Lower commodity and milk prices are impacting farmland values. Dairy Profit Weekly editor, Dave Natzke, gives us an update on quarterly federal reserve bank surveys, and summarizes an annual USDA report on land values and rental rates on tomorrow's DairyLine broadcast and Dr. Paul Chandler, has his weekly “Nutrition Update” in our second half.

Good information makes for good decision making
(February 25, 2009) Good information makes for good decision making and, with that in mind, DairyLine listeners were informed in Wednesday’s broadcast of a free “webinar” on March 18 by the parent company of Downes-O’Neill dairy brokers, FC Stone.  

The one hour session will address dairy and meat prices which may be more volatile than ever in the months ahead, according to dairy broker Eric Meyer. Meyer explained that a webinar is like a traditional “meeting” where speakers are brought in to provide information to attendees only it’s done through an internet and telephone connection.

The webinar is designed for dairy producers, processors, end users, or anyone interested to log on with their computer and call into a conference line and be able to watch the presentation from their home, listen, and participate. Even if one does not have internet access, one can still participate through a phone line.

Meyer said the webinar is a good opportunity for industry participants to get more of a background and history of the dairy and meat markets and dairy producers will learn what meat analysts are saying about the beef market and see the latest market outlooks and tools that are available to them and to ask the questions they have on their minds. Register at www.dairy.nu or call 1-800-231-3089.

(February 24, 2009) Cheese prices plunged Monday, likely in response to Friday’s Cold Storage data, according to the University of Wisconsin’s, Dr. Robert Cropp, in Tuesday’s DairyLine. Cheese production has been pretty strong, he said, running about 6 percent ahead of a year ago on Cheddar.

Cropp said he thought cheese prices were perhaps a little too strong. He was encouraged by the movement however reports indicate that production is slowing and featuring is happening at the retail level but foodservice is slow.

“It’s the restaurant business that’s a big share of that,” he said. “That remains very soft but, as retail prices come down, there’ll be more improvement in sales.”

He believes prices will strengthen despite USDA’s projections being “pretty pessimistic.” He looks for $1.30-$1.40 per pound by summer or the second half of the year.

On a more positive note, butter crept up a penny and a quarter Monday, the first movement in 10 trading sessions. Butter stocks are not quite as burdensome, according to Cropp, and retail sales have been pretty good as features have driven sales. Cream supplies are also going into other products such as cream cheese for the Easter/Passover holiday, according USDA.

(February 23, 2009) Dairy Management Incorporated’s, David Pelzer, discussed the February 16 launch of a new partnership between the dairy check off and Domino’s Pizza.

Pelzer reported that the check off is working with the pizza industry to find ways to sell more cheese on pizza.

Entitled the American Legends promotion, the chain introduced six new pizzas that use up to 40 percent more cheese and Pelzer expects the partnership will greatly help the sales of various kinds of cheese used on pizza.

A teleconference was held February 16 and it was pointed out that if we can add one additional ounce of cheese per pizza, we would sell 250 million more pounds of cheese per year or the equivalent of as much as 2.5 billion pounds of milk.

Dominos uses about 10 million pounds of cheese per year, according to Pelzer, and he anticipates that this new line of pizzas will add about 100 million pounds of milk sold and with Dominos being a leader in the pizza industry we really feel this could have an influence on other pizza companies to also add cheese to their pizzas.

Dominos also carries a message on their delivery boxes congratulating America’s dairy farmers and one of the TV commercials called the “Secretary of Taste” compliments dairy farmers for producing the milk that goes into the cheese that goes on Domino’s pizza.

The check off is also priming the promotion pump by investing about $12 million over two years but that’s complimented by Dominos who are investing about four to five times that amount. More details are posted on the check off website at www.dairycheckoff.com.

The American cheese inventory for January stood at 539.5 million pounds,  relatively unchanged from December (up 1.4 million pounds).  January stocks were up 45.1 million pounds or 9 percent above a year ago. December American cheese stocks were revised down nearly 3.6 million pounds. 

Total cheese stocks amounted to 862.3 million pounds, up 1 percent or 10.3 million pounds from December, and up 80.9 million pounds or 10 percent from a year ago. December stock data was revised up 5.4 million pounds. Full Report:  PDF

(February 20, 2009) CME cash cheese prices moved higher for the fifth consecutive week but weakened at week’s end as lots of product made its way to the market. The 40-pound block price climbed to $1.33 but ended the President’s Day holiday-shortened week at $1.31 per pound, up 7 cents on the week, but 76 1/4-cents below that week a year ago. The 500-pound barrels closed Friday at $1.27, up 4 cents on the week, but 75 cents below a year ago. Thirty six carloads of block traded hands on the week and 14 of barrel but a lot of offers went uncovered. The NASS-surveyed, U.S. average block price hit $1.1310, up 2.7 cents. Barrel averaged $1.1477, up 2.8 cents.

Butter closed Friday at $1.1025, unchanged on the week, but 7 1/2-cents below a year ago. Nothing was sold all week. NASS butter averaged $1.0793, up 0.9 cent. NASS nonfat dry milk averaged 81.87 cents, down 0.2 cent. Dry whey averaged 15.55 cents, up 0.2 cent on the week.

Price support purchases for the week amounted to 433,554 pounds of butter and 4.7 million pounds of nonfat dry milk, bringing the respective cumulative totals for the year so far to 4.6 million pounds and 174.7 million respectively.  

MILC March Payment Substantially Higher Than February
(February 20, 2009) Today’s Class I price announcement confirms that the March payment is substantially higher than February, and is likely to be the highest payment for at least the next several months.  The rates projected for February and March are minimum payments. 

They could, in theory, be increased (only) by the feed price adjustor when the final numbers are released, but that looks very unlikely. (http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRD3247515)

                                               
        MILC Payment Rates and Projections             
        Year    Boston Class I  Payment        
                Actual  Target  Rate           
        FY 2009                                
        October '08     18.78   18.48   0.0000         
        November        20.58   18.10   0.0000         
        December        18.68   17.76   0.0000         
        January '09     18.99   17.78   0.0000         
        February        13.97   16.94   1.3365         
        March   12.68   16.94   1.9170         
        April   13.39   16.94   1.5967         
        May     13.72   16.94   1.4505         
        June    14.14   16.94   1.2600         
        July    14.74   16.94   0.9916         
        August  15.73   16.94   0.5428         
        September       16.62   16.94   0.1422         
        FY 2010                                
        October '09     17.24   16.94   0.0000         
        November        17.47   16.94   0.0000         
        December        17.83   16.94   0.0000         
        January '10     17.91   17.03   0.0000         
        February        18.04   17.04   0.0000         
        March   18.03   17.04   0.0000         
        April   18.17   17.15   0.0000         
        May     18.17   17.15   0.0000         
        June    18.41   17.25   0.0000         
        July    18.43   17.25   0.0000         
        August  19.71   17.19   0.0000         
        September       20.10   17.19   0.0000         
        Projections based on futures as of 2/20/2009.      

There was no word on any MILC payment but that could come next week. National Milk’s, Roger Cryan, expects the February payment to be at least $1.3365 per hundredweight, depending on the feed cost adjustor, and looks for $1.9170 for March. That should be the peak for the next several months, he said.

The NASS-surveyed butter price averaged $1.0731 per pound, down 1.8 cents from February. Nonfat dry milk averaged 81.95 cents, down 1.4 cents. Cheese averaged $1.1414, down 14.8 cents, and dry whey averaged 15.45 cents, down 1.6 cents from February.

2-week Product Price Averages:

(February 20, 2009) U.S. dairy farms keep getting bigger but there are fewer of them, according to the USDA’s annual summary of dairy operations. Dairy Profit Weekly editor, Dave Natzke, reported in Friday’s broadcast that herds with 500 or more cows continues to grow as a percentage of total U.S. herds and the percentage of U.S. milk production.  

Herds with 500 or more cows were estimated at 3,350 in 2008, up about 30 from a year earlier. And, while they represent just 5 percent of U.S. dairy herds, those herds contained about 55 percent of all U.S. dairy cows and produced about 59 percent of U.S. milk in 2008.

Herds with 200 cows or fewer fell by about 2,600 last year and represented about 32 percent of U.S. cows, but produced less that 29 percent of the milk in 2008.

Before jumping to any conclusions about large corporate farms, Natzke cautioned that USDA’s latest Ag Census showed that well over 90 percent of all U.S. dairy farms are still owned by individuals, families or family partnerships.

Meanwhile, Statistics Canada reported this week that, unlike the U.S., Canada's dairy cow and heifer numbers are down from a year earlier. There were about 978,000 cows on Canadian farms on January 1, down 16,000 from a year ago. One year or older heifers were estimated at 456,000, down 15,000 from last year. Interestingly, about 70 percent of all Canadian cows and heifers are located in just two provinces, Quebec and Ontario, Natzke concluded.  

January Milk Production up 1.0 Percent
(February 19, 2009) Milk production in the 23 major States during January totaled 14.9 billion pounds, up 1.0 percent from January 2008. December revised production at 14.7 billion pounds, was up 1.8 percent from December 2007. The December revision represented an increase of 44 million pounds or 0.3 percent from last month’s preliminary production estimate. 

Production per cow in the 23 major States averaged 1,746 pounds for January, 5 pounds above January 2008. The number of milk cows on farms in the 23 major States was 8.51 million head, 58,000 head more than January 2008, and 12,000 head less than December 2008. 

2008 Annual Milk Production up 2.3 Percent from 2007 
The annual production of milk for the U.S. during 2008 was 190 billion pounds, 2.3 percent above 2007. Revisions to 2007 production increased the annual total 52 million pounds. Revised 2008 production was up 293 million pounds from last month's publication. 

Production per cow in the U.S. averaged 20,396 pounds for 2008, 192 pounds above 2007. The average annual rate of milk production per cow has increased 14.8 percent from 1999. The average number of milk cows on farms in the U.S. during 2008 was 9.32 million head, up 1.4 percent from 2007. The average number of milk cows was revised up 44,000 head for 2008.  Text | PDF | CSV

Farmer Funded CWT Wraps Up Sixth Herd Retirement
(February 19, 2009) The farmer-funded CWT self-help program has wrapped up its sixth herd retirement. National Milk’s Chris Galen reported in Thursday’s DairyLine that this was one of the largest removals, considering the number of cows and the amount of milk removed.  

The actual cow number was 50,630 that produced 976 million pounds of milk. There were 186 herds removed from 33 states along with 1200 bred heifers. The 186 accepted herds came out of 471 bids that were submitted last fall.

There were rumors recently of a mega herd removal program. Some consider the CWT program to be a “drop in the bucket” as far as the number of cows removed but Galen pointed out that the last CWT removal was only done six months following the previous one in the summer of 2008 so, when you put the two together, you have removed 1.4 million pounds of milk from about 76,000 cows, “a pretty significant reduction.”

Galen admitted that the gravity of the economic situation facing the dairy industry is much larger than it was six or eight months ago but going forward, CWT will “hopefully bring more resources to bear on this,” as members have approved a two year commitment to the CWT to “deal with this economic imbalance that we are facing right now.”

The export portion of the CWT will likely remain fairly quiet for the time being, Galen said, considering where international dairy prices are. He said it doesn’t make as much sense to use the export assistance program, compared to the “bang for the buck” derived from a herd retirement program but this is all predicated on getting a two thirds majority of the milk committed to the program and “once we have that we’ll look at all the tools we have available to us to have a maximum impact on farmer’s income.”

(February 17, 2009) We hear a lot about energy deficiency in this country but there’s also an energy deficiency on the dairy farm and it’s in the cows, according to Dr. Kevin Leahy, Director of Dairy Technical Service for Land-O-Lakes-Purina Feeds. Leahy talked about Propel Energy Nugget in Wednesday’s DairyLine and said it’s a highly palatable, high energy product specifically formulated to be used as a nutritional supplement for lactating and post fresh transition cows.

I asked if this was a good time for dairy farmers to try something new when they’re looking at cutting expenses. Leahy responded saying, “The dairy farmer doesn’t want to cut expenses to the point that it adversely affects milk production because milk is still paying the bills.”

Propel is cost effective and will not have an adverse affect on milk output, according to Leahy and benefits the cow because it’s such a high energy source of fat when compared to other ingredients such as cottonseed or distiller’s grains.

Propel contains about twice the energy, he said, both in metabolizable energy and net energy for lactation. It comes in a nice concentrated form and, because it’s so palatable, you won’t have any adverse effect on dry matter intake and dry matter intake is what fuels milk production.

The product is said to have a macro encapsulation which is a new patent pending technology that was developed by Land O Lakes-Purina Feeds that increases the energy density in fat content through an extruded particle that is more than twice the density of standard products.

Typically, this technology is found in aqua culture type feeds and the most amount of fat that they have been able to get into a particle is about 20 percent. Propel boasts 50 percent fat in this extruded particle, Leahy said.

Land O Lakes has built a $20 million plant in Russell, Kansas to produce this product. For more information, contact your local Land O Lakes-Purina Feeds dealer or log on to www.propelnugget.com.

Herd size is forecast to decline slightly to an average of 9.17 million cows with increased dairy cow slaughter later in the year. At present, the forecast assumes no additional herd buyouts through CWT(Cooperatives Working Together).

The contraction is expected to be sharpest in the second half of the year as poor returns early in 2009 force a sharper response from producers. Output per cow is expected to continue to rise, but by less than 1-percent. The assumption is that liquidation would remove lower producing cows, raising the average yield of the remaining herd.

Complicating this assumption is that the number of replacement heifers, while slightly lower than last year, remains relatively high. The milk-feed price ratio could decline further in 2009 as falling milk prices trump any declines in feed prices.

For products, the central problem is that domestic demand is not sufficient to absorb the available supplies, according to the Outlook. As a result, prices have declined sharply and are expected to remain well below 2008 levels throughout the year.

U.S. commercial dairy exports softened in fourth-quarter 2008, and total milk equivalent exports on a fats equivalent basis are forecast to reach only 5.1 billion pounds in 2009. The same forecast on a skims solids basis is for 19.0 billion pounds of milk equivalent to be exported. Such totals are a sizable retrenchment from 2008s exports of 8.7 billion pounds (fats basis) and 26.0 billion pounds (skims/solids basis).

While global recession has reduced demand, slow sales may be compounded by the recent decision by the European Union to subsidize exports of nonfat dry milk (NDM), whole milk powder (WMP), cheese, and butterfat.

Total domestic commercial use in 2009, on a fats basis, is forecast at 185.6 billion pounds, less than a 1-percent increase from that of 2008. Dairy production expanded over 4 percent on a milk equivalent basis in December, and butter production was 10 percent higher, but total cheese production increased by only 1 percent. 

NDM production was substantially higher in December, year-over-year. Lactose and whey protein concentrate production partially compensated for the 6.5-percent decline in dry whey production for human consumption.

Increased availability of milk and weak demand are leading to inventory building in some products, notably cheese and NDM. The increase in dairy products production will keep prices low but are also expected to prompt sales, even in a weak economy. Lower production in 2009 should ultimately ease the supply-demand imbalance, and prices could firm later in the year.

Butter is moving to the Commodity Credit Corporation. The Government has been purchasing NDM since last fall. Removals are expected to be heaviest in the first half of the year, dropping off as reduced production firms prices in the second half.

Cheese prices are forecast much lower in 2009 at $1.180-$1.250 per pound. Likewise, butter prices will be lower in 2009, averaging $1.080-$1.180 per pound.

Prices for dry products will also decline this year but not as drastically because prices for those products slid considerably in 2008. NDM prices are forecast at 80-86 cents per pound and whey at 16-19 cents per pound in 2009. 

Based on product price forecasts, milk prices will plunge in 2009 from those of 2008. The Class IV price is expected to be $9.35-$10.15 per cwt, and the Class III price is projected at $9.70-$10.40 per cwt. The all milk price is expected to be $10.95-$11.65 per cwt in 2009.

Link to actual report

(February 17. 2009) Cheese prices continued to move higher the second week of February, the fourth consecutive week of gains. Allan Levitt, editor of the CME’s Daily Dairy Report, said in Tuesday’s broadcast that dairy farmers should be encouraged by the gains and that blocks have moved up in 12 of the last 16 trading sessions, gaining 17 cents since January 22.

It started with bargain hunting, according to Levitt, as the low prices brought people off the sidelines but now it has become a buyer’s market. Users are starting to put in orders before prices go higher, he said, and “that becomes a self-fulfilling prophecy and continues to drive the price up.”

March Class III futures have increased about 80 cents since mid January. That’s good news, according to Levitt, and the rest of the board has increased as well but he warned there’s still a lot of premium left. The September contract is around $14.00, he said, and that translates into a cheese price of around $1.60. “That’s six months away and it’s only 36 cents away so maybe we get there.”

It’s likely that milk production will start to pull back throughout this spring, Levitt said. The January Milk Production report will be out Thursday and he expects a 1.2 percent increase in the 50 states but cautions that the weakness of the global market could weigh on the U.S. market for awhile.

Oceania Cheddar cheese is trading at $1.00-$1.22 per pound and that could put a ceiling on U.S. prices. There’s also a growing inventory of nonfat dry milk and butter continues to move to the government and, in last week’s supply-demand estimate, USDA forecast that U.S. dairy exports to drop about 30 percent in 2009. A lot of that will be powder, he said, and without export markets, all that powder will go to the government and prices will likely remain near 80 cents per pound for awhile and that keep the Class IV milk price near $10.

“If you have a Class IV price near $10,” Levitt concluded, “It’s tough for the Class III price to move much higher than $14.” In the last eight years there was only six times that the Class III was $4.00 more than the Class IV and it’s never happened more than two months in a row so “that tends to put a limit on things.”  

Mycogen Seeds Offers Nutritional Value and Savings with BMR

(February 13, 2009) DairyLine's Bill Baker talked with California dairy producer Vernal Gomes at this weeks World Ag Expo. Gomes represented Mycogen Seeds at Expo and he talked about Mycogen's Silage Specific corn hybrids in Fridays DairyLine.

He reported that milk prices were certainly the key topic at Expo but pointed out that Mycogen has some answers to the economic crunch dairy farmers are experiencing by addressing issues in rations at the dairy level and lessen the costs with Mycogen's Brown Mid Rib (BMR) silage corn.

He talked of instances where expensive row corn was taken out of the ration and replaced with BMR, saving substantially on the bottom line. He explained that "When you take a direct look at the nutritional value of Brown Mid Rib, you come to realize the digestibility is from 25-30 percent more than conventional corns, hence your dairy cow can take in more usable dry matter and that allows us to cut back on some of the expensive concentrates that are in the ration."

Mycogen offers both a nutritionist expertise as well as an expert agronomist to balance the ration, according to Gomes. For more information, log on to www.mycogen.com or contact your local dealer.

(February 12, 2009) Cooperatives Working Together members made a firm commitment to the voluntary self help program this week. National Milk's Chris Galen reported on Thursday's DairyLine that the CWT committee voted to commit to two full years, January 2009 through December 2010, to help bring the milk supply in balance with demand. He said that things are way out of whack and that's why were experiencing these low prices right now.

In the past CWT has been a one year program, but given the gravity of the situation the CWT members said they need to have a two year program to give the financial resources necessary to have a positive impact on farmer income.

Two other changes, Galen outlined, is that farmers whose bids are accepted in future retirement programs will have to agree to stay out of dairy production for one year, both the farmer and the facility, and farmers who were successful participants in previous buyouts will be permitted to bid in the next program but not any subsequent programs.  

There has been rumors of a mega CWT herd removal but Galen said the speculation is unfounded and baseless. No dates are being put forth as to when the next herd removal will take place nor will there be any stated targets for how many cows or how much milk will be removed, largely because they don't know how many cows will be taken out until they see the bids that come in.

"We will use the financial resources to get the most bang for the buck," Galen said. "That means making certain that we pay prudent prices for the cows that are submitted in the next herd retirement." He added that it's important to be careful stewards and not squander money "just because somebody thinks we should take x number of cows here in the next month or two." More: CWT Renewal

(February 11, 2009) World Ag Expo is in day number two today and Expo Communications Director, Steven Knudsen, reported in Wednesdays DairyLine broadcast that the yearly prayer breakfast started the day under the theme Our Fathers Families and Farms. The speaker was Farm Bureau administrator Richard Matteis.

Seminars are being held today on water, according to Knudsen, who invited listeners to check the Expo website for complete details on all of the seminars being offered on the grounds. Today's Dairy Profit Seminar, hosted by DairyLine's sister publication, Western DairyBusiness magazine, focuses on lesion identification. There's also a dairy tour off the grounds as well as a general ag tour and there's plenty of events planned for women, according to Knudsen.

A new Peterbilt 340 will be auctioned off at noon today at the Heritage Complex, with all proceeds going to the local Children Hospital of Central California.

Knudsen also promoted tonight, the final night of the West Coast National truck and tractor pull and encouraged attendees to pre-register on line. You can register at the gate, he said, but your entry is expedited if its done on line.  

WASDE: Lower Milk Production, Dairy Prices Down

(February 10, 2009) Agriculture Department has again lowered its forecast for 2009 milk production in its latest World Agricultural Supply and Demand Estimates report issued this morning. It now projects output to hit 189.1 billion pounds, down from 190.5 billion projected a month ago, and compares to an estimate of 189.7 billion pounds in 2008. It cites the January 30 Cattle report which estimates that dairy cow inventories on January 1, 2009, were up almost 1 percent from a year ago and only fractionally fewer heifers were being retained.

Assuming no significant herd reductions in the first part of the year, the report states that Producer returns are expected to be heavily pressured resulting in a relatively sharp reduction in inventories during the later part of the year.

The 2009 Class III milk price is now projected to average $9.70-$10.40 per hundredweight, down from the $10.60-$11.40 projected last month, and compares to $17.44 in 2008. The 2009 Class IV price is projected to average $9.35-$10.15, down from the $10-$10.90 projected a month ago, and compares to $14.65 in 2008.

Output per cow was unchanged from last month and both domestic and export demand was forecast to remain weak due to economic uncertainty. 2009 commercial export forecasts were reduced as the report stated that weak international demand and expected competition from recently announced subsidized EU-27 exports limit opportunities for commercial exports.

The lower international prices are expected to result in slightly higher U.S. imports of dairy products, primarily cheese, according to USDA, and fat basis ending stocks are forecast lower as supplies tighten later in the year due to lower milk production. Skim-solids stocks were raised however, as exports of nonfat dry milk are limited and supplies burden the market. Sales of powder and butter to Uncle Sam under the price support program were raised.

Continued Strength in Cash Cheese Market
(February 10, 2009) There was more strength in Monday's cash cheese market. The block price gained three quarters of a cent and barrel jumped 2 1/4 cents and is a half-cent above the blocks. Downes-ONeill dairy broker, Dave Kurzakswki, said he doesn't think that means a whole lot. More block was traded, he said, 14 loads of block versus 4 of barrel, and that should be the number were looking at.  

Blocks traded up to $1.1775 but finished at $1.1650 so, from a trading standpoint, Kurzawski said there's probably more product to come to the market. Most of the trading was in the blocks, he said, and he expects that to be the case for the rest of the week.

The barrels may have had a nice day up here, Kurzawski said, But I don't think they're the leader. Blocks are the leader, he said, and he believes the trading portends prices slipping back to $1.10 before they move above $1.20.

When asked about concerns in last weeks Dairy Products report, Kurzawski said nonfat dry milk output being up 42.6 percent from a year ago caught his eye. He added that Its an old report, a report from December but it gives fodder to what has happened in the markets over the past six to eight weeks and supports that.

It doesn't necessarily bring in new selling as we've seen by the futures market the past two days, he said, But it definitely supports what has happened in the market, and is some very bearish news for the butter-powder part of the report.

American cheese was up 6.9 percent from a year ago but that's lighter than was expected, Kurzawski said, So, when the expectations are more bearish than what's actually going on out there, that kind of a bullish tone on the market and may have helped to some degree support some prices here on the Class III futures the past couple of days. That, plus talks of another CWT her buy out, was another underlining factor to the support in the Class III market, he concluded.

(February 9, 2009) Dairy Management Incorporated’s, Joe Bavido, outlined two more of the major accomplishments of the dairy check off in 2008 in Monday’s “DMI Update,” starting with the sustainability initiative.

Bavido said dairy producers have a long standing commitment to preserving and protecting natural resources and he reported that the initiative unites producers, processors, manufacturers, distributors, retailers, and others to “identify opportunities to reduce energy use and increase dairy sales, making dairy part of the green movement that is becoming more important to consumer purchase decisions.”

Another accomplishment of the check off was the issues management and crisis preparedness role. National and local checkoff organizations are more prepared to respond with one unified voice to criticisms or attacks on the dairy industry.

He gave, as example, the China melamine contamination that unfolded in late 2008. The dairy check off closely monitored the situation, he said, and provided the industry with timely updates. DMI training workshops also helped prepare check off and other industry staff to respond to any potential crisis situation. 

(February 6, 2009) Cash block cheese closed the first Friday in February at $1.1575 per pound, up three-quarters of a cent on the week, but still 83 1/4-cents below a year ago when the blocks jumped 19 cents, to $1.99. Barrel closed Friday at $1.1475, up 3 1/4-cents on the week, but 79 cents below a year ago. Seven cars of block traded hands on the week and six of barrel. The NASS-surveyed U.S. average block price lost another 6.2 cents, dipping to $1.0916. Barrel averaged $1.1397, down 0.4 cent.

Butter closed at $1.1025, unchanged on the week, but 11 3/4-cents below a year ago. Six cars traded hands on the week. NASS butter averaged $1.0721, down 0.2 cent. Nonfat dry milk averaged 83.09 cents, up 0.3 cent, and dry whey averaged 15.86 cents, down 0.7 cent.

Price support purchases for the week included 1.6 million pounds of butter and 12.1 million pounds of nonfat dry milk.

Prices and Demand Drop For Replacement Animals 

(February 6, 2009) One of the areas impacted by slumping milk prices and high feed prices is the demand and price for replacement cows and heifers. Dairy Profit Weekly editor, Dave Natzke, talked about it in his Friday DairyLine program.

“Starting in 2004, U.S. commercial dairy farmers have essentially been on a five-year herd expansion track, leading to a peak in replacement demand and prices in late 2007 and most of 2008,” Natzke reported. “Now, however, dairy farmers are feeling the pressures of lower milk prices and high feed costs, and that's reducing both demand and prices for replacement animals.”

USDA’s latest quarterly report showed January 2009 replacement prices averaged about $1,630 per head, down about 15 percent from October 2008, and down about 20 percent after peaking in late 2007 and 2008. The January 2009 average price is the lowest since January 2005, according to Natzke.

The impact is even larger in several western dairy states, where cow numbers have been growing the most. January 2009 replacement prices in California and Idaho were down $500 per head from October, with $400 declines seen in New Mexico and Washington.

There is general consensus that the U.S. dairy herd is too large, Natzke said, but reducing cow numbers may be easier said than done, based on the number of replacement heifers waiting in line.

USDA’s semi-annual inventory of cows and heifers showed that, as of January 1, there were about 9.3 million cows and 4.4 million heifers in U.S. dairy herds, or about 47 heifers for every 100 cows. Of the total heifers, about two-thirds are expected to calve and begin producing milk this year, further adding to the milk supply surplus, Natzke warned.

As if farmers don’t have enough to be concerned about these days; now there’s confusion regarding a new reporting requirement from the Environmental Protection Agency (EPA), particularly larger farms.

National Milk’s, Chris Galen, reported Thursday that, on December 18, 2008, EPA published a final rule that exempted animal waste from emissions reporting under the Comprehensive Environmental Response Compensation (CERCLA) regulations. In this same rule however, EPA determined that Environmental Protection and Community Right to Know Act (EPCRA) reporting is still required. 

EPCRA is designed to protect emergency first responders from potentially hazardous exposures to things like ammonia, according to Galen, and the effective date for this rule was January 20, 2009 so many in industry are viewing this January 20 deadline as the date for compliance with EPCRA reporting and not just the effective date of the CERCLA exemption.

Anyone emitting 100 pounds or more of ammonia or hydrogen sulfide has to contact their state emergency response committee as well as their local emergency planning committee, he said.

It’s unclear how the EPA intends to address the EPCRA reporting requirement, but National Milk’s recommendation is that producers contact their state and local committees. Log on to www.nmpf.org/washington_watch/environment/cercla-epcra for details and an emissions estimator to help determine if a farmer needs to report, who to call, and what to say. 

The emissions estimator is for ammonia only. At this time, there is no good data on hydrogen sulfide emissions from dairy operations, but anecdotal reports are that, if you have less than 20,000 dairy cows, you probably don’t emit more than 100 pounds of hydrogen sulfide, according to National Milk.

(February 4, 2009) The Agriculture Department’s December Dairy Products report issued today puts butter production at 155.8 million pounds, up 22.1 million pounds or 16.5 percent from November and 14.3 million pounds or 10.1 percent above December 2007. 

Mozzarella cheese output totaled 277.6 million pounds, up 17.3 million pounds or 6.7 percent from November, but 10.7 million pounds or 3.7 percent below a year ago. Total Italian type cheese, at 359.2 million pounds, was up 22.8 million pounds or 6.8 percent from November, and 0.6 million pounds or 0.1 percent below a year ago.

Cheddar production totaled 283.7 million pounds, up 25.7 million pounds or 9.9 percent from November, and 17.9 million pounds or 6.7 percent above a year ago. American type cheese amounted to 359.4 million pounds, up 20.3 million pounds or 6.0 percent from November, and 23 million pounds or 6.8 percent above a year ago.

Total cheese output came to 856.9 million pounds, up 32.9 million pounds or 4.0 percent from November, and 9.6 million pounds or 1.1 percent above a year ago. 

December nonfat dry milk output amounted to 155.3 million pounds, up 20.5 million pounds or 15.3 percent from November, and 46.4 million pounds or 42.6 percent above a year ago.
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(February 4, 2009) Dairy processors have made some recommendations to the new Agriculture Secretary on ways to improve government feeding programs and increase demand for dairy products. The international Dairy Foods Association’s (IDFA), Peggy Armstrong, said in Wednesday’s “Processor Perspective” that, “With the recent steep drop in farm-level milk prices, dairy producers are beginning to feel the full impact of the global recession and, while it's likely that the support programs under last year's Farm Bill will be triggered, they may not be enough to balance supply and demand.” 

Historically, many surplus dairy products bought by the government go into storage or wind up competing with other commercial products, Armstrong charged, which can drive prices even lower.

“IDFA sees another way,” Armstrong said, and, in a letter to Secretary Tom Vilsack, IDFA President and CEO Connie Tipton asked USDA to take a careful look at what it can do to bolster dairy demand in ways that will increase access to healthy dairy products for a growing number of needy people, outlining a three-point plan.

IDFA urged USDA to convert any surplus into consumer-oriented dairy products, using dollars that otherwise would be spent on transportation and storage. Updating specifications for products purchased under the Dairy Price Support Program to reflect current commercial practices would make it easier for companies sell products to the government under this program, she said.

Currently most dairy products aren't purchased under the price support program. So, as a second step IDFA recommends "stimulus purchases" of products such as yogurt, and additional funding for reduced-fat and lower-fat cheeses that can be used in schools and other institutions. 

Thirdly, IDFA encourages USDA to finalize the Special Supplemental Nutrition Program for Women, Infants and Children rule to include yogurt, which was recommended by the Institute of Medicine, according to Armstrong.

“We believe this approach creates a better safety net for farm prices, and gets more products moving to consumers, many of whom are losing jobs and depending on food assistance to feed their families,” she concluded.

On December 18, 2008, the Environmental Protection Agency published a final rule that exempted animal waste from emissions reporting under certain EPA regulations. In this same rule, however, the EPA determined that another type of reporting is still required and the effective date for this rule is January 20.

There’s a lot of confusion over what EPA is going to require of dairy farmers and there have been threats of lawsuits from environmental groups and from the dairy industry over this rule.  

(February 3, 2009) Last week’s fall in the Federal order Class III milk price was driven in part by cheese prices falling below $1.10 per pound but the good news is that cheese is back above support, according to Mary Ledman, principal of Keough Ledman and Associates in Libertyville, Illinois, speaking in Tuesday’s DairyLine.

She quickly added however that the Class III price will bottom out in February below $9.50, but that’s still above the record low of $8.57 set in November 2000.

She looks for the March Class III to rebound to $9.90 or higher as she believes the cheese market will trade “sideways,” at $1.15-$1.20, for the next two months, but “buyers have come into this market.”

Capacity is tapped out through February, according to processors she has talked to and producers are curbing production, as evidenced in a very strong dairy cull in January, according to Ledman, possibly the highest culling January on record.

On a brighter note; Ledman reported that Oceania milk production, which was expected to increase about 8 percent from their last season, will likely be below 2 percent. Not all Oceania stocks are committed and stocks are still available out of Europe, she concluded, but “cleaning up the global stock situation in tandem with curbing milk production are all factors that we need to get a rebound in these prices.”