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Milk Consumption Among School Kids: We Can Do Better
(May 12, 2008) Milk consumption continues to climb among school kids but “We can do better,” according to Liz Anderson, an Onalaska, Washington dairy producer and DMI Board member. Speaking to DairyLine’s Bill Baker in Monday’s “DMI Update,” Anderson reminded us of the importance of school milk because once a milk drinker is lost in school they may be lost for a long time because “there are so many (beverage) alternatives to milk.”

She said the goal of the dairy check off is to offer school kids the milk they like and that’s where the “New Look of School Milk” campaign comes in, in getting processors to work with the schools to offer single-serve plastic containers in schools “So kids get a quality product that’s good and cold, and hip, and fun, with new graphics on it as well as in new flavors.”

Anderson offered chocolate milk as a prime example, a chocolate milk that meets all the specifications of lower calories with good flavor. She warned that “You can lower the calories but you don’t always have the good flavor left so the check off is working with processors to do that.”

Some 9200 schools across the country representing over 5 million kids are now offering milk in the new self-serve, plastic and, while that may not sound like that many when you consider how many schools there are in the U.S., when you stop to consider that there weren’t any offering them in 2000, “It’s a good start.”

Single serves are also offered in fast food chains like McDonalds, Subway, Sonic, Wendy’s, and others, she said, so kids get the same quality product in restaurants as they get in school and the check off is working to keep that going.

Anderson also pointed out that they don’t have enough people to reach every school with the program so they are concentrating on the top 15 school districts around the country where “They can make a big difference because a lot of milk goes through those schools every day when they’re serving lunch and breakfast.”

The University of Wisconsin's Dr. Brain Gould has our weekly dairy market analysis on tomorrow's DairyLine broadcast and Dr. Alan Britten has his weekly "Udder Health Update" in our second half.

Posted May 9, 2008 - By Dave Natzke, Editor, Dairy Profit Weekly  

Dairy Farmers of America (DFA) members have been informed of an unauthorized payment of $1 million – arranged by former DFA CEO Gary Hanman to former DFA chair Herman Brubaker. The payment, made in 2001 through a DFA affiliate, had not been approved by the DFA board. The affiliate was not identified.

In a teleconference with dairy media on May 9, current DFA president and CEO Rick Smith said all DFA members were informed of the discovery via a May 8 letter from Smith and DFA board chair Tom Camerlo. Smith said the current board and management team became aware of the payment in the past six to eight weeks.

Smith said the $1 million, plus interest totaling “hundreds of thousands of dollars,” has been paid back by Hanman and Brubaker. He said it was too early to determine if DFA would pursue criminal charges against Hanman and Brubaker, but that the co-op would reserve that right.

The DFA board established a special committee to investigate all details related to the payment, as well as any other potential unauthorized payments or activities made by Hanman, Brubaker or others. A committee report is expected in the next few months.

Smith said the payment discovery was made during “due diligence” on a different matter. He said his role at DFA in the past two years has included creating “a culture of transparency,” which includes looking into past transactions. “We’re not on a witch hunt, but we’re not going to have a whitewash,” he said.

Brubaker stepped down as DFA chair in 2003; Hanman retired as CEO at the end of 2005, but in a pre-existing employment agreement was technically retained as a consultant. At the time of the payment discovery, Smith said Hanman was no longer providing consulting services, and the employment agreement has been terminated.

Smith said the payment should not reflect on DFA’s internal controls, “because it happened outside of DFA,” but that the special committee will also look into internal controls and systems to make sure they are adequate and consistent.

The letter assured members that significant operational changes designed to ensure the long-term strength and success of the cooperative had been implemented.

Push For Green Is Impacting Dairy Industry
(May 9, 2008) Environmental sustainability, global warming and “carbon footprints” are terms that are becoming part of today’s vocabulary as consumers are told they need to look at how everything they use and eat is impacting the environment. Dairy Profit Weekly editor, Dave Natzke, talked about how this push for “green” is impacting the dairy industry in Friday’s broadcast.

He pointed out that, with presidential candidates promising “green” policies and food companies trying to position themselves as marketers of environmentally friendly products, at lot of attention is being directed toward global warming and carbon footprints, and dairy is no different. 

Cornell University has submitted results of a research project on dairy’s sustainability to the National Academy of Sciences for publication, possibly in early June. The University of Arkansas, at the request of Wal-Mart and with funding from Dairy Management Incorporated (DMI), will begin a pilot program to conduct carbon footprint research on 17 products, including milk, all the way from the farm to the store shelf.

And, along with DMI, National Milk Producers Federation (NMPF) and the International Dairy Foods Association (IDFA) have launched an initiative to encourage dairy industry innovations to improve environmental performance and meet consumer demand. The three organizations will identify best practices and seek opportunities for product, processing and marketing innovations of milk and milk products, with a focus on reducing energy consumption and boosting on-farm income in emerging “green” energy markets.

As part of the initiative, the three dairy organizations have begun efforts to analyze the carbon footprint of milk, from production on the farm, through processing and retail distribution, to consumption, according to Natzke.

And, at the international level, the International Dairy Federation will hold a summit on dairy farming and climate change in late June in Edinburgh, Scotland. Dairy Profit Weekly’s assistant editor, Susan Harlow, will be attending that meeting, which will look at how the dairy industry can reduce carbon emissions and what impacts climate change has on dairy producers and processors.

Animal Rights Activists Very Motivated By "Gotcha" Videos
(May 8, 2008) The livestock industry was hit by yet another Humane Society undercover video this week highlighting mistreatment of cattle, this time at auctions. National Milk’s, Chris Galen, said in his Thursday DairyLine report that “Again there’s going to be a spotlight shined on the treatment of livestock from farm to fork.” 

He said that it was unfortunate that this kind of thing happens but animal rights activists are “very motivated, very ingenious and devious in many cases, and it’s likely that we’re going to continue to see these types of undercover gotcha videos focused on various aspects of the food chain.”

In response, National Milk is putting together some new dairy producer education materials that will hopefully be available later this spring to anyone on the farm or anyone working with dairy producers containing basic, easy-to-use information to make informed decisions when it comes to culling and transporting cattle.

The Federation has also worked from a policy standpoint by joining with the American Meat Institute and the National Meat Association to support closing what Galen called “the loophole” that allows animals that go down at the meat packing plant to be re-inspected and approved for slaughter by a federal veterinarian. A citizen petition to USDA will seek this change, according to Galen.

“Our message here has been that this is a system wide challenge,” Galen said,

“And the good news is that we have been working well with trade organizations that represent all different aspects of the livestock production system, other farm groups, transportation organizations, groups representing livestock markets, and meatpacking organizations.” “We all recognize that we have a role to play in assuring consumers that they have a safe food supply but we all have to make certain that we’re working together on this very dicey and delicate issue.”

Processors Perspective on Class I Milk Pricing Forumulas
(May 7, 2008) Ruth Saunders voiced the “Processors Perspective” in Wednesday’s DairyLine broadcast, concerning changes the Agriculture Department made to Class I milk pricing formulas that, she said, “will have mixed impacts across the country.”

New increased Class I differentials went into effect May 1st in 14 states that were sought by nine coops from Texas, New Mexico and the southeast about a year ago, Saunders reported. Prior to that, USDA’s Class I location differentials had been fixed with only minor adjustments since 1985. 

Differentials add a set price increase to the Class I mover or base price which is announced by USDA, that Saunders charged “Sends a signal that Class I milk should cost more the further south the milk is from the Upper Midwest , where differentials are the lowest in the country.”

The new Class I differentials were disproportionately increased, according to Saunders, “creating new incentives for moving milk and uncompetitive situations for plants, depending on their location.”  

Saunders reported, for example, that differentials were raised in Louisiana and Tennessee between 10 and 60 cents per hundredweight, depending on the county. In Alabama and Virginia the increase ranged from 30 to 85 cents. In South Carolina and Florida , the differentials jump up by as much as $1.00 to $1.70.  The highest Class I differential is now up to $6.00, she said. No changes were made in the upper Midwest where Class I differentials remain at $1.70.

“It makes you wonder what’s next” Saunders said. USDA is considering a proposal that would raise Class I differentials nationwide, she said. “The impact, once again, will depend on where your farm or plant happens to be located.” 

In this yet to be decided proposal, USDA’s published analysis indicates that Class I utilization would decline and Class III and IV prices would soften, Saunders warned. The proposal is projected to reduce Class I fluid milk sales, she said, “Under a pricing system that is designed to ensure an adequate supply of milk for Class I needs.” 

“It is important for USDA to remember that ours is a national market for milk,” Saunders concluded, “Class I differentials cannot be selectively altered without disrupting the existing relationships in the marketplace, and without penalizing certain regions of the country.” 

Market Analysis
(May 6, 2008) Monday’s half-cent advance in cash butter marked the 13^th consecutive trading session of gain. Barrel cheese jumped 2 cents, hitting $1.95, while block was unchanged, holding at $1.94. And, cash Grade A and Extra Grade nonfat dry milk jumped 2 cents, to $1.42 per pound.

Market analyst Mary Ledman, Principal of Keogh Ledman and Associates in Libertyville , Illinois , cautioned us in Tuesday’s DairyLine however that the barrel price inched above the block price and “That always gives us a precarious situation as to whether one will move up or the other move down.”

She pointed to Friday’s trading which saw the block price drop 2 cents, to $1.94, and Monday’s gain in the barrel price came on an offer which, she said, indicates there may be more downward pressure ahead.

“We have a $1.90-$1.95 market right now which is unprecedented,” Ledman said, “As we enter the peak flush period in the Midwest .” The key factor to watch, she said, is the export market, which is “clearly influencing our dairy products market and it’s just really uncertain how long they will remain this strong.”

When asked about concern over the overall economy in the U.S. and what that may mean for domestic dairy product disappearance, Ledman replied, “So far so good.” Milk is used as a “loss leader,” she explained. She reported seeing promotional specials of four gallons of conventional milk for $10.00 and two for $10.00 for organic milk and said “We did not see those types of promotional activity in 2006 when milk prices were low.”

“Dairy products remain a good value,” Ledman said, and she is optimistic that the recession will have less impact on domestic demand than other food products.

March Dairy Products Report
(May 5, 2008, 2008) The Agriculture Department’s March Dairy Products report issued today puts butter production at 154.3 million pounds, up 7.5 million pounds or 5.2 percent from February and 15.9 million pounds or 11.5 percent above March 2007. 

Mozzarella cheese output totaled 284.5 million pounds, up 19.2 pounds or 7.2 percent from February, but 2.7 million pounds or 0.9 percent below a year ago. Total Italian type cheese, at 358 million pounds, was up 23 million pounds or 6.9 percent from February, but 4.2 million pounds or 1.2 percent below a year ago.

Cheddar production totaled 266.4 million pounds, up 15.1 million pounds or 6 percent from February, but 4.6 million pounds or 1.7 percent below a year ago. Total American type cheese amounted to 340.2 million pounds, up 20.9 million pounds or 6.5 percent from February, and 0.8 million pounds or 0.3 percent above a year ago.

Total cheese output came to 834.3 million pounds, up 49.7 million pounds or 6.3 percent from February, but 6.2 million pounds or 0.7 percent below a year ago. 

March nonfat dry milk output amounted to 134.2 million pounds, up a 15.9 pounds or 13.4 percent from February, and 21.3 million pounds or 18.9 percent above a year ago.  
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DMI Update
(May 5, 2008) U.S. cheese exports hit a record high in 2007, topping 99,000 tons in, up 40 percent from 2006. Much of that success can be attributed to the U.S. Dairy Export Council’s (USDEC) work in Japan, where U.S. suppliers proved that Japanese consumers would buy more U.S. cheese varieties if offered to them.

Jeff McNeill, of the U.S. Dairy Export Council office, in Japan , reported in Monday’s “DMI Update,” that, at the beginning of 2007, U.S. suppliers had a foothold in Japan ’s retail market with cream cheese. However, USDEC saw great potential for other U.S. products and began to hammer home the message that the U.S. dairy industry is more than just cream cheese.

USDEC’s Japan office created a marketing plan that emphasized high-value U.S. artisan cheeses. Staff members worked to increase consumer awareness and demand for cheese, expand varieties available to Japanese consumers and elevate the image of U.S. specialty cheese versus European cheeses.

To increase awareness of U.S. cheese, USDEC helped Japanese importers introduce approximately 20 U.S. specialty cheeses by conducting one-on-one consultations with retailers and hotels. USDEC also sponsored seminars in Tokyo and Osaka and cheese and wine tastings for culinary professionals.

USDEC’s marketing work boosted U.S. cheese shipments to Japan by 30 percent last year with a volume gain of 2,300 tons. This was second only to Mexico , the largest export customer of U.S. cheese.

Through the support of U.S. dairy producers, USDEC’s marketing efforts will continue to increase export demand for and drive sales of U.S. dairy products and ingredients in Japan and around the world.  

Dairy Markets Weekly Review
(May 2, 2008) This week was the sixth consecutive gain for cash cheese prices. Blocks climbed to $1.96 but inched back 2 cents on Friday to close at $1.94 per pound, up 1 1/2-cents on the week and 23 3/4-cents above that week a year ago when the blocks jumped 15 1/4-cents.

Barrel closed Friday at $1.93, up a nickel on the week and 29 1/2-cents above a year ago. Six cars of block traded hands on the week and none of barrel. The NASS U.S. average block price hit $1.8460, up 1.5 cents. Barrel averaged $1.7938, up 1.9 cents.

Butter closed at $1.44, up 2 3/4-cents on the week but 1 1/2-cents below a year ago. Only three cars traded hands. NASS butter averaged $1.3666, up 1.8 cents.

Cash Grade A and Extra Grade nonfat dry milk closed at $1.40 per pound, up a nickel on the week. 

NASS-surveyed nonfat dry milk averaged $1.2623, up 1.5 cents. Dry whey averaged 26.15 cents, up 0.3 cent.

The April Class IV price is $14.56, up 39 cents from March but $1.56 below April 2007.

The NASS-surveyed cheese price averaged $1.8164, down 14.1 cents from March. Butter averaged $1.3492, up 9.5 cents. Nonfat dry milk averaged $1.2506, down fractionally, and dry whey averaged 25.6 cents, up 1.3 cents.

How Is Conventional Animal Agriculture Impacting Our World?
(May 1, 2008) Conventional farm animal practices received some criticism in a study on the impacts to humans, animals, and the environment of intensive food animal production. The study began in 2006 by the Pew Commission on Industrial Farm Animal Production but the group’s recommendations were “fairly tame compared to what they might have been,” according to National Milk’s Chris Galen.

Speaking in Thursday’s DairyLine, Galen called it a “fairly high level group of some prominent people,” including the former governor of Kansas, former Agriculture Secretary Dan Glickman and others, many who are critics of conventional food production so there was apprehension about the findings.

The group made some recommendations which NMPF considers “rather harsh and off base,” he said, but they supported the need for a national animal identification system to facilitate food traceability, something the Federation supports, and they recommended more funding for animal research, something that NMPF would also agree with.

They also suggest that consumers need to be more aware of where and how food is produced and Galen believes that would help dairy farmers because, “If you look at a lot of the issues we’re dealing with today, it’s consumer misperception about what goes into food, what’s in or not in dairy, and “If we could educate consumers that our farms are not factories, are not cow prisons, in fact produce a safe product on a daily basis that actually would help us all.”

While the study was not backed by an animal rights or vegetarian agenda per se, several of the members have that orientation, according to Galen, and a lot of the people in the audience of the meeting where the findings were presented, were animal rights supporters who have been waiting for this “with baited breath.”

A lot of people in the livestock industry were apprehensive about this, Galen said, and he predicted there’ll be some criticism of the findings by other sectors of agriculture but, from NMPF’s standpoint, Galen said “There are a few things that are off base. There are a few things that are on target and, most importantly now, we have to find common cause for things that we agree need to be changed or can be changed in the future.”

Related Links:
http://www.reuters.com/article/domesticNews/idUSN2930966720080429?sp=true

http://www.chron.com/disp/story.mpl/ap/fn/5738971.html

http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=/20080429/NEWS/80429006/-1/SPORTS09 

Block Cheese is Tight, Barrel is Plentiful
(April 30, 2008) Downes-O’Neill dairy broker, Dave Kurzawski, also pointed to exports as a big player in the cheese market in Wednesday’s DairyLine. I likened the cheese price to a fighter in the ring that keeps getting back up after being knocked down. He said the cash market isn’t giving up much ground, at least the block market isn’t, and indications are that block cheese is very tight right now and that’s been the case all year, with short lived periods of product being available.

Barrel cheese appears plentiful, according to Kurzawski, and the difference is exports. “We don’t export barrel cheese,” he said, “But either way futures are still keeping a pretty good premium to the spot price.”

When asked what this means for a dairy producer’s hedge management strategy, Kurzawski said “It means you have a premium in a market that had been carrying a pretty good discount for the past year.” He recommends that producers take advantage of that and lock up at least a floor price at a profitable level because “They’re giving you that opportunity right now.”

Kurzawski went on to preview the Downes-O’Neill/E-Dairy annual Dairy Outlook Conference, June 18 and 19 in Chicago . Topics to be covered include world currencies, weather and climate, grains, edible oils, Latin America ’s agricultural economy, as well as several technical aspects of the futures markets. He said it’s going to be a great opportunity for people to learn a lot in a short period of time. For complete information and to register, log on to www.dairy.nu. And click on the Outlook 2008 icon.

Market Analysis with Robert Cropp
(April 29, 2008) The cheese price roller coaster started the last week of April on an up note, with blocks jumping a penny and a half, to $1.94 per pound. Barrel was unchanged at $1.88, while butter moved a half-cent higher.

University of Wisconsin Emeritus Professor, Dr. Robert Cropp, reported in Tuesday’s DairyLine that the cream supply is “very ample,” production is up, and stocks are still ample but demand has been pretty strong and some anticipate that butter could get tighter this summer as more cream goes into ice cream, something that has already started. Retail sales have been good as well, he said.

“The cheese market continues to surprise us,” Cropp said, and “It’s a pretty strong market when you get over $1.90. Cheese production continues to run below a year ago by 2-2 1/2 percent, but he expects that to change as there is plant capacity available, and this is particularly Cheddar cheese which is traded on the Chicago Mercantile Exchange.

The high prices result in reluctance to carry a lot of extra inventory, according to Cropp, so “it keeps it pretty tight.” Sales have been “half way decent,” he said, but he expects that to weaken as we move into May.

He adds that exports have been strong, up about 66 percent from a year ago for the first two months of 2008, and “That adds to the tightness a little,” and butter exports have been good, running about 14 percent of U.S. production.

Cash Grade A and Extra Grade nonfat dry milk was bid 2 1/2-cents higher Monday, to $1.3750 per pound. Cropp reported that we have a lot of powder in storage, although not as much as a few years ago, and we’ve produced quite a bit, with a lot of the increase in Western milk production going into powder but he believes the export market will pick up.

New Zealand reports its 2007 production was down about 4 percent, Cropp said, and that should strengthen domestic prices, not to $2.00 but likely $1.40 and possibly $1.50 by the second half of 2008.

The Agriculture Department’s annual Dairy Product and Milk Disposition summaries issued Friday shows “favorable” sales distribution in 2007, according to Cropp. American cheese output is not as strong as other types, he said, but “We’ve kept that American cheese supply tighter so it was a pretty good year,” but he warned that “It’s crucial that we have as strong a distribution this year,” said that exports will play a key role, particularly on nonfat dry milk and dry whey.

“With high retail prices and the economy there’s a concern if we’ll maintain the same growth in 2008 that we had in 2007,” he concluded.

DMI Update
(April 28. 2008) The export market is a shining star in the dairy industry these days and Joe O’Donnell, Executive Director of the California Dairy Research Foundation, said in Monday’s “DMI Update” that America has always been the greatest producer of agricultural products in the world and that includes dairy.

He adds that “the opportunities around the world are coming to our shores.” He reported that these are people with improving economies and “the first thing they want is eat better and the way they can meet that need, the most easily and most efficiently is to take in dairy products.”

The U.S. can ship dairy products anywhere in the world, O’Donnell said, and “What these dairy products are doing for these people is to add to their regular diet, and raise the nutritional status of the entire population.” “They have a healthier population, a better fed population, and dairy products have the ability to do that and we are in a position to market those products to those people and raise the standards of the world.”

The future holds more of the same, according to O’Donnell, and the dairy check off is helping in that effort, by enabling us to “better understand the advantages that we have with our products and how we can use our ingredients to formulate foods that are appreciated by other cultures.” Understanding what those consumers want, not only in terms of nutrition but in terms of palatability, is very important to maintaining and expanding those markets, he concluded.

Farm Bill Update
(April 25, 2008) The question repeated itself this week; will we see a new farm bill by week’s end. You’ll recall that a deadlock in negotiations forced another extension of the 2002 Farm Bill last week, and while the House-Senate Conference Committee met this week, the chance of an agreement before the April 25 deadline remained unlikely, according to Dairy Profit Weekly editor Dave Natzke.

Much of the current debate relates to the total cost of the 2007 Farm Bill, and how it will be paid for, he said, and the Bush administration, which reluctantly agreed to the one-week extension last week, said tax provisions of the legislation had not progressed enough, and that proposed spending levels exceeded the $10 billion increase agreed to by congressional leaders and the administration.

If negotiations aren't wrapped up by Friday, President Bush said he would seek a one-year extension of the 2002 Farm Bill, Natzke reported. With planting season getting underway in many parts of the country, Bush said farmers needed the extension to make planting and business decisions but House and Senate leaders were expected to ask for another short-term extension, perhaps a week or two, to try to iron out a final bill, according to Natzke.

Turning our attention to the grocery store, latest USDA figures and the Labor Department indicate food inflation is the worst in 17 years. Through February, the Consumer Price Index for all food was up nearly 5 percent compared to a year ago. Dairy product prices were up even more, increasing about 13 percent.

There was better news for consumers in March, according to Natzke. The Bureau of Labor Statistics said retail dairy product prices declined about 1 percent during the month, but remain about 13 percent more than a year earlier. March retail fluid milk prices dropped 2 percent and butter prices were down due to Easter sales specials. Cheese prices also declined slightly, he said.

Compared to food prices, increasing energy costs continue to hit consumers and farmers. Retail gasoline prices rose 7.5 percent in March, and are 26 percent higher than a year ago.

NMPF Presses Congress For Passage of Free Trade Agreement
(April 24, 2008) National Milk is pressing Congress for passage of a pending Free Trade Agreement (FTA) with South Korea , now that it has announced that it will resume imports of U.S. beef. NMPF’s, Chris Galen, reported in Thursday’s DairyLine that the FTA was held up by the imposition of trade barriers to U.S. beef ever since the discovery of Mad Cow disease in the U.S. a few years ago.