Archived Cash Prices

Legal firms, such as the one in the Northwest that was involved in the Jack in the Box hamburger e-coli litigation in the early 1990s, are turning their attention to milk, according to Galen, and “This issue will be played out, not in the regulatory environment but in the courtroom.”

When asked how big of an industry this is, Galen answered, “A lot of it is underground because, while there are some states that allow raw milk purchases or cow share programs, other states prohibit it so it’s more of a grass roots movement and the patrons of raw milk claim that if you only work with a farmer that you know and trust, then the raw milk will be fine.”

That’s not always the case, according to Galen, because there have been incidents of some very serious illnesses tied to the consumption of raw milk in states as diverse as Connecticut, Pennsylvania, and Missouri, “So you know the environment is changing when the lawyers get in the pool and they start swimming around, looking for opportunities to litigate these cases.”

Galen believes this may affect the outcome of the whole raw milk popularity movement more than anything else.

When asked if this will invite more government involvement, Galen said that one of the challenges in this is that states have jurisdiction over in state sales of raw milk but those state regulatory agencies, be it agricultural or health department, don’t have the resources to control or supervise it to any great extent so, if in fact there is a greater legal liability on the part of producers and processors of raw milk, that may have as much impact on the outcome of this issue as anything that state governments can or cannot do.

Cheese Prices Won't Stay High Much Longer
(July 30, 2008) Downes-O’Neill dairy broker, Dave Kurzawski, doesn’t think cheese prices will stay high for much longer. He admitted the prices are unusually high but quickly added that milk and cheese markets haven’t followed historical or seasonal patterns either.

He reported that it didn’t take much effort to push the price above $2 but he still believes there plenty of cheese out there and it’s just a matter of when they bring it to the market. He believes that will happen in August.

Plant margins have improved the last three to four months, he said, but we have a waning demand situation and he looks for the price to fall below $2 in short order.

Dairy producers hope the price stays high to help offset their high feed prices and while Kurzawski has no argument there, the fact is, the fundamentals on the supply side are bearish and not bullish.

“If demand can carry the market, which is a big wild card” Kurzawski said, “Then we can stay at $2 plus for quite some time.” His belief is that the demand is not there right now but may resurface in the fourth quarter, but “If that was the case, then dairy producers would never have to operate in the red and there is some potential for that. The Class III futures could continue to move lower, he warned.

What does this mean for a producer’s risk management? Kurzawski said it’s critical to lock in feed costs as well as milk price to lock in a profit margin. Producers can still do that, he concluded, considering the Class III $19.11 average for the balance of 2008, and $19.20 average for 2009, as of early Tuesday morning.

“There’s still some good prices out there, he concluded, you have to sell the futures, sell a forward contract through your coop but there still are some put options and different strategies to employ but the bottom line is, lock in your profit margin.

Market Analysis with Alan Levitt
(July 29, 2008) Cheese prices continued to strengthen with Monday’s trading pushing the blocks up another penny, to $2.0775 per pound, and barrel to $2.0225, up a nickel and a quarter. Alan Levitt, editor of the CME’s Daily Dairy Report, said in Tuesday’s broadcast that “there’s less seasonality in dairy than there used to be but August is always an interesting time and we’re starting to get into August.”

A lot of factors come into play, according to Levitt, who pointed out that the September Class III milk price has been higher than the August price for 15 consecutive years. He called it “one of the most reliable patterns we have in this often unreliable dairy industry,” but he said “it tells us that cheese prices generally firm in August and there’s fundamental reasons why that happens.”

First, there’s less milk available for manufacturing as milk volumes continue to drop the next few months and he said milk production generally doesn’t start trending higher until November.

Milk yields are also at their lowest levels in July and August, according to Levitt. Furthermore, over the last three months, more than 160 loads of milk per week have been shipped out of the Southeast for processing but by mid August, Levitt says that will turn around and milk will begin to be imported, pulling from the surrounding regions to the tune of 400 to 500 loads a week over a 12 week period. That starts to be a real draw on the manufacturing side of the business, he warned.

Schools also begin to reopen over the next week or two, so fluid plants will gear up and that will pull milk away from the vat and the churn.

July is the slowest month of the year for fluid milk sales, according to Levitt, but August sales typically run 5 percent above those in July.

And, the CWT cull will take place over the next few weeks, Levitt said. That will only reduce the milk supply by about 0.2 percent, but “all these elements coming together should keep the milk supply pretty snug over the next four to six weeks.”

July Federal order milk prices are announced Friday, along with California 4a and 4 b prices. Levitt predicts the Federal order Class III price will come in at $18.27. That would be a drop of almost $2 from June, due to the drop in cheese prices in early July. The recovery in cheese only happened within the last week and a half so that won’t play out until the August price, he concluded.

DMI Update
(July 28, 2008) A joint information session on animal care was recently held for beef and dairy producers and Dairy Management Incorporated’s, David Pelzer, reported in Monday’s “DMI Update” that beef and dairy have a “common challenge” in maintaining consumer confidence in dairy and beef products, relative to how animals are cared for.

Beef and dairy representatives are communicating with the food industry to inform them of beef and dairy’s shared concerns, Pelzer said, and assure them that animals raised with high standards of care will provide safer and better tasting products.

When asked if this joint effort wasn’t a proactive approach to animal welfare concerns Pelzer answered, “This is a very proactive approach, to be able to say with confidence that beef and dairy producers are doing the right thing in caring for their animals and help instill greater consumer confidence in our meat and dairy products.”

Dairy Markets Weekly Recap
(July 25, 2008) Block cheese closed the week at $2.0675 per pound, up 6 3/4-cents and 22 1/4-cents above a year ago when the blocks lost 11 1/2-cents and were trading at $1.8450. The Daily Dairy Report credited strong export demand for block cheese but says exports for barrel are non-existent.

Barrel, after losing 6 1/2-cents early in the week, gained it all back and closed Friday at $1.97, unchanged on the week, 14 cents above a year ago, and almost a dime below the blocks. Seven cars of block were sold this week and 12 of barrel. The NASS-surveyed U.S. average block price hit $1.9218, down 2.9 cents. Barrel averaged $1.9313, down 0.3 cent.

Butter closed at $1.54, up a penny on the week, and 2 cents above a year ago. Only three cars traded hands. NASS butter averaged $1.5127, down 2.8 cents. Nonfat dry milk averaged $1.4099, up 1.3 cents. Dry whey averaged 25.83 cents, down 0.9 cent.

AFACT Celebrates One Year Anniversary at Summit
(July 25, 2008) Dairy producers and leaders of several major agricultural companies met this week for a summit of the 1400 member American Farmers for the Advancement and Conservation of Technology (AFACT) and celebrated their one year anniversary. Dairy Profit Weekly editor, Dave Natzke, was there and reported in Friday’s DairyLine that discussion centered on what is viewed attacks and restrictions on science and technology in the production of milk and other foods.

A main theme of the summit, Natzke said, was to emphasize that farmers can reconnect with food retailers and consumers to promote, not only the efficiencies of modern agriculture, but also share their passion and values on sustainable and environmentally sound food production.

One of the technologies being assailed, he said, is recombinant bST and a new Penn State University study revealed that despite marketing claims and milk labels, there’s little or no difference in the composition of milk produced conventionally, as rbST free, or organically.

Results of the study were published in the July issue of the Journal of the American Dietetic Association and analyzed 334 samples of milk purchased from grocery stores throughout the U.S.

The samples were tested for antibiotics, bacteria, nutrients, and hormones, according to Natzke, and the study found that none of the samples contained any antibiotics, regardless of how it was produced or labeled.

Conventional or regular milk had the lowest level of bacteria, he reported, with rbST-free milk having the highest. There were no differences in milk fat, lactose, or solids among the three label types. Protein levels were slightly higher in the organic milk than the other two.

Conventional milk contained the lowest level of estrogen and progesterone and insulin like growth factor or IGF1 was similar to both regular and rbST-free milk.

The main difference between the three, according to the study, was retail price, with rbST-free and organic milk running $1-$4 per gallon higher than regular milk.

CWT Auditors are Visiting Farms
(July 24, 2008) National Milk’s Chris Galen reported in Thursday’s broadcast that CWT auditors are visiting the farms whose herd removal bids were accepted to make sure things are “above board” to inspect the herds and the recent milk production records against the historical information that was supplied when the bids were first mailed in June.

The animals then get tagged and sent to slaughter by a set date. Payment is not made until the slaughter house sends the tags to the CWT office. Bid information and final data will not be made public until the end of summer, Galen said.

A total of 609 bids were submitted from farmers in 41 states and, while the tally is a little less than half of the previous buy out effort, when compared to the 2005 herd removal, the tally is close and the acceptance rate is in line with historic averages, according to Galen.

The overriding mantra is to take out the most amount of milk at the most economical cost, Galen said, and “I think we’ve done that in 2008.”

Most of the milk and cows will come out of the West, consistent with previous herd removals, according to Galen, though the largest number of accepted bids came out of the Midwest.

Sanitation the biggest factor in controlling flies
(July 23, 2008) Fly control was our topic in one of DairyLine’s special features Wednesday, called “The No Fly Zone.” Bill Baker talked with Tom Spalding, of California-based Spalding Labs.

Spalding began by pointing out that flies are “sensitive creatures that are hard to raise.” Dairymen will think that’s the craziest thing they’ve ever heard, he said, but it’s true and Spalding knows that because they raise billions of them as part of the process they use to produce their fly predators.

Flies have very specific nutrition, moisture, and temperature requirements, he said, and if you change those conditions on your dairy, you will go a long way in reducing your fly population.

Overall sanitation is the single biggest factor, according to Spalding, and you need to remember the time it takes in a fly’s life cycle and how far a fly will travel.

Spalding said it takes at least eight days to go from an egg to a fly at summer time temperatures so, “If you can remove manure more frequently than eight days, wherever you take that manure, that is where the flies will be and if it’s far away, they won’t be coming out next to your barn.”

If you clean manure out every three weeks, you’ll have several generations of flies to deal with, he cautioned, but if you clean and haul it away more frequently, like every seven days, you’ll dramatically reduce the fly population at your barn.

Also, flies only travel a limited distance, typically about a quart of a mile for a house fly, according to Spalding, so the further you take the manure away, the less you’ll have around the barn. Spaulding suggests dumping it where you will apply it when your crops come off so the flies that do come out of that manure, not all of them will make it back to your barn.

The company offers a non chemical treatment that uses what they refer to as “a natural biological control,” made up of tiny fly predators. These are insects that are natural enemies of flies but do not bother people or animals. The Fly Predators are released around manure areas and fly populations are dramatically reduced, according to Spalding. For more information, log on to www.spalding-labs.com.

The American cheese inventory stood at 580.6 million pounds, up 2 percent or 12.2 million pounds from May, and 3 percent or 14.7 million above a year ago. American cheese stocks were revised down 1.2 million pounds. Total cheese stocks amounted to 905.1 million pounds, up 3 percent or 23.8 million from May and up 2 percent or 13.4 million below a year ago. May stocks were revised down 6.2 million pounds.

Market Analysis with Bob Cropp
(July 22, 2008) Monday cash cheese market pretty much ignored Friday's June Milk Production report and the block price even inched up a half cent to the wonderment of Dr. Robert Cropp, Emeritus professor at the University of Wisconsin at Madison. Cropp said in Tuesday’s DairyLine that this is the second month in a row with a 3 percent growth.

The last Dairy Products report also showed American cheese production was running about 3 1/2 percent above a year ago, he said, and while stocks were down, sales appear to be soft.

“I could see prices strengthen a little later on, in August or September,” Cropp said. “It has me a little puzzled why we had an increase after a very strong milk production report.”

When asked if this could be attributed to exports, Cropp acknowledged that exports for the first four months of 2008 have been running about 55 percent ahead of a year ago but indications were that the high prices were softening that demand. Exports have helped, he admitted, but said it seems like a pretty strong market, considering milk production, cheese output, and domestic sales.

The weaker dollar makes U.S. products more viable, even with the higher prices, and Cropp pointed to the lower exports from the Oceania region due to draught.

Switching to the butter market, Cropp said it remains strong and, while we have seen stronger prices in some years, the production of butter to meet demand for new butter has been tight, with cream supplies going to ice cream. That has drawn down old stocks, he said, though stocks remain high. On the other hand sales have been strong so far this year and butter production has had a hard time keeping up.

(July 21, 2008) Dairy producers, processors, and manufacturers have announced “an unprecedented agreement” to collaborate on what is termed “pre-competitive initiatives through a new Innovation Center for U.S. dairy to accelerate industry innovation throughout the supply chain to increase dairy sales to consumers.

Speaking in Monday’s “DMI Update,” David Pelzer said this effort puts dairy producers, processors, and manufacturers together in one room to talk about the priority issues facing the industry.

Six priorities were named, he said, and include sustainability, health and wellness, product development, information and communications, regulatory issues (with the exception of pricing), consumer confidence, and globalization. The idea is to identify opportunities and solutions to problems, according to Pelzer, with the ultimate goal to sell more milk.

One example Pelzer gave Monday was selling milk to school districts across the country and the challenges that entails, especially for flavored milk in agreeing to sugar and calorie contents so the whole industry can sell more milk through school districts.

This was being done before, he admitted, but it was in a “piece meal way,” and didn’t get the key players in the industry together and “that’s what makes this idea so powerful,” he concluded.

Innovation Center for U.S. Dairy Offers Unprecedented Opportunity

for Industry Collaboration to Increase Sales

Producers, processors and manufacturers agree to address pre-competitive priorities

Rosemont, IL – Dairy producers, processors and manufacturers today announced an unprecedented agreement to collaborate on pre-competitive initiatives through a new Innovation Center for U.S. Dairy (Innovation Center). The goal is to accelerate industry innovation throughout the supply chain to increase sales in an increasingly competitive consumer marketplace.

The Innovation Center was established by America’s dairy farmers through Dairy Management Inc.™ (DMI), the nonprofit organization that manages the producer checkoff program. It is the first of its kind to bring together milk producers, processors and manufacturers under one organization to collaborate on major issues affecting the dairy industry.

Through the Innovation Center, the entire industry will work together to address six priorities established by its board of directors comprising a blue-ribbon group of executives and chairs from the nation’s leading producer, processor and manufacturing organizations. The priorities include:

· Sustainability

· Health and Wellness

· Product Development, Information and Communications

· Regulatory Issues (excludes pricing)

· Consumer Confidence

· Globalization

“Our future success as an industry depends on our ability to be more responsive to consumer needs and more competitive in the consumer marketplace,” said Larry Jensen, chair of the Innovation Center Board of Directors and president of Denver-based Leprino Foods Company. “By working together, we will develop new approaches to ensure that we meet consumer demand for the products they want, when and where they want them.”

The competitive marketplace and vast portfolio of product choices available to consumers is why it is increasingly important for the dairy industry to work together to address industry-wide, pre-competitive priorities, said Jensen. Doing so allows the industry as a whole to tap into expertise and resources throughout the dairy value chain, from farm to consumer table, to meet unmet consumer demand, he said.

“The Innovation Center represents a tremendous opportunity to extend the effectiveness of the checkoff program,” said Clyde Rutherford, treasurer of the Innovation Center Board of Directors and president of Dairylea Cooperative Inc., East Syracuse, New York. “It leverages industry-wide resources to address consumption of milk and dairy products to create the kind of demand growth dairy farmers want and need.”

The Innovation Center will move forward its priorities through enlisting cross-industry Operational Committees charged with developing action plans. The action plans will also recommend industry funding and human resources needs to support these efforts.

“This is an exciting and crucial moment in time for the dairy industry,” said Thomas P. Gallagher, chief executive officer of the Innovation Center and chief executive officer of DMI. “We, as dairy leaders, recognize that transforming the industry requires a different approach to working together, and the Innovation Center provides the forum to address industry opportunities and issues and establish realistic priorities. Industry-wide commitment will ensure that we meet the ever-changing needs of our consumers, not only today, but well into the future.”

Other members of the Innovation Center Executive Committee are vice chair Richard Clauss, founding chair of Hilmar Cheese Co. (Hilmar, Calif.), and secretary Miriam Erickson Brown, president and chief executive officer of Anderson Erickson Dairy (Des Moines). Two at-large Executive Board members include Chris Policinski, president and chief executive officer of Land O’ Lakes (St. Paul, Minn.), and Rick Smith, chief executive officer of Dairy Farmers of America (Kansas City, Mo.).

It is the policy of The Innovation Center for U.S. Dairy to fully comply with all applicable antitrust laws and requirements. Each participant is encouraged to exercise independent business judgment.

#####

Innovation Center for U.S. Dairy provides a forum for the entire dairy industry to work together to offer consumers the products they want—when and where they want them—and increase dairy sales through pre-competitive collaboration. The Innovation Center combines the collective resources of the industry to provide consumers with nutritious dairy products and foster industry innovation for healthy people, healthy products and a healthy planet. The Board of Directors for the Innovation Center represents leaders from across the dairy value chain, including producers and chief executives of the nation’s leading processors, manufacturers and brands. The Innovation Center is supported and staffed by Dairy Management Inc.™

Production per cow in the 23 major States averaged 1,737 pounds for June, 25 pounds above June 2007. The number of milk cows on farms in the 23 major States was 8.46 million head, 158,000 head more than June 2007, and 1,000 head more than May 2008.

California output was up 2.3 percent from a year ago, thanks to 37,000 more cows and a 5 pound gain per cow. Wisconsin was up 1.6 percent, on a 5,000 cow increase and 20 pounds more per cow. New York was up 3.7 percent, thanks to an 60 pound gain per cow. Cow numbers were unchanged. Idaho was up 8.4 percent, on 42,000 more cows but no change in pounds per cow. Pennsylvania was up 1.9 percent. Cow numbers were down 3,000 but output per cow was up 40 pounds per cow. Minnesota was up 2.2 percent thanks to 3,000 more cows and 25 pounds more per cow.

The biggest increase was Texas, up 16.3 percent. New Mexico had the second biggest increase, up 10.2 percent. The biggest decline in milk production was Oregon, down 5.3 percent, followed by Kentucky with a 2.9 percent drop. Text | PDF |

Dairy Markets Weekly Review
(July 18, 2008) The cash cheese market strengthened this week as it awaited Friday afternoon’s June Milk Production report. Forty pound block closed at $2.00 per pound, up 6 3/4-cents on the week and 15 1/2-cents above a year ago, when the blocks tumbled 11 1/2-cents, to $1.8450.

500-pound barrel closed Friday at $1.97, up a nickel on the week and 13 cents above a year ago, when the barrels lost a dime. No block traded hands this week but three cars of barrel were sold. The NASS-surveyed U.S. average block price fell to $1.9512, down 4.3 cents. Barrel averaged $1.9346, down a nickel.

Butter fell to $1.53, down 2 cents on the week, but a penny above a year ago. Four cars were sold on the week. NASS butter averaged $1.5406, up 3.2 cents. NASS nonfat dry milk averaged $1.3957, down slightly, and dry whey averaged 26.67 cents, down 0.6 cent.

August F.O. Class I Base Down $2.31
(July 18, 2008) The August Federal order Class I base milk price was announced this morning by the Agriculture Department at $18.47 per hundredweight, down $2.31 from July, and $3.29 below August 2007. The Class III pricing factor was the “higher of” in driving the Class I value.

The NASS surveyed butter price averaged $1.5205 per pound, up 6 cents from July. Nonfat dry milk averaged $1.3957, up 4.8 cents. Cheese averaged $1.9792, down 23.6 cents, and dry whey averaged 26.9 cents, down almost a penny.

Dairy Feed Crystal Ball Is Partly Cloudy
(July 18, 2008) The dairy export picture was just one bit of good news reported by Dairy Profit Weekly editor, Dave Natzke.

USDA’s latest data shows the value of U.S. dairy product exports hit $380 million in May, setting a new record and surpassing May dairy product imports by $133 million. U.S. cheese, nonfat dry milk, skim milk powder and butterfat are among the products most sought after in the export market, according to Natzke.

So far in fiscal year 2008, U.S. dairy product exports, at almost $2.8 billion, total 90 percent more than the same period last year, while imports are up just 17 percent, resulting in a dairy trade surplus of more than $600 million. And, if the export pace continues, Natzke said, fiscal year 2008 annual exports could near last year’s record of $3.1 billion in just nine months.

State by State	Milk Cows Change from June 2007	Output Per Cow Change from June 2007	Milk Production Change from June 2007
Arizona	+4,000	-15 lbs.	+1.4%
California	+37,000	+5 lbs.	+2.3%
Colorado	+10,000	-2 lbs.	+7.4%
Florida	-4,000	+25 lbs.	-1.6%
Idaho	+42,000	Unchanged	+8.4%
Illinois	-1,000	+15 lbs.	Unchanged
Indiana	-1,000	-25 lbs.	-2.1%
Iowa	-2,000	-25 lbs.	-0.6%
Kansas	+2,000	+110 lbs.	+8.3%
Kentucky	+2,000	-60 lbs.	-2.9%
Michigan	+14,000	-65 lbs.	+0.6%
Minnesota	+3,000	+25 lbs.	+2.2%
Missouri	-2,000	Unchanged	-2.2%
New Mexico	+5,000	+155 lbs.	+10.2%
New York	Unchanged	+60 lbs.	+3.7%
Ohio	+6,000	+30 lbs.	+4.2%
Oregon	-1,000	-75 lbs.	-5.3%
Pennsylvania	-3,000	+40 lbs.	+1.9%
Texas	+29,000	+130 lbs.	+16.3%
Vermont	+1,000	+40 lbs.	+3.3%
Virginia	-2,000	+10 lbs.	-1.4%
Washington	+10,000	Unchanged	+4.3%
Wisconsin	+5,000	+20 lbs.	+1.6%
23 State Total	+158,000	+25 lbs.	+3.4%

Advanced Pricing Factors	Aug 2008	July 2008	June 2008
Class I Base	$18.47/cwt.	$20.78/cwt.	$18.18/cwt.
*The Base Skim Milk Class I:	$13.05/cwt.	$15.70/cwt.	$13.17/cwt.
Class III skim:	$13.05/cwt.	$15.70/cwt.	$13.17/cwt.
Class IV skim:	$11.04/cwt.	$10.61/cwt.	$10.19/cwt.
**Butterfat	$1.6804/lb.	$1.6086/lb.	$1.5625/lb.
Class II Skim price:	$11.74/cwt.	$11.31/cwt.	$10.89/cwt.
Class II NFS price:	$1.3044/lb.	$1.2567/lb.	$1.2100/lb.

	Aug 2008	July 2008	June 2008
Butter	$1.5205/lb.	$1.4607/lb.	$1.4223/lb.
NFDM	$1.3957/lb.	$1.3479/lb.	$1.3006/lb.
Cheese	$1.9792/lb.	$2.2156/lb.	$1.9527/lb.
Dry Whey	$0.2690/lb.	$0.2774/lb	$0.2686/lb.