(July 3, 2009) The first half of 2009 is behind us and it's been a difficult six months for farmers. Dairy Profit Weekly editor, Dave Natzke, said in Friday’s DairyLine that things have to get better in the second half, and one area could be dairy feed prices.

USDA’s latest “Crop Acreage and Grain Stocks” reports released early this week, indicate there’s more corn acreage for this year’s crop and more corn in storage from last year’s crop than previously anticipated and Natzke reported that corn futures prices declined sharply a day after the reports, an indication dairy feed prices could also come down.

USDA also estimated acreage for dry alfalfa hay is virtually unchanged from a year ago. U.S. average alfalfa hay prices have been running about $45 per ton less than last year, and in California, June 2009 alfalfa prices were about $100 per ton less than a year earlier.

The other factors affecting milk prices are that production is starting to flatten out and cow numbers are shrinking. Cooperatives Working Together announced the final tally for the recent herd retirement program, completed at the end of June.

CWT reported a total of 101,000 cows producing an estimated 1.96 billion pounds of milk, were removed. CWT’s Jim Tillison said additional herd reduction activities are likely in 2009, given the depressed state of milk prices.

A national dairy conference call was conducted Tuesday by the advocacy group, Dairy Farmers Working Together (DFWT). DFWT’s Amanda St Pierre told DairyLine that the call went very well and such calls would play a role in communicating with dairy farmers in the future.

She said the number of participants was uncertain but was in the hundreds although she admitted there were a few challenges that need to be worked out before any future calls and more publicity would be needed to attract more participation. When asked when another such program would be conducted, St Pierre said it depended on the finances of the organization. For more information, log on to www.dfwt.org.

Dairy Management Incorporated’s, Stan Erwine, discusses dairy ingredient marketing in Monday’s “DMI Update.” He points out that, as consumers change so do their tastes and desire for nutrition and dairy products. As a result food and beverage manufacturers are looking for new and innovative ways to deliver improved nutrition in products that respond to healthier lifestyles and increased convenience. Listen for that on Monday, along with our Pfizer "Vet Visit" in our second half.

(July 3, 2009) Cash cheese prices were mixed in the shortened 4^th of July week. The blocks closed Thursday at $1.1150 per pound, down a half-cent on the week, 80 3/4-cents below a year ago, and 1 1/2-cents below support. Barrel closed at $1.10, up a penny on the week, 77 1/2-cents below a year ago, and right at support. Twenty nine cars of block traded hands on the week and 11 of barrel. The NASS-surveyed U.S. average block price hit $1.1490, down slightly. Barrel averaged $1.1123, down a half-cent.

Cash butter slipped this week, closing at $1.1925, down 1 1/4-cents on the week, and 36 cents below a year ago. Ten cars were sold on the week. NASS butter averaged $1.1703, down 3.9 cents. NASS nonfat dry milk averaged 84.93 cents, up 0.3 cent, and dry whey averaged 27.2 cents, down 0.3 cent on the week.

(July 3, 2009) The American Farm Bureau Federation’s Marketbasket Survey took a quarterly look at retail prices for regular, “rbST-free” and organic milk. The survey involves consumers in 33 states. 

For the second quarter of 2009, U.S. shoppers reported the average price for a half-gallon of regular whole milk was $1.92, down 24¢ from the prior quarter. The average price for one gallon of regular whole milk was $3.01, down 14¢. Comparing per-quart prices, the retail price for whole milk sold in gallon containers was about 25% lower compared to half-gallon containers, a typical volume discount long employed by retailers.

The average price for a half-gallon of rBST-free milk was $3.18, down 1¢ from the last quarter and about 65% higher than the reported retail price for a half-gallon of regular milk ($1.92).

The average price for a half-gallon of organic milk was $3.63, down 8¢ compared to the first quarter andapproximately 90% higher than the reported retail price for a half-gallon of regular milk ($1.92).

Compared to a year ago (second quarter of 2008), the retail price for regular milk in gallon containers decreased by 22%, while regular milk in half-gallon containers decreased 20%. The average retail price forrBST-free milk dropped about 5% in a year’s time. The average retail price for organic milk in half-gallon containers went up and down slightly throughout the year, rising 1% in the second quarter of 2009 compared to a year ago.

—

• one half-gallon of milk = approximately 4.3 lbs. = 23.25 half-gallons per hundredweight (cwt.) of milk.

• “rbst-free” premium markup: $1.26/half-gallon X 23.25 = $29.30/cwt.

• $3.18/half-gallon (price per half-gallon “rbST-free” milk = $73.94/cwt. gross income from sale of “rbST-free” milk

• May U.S. average fluid milk price paid to farmers: $11.60/cwt.* (Source: USDA)

* Some dairy farmers received a small premium for producing “rbST-free” milk.

To see the latest analysis and comment from Feuz, visit http://cattlemarketanalysis.org.

(July 2, 2009) The Agriculture Department’s May Dairy Products report puts butter production at 139.4 million pounds, down 3.1 million pounds or 2.2 percent from April and 0.4 million pounds or 0.3 percent below May 2008.

Nonfat dry milk output amounted to 149.1 million pounds, up 10.6 million or 7.7 percent from April, and 17.6 million or 13.3 percent above a year ago.

Mozzarella cheese output totaled 273.5 million pounds, up 1.1 million pounds or 0.4 percent from April, and 0.4 million or 0.1 percent above a year ago.

Total Italian type cheese, at 350 million pounds, was down 0.1 million pounds or 0.1 percent from April, but up 1 million or 0.3 percent above a year ago.

Cheddar production totaled 284.9 million pounds, up 16 million pounds or 6 percent from April, and 10.1 million pounds or 3.7 percent above a year ago.

American type cheese amounted to 366.3 million pounds, up 15.1 million pounds or 4.3 percent from April, and up 13.7 or 3.9 percent from a year ago.

Total cheese output came to 860.7 million pounds, up 15.4 million pounds or 1.8 percent from April, and up 22.1 million or 2.6 percent from a year ago. 

(July 2, 2009) Dairy farm profitability remains elusive. The Agriculture Department announced the June Federal order Class III milk price today at $9.97 per hundredweight (cwt.), up 13 cents from May but a whopping $10.28 below June 2008. That puts the 2009 average at $10.19, down from $18.26 a year ago, and compares to $16.11 in 2007.

Class III futures point to further increases ahead but still well below year ago levels and below the cost of production for most farms. The July contract was trading late morning Thursday at $10.06, August at $10.55, September at $11.25, October at $12.17, November at $13.15, and December at $13.57.

The June Class IV price is $10.22, up 8 cents from May, but $5.70 below a year ago.

The four week NASS-surveyed cheese price average was $1.1466 per pound, down almost a penny from May. Butter averaged $1.2073, also down almost a penny. Dry whey averaged 26.93 cents, up 3.76 cents, and nonfat dry milk averaged 84.61 cents, up 1.43 cents from May.

(July 2, 2009) National Milk Producers Federation has called on the USDA to raise the purchase prices for cheese and nonfat dry milk under the Dairy Price Support program for about 90 days. Chris Galen said in Thursday’s broadcast that doing so would enhance the safety net program in last year’s farm bill by boosting the purchase price of cheese by 6 cents and nonfat dry milk by 4 cents per pound and would allow more product to clear to the government, thereby boosting producer milk prices by about $235 million, according to Federation calculations.

USDA has not yet responded, Galen reported, but there are a lot of ideas being considered to help dairy farmers and some have already been taken, including the use of the Dairy Export Incentive program (DEIP) and efforts to clear the 200 million pounds of powder USDA currently has in storage.

The good thing about National Milk’s proposal, he said, is that it does not involve passing legislation through Congress but simply relies on a USDA decision, a decision that NMPF believes USDA has the authority to make.

The Farm Bill specifies minimum support prices, according to Galen, but there’s nothing in the bill that prohibits USDA from temporarily raising those prices and “that would provide a short term boost for farm level milk prices, which is what’s desperately needed right now.”

The Federation has no cost estimate to the government of doing this. Galen admitted there would be some extra cost but, “We don’t think this would result in any huge flood of cheese going to the government.” Nonfat dry milk already is moving weekly to government storage but it would be paying 84 cents per pound, instead of the current 80 cents, he said.

National Milk also called on USDA to reauthorize the DEIP. The DEIP fiscal year ended June 30 and a renewal would allow an additional 1.7 billion pounds (milk equivalent) of product to be exported.  

(July 1, 2009) During periods of low farm milk prices, we often hear complaints that retail milk prices have not fallen at the same rate. The International Dairy Foods Association’s chief economist, Bob Yonkers, said in Wednesday’s broadcast that “There are a number of reasons why retail milk prices may not change in lock step with changes in farm milk prices however available data show that retail milk price changes do follow farm milk price changes over time.”

One reason for confusion about this price relationship, according to Yonkers, is that dairy producers receive a blend price that reflects the value of farm milk sold for all uses. However, the cost of farm milk to processors of fluid milk products regulated by Federal Orders is the Class I minimum price. For any given month, the farm blend price and the Class I price do not change by the same amount, he explained, and in some months actually move in opposite directions.

Another reason for the confusion is that retail prices are in dollars per gallon, while farm milk prices are reported in dollars per hundredweight. Yonkers gave an example that, between May 2008 and 2009 the average Class I price declined from $19.50 to $13.85 per hundredweight, a drop of 29 percent. According to the Bureau of Labor Statistics, the U.S average retail price for a gallon of whole milk fell from $3.760 to $3.068 per gallon for that same period, a drop of only 18 percent.

However, when you convert the farm milk price per hundredweight to a price per gallon, the Class I price per gallon fell between May 2008 and 2009 from $1.677 to $1.191, a decline of 48.6 cents. Compare this to the decline in the retail price per gallon of 69.2 cents during that same period, he said. “The reality is that the retail price of milk fell by over 20 cents per gallon more than the price dairy producers received for the farm milk used to process fluid milk products at the Federal order regulated minimum price.”

“While the relationship between the two prices is not exact,” Yonkers concluded, “They do tend to move together over time despite the many other factors that influence the difference between them.”  View Graph Here

National Milk has called on the Agriculture Department to temporarily raise the support price of cheese and nonfat dry milk under the Dairy Price Support program, in an effort to help financially strapped dairy prodcuers. Chris Galen talks about it on tomorrow's DairyLine broadcast and John Ellsworth has his weekly "Success Strategies" program in our second half.

(June 30, 2009) Cash cheese prices started the 4^th of July week mixed. The blocks lost a half-cent while the barrels gained a half, but both remain below the government support price. That doesn’t bode well for Class III milk prices but the University of Wisconsin’s, Dr. Brian Gould, said in Tuesday’s DairyLine broadcast that there is at least one positive trend in dairy commodities, specifically dairy protein.

Dry whey prices, as reported weekly by the National Agricultural statistics Service (NASS), have seen a steady rebound since the middle of February, he said, climbing from a February 7 low of 15 cents per pound, to a June 20 high for the year of 27 cents, an 80 percent increase. He added that the 27 cent price level compares very favorably to the international price which is about 28 cents per pound, FOB Europe.

Furthermore, dry whey exports, in contrast to other dairy commodities, saw their second best quarter ever in pounds removed in first quarter 2009, so “It’s been a very very positive part of the dairy side.”

Concurrent with that and, one of the reasons for those higher prices, is that manufacturer stocks of dry whey are significantly below a year ago, according to Gould. Looking at April, for example, dry whey stocks amounted to 48.8 million pounds, he said, down 15 percent from April 2008 and, since December 2008, we had a steady decline in end of month stocks, to the tune of 25 percent since December.

“I know cheese prices aren’t the best,” he concluded, “But the whey is starting to recover and the futures market looks very positive for whey and that helps the Class III price.”

(June 29, 2009) Dairy producers are partnering with Domino’s Pizza® to launch the second phase of the American Legends™ specialty pizza campaign. Dairy Management Incorporated’s, Joe Bavido, reported in Monday’s “DMI Update” that the check off had previously partnered with Dominos to introduce six new premium pizzas that feature 40 percent more cheese than their traditional line.

The check off looks for these partnership opportunities to help drive sales and demand for U.S. dairy products and ingredients, according to Bavido. The potential is there to increase in cheese use by 10 million pounds or the equivalent of 100 million pound of milk sold, he said, and “right now, any additional milk sales would be greatly welcomed.”

Dominos kicked off phase II with a new round of radio and television commercials, according to Bavido, emphasizing premium ingredients, including extra cheese and its signature “cheese crust.”

Dairy producers will invest $12 million over a two year period to support this and Dominos will invest four to five times that amount for menu development, advertising, in store promotion materials, and other marketing efforts.

Dominos reported a 1 percent increase in first quarter sales in 2009, Bavido said, and they credit the “America Legend” pizza promotion. This sales increase, along with the additional cheese consumption, shows that the partnership is “good business” Bavido concluded, and “has been a win-win for both partners.”

(June 26, 2009) Cash dairy product prices saw little change in the final full week of June Dairy Month. Cheese prices inched a little higher but are still below their respective government support levels. The 40-pound blocks closed that Friday at $1.12 per pound, up a quarter-cent on the week, but 80 cents below that week a year ago. The 500-pound barrels closed at $1.09, up 2 cents on the week, but 87 cents below a year ago. Twenty eight cars of block traded hands on the week and nine of barrel. The NASS-surveyed U.S. average block price inched up 0.2 cent, to $1.1494 and barrel averaged $1.1173, down 0.7 cent.

The cash Double A butter price held all week at $1.2050, 34 cents below a year ago. Twenty nine cars were sold on the week. The NASS butter average hit $1.2092, down 0.7 cent. NASS nonfat dry milk averaged 84.64 cents, down 0.5 cent, and dry whey averaged 27.55 cents, up 0.9 cent.

Price support purchases for the week amounted to 5.7 million pounds of nonfat dry milk, raising the cumulative total to 264 million.

As of Friday morning bids totaling 25.8 million pounds of nonfat dry milk, 167,550 pounds of Cheddar cheese, 119,000 pounds of anhydrous milkfat, and 2.9 million pounds of butter were accepted that week under the Dairy Export Incentive Program (DEIP).

Peter Vitaliano  

The hurting dairy economy has led National Milk’s newly formed Strategic Planning Task Force to develop some short and long term solutions. Chris Galen reported in Thursday’s broadcast that, while any big change in the milk pricing system is a longer term prospect, farmers can’t wait that long, so the goal is to determine what can be done immediately.

The current CWT herd removal is one of those efforts, he said, and is the biggest one ever, but the Task Force is also asking if there is a role that the CWT can play in helping to augment the DEIP.

There is one more week for interested parties to apply to receive DEIP bonuses to export cheese, butterfat, and skim milk powder, Galen said, and CWT is considering ways to facilitate additional DEIP exports. He adds that the new DEIP fiscal year begins July 1 and National Milk will ask USDA to make full DEIP allocations available in the new fiscal year.

The Task Force will also meet with several other farm groups to discuss what other things can be done to help dairy producers, not just with the challenge of the low milk prices but also the high input costs. It’s not just the economic feasibility that has to be considered, according to Galen. The political viability must be considered and this process will take place in July.

When asked if dumping of milk was considered, Galen responded, “I don’t think dumping milk is a viable economic option.” He it’s a it’s a “protest the Europeans seem to be pretty good at but, at the end of the day, if you’re paying to feed the cows and to keep the cows healthy, only to dump their output, that’s not something that’s going to be useful in terms of a longer term or nationwide effort.”

(June 24, 2009) The Cattlemen’s Beef Board via the beef checkoff has begun a series of DairyLine program over the next few months because dairy producers are also beef producers, according to Lucinda Williams, Hatfield, Massachusetts dairy producer and chair person of the Beef Board in Wednesday’s broadcast. She said dairy producers need to know what the beef checkoff does for them.

Currently 13 dairy producers serve on the Beef Board, she said, and 20 percent of the total beef supply comes from dairy breeds. Beef may make up only 6-8 percent of a dairy’s annual income, dairy does play an important role in the beef industry, Williams said, because dairy cull cows and bull calves  eventually go into the beef supply chain and dairy producers need to be aware of all the great things their beef checkoff dollars are accomplishing.

Dairy beef is more than just ground beef, Williams said, and research shows that 44 percent of the muscle from dairy animals is used for steaks, roasts, filets and strips. Since 1998, more than 2,500 new products have been created, according to Williams, such as the Flat Iron Steak which quite often uses dairy beef.

Checkoff-funded foreign marketing efforts also help build beef demand overseas, according to Williams, where 94 percent of the population lives. “Producers can’t be everywhere,” Williams concluded, “But your beef checkoff can.”  

(June 23, 2009) Cash dairy product prices were unchanged in the first day of trading in the fourth week of June Dairy Month and, if cheese prices stay very long below the government support level, particularly the barrels, we could begin to see product move to Uncle Sam under the price support program, according to the University of Wisconsin Emeritus Professor, Dr. Robert Cropp. Speaking in Tuesday’s broadcast, Cropp said the cost to sell to the government makes some plants reluctant to sell to the government, but it could happen.

The recording was made prior to the release of the May Cold Storage report but Cropp said milk production will have to fall below year ago levels before cheese prices will start to climb, due to the lower demand of the domestic and world market. The May production data showed that output is holding, he said, and there’s plenty of cheese in storage and enough to meet current demand so buyers have to be convinced that things will get tighter as we move into the summer and fall demand period.

That will happen, Cropp predicted, and he expects milk production will fall below year ago levels in the next report as cow numbers fall due to CWT and that should trigger an increase in prices.

Reports continue to surface that dairy farmers will dump milk in protest of the low prices but Cropp questions the success of doing so because it’s usually done by a very few farmers for a short period of time. It would have to be national to have much impact, he said but he admitted that it does “demonstrate the depressed prices and the financial conditions that some farmers are facing.”  

The Cattlemen’s Beef Board via the beef checkoff kicks off a series of DairyLine program over the next few months tomorrow because dairy producers are also beef producers, according to Lucinda Williams, Hatfield, Massusechetts dairy producer and chair person of the Beef Board. John Ellsworth has his weekly "Success Strategies" program in our second half.

(June 22, 2009) May butter stocks totaled 251.1 million pounds, up 11.1 million pounds or 5 percent from April but were down 18.4 million or 7 percent from May 2008, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued Monday afternoon.

The American cheese inventory, at 608.3 million pounds, was up 20.4 million or 3 percent from April and 39.9 million pounds or 7 percent above a year ago. Total cheese stocks amounted to 957 million pounds, up 42.5 million or 5 percent from April, and 75.7 million or 9 percent above those a year ago.

(June 22, 2009) Dairy Management Incorporated  (DMI) is encouraging dairy producers to tell their story to local news media, churches, neighbors, schools, and service clubs so consumers know what they do and how they take care of their animals and their land. The point was made in a discussion with Moreno Valley, California dairy producer and DMI board member, Brad Scott, in Monday’s “DMI Update.”

He said dairy producers are “the best ambassadors for the industry,” but there are many people making false accusations against dairy farms so dairy farmers are “the best messengers and their actions and their words are probably what’s going to do the best to convey the message what positive role dairy farming families play in America.”

Scott says he practices what he preaches because he’s concerned how his farm looks. He educates his employees to be aware of what they’re doing, their actions and protocol concerning animal husbandry practices and to “be aware of people who park near the driveway taking pictures.”

“There are activists and you never know what they’re up to,” Scott warned, “So be aware of your surroundings, making sure that the presentation that you give the person just driving by on their way to town is always a positive image when they drive by a dairy farm.”

Resources are available to dairy farmers from DMI to help in this endeavor in the check off’s “Telling Your Story,” program. Just contact DMI for details.

“You don’t have to be an expert in media, Scott concluded, “It’s talking, just like you do to your neighbor in telling your story as far as what you do, that goes a long way when it comes to an individual farmer in the community and the rest of the peers in your community take heart to that and realize what you’re doing is actually beneficial and sustainable, contrary to some of the negative things you hear in the press.”

(June 19, 2009) The cash dairy markets remain depressed at the midpoint of June Dairy month. The block cheese price closed Friday at $1.1175 per pound, down 3 1/4-cents on the week, 84 1/4-cents below a year ago, and 1 1/4- cents below the support price. Twenty nine cars traded hands on the week plus, 12 of barrel.   

Barrel closed at $1.07, down 2 1/4-cents on the week, 3 cents below support, and 88 cents below a year ago. That's when the barrel price plunged 20 cents to $1.95. However, sales may now be triggered to Uncle Sam. The lagging NASS U.S. average block price was $1.1478, up a half-cent. Barrel averaged $1.1245, up 1.5 cents.

Butter closed Friday at $1.2050, down 2 1/4-cents on the week, 29 3/4-cents below a year ago. Twenty one carloads were sold. NASS butter averaged $1.2103, down 1.7 cents. NASS nonfat dry milk averaged 85.16 cents, up 1.3 cents, and dry whey averaged 26.68 cents, up 0.4 cent.

Cash Grade A nonfat dry milk lost a penny, slipping to 89 cents per pound. Four cars were sold. Extra Grade remained at 87.50.

Price support purchases for the week amounted to 7.9 million pounds of nonfat dry milk, raising the cumulative total so far to 258.4 million, compared to none a year ago. The 4.6 million pounds of butter purchased under the support program in January and February was sold at $1.1581-$1.1750 per pound this week.

(June 19, 2009) The July Federal order Class I base milk price was announced this morning by USDA at $10.26 per hundredweight (cwt.), up 18 cents from June, but a whopping $10.52, less than half of what it was in July 2008. The 2009 Class I average now stands at $11.08, down from $18.79 at this time a year ago.

The MILC payment should be about $1.54 per cwt., according to market analyst, Alan Levitt, plus a feed cost adjustor of 25 cents per cwt.

The Class IV advanced pricing factor remained "the higher of" in driving the Class I value.

The NASS surveyed butter price averaged $1.2187 per pound, up 1.4 cents from June. Nonfat dry milk averaged 84.43 cents, up 1.3 cents. Cheese averaged $1.1459, down a penny, and dry whey averaged 26.49 cents, up 3.3 cents.

2-week Product Price Averages:

(June 19, 2009) Dairy Profit Weekly’s, Dave Natzke, attended the sixth annual FC Stone/Downes-ONeill Dairy Outlook Conference held this week in Chicago and he reported in Friday's DairyLine broadcast that, as in the past, the conference covered a wide range of topics affecting agriculture and dairy farming, either directly or indirectly.

Dennis Gartman, editor of the Gartman Letter, who provides economic and stock market analysis on cable television, had good news regarding the general economy, saying we should see improvement in the fourth quarter of this year, with housing starts and automobile sales improving next year. He said that a better general economy should boost domestic dairy sales.

Climatologist Drew Lerner forecast a cooler and wetter-than-normal growing season this summer, with things drying up this fall, improving harvest conditions and helping ensure strong crop yields, which is good news for dairy farmers buying feed, according to Natzke.

Bill Brooks provided an update on the domestic dairy market and predicted the U.S. will average about 9.2 million milk cows in 2009, down from 2008 but well above the 8.9 million needed to meet current milk production  demands. Based on current milk and feed prices, Brooks warned that dairy producer margins, which are very poor this year, won’t return to more favorable levels until July or August of 2010.

Dairy product inventories will continue to hold down dairy prices, Brooks said. Based on current inventories and consumption estimates, inventories of U.S. total cheese stand at about 32 days of use, with butter inventories at 45 days, and nonfat dry milk supplies at 100 days.

Ken Bailey, former Penn State dairy economist who has joined FC Stone-Downes-O’Neill on a full-time basis, offered a look at the global market, saying that milk production in major exporting countries is stagnant, and that both the European Union and United States will export less this year. Stockpiles of butter and skim milk powder will depress world prices, according to Bailey, who looks for a rebound in trade and prices in 2010 and 2011.  

May cow numbers totaled 8.47 million head, down 10,000 from April, and 25,000 less than a year ago. Output per cow averaged 1,828 pounds, up 9 pounds from May 2008.

California production was down1.9 percent from a year ago. Wisconsin was up 1.9 percent. New York was down 0.8 percent, Idaho was down 1.4 percent, Pennsylvania was off 0.8 percent, and Minnesota was up 2.9 percent.  

MPC and Casein Imports Down

(June 18, 2009) Some blame dairy imports, particularly milk protein concentrate (MPC) for the low dairy prices but National Milk’s, Jim Tillison, argued in Thursday’s broadcast that’s not a legitimate claim. He reported that, through April 2009, USDA data shows MPC and caseine imports are down about 27 million pounds from a year ago and total dairy imports are down by about 47 million pounds.

The real issue is exports, according to Tillison. U.S. dairy exports in the first four months of 2009 were down 267 million pounds from a year ago. Butter exports were down 57 million pounds, nonfat dry milk was down over 170 million, and cheese exports were off 6 million pounds.

“The export market has gone away for all intense and purposes,” Tillison concluded. “When you have 267 million fewer pounds of U.S. dairy products being exported; that’s a significant number for just four months of the year.” He said it’s a combination of a bad U.S. economy and a bad world economy.  

The following excerpt is from USDA's Livestock, Dairy, Poultry Outlook Report:

(June 17, 2009) High feed prices are taking a toll on milk production. Estimated U.S production for April was 0.1 percent below that of 2008. Production is being reined in as the dairy herd size is contracting. The estimated U.S herd was 9.28 million head in April, down from 9.31 million in April 2008. In 2010, dairy herd contraction is expected to continue and the herd is forecast to average 8.94 million head for the year. 

On the other hand, production per cow continues to rise, albeit slowly. Production per cow on a daily basis has ranged above year-earlier levels in the first 4 months of 2009. For the year, output per cow is expected to reach 20,445 pounds, up a quarter percent year-over-year. For 2010, output per cow is forecast to climb to 20,850 pounds per cow, which would represent a 2-percent increase above 2009’s weak growth.

Feed prices this year are projected to be below 2008’s lofty highs, but still above those in 2007. Corn prices are expected to average over $4.00 per bushel for both the 2008/09 and 2009/10 crop years. Soybean meal prices are expected to decline to average $320 per ton in 2008/09. Meal prices should be slightly lower in 2009/10. Projected relatively high feed prices, especially for corn, will keep the annual average milk-feed price ratio below 2.0 both this year and next. This limits any incentive for herd expansion even with alfalfa hay prices reflecting improved harvest conditions. The Cooperatives Working Together program is expected to remove over 100,000 cows from the herd by mid-summer. 

In addition, culling will likely be above average as a result of weak returns to producers. The cow removals will boost average output per cow among the remaining herd, but higher feed prices will likely dampen growth in output per cow. The smaller herd size will lead to lower milk production in 2009 and 2010. Milk production is forecast at 187.5 billion pounds this year and 186.4 billion pounds in 2010.

Compounding weakness in domestic demand is the loss of export markets, which expanded rapidly in 2007 and 2008. Commercial exports this year are expected to total only 3.7 billion pounds of milk equivalent on a fat basis (19.7 billion pounds on a skims/solids basis). Fat basis exports are forecast to increase to 3.8 billion pounds of milk equivalent in 2010. Buoyed by stronger nonfat dry milk (NDM) and whey sales, skim/solids exports will increase to 23.1 billion pounds next year.

Domestic commercial use on a fats basis is forecast to rise in 2009 to 186.1 billion pounds, up 1 percent from 2008, but to remain virtually unchanged in 2010. The reduction in milk supplies is the basis for modestly higher milk and dairy product prices in both 2009 and 2010. Net removals are estimated to reach 234 million pounds in 2009 but are forecast to drop to 10 million pounds next year.

Dairy product prices are forecast to rise. Cheese prices have been close to support levels in recent weeks, but are expected to average $1.235 to $1.275 per pound in 2009. Cheese prices are expected to strengthen throughout 2010. The average 2010 price is forecast at $1.580 to $1.680. For butter, the 2009 prices are expected to average $1.185 to $1.255 per pound for the year. In 2010, prices could rise to average $1.44 to $1.57 per pound. NDM exports have lagged earlier expectations and prices to reflect that fact. 

(June 17, 2009) DairyLine listeners are introduced to various products and services in our daily broadcasts and Wednesday, we talked with a dairy farmer who uses one of those products, a relatively new calf starter technology from Land O Lakes, Purina Feed, called Ampli-Calf.

Steve Vander Haak dairies near Lynden, Washington, (also the home of DairyLine). He milks about 475 cows and raises about 30-40 calves. He used Land O Lakes Cows Match milk replacer but now uses Ampli-Calf.

It started as a trial about a year ago, he said, putting half of his calves on Ampli-Calf. Weights and other data was recorded and the calves being fed Ampli-Calf appeared to be bigger, taller, longer, seemed to grow better, and were healthier.

Calves get off to a better start and that growth continues throughout the rest of their life, according to Vander Haak, who admitted that they seriously considered dropping the program due to the poor economic situation dairy is under these days. But, he quickly added, We don't want to cut things that will hurt us in the future and this is one of the things that, at this point, we've been able to keep in and, hopefully will pay off in the future. He said he does recommend Ampli-Calf to others, as he has been very happy with it. It would take a lot to get me to change, he concluded.

(June 16, 2009) The cash dairy markets remain depressed at the midpoint of June Dairy month. Monday’s trading saw cheese prices hold steady but butter slipped three quarters. Downes-O’Neill dairy economist, Bill Brooks, pointed out in Tuesday’s DairyLine that the block cheese price is barely above support and barrel is below so there’s not much impetus to push the market down but there’s still enough supply so traders don’t see any risk at the moment of trying to push the market higher to get any product.

He said there’s been heavy trading over the last few months so there’s a lot of product available and, on the butter side, there hasn’t been much in the way of above average temperatures yet in most parts of the country. That would spur ice cream and frozen treat demand. That, with the typical seasonal downturn in butter demand right now, has resulted in a backup and thus the price slippage.

Brooks will speak at Wednesday and Thursday’s Downes-O’Neil Dairy Outlook conference in Chicago and he reported that, as he began to prepare his remarks, it looked like things were going to start to turn around and at least be stabilized by the end of the year when looking at income over feed costs but given the futures activity of last week, that recovery looks like it has been pushed back, though he cautioned not to base too much on the futures of one particular day.

The return to profitability may not come till the end of the year or next year, he concluded, where we can say producer profitability has come to the point where we can “maintain milk production, but it will be a little longer before we can see a return to growth.”

(June 15, 2009) Moreno Valley, California dairy producer and Dairy Management Incorporated board member, Brad Scott, was back on Monday’s “DMI Update,” discussing the website www.dairyfarmingtoday.org.  Scott said the website was established by Dairy Management Incorporated as a tool for people who have questions about the dairy industry.

People can take virtual tours of dairy farms located throughout the country, according to Scott, which show various management practices and how sustainable today’s farms are in their stewardship and animal welfare. Visitors to the website can ask questions of farmers as well, he said, “So it’s a good way to spread the message to the public about the dairy industry and all the positive things we do.”

Dairy producers are also invited to visit the site because Scott says they can learn what their fellow dairy farmers are doing in other parts of the country, the challenges they face and how they address them.

1) Feed costs: Weather-related delays in corn planting, resulting in lower projected yields, and reduced soybean stocks, due an increase in export demand, pushed both corn and soybean price forecasts higher for the 2009-10 marketing year in two USDA reports. 

2) Supply management: A discussion of Holstein Association USA’s proposed Dairy Price Stabilization Program will be held June 29, in Sacramento, Calif., during the 124th National Holstein Convention and Annual Meeting. Accountant Gary Genske, a frequent critic of the Cooperatives Working Together program, unveiled his own “36-Month Base Plan” to address the current dairy financial situation.

3) DPW Trends: USDA’s monthly World Ag Supply and Demand Estimates report lowers the U.S. milk production forecasts for 2009 and 2010. The Class III price forecast is unchanged for 2009, at $10.60-$11.00/cwt., but raised for 2010, at $14.30-$15.30/cwt. Class IV prices are forecast higher for 2009 ($10.10-$10.60/cwt.) and 2010 ($12.55-$13.65/cwt.). The all-milk price is forecast at $11.95-$12.35/cwt. for 2009; and $15.10-$16.10/cwt. for 2010.

4) DPW Numbers: Trade was down, but the United States turned in a small dairy trade surplus in April, the first in seven months. April 2009 exports were valued at $176 million, up 2% from March, but less than half the April 2008 total of $362 million. April imports were valued at $166 million, down 30% from March and $85 million less than April 2008.

5) DPW Washington:  International Dairy Foods Association and the National Milk Producers Federation again told the U.S. Food and Drug Administration that ultrafiltered milk should be allowed to be used to make cheese, without requiring a special label.

 Check in for daily Dairy Profit Weekly news updates at www.dairybusiness.com.

Dave Natzke, Editor  

(June 12, 2009) Dairy Profit Weekly editor, Dave Natzke, gave us his read on USDA’s Ag Supply and Demand Estimates report in Friday’s broadcast and said it gives us a preview of what dairy producers can expect. He said the report indicates U.S. producers will reduce cow numbers and milk production per cow due to low milk prices and higher feed costs, resulting in declining annual milk production for both 2009 and 2010.

“Less milk means higher prices,” Natzke said, “And USDA forecasts higher wholesale milk, cheese and butter prices in 2010, although cheese prices will remain weaker through the end of 2009.”

USDA forecasts a Class III milk price of about $10.80 per hundredweight. for 2009, with a Class IV price of about $10.35, and an all-milk price average of about $12.15.

Current Chicago Mercantile Exchange futures prices are slightly more bullish, according to Natzke, averaging $11.48 per cwt., about 70 cents per cwt. higher for Class III, and $10.70 or 35 cents higher for Class IV milk in 2009.

The good news, he said, is that both USDA and CME indicate higher prices in 2010. USDA forecasts a Class III average of about $14.80 per cwt. next year, and a Class IV average of about $13.10. CME futures are again more bullish, with a Class III average of $15.40 and a Class IV average of $14.78 per cwt.

There is a downside to the report related to feed costs, Natze warned. Weather-related delays in corn planting, and reduced soybean stocks due an increase in export demand, pushed both corn and soybean price forecasts higher for the 2009-10 marketing year.

(June 11, 2009) Lawmakers got some perspective on the importance of “rational immigration policy” from a national survey on the employment practices of America’s dairy farmers. Commissioned by the National Milk Producers Federation, the survey was conducted by Texas A & M University and was the first comprehensive study of the specific hiring and labor practices of dairy farms, according to Chris Galen in Thursday’s DairyLine.

Galen said the study was necessary so the Federation could present its case to policymakers, based on good data.

The potential loss of foreign-born workers is important, not just to farmers themselves and their employees, Galen said, but to all of the others that supply inputs to the dairy farms, feed, veterinary services, hauling and transportation, processors, even retailers “have a stake in the health of dairy farms.”

More than 2,000 farms were surveyed last year, according to Galen, and it was determined that about 138,000 full time workers are employed on U.S. dairy farms, and 40 percent of them are foreign born.

He warned that, if we lost just half of those foreign born workers, an additional 66,000 workers in other related jobs would also be lost, due to the closure of some farms and the resulting “multiplier effect when you have fewer jobs in the other input businesses.”

“A lot of people say we have to save American jobs for Americans,” Galen argued, “But every American dairy farmer I talk to, really just wants to make certain that they can stay in business and, if they don’t have access to an available labor force, then not only do those jobs go away but so do a lot of other jobs related to dairy farming.”

Look for 2009 output to total 187.5 billion pounds, down from the 187.7 billion predicted a month ago and the 190 billion of 2008. 2010 output is now projected to fall to 186.4 billion, down from the 186.8 billion predicted last month.

Growth in milk per cow is also slowed due to higher feed costs. Commercial exports, primarily on a skim-solids basis, are forecast higher in 2009 and 2010 on tighter global dairy product supplies and a weaker U.S. dollar.

CCC removals are adjusted to reflect exports under the Dairy Export Incentive Program (DEIP).

Most product prices were forecast higher in the face of tighter supplies, but cheese prices are forecast lower for 2009.

The 2009 Class III milk price was unchanged for 2009, at $10.60-$11.00 per hundredweight, but raised for 2010, at $14.30-$15.30, up from the $13.80-$14.80 range anticipated a month ago. The 2008 average was $17.44.

Class IV prices are forecast higher for 2009, at $10.10-$10.60, up from $9.95-$10.55 predicted last month. Look for a range of $12.55-$13.65 in 2010, up from the $12.30-$13.40 range predicted in last month’s report. The 2008 average was $14.65. The all milk price is forecast at $11.95 to $12.35 per cwt for 2009 and $15.10 to $16.10 for 2010.

Dairy Outlook Conference June 17-18 in Chicago

(June 10, 2009) Wednesday’s DairyLine broadcast gave us a preview of the sixth annual Downes-O’Neill Dairy Outlook conference June 17-18 in Chicago. Broker, Dave Kurzawski, reported that it’s a chuck full program that will cover everything from global weather and energy, to grains, to the dairy market outlook and overall general economy.

The keynote speaker is Dennis Gartman, editor of the Gartman Letter, a daily update on the political, economic, and technical events of the day.

The conference attracts producers of all sizes, according to Kurzawski, “anybody whose bottom line is sensitive to the prices of commodities,” and he expects a lot of interest, especially with the economy in the way that it is right now.

He adds that it is not a hedge recommendation or risk management kind of conference, although it will be covered briefly, but Downes-O’Neill brokers will be on hand to answer any such questions. For more information and to register, log on to www.dairy.nu and click the Outlook Conference link or call 1-800-504-5620.

(June 9, 2009) Cheese prices start the second week of June close to or below the government support price and market analyst, Mary Ledman, Principal of Keough Ledman and Associates in Libertyville, Illinois, said in Tuesday’s DairyLine that we need a “weather event “or “some significant event” that would result in lower cheese stocks and a decline in milk production before things will turn around.

American type cheese production in the first quarter of 2009 was up 5.3 percent from a year ago, according to Ledman, “a huge number,” and as a result plenty of cheese has traded at the Chicago Mercantile Exchange.

On the bright side, she said there has been buyers and sellers but a $1.10 to $1.15 per pound cheese is a long ways from $1.30 and she warns that we’ll need at least a 2 percent drop in milk production in one of these nearby months to push the cheese price higher.

Demand is steady, Ledman reported, as there’s been a tremendous amount of promotion at the retail and some at the food service level, but “We’re countering a 5.3 percent increase in production and that’s a big increase.”

She adds that consumers are getting used to seeing these specials so the promotions “don’t necessarily have the same bang for the buck that they did perhaps in the first quarter of this year.”

Ledman attributed Monday’s 2 1/4-cent drop in the butter price in part to last week’s announcement by USDA that it was selling back the 4.6 million pounds of butter it purchased earlier this year under the price support program.

She admits that it’s more symbolic that this butter is coming back to the market but said it will be interesting to see what kind of offers they get. “That may give us an indication of where participants think this market is going through the second half of the year,” she concluded.

(June 5, 2009) The May Federal order benchmark milk price has suffered a temporary relapse. The Agriculture Department announced the Class III price this morning at $9.84 per hundredweight (cwt.) down 94 cents from April, $8.34 below May 2008, but 30 cents above California’s comparable 4b cheese milk price. That pulls the 2009 average to $10.23, down from $17.86 at this time a year ago and compares to $15.30 in 2007. The Class IV price is $10.14, up 32 cents from April but $5.12 below a year ago.

Class III futures settled Thursday, showing a small rebound, to $9.95 in June, $10.73 in July, $11.80 in August, $13.20 in September, $14.02 in October, $14.44 in November, and $14.69 in December.

The four-week NASS surveyed dairy product prices had cheese averaging $1.2159 per pound, up 4.9 cents from April. Butter averaged $1.1553, down 12.2 cents. Nonfat dry milk averaged 83.18 cents, up 1.2 cents, and dry whey averaged 23.17 cents, up 3.7 cents.

(June 5, 2009) The meltdown in global and U.S. economies has led to a sharp downturn in milk prices and dairy farmer income this year. The impact has more dairy farmers looking at ways to manage milk supply and price volatility. Dairy Profit Weekly editor, Dave Natzke, reported in Friday’s broadcast that U.S. dairy farm receipts from milk sales were estimated at about $35 billion annually for both 2007 and 2008. However, based on recent USDA forecasts, 2009 U.S. milk sales will generate nearly 35 percent less, or about $23 billion at the farm level.

Total U.S. farm receipts from the sale of milk were estimated at $35.5 billion in 2007 and $34.8 billion in 2008. However, based on recent USDA forecasts, 2009 U.S. milk marketings will generate nearly 35 percent less, with cash receipts at the farm level approaching the $22.6 billion in 2003.

“Billions" don't mean much to many, Natzke said, so he calculated the gross income from milk sales from each of the nation’s 9 million cows. Each "average" cow generated $3,880 in 2007, falling slightly to $3,755 in 2008. This year, however, each cow will earn about $2,475, down 35 percent from 2008. And remember, that's gross income, and doesn't factor in higher production costs.

Dairy prices and income have been on a real roller coaster ride in the past decade, and that kind of income fluctuation has dairy producers looking at ways to manage milk production and price volatility. The Cooperatives Working together program is in the middle of "retiring" about 103,000 cows from the nation’s total dairy herd to reduce overall milk production.

In addition, two other proposals are gaining momentum. Similar in nature, the California Milk Producers Council’s Growth Management Plan, and Holstein USA’s  Dairy Price Stabilization Program, would establish historical base milk production levels for all dairy farmers, factoring in small percentages of growth to meet increased consumer demand. Farmers who produce milk above and beyond that base level would be required to pay a market access fee on all milk. Farmers who keep production within the base level would receive payments from the pool, creating a financial incentive to limit production growth.

Tough times often cause dairy producers to question the value of the dairy check off. California dairy producer and DMI Board member, Brad Scott, talks with Bill Baker about the value of the check off, even in tough times on Monday's "DMI Update," and we have our weekly Pfizer "Vet Visit" in our second half.

(June 4, 2009) The Agriculture Department’s April Dairy Products report puts butter production at 144.1 million pounds, down 3.1 million pounds or 2.1 percent from March and 5.9 million pounds or 3.9 percent below April 2008.

Nonfat dry milk output amounted to 139 million pounds, up 3.7 million or 2.8 percent from March, and 4.1 million or 3.1 percent above a year ago.

Mozzarella cheese output totaled 272.1 million pounds, down 9 million pounds or 3.2 percent from March, and 4.4 million or 1.5 percent below a year ago.

Total Italian type cheese, at 350.1 million pounds, was down 12.8 million pounds or 3.5 percent from March, but up 1.1 million or 0.3 percent above a year ago.

Cheddar production totaled 268.8 million pounds, down 4.8 million pounds or 1.7 percent from March, and 1.2 million pounds or 0.6 percent below a year ago.

American type cheese amounted to 351 million pounds, down 8 million pounds or 2.2 percent from March, but up 10.9 million pounds or 3.2 percent from a year ago.

Total cheese output came to 846.4 million pounds, down 24.4 million pounds or 2.8 percent from March, but up 26 million or 3.2 percent above a year ago. 

(June 4, 2009) Washington’s spend-then-tax mentality has quickened the need to raise revenue and one of the insane ideas being put forth is a federal excise tax on, of all things, flavored milk drinks that contain sugar-based sweeteners.

National Milk and the International Dairy Foods Association have teamed up to oppose it and the Federation’s Chris Galen recalled the question in Thursday’s DairyLine, “Do you want one lump or two of sugar in your coffee?” “We think the federal government may be unwise in lumping sugar sweetened milk with other beverages which don’t have any nutrition,” he said.

He reported that they have put Senators on notice that “It’s bad nutrition policy and bad tax policy to be tie milk together with other drinks sweetened by sugar,” a beverage the government actually encourages children to consume.

When asked why this is even being considered, Galen answered, “I could give a trillion reasons,” referring to the trillion dollar deficits that Congress and administration is racking up over the next few years.

The other reason is concern over the obesity rate among adults and children, he said, so perhaps the thinking is that, “if they tax things which have sugar in them, that will take care of the problem of having fat kids.”

Research shows however that children who consume milk and dairy products, and that can include flavored milk, according to Galen, “have better body weight and appropriate body mass than kids who under consume dairy products.” Even the American Academy of Pediatrics believes flavored milk is not necessarily a problem or a bad thing, Galen said.

Taxing flavored milk because it has a small amount of sugar in it is what the Federation calls, “penny wise and pound foolish,” Galen concluded. “Raising a few pennies in taxes to get rid of a few pounds on children may actually hurt their nutritional consumption, both in the short term and the long term.”

The agriculture department will issue its April Dairy Products report this afternoon. Please check here for complete details.

May Federal order milk prices are announced tomorrow morning. The benchmark Class III price will suffer a temporary relapse, following three months of gain.

Market analyst, Alan Levitt, predicts it will drop to $9.85 per hundredweight, that would be a loss of 93 cents from April and would be $8.33 below a year ago. Again, we will post the official prices here as soon as possible.

(June 3, 2009) Vivian Godfrey is the new CEO of the dairy processor’s MILKPEP program and said in Wednesday’s broadcast that she’s excited to head up MilkPEP and its Milk Mustache “got milk” Campaign.

She grew up in London, England and after living briefly in France, Germany and Canada, moved to Minneapolis, Minnesota in 1992. She worked for the Pillsbury Company for nine years including four years as CEO of Haagen-Dazs ice cream.

“Every single person that I've met over the past few weeks has given me a warm welcome,” Godfrey said, and dairy farmers who are involved with DMI such as Paul Rove in Arizona and Les Hardesty in Colorado have invited her to their farms. I’ve also been touring dairy processing operations in California, Colorado and Massachusetts and have visits planned to Illinois, Texas and Florida.

Producers and processors are sharing great ideas, Godfrey said, and she shares things she already knows about the program. She said it’s clear to her that the Milk Mustache program has “significantly improved milk’s image and market position over the years.” “Year after year, the program effectively moves the needle and helps drive incremental milk sales.”

She pointed to the various celebrities that have donned the Milk Mustache as a “tremendous asset,” people from all walks of life including sports, actors, business, and musicians to “remind consumers about the benefits of milk.”

“People today are looking for foods that are naturally nutrient-rich,” Godfrey concluded, and “Nothing tops milk in that regard.” “I think in these tough economic times it’s even more important that MilkPEP remind Americans that milk is number one when it comes to providing value.  Milk packs a huge nutritional punch and is a great choice for families on a tight budget.”

(June 2, 2009) The low cheese prices have made buyers more aggressive but the prices are still close to support, according to Alan Levitt, editor of the CME’s Daily Dairy Report in Tuesday’s DairyLine broadcast. There are plenty of bids, he said, but sellers have countered, production is seasonally heavy, and inventories are building. He doesn’t see that changing in the short term.

He doesn’t think USDA’s decision to sell back the 4.9 million pounds of butter it purchased under the price support program will affect the market as it’s not that big of a volume and the market has seen good support as people see value in butter at current prices. He said that “People know that at some point this market is going to overcorrect and we will get into a short situation. Butter is one of the first things to go and nobody wants to pay $2.20 a pound for butter like they have in the past.”

Commenting on the latest milk feed ratio, Levitt warned that “the worst is still to come,” because feed costs are still going up. July corn futures jumped into the $4.40s Monday morning for the first time since early January, according to Levitt, and corn prices were up about 80 cents in the last three months.

July soybean futures broke $12 Monday, for the first time since last September, Levitt reported, up about $3.70 in three months. The June and July ratios will be “pitiful,” Levitt said, “even lowered than what we’re seen and that’s when it’s really going to hit and we’ll start to see this supply correction, when farmers are dealing with that for months on end.”

(June 1 ,2009) Joe O’Donnell, director of the California Dairy Research Foundation, turned his attention to milk in Monday’s “DMI Update” and pointed out that the culturing of milk to make yogurt and cheese has gone on for decades but now we’re understanding more about the components of milk, specifically the carbohydrates in milk, and how important they are in promoting proper bacteria development in human GI tracts.

This concept is being marketed by some yogurt manufacturers, according to O’Donnell, but it’s relatively new, due to new technology that is unlocking this information and “These carbohydrates are very important for the good bacteria that live in our GI tract. Without them they just don’t survive as well and they contribute to our good health.”

“Again, milk in ways we never knew before,” O’Donnell said, “We’re now finding out promotes good health.” Telling this story is very important to the dairy industry, according to O’Donnell, as “It’s all about good health and that’s the key for dairy products.” “That’s one thing we have above every other product is that we are there to deliver nutrition and health.”

One of the key components, he said, is turning out to be the carbohydrates that are in milk. Not just lactose but others that we weren’t even aware that were there, he concluded, but “now we have the technology to tell us about it.”

(May 29, 2009) Legislation that would ease restrictions on U.S. agricultural exports to Cuba has gained the support of the U.S. dairy industry. Dairy Profit Weekly editor, Dave Natzke, reported Friday that National Milk and U.S. Dairy Export Council (USDEC) say the legislation introduced in both the Senate and House this spring would facilitate increased dairy trade to the island nation.

Both bills seek to remove administrative barriers that have arisen from a law passed in 2000, called the Trade Sanctions Reform and Export Enhancement Act, according to Natzke. Specifically, the new bills clarify a "cash-in-advance" requirement and authorize direct transfers of money between Cuban and U.S. banks. The bills would also ease travel restrictions for trade delegations between the two countries, and establish an ag export promotion program with Cuba.

National Milk and the USDEC believe Cuba holds promise as a market for U.S. dairy exports, Natzke said. The U.S. Census Bureau reports that U.S. dairy exports to Cuba peaked at about $30 million in 2004-05, but fell to about half of that in 2006 and 2008. That compares with New Zealand, which the Ministry of Foreign Affairs said sold about $97 million in dairy products to Cuba in 2008.

Turning attention to the farm specifically, Natzke reported that USDA has expanded a program designed to protect dairy farm income margins. The Livestock Gross Margin insurance program, launched a year ago in 29 states, was expanded to Kentucky, New Mexico, Tennessee and Washington. 

Under the program, dairy farmers can tailor insurance policies to their specific herd size, setting ceilings on feed prices and floors on milk prices, to lock in a gross margin. With the expanded program, producers in 33 states can purchase policies for 2010, beginning on July 31, according to Natzke.

(May 28, 2009) The Dairy Export Incentive Program (DEIP) is up and running again following a five year hiatus. National Milk’s, Chris Galen, said in his Thursday broadcast that “Beating on USDA’s doors paid off,” because “Now more than ever we really need the Dairy Export Incentive Program to help remove some surplus dairy products from this market,” and compete with products coming from Oceania and Europe.”

He said this will “Hopefully, be another tailwind for dairy prices at a time when obviously things aren’t looking too good.”

NMPF estimates that if all of the allotted allocation under international trade law is exported, it would equate to about 1.5 billion pounds of milk. Earlier in the week, USDA issued invitations for the full permitted amounts of nonfat dry milk (150.4 million pounds), cheese (6.7 million pounds), but only about half of the total permitted amount of butterfat (23.2 million pounds).   

The bottom line, according to Galen is, “This will help U.S. dairy producing companies compete at a time when world prices are very low.”

The DEIP ends June 30, but NMPF is optimistic that a similar quantity of dairy products will be exported in calendar year 2009.

“That’s the $64,000 question,” he said. “No one knows the answer, but I think even the most bullish of folks out there think it will be sometime in the fourth quarter or sometime next year.”  

Kurzawski believes the market could rebound sooner. The price of cheese could rise to the $1.30 mark and Class III futures could rise to a level of some profitability, depending on what happens to the price of feed grains the next two months.  

He understands it’s a desperate situation for the dairy industry, but export prices have been on the rise for May. “I think it’s going to bode well for U.S. prices,” he said. With the weakness of the U.S. dollar, our goods are going to be very competitive in the world market moving forward.

(May 26, 2009) Friday’s up tick on the block cheese price will have a lot of eyes watching to see if the rebound will be sustained this week. The University of Wisconsin’s, Dr. Robert Cropp, said in Tuesday’s DairyLine broadcast that he expects strength in the block price as we move into June and, while it was at $1.29 per pound in March, he pointed to the small decrease in April milk production. If milk output continues to slip, he believes block could be trading at $1.30 by the end of June.

“It’s the softness in the demand side,” explained Cropp, both on the export front and the domestic front so we have to get milk production trending below a year ago and, hopefully with the CWT program I think things will tighten as we move into the summer.

It’s a little peculiar that the barrel price is so far below the block price in that this is the grilling season and barrels normally get a little tighter, according to Cropp, so with the blocks strengthening, maybe the barrels will follow.

He also praised USDA’s announcement that it will reopen the Dairy Export Incentive program. The powder market is tightening, he said, and government price support purchases are slipping, so if the product is not overhanging the market is a positive factor for the industry.

(May 25, 2009) Joe O’Donnell, director of the California Dairy Research Foundation, was back in Monday’s “DMI Update” and discussed the difficult position dairy farmers are in with low milk prices and the desire to be environmental stewards of their farms.

Consumers are very interested in maintaining good quality air and water, O’Donnell warned, and “That influences their purchase decisions so dairy producers and the dairy industry needs to be responsive to that.”

That said, any management changes made on the dairy has to be based on “reasonable science,” O’Donnell said. “If we simply spend money without good reason, then we’re just adding to the cost of the product and the consumer is not going to like it.”

O’Donnell praised the University of California at Davis for research it has conducted on air and water quality measurements resulting from changes in management procedures so that “at the end of the day, we have proper science backing up all of the management procedures that we have on the dairy.”

The next step, according to O’Donnell, is through the California Dairy Quality Assurance program to educate producers on new technologies that are available, which help the bottom line as well as the environment.

“We want to be as efficient as possible,” O’Donnell concluded. “We have regulations coming down and we can’t control that so much, except to have them based on science, but then the objective here is to maintain the minimum cost of production, that is foremost to the dairyman and foremost for the consumer.”

(May 22, 2009) April butter stocks totaled 242.7 million pounds, up 30.2 million pounds or 14 percent from March but were down 8.8 million or 3 percent below April 2008, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued Friday afternoon.

The American cheese inventory, at 586.1 million pounds, was up 24.5 million or 4 percent from March and 43 million pounds or 8 percent above that of a year ago. Total cheese stocks amounted to 914.1 million pounds, up 19.5 million or 2 percent from March, and 58.2 million or 7 percent above those a year ago.

The Class IV advanced pricing factor became the “higher of” in driving the Class I value and the June MILC payment should be about $1.62 per hundredweight, plus the feed cost adjustor, according to market analyst, Alan Levitt.

The NASS-surveyed butter price averaged $1.2051 per pound, up 4.1 cents from May. Cheese averaged $1.1562, down 14.7 cents. Nonfat dry milk averaged 83.14 cents, up 1.3 cents, and dry whey averaged 23.23 cents, up 4.7 cents.

2-week Product Price Averages:

(May 22, 2009) While U.S. milk production is starting to moderate, Dairy Profit Weekly editor, Dave Natzke, turned our attention to dairy product demand in Friday’s broadcast. He reported that, according to the U.S. Dairy Export Council, 2009 dairy exports continue to lag far behind 2008’s record pace.

Overall first-quarter exports (January-March 2009) were valued at $502.4 million, down 51 percent from the same period a year earlier. On a volume basis, exports of nonfat dry milk, cheese, butterfat, fluid milk and whole milk powder are all down substantially from a year ago, he said.

Whey continues to be a bright spot in the export market. Dry whey exports are up 19 percent for the quarter, with total whey protein exports up 3 percent for the first quarter of 2009 compared to a year earlier.

March dairy exports were valued at $173 million, up 8 percent from February, but less than half the total for March 2008.

March imports were valued at $238 million, down 8 percent from February, but it’s the sixth consecutive month dairy imports have surpassed exports. Through the first five months (October 2008-March 2009) of fiscal year (FY) 2009, the dairy trade deficit is estimated at $409 million, according to Natzke.

There's better news on the domestic front, he said. Consumer Price Index (CPI) data released by the Bureau of Labor Statistics, shows April 2009 retail dairy prices were down 1.3 percent compared to March 2009, and down 5.1 percent compared to April 2008.

Retail whole milk prices are down nearly 17 percent from a year ago, while butter is down 11 percent, and cheese is down just over 1 percent. Those lower prices should help stimulate sales as we head into summer, Natzke concluded.

(May 21, 2009) Dairy importers may soon have to pay into the national dairy check off. The requirement is almost a decade in coming, according to National Milk’s Chris Galen in Thursday’s broadcast, and involved two farm bills. The USDA published a proposed rule May 19 on how it will calculate and assess it.

National Milk successfully lobbied for its inclusion in the 2002 farm bill but it was never implemented because the assessment was not being paid by all dairy farmers in all 50 states. That was corrected in the 2008 farm bill, he said.

Processors and opponents charge that this will invite a challenge at the World Trade Organization and or mean retaliation from other countries but Galen countered, “We have 10 other commodities assessing check offs, including big ones like beef, pork, and cotton, and we have never seen any kind of reaction from any of our trading partners.”

He encouraged farmers to write USDA in support of this because there is plenty of opposition from dairy importers who don’t want to have to pay however National Milk sees it as a “matter of fairness,” Galen said, “That, if dairy farmers pay to help to expand this market which they have been doing now for 25 years, we should have importers pay at least a portion of what dairy fa