 per hundredweight, down 92 cents from November, $2.82 below December 2009, and $1.61 below the comparable Federal order Class III price. The December 4a butter-powder price is $14.67, down $1.67 from November, and 9 cents below a year ago.

The updating came after input from farmers at World Dairy Expo in Madison in October, according to Bavido, and it now contains more easy to follow links to dairy farmer image programs such as “Telling Your Story” that helps them become active industry spokespersons in their community.

Current news is posted about checkoff led initiatives such as “Fuel Up to Play 60,” that aims to help improve health and wellness in students in schools and is a cooperative program with the National Football League and USDA. Other partnerships are also highlighted, such as those with McDonalds and Dominos.

The website includes contact information for local checkoff offices plus a list of industry meetings being held across the country, including those that feature checkoff staff.

Advanced Pricing Factors	Feb 2011	Jan 2011	Dec 2010
Class I Base	$15.89/cwt.	$15.20/cwt.	$16.96/cwt.
*The Base Skim Milk Class I:	$9.57/cwt.	$9.33/cwt.	$9.11/cwt.
Class III skim:	$6.71/cwt.	$8.14/cwt.	$8.47/cwt.
Class IV skim:	$9.57/cwt.	$9.33/cwt.	$9.11/cwt.
**Butterfat	$1.9003/lb.	$1.7696//lb.	$2.3348/lb.
Class II Skim price:	$10.27/cwt.	$10.03/cwt.	$9.81/cwt.
Class II NFS price:	$1.1411/lb.	$1.1144/lb.	$1.0900/lb.

	Feb 2011	Jan 2011	Dec 2010
Butter	$1.7407/lb.	$1.6328/lb.	$2.0995/lb.
NFDM	$1.2423/lb.	$1.2148/lb.	$1.1903/lb.
Cheese	$1.3757/lb.	$1.4841/lb.	$1.7063/lb.
Dry Whey	$0.3915/lb.	$0.3783/lb.	$0.3716/lb

State by State	Milk Cows Change from Dec. 2009	Output Per Cow Change from Dec. 2009	Milk Production Change from Dec. 2009
Arizona	+17,000	-35 lbs.	+8.1%
California	-14,000	+65 lbs.	+2.7%
Colorado	+7,000	+85 lbs.	+10.9%
Florida	+2,000	+45 lbs	+4.7%
Idaho	+24,000	+10 lbs.	+4.9%
Illinois	-3,000	+40 lbs.	-0.6%
Indiana	+2,000	+20 lbs.	+2.5%
Iowa	-8,000	+25 lbs.	-2.4%
Kansas	+7,000	+20 lbs.	+7.3%
Michigan	+7,000	+10 lbs.	+2.5%
Minnesota	Unchanged	Unchanged	Unchanged
Missouri	-8,000	Unchanged	-7.9%
New Mexico	+3,000	+50 lbs.	+3.4%
New York	+1,000	+75 lbs.	+4.6%
Ohio	-2,000	+40 lbs.	+1.6%
Oregon	+7,000	+25 lbs.	+8.1%
Pennsylvania	+3,000	+20 lbs.	+1.8%
Texas	+9,000	+50 lbs.	+5.0%
Utah	+4,000	-15 lbs.	+4.1%
Vermont	+1,000	+40 lbs.	+3.4%
Virginia	Unchanged	+20 lbs.	+1.4%
Washington	+9,000	+5 lbs.	+4.0%
Wisconsin	+6,000	+5 lbs.	+0.7%
23 State Total	+74,000	+33 lbs.	+2.8%