Dairyline.com Blog

The FC Stone/Downes-O’Neill annual Outlook Conference takes place June 9 and 10 in Chicago with the theme “Make Mine With Everything.” Dairy broker, Dave Kurzawski, said in Wednesday’s DairyLine that the theme sums up what the conference will be about.

“In our increasingly inter connected world, the price of commodities is dependent upon a wider range of factors than ever before,” Kurzawski explained. The conference therefore will address dairy, feed grains, meats, livestock, soft commodities, interest rates, currencies, precious metals, global weather patterns, as well as upcoming legislation, and regulations that will influence agriculture.

The conference will have a wide reaching range of information, he said, plus some focused presentations on risk management but attendees will include everyone from dairy producers to multinational food corporations, he said, so you can go too in depth with risk management strategies in a conference made up of such a diversity of people but it’s helpful to put these people together and they will come from throughout the country and the world. For more information, log on to www.dairy.nu and click on the Outlook Conference 2010 link.

This week’s Success Strategies podcast, John Ellsworth shares the top ten steps for moving forward.

 

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Cash cheese prices started the last week of March with a nice increase. The blocks jumped a penny and three quarters, to $1.3425 per pound, while the barrels gained 2 1/4, and hit $1.3350. Both gains came on unfilled bids.

Alan Levitt, editor of the CME’s Daily Dairy Report, said in Tuesday’s broadcast that, once the prices got down to the mid $1.20s, it “gave buyers the green light to come back off the sidelines.” He suspects they were waiting until they felt the price had bottomed out.

The blocks have gained over 7 cents in the last week, he said, and he finds it “encouraging that the sellers are the ones who have moved off to the sidelines and the prices have increase on unfilled bids.”

“The higher prices aren’t generating any sales,” Levitt reported, “Which means, the next day, buyers are going to come back and maybe bid it up even more,” though he warned that he’s cautious.

Increases in the commodity prices and milk futures are encouraging, he said, but “It’s going to take a sustained rally in the cheese market to keep futures from falling back again. The futures are still priced at a premium compared to where cheese prices are today.”

Buyers recognize that there’s a lot of cheese in storage, running about 10 percent above a year ago and “this is the time of year when you’re continuing to build stocks.” Spring is starting to hit in the upper Midwest, according to Levitt, with milder weather, “so we’re seeing a seasonal increase in milk volume.”

Production is also trending higher in California, Levitt reported, although the volume is still below a year ago because they have a lot fewer cows in the herd. Other parts of the country are also seeing their spring flush so he said it may be a while before we can say that things have fully turned the corner but “it’s certainly encouraging.”

Levitt predicts the March Federal order Class III milk price will be announced Friday at $12.79 per hundredweight. That would be a drop of $1.49 from February but would be $2.35 above March 2009. He looks for a Class IV price of $12.91. That would be a penny increase from February and $3.27 below a year ago.

Gary Neubauer, Pfizer Animal Health’s Dairy Technical Services director, continues his discussion on extended therapy. This week, how come it’s so difficult to find a cure for mastitis?

 

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Members of the nation’s largest dairy cooperative, Dairy Farmers of America, held their 12th annual meeting in Kansas City this week. Dairy Profit Weekly editor Dave Natzke reported Friday that emotions were mixed on a couple of levels. It was the first annual meeting since the death of Colorado dairy farmer and long-time DFA leader Tom Camerlo, so emotions featured the mourning of his passing and the celebration of his life, Natke said.

The other mixed emotion centered on the dairy economy. While dairy farmers suffered through one of the worst years ever in 2009, DFA members heard their co-op’s annual profits rose about 6 percent, to about $65 million. The co-op marketed nearly 63 billion pounds of milk last year, or about one-third of the nation’s total, but lower milk prices meant the value of sales was down about 31 percent, to about $8 billion. The co-op’s annual average milk price paid to members was $13.05 per hundredweight in 2009, down from $18.60 last year. Attendees heard from speakers on what’s being done to address depressed milk prices, according to Natzke. Dairy Management Incorporated president and CEO Tom Gallagher said the checkoff program was working to address cheese inventories, including helping multiple fast-food and casual dining restaurant chains utilize more American cheese on sandwiches, and increasing use of U.S.-sourced mozzarella in pizza restaurants in the Pacific Rim.

Gallagher also said dairy organizations are pressuring the Obama Administration to purchase more cheese for feeding programs and food banks, offering both the needy and dairy farmers, a “win-win situation.”

He said the American cheese inventory is overhanging U.S. markets, keeping cheese prices low. He also said any bank-forced foreclosures of dairy operations in the coming year were not likely to substantially reduce the nation’s dairy herd, but rather move the cows, and production potential, to other dairy operations.

Jerry Kozak, president and CEO of National Milk Producers Federation, outlined major dairy policy considerations currently underway in the Federation’s committees. They include a margin insurance program, with a base plan funded by the government, and a supplemental plan, allowing producers to buy additional coverage through insurance premium payments. National Milk is also formulating a growth, or supply management plan, with some alterations to proposals already offered by Holstein USA and California’s Milk Producers Council, Natzke reported.

The NMPF proposals call for elimination of the current dairy product price support and Milk Income Loss Contract program payments, with money from those programs used to finance the margin insurance. Details of both programs will be available in late spring or early summer, he said.

As we reported last week, the Cooperatives Working Together program (CWT) has reactivated its export assistance on cheddar cheese. The decision came after CWT’s monthly analysis of dairy markets, according to CWT CEO Jim Tillison in Thursday’s DairyLine. Tillison said that one of the things that the analysis showed is that the issue right now is not too much milk but too much inventory of cheese overhanging the market, negatively affecting prices.

World cheese prices are above U.S. prices, he admitted, but CWT wanted to provide an incentive to CWT members to “aggressively pursue additional business.” If significant quantities of cheese can be moved overseas, he said, CWT believes domestic cheese prices will climb.

Tillison also admitted the CWT subsidies could impact private sales abroad however the incentive CWT provides is “modest,” he said, is targeted specifically for new business, and CWT doesn’t expect price sales to be affected.

When asked if the incentive might be expanded beyond cheese, he said, “At this point we’re looking only at cheese but certainly, because we re-evaluate on a monthly basis the possibility exists for that decision to be made down the road.”

A key season for beef sales is approaching, namely summer grilling and holidays like Cinco de Mayo and Memorial Day. Texas dairy producer and Texas Beef Council member Jerry Spencer stated in Wednesday’s DairyLine that beef checkoff partnerships and promotions at the grocery store help increase beef demand and put money back in the pockets of beef and dairy producers.

 

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“The great thing about these programs is that all of the coupon redemption costs are covered by promotional partners,” Spencer said. “Our checkoff investment as producers goes toward the creative development and media costs for advertising these promotions,” and he pointed out that, on average, for every dollar farmers invest, the retail partners are put in $5-$10, and “That’s a sizeable return on investment.”

He added that “Partnerships through retail help demonstrate how our producer dollar is stretched to maximize our checkoff investment,” adding that, “Our minimal investment is extending the retail program reach to millions of beef customers for the next few months.” The goal, according to Spencer, is that “through these partnerships and relationships, we can continue to grow demand for our great product and thereby create profit opportunities for producers.”

Some of the upcoming partnerships include: Heinz’s Classico and New York Texas Toast Beef Bolognaise Recipe Promotion, Anheuser-Busch’s Bud Family Hispanic Promotion, Snyder’s of Hanover Promotion, and the Sutter Home Build a Better Burger Promotion.

Each of these promotions features a coupon for beef, he said, whether it’s a mail-in rebate or in-store coupon. The goal of reaching more than 20,000 stores with each promotion is to really drive beef sales during a key time, the summer months, when consumers love to be outside at the grill.

For more information about the checkoff investment, log on to www.mybeefcheckoff.com and for more about summer grilling and the “Safe & Savory at 160 program,” visit the checkoff-funded, www.beefitswhatfordinner.com.

This week’s Success Strategies Podcast with John Ellsworth. John talks about how stress comes from unkept agreements with your self.

 

 Success Strategies with John Ellsworth: Play Now | Play in Popup | Download

The Monday morning markets were anticipating that afternoon’s February Cold Storage report and were unchanged except for the half-cent rise in butter. The University of Wisconsin’s Dr. Brian Gould said there’s uncertainty in the cheese market regarding inventories which are quite a bit higher than a year ago.

Uncertainty over the export market is another factor, he said, but CWT’s announcement last week that it was reinvigorating its export assistance program for cheddar cheese is a positive sign but typically we don’t export a lot of cheese.

He wasn’t sure that will have as much of a “kick” as their whole herd buyout programs, given the increase in milk production that we saw for February.

Dairy trade has picked up, according to Gould, although it softened in the last quarter of 2009 but we’re a net exporter of dairy products again, except for the first quarter of 2009 and the last quarter of 2008. It’s still soft, he said, and another reason the cheese market and other markets are stable and taking a wait and see approach.

Many viewed last week’s Milk Production report as bearish due to the increase in cow numbers but Gould added that yields are up as well and said he finds it “quite interesting that we’re having increased production at a time when people are having a hard time getting refinancing so, when you couple the international situation with what’s going on domestically in terms of our production, it’s not surprising that we have flat cheese prices.”

Looking ahead, Class III, dry whey, and butter futures portend an increase in cheese prices once we get past the bottom in April, Gould concluded. He sees an increase of a dime or so over the following six months when you look at the implied valuation in those futures prices.

The American cheese inventory, at 597 million pounds, was up 9.3 million pounds or 2 percent from January and 55.3 million pounds or 10 percent above a year ago. January revised estimates were lowered nearly 7.6 million pounds.

Total cheese stocks amounted to 983.6 million pounds, up 10.5 million pounds or 1 percent from January, and 91.1 million or 10 percent above those a year ago. January total cheese stocks were revised down 7.7 million pounds.

February butter stocks totaled 198.1 million pounds, up 29.9 million pounds or 18 percent from January but 6.8 million pounds or 3 percent below February 2009, according to preliminary data in the Agriculture Department’s latest Cold Storage report issued this afternoon. January butter stocks were revised down 1.6 million pounds.