Base milk prices lower

Dairy producers’ milk checks will be a little smaller this month. The base milk prices for January are mostly lower than they were in December. The Class III base is $14.50 per hundredweight, down 48 cents from December. Class IV is $1.16 lower at $13.85 while Class II is 97-cents higher at $15.22. Component prices for January milk are $1.4405 per pound for butterfat; $2.7916 for protein; $1.0148 for nonfat solids and $0.1946 for other solids.

Right now, it looks like things are going to get worse before they get better; Class III futures continue to slide with February through June all lower than the January price. In fact, March, April and May contracts are $13.55 and lower. If it’s any consolation, a year ago the base for Class II was $10.41, Class III was $10.78 and Class IV was $9.59.

The powder market continues to weaken, Dairy Market News reports drying schedules are heavy and inventories are increasing seasonally. Shipping container availability is a bit of a problem for exporters. Grade A nonfat dry milk on the Chicago Mercantile Exchange cash market Friday slipped 4 cents to $1.15 on one uncovered offer.

In Oceania, New Zealand’s milk production is running about even with year-ago levels while in Australia, November milk production was 6.8 percent below a year ago and preliminary indications show December about 9 percent lower. However, weakening world powder markets do not provide any incentive to increase production. The monthly global dairy sale in New Zealand saw the whole milk powder price down 1.6 percent and anhydrous milk fat down 7.9 percent from the January sale.

European milk production is a little lower than usual for this time of year although there are signs of it picking up. March 1 will be the start of a new dairy intervention year in the E.U. but traders and handlers say prices are around 10 percent higher than intervention levels. There is some concern the Union might release some of the stocks from the current year onto the market.

Kraft gets the needed Cadbury shares

Kraft’s acquisition of Cadbury is a “go”. Kraft says 74 percent of Cadbury shareholders accepted their offer by the February 2nd deadline; only 50 percent was needed to validate the deal.

The company gave shareholders two options: $7.61 plus 0.202 Kraft shares for a total value of $13.36 or a straight cash deal of $12.77 per share. Kraft says most shareholders took the cash-and-stock deal. The offer remains open for another two weeks.

Meanwhile, Bloomberg reports Cadbury CEO Todd Stitzer and CFO Andrew Bonfield will step down. The two led the campaign against the Kraft deal.

December cheese production below a year ago

Total cheese production in the U.S. in December was 862 million pounds, 0.1 percent below December of 2008. The National Ag Statistics Service reports Italian type production was 2.5 percent above a year ago at 373 million pounds while American type production was 2.6 percent lower at 349 million pounds. Cheddar production was 8.3 percent lower than a year ago.

Wisconsin cheese production in December totaled 221.2 million pounds up 2 percent from December of 2008. The Badger State increased Italian cheese production 5.4 percent to 109 million pounds. American type production slipped 0.8 percent to 71.4 million pounds; cheddar was 1.5 percent lower at 55.3 million.

Total cheese production in California in December was 175.87 million pounds, down 2.3 percent from a year earlier. Italian cheese production increased 0.1 percent in the Golden State to 104.76 million pounds. American type production slipped 4.4 percent to 54.2 million pounds; cheddar output was 10.3 percent lower at 30.6 million pounds.

Rounding out the top-five cheese producing states: Idaho 67.8 million pounds, New York 59.8 million, New Mexico 57 million pounds.

Butter production in the U.S. in December totaled 150 million pounds, 4.3 percent below December of 2008.

Other products compared to December of 2008:

• Nonfat dry milk, 126 million pounds, down 18.6%
• Skim milk powder, 20.7 million pounds, up 16.4%
• Dry whey, 91.2 million pounds, up slightly
• Lactose, 64.2 million pounds, up 6.3 %
• Whey protein concentrate, 35.3 million pounds, down 2%
• Regular ice cream, 49.4 million gallons, down 7.1%
• Lowfat ice cream, 23.1 million gallons, up 6%
• Sherbet, 2.87 million gallons, down 16.6%
• Frozen Yogurt, 4.13 million gallons, down 6%

For the year, total cheese production in the United States was 10.1 billion pounds up 1.7 percent from 2008. American type cheese production was 2.4 percent higher at 4.1 billion pounds; cheddar was 0.7 percent higher, 3.1 billion pounds. Italian cheese output totaled 4.2 billion pounds, up 1.5 percent while total butter production slipped 4.6 percent to 1.567 billion pounds for the year.

Read the full NASS report here:

Be prepared for dairy to go up….or down

Dairy markets continue to disappoint. While cash cheese prices have been hanging around the $1.50 range, Class III futures have been sliding. On Monday, March through December 2010 contracts lost anywhere from 30 to 62 cents. February through June are now all below $14.00. There are a number of factors weighing-in, a 13 percent increase in cold storage stocks in 2009, lower feed prices, a stronger dollar and 4.5 million replacement heifers in the country as of the end of December. Jacquie Voeks with Stewart-Peterson says traders are just a bit nervous these days, “Traders have been burned so many times taking a chance that they’re just not too sure they want to do that at this point in time.” She says even though we have reduced cow numbers, we have improved efficiencies and “until they really see something that says we are not going to continue to produce more milk, we’re going to struggle.”

Voeks says some believe cash cheese is going to move up to $1.60 and others think it will slip to $1.30 so the best thing a producer can do is prepare for either move. “Be protective and be proactive,” says Voeks, with August through December still above $15.00 she suggests producers use puts to establish a floor and for the near-month contracts, move on any bounce. “We should be thinking about what am I going to do if it goes up and what am I going to do if it goes down.”

AUDIO: Jacquie Voeks talks about the dairy market situation

Class III futures continue to slide

It was a mixed week in the dairy markets, while cash cheese on the Chicago Mercantile Exchange saw barrels hold steady at $1.505 blocks gained 3.5 cents to end the week at $1.515. But Class III futures slipped through the week with the February contract losing 13 cents, March fell 54 cents, April lost 76 cents and May dropped 80 cents. The March, April and May contracts all fell below the $14.00 mark with February just holding-on at $14.05.

There were a couple of factors providing a pressure on the futures on Friday. Daily Dairy Report notes the income-over-feed-cost for January was $9.77 up from $9.68 in December as both corn and soybean prices declined for the month. Improved profitability could lead to increased milk production.

Another factor, USDA reports there were 4.52 million replacement dairy heifers as of January 1, 90,000 more than on January 1 of 2009 and the most since 1986. That works out to 49.7 replacements for every 100 cows in the milking line up from 47.2 a year ago. So, while Cooperatives Working Together herd retirement program and low prices prompted a 3 percent reduction in milk cow numbers in 2009, 4.5 million replacements waiting in the wings mean the herd could be rebuilt quickly.

Wisconsin dairy interests like Doyle’s idea

Wisconsin Governor Jim Doyle drawing praise for his announcement in the State-of-the-State address on Tuesday that he wants to expand the dairy investment tax credit. Assembly Ag Committee Chair Amy Sue Vruwink stated “I applaud Governor Doyle stressing the need to protect our agricultural community and investing in our local producers. By extending the dairy modernization tax credits as well as enacting the Food-Processing Modernization tax credit, it is evident the state will continue to invest in agriculture. I look forward to seeing the details of this proposal and am pleased that these actions are being taken.”

 

Dairy Business Association Executive Director Laurie Fisher also praised the Advanced Renewable Tariff (ART) or ‘feed-in tariffs’ for the production of energy produced from Wisconsin’s dairy farms. Fischer says “Expanding the dairy modernization tax credit and providing ‘feed-in tariffs’ for bioenergy production are excellent ways to assist in making the state’s dairy industry more modernized and profitable.”

“Due to expire this year, this tax credit allowed the Wisconsin dairy industry to reach record levels of production in 2009,” said Bill Oemichen, Cooperative Network president and CEO. “Now that Governor Doyle has committed to continuing this program, Wisconsin dairy producers can compete more effectively with other regions of the country.”

Dairy industry needs unity, innovation and resolve

International Dairy Foods Association (IDFA) president and CEO Connie Tipton told attendees at the annual U.S. Dairy Forum recently the industry needs to use innovation and unity to combat the sluggish economy. Speaking to more than 880 producers, processors and suppliers, Tipton said the past year of low milk prices, plunging exports and consumer belt-tightening has shown the current safety net for dairy doesn’t work. She urged the industry to abandon the status-quo and give serious consideration to the plan put forth by the National Milk Producers Federation task force. She stated, “The U.S. dairy industry has a chance in 2010 to re-chart its future.”

Tipton says another lesson we hopefully have learned through all of this is the importance of knowing what the consumer wants and doing what it takes to fill that need. “We need more people eating dairy and choosing dairy ingredients and that means we’d better know what consumers are thinking and what’s tickling their taste buds.”

Over the years, Tipton’s processor group has been at-odds with producer groups on various issues, the leader called on all in the industry to meet the challenges of today and the future with resolve and teamwork.

Read the text of Tipton’s full speech here;

Suit filed to stop Dean’s purchase of Foremost bottling plants

The State of Wisconsin has joined a lawsuit seeking to halt Dean Foods acquisition of the milk bottling plants from Foremost Farms USA. Attorney General J.B. Van Hollen says he has signed on with Attorneys General from Illinois and Michigan and the U.S. Department of Justice opposing the sale of the bottling plants in Waukesha and DePere. The plaintiffs contend the deal reduces competition for fluid milk sales to schools in Wisconsin, northeastern Illinois and the Upper Peninsula of Michigan and that is in violation of federal law.

Dean Foods says the deal is not damaging to competition and has benefitted Wisconsin dairy farmers by providing a stable and growing outlet for their milk. The company contends the acquisition has also produced cost savings that will benefit customers and spark competition and promises to “defend itself vigorously against the complaint.”

Rosendale Dairy cleared to expand

The Wisconsin DNR has granted permits to Rosendale Dairy to expand their Fond du Lac County farm from the current 4,000 cows to 8,000 cows. The expansion includes a plan to expand manure application area by 12,000 acres. In issuing the permits, Gordon Stevenson, who leads the DNR runoff management section said these are the most stringent rules ever imposed on a farm. “We’ve taken existing laws as far as they can go to assure that significant safeguards are in place to maximize protection for the environment.”

 The permit imposes conditions over and above the requirements contained in permits issued to other large livestock operations, including:

• Extra limits on how much manure and commercial fertilizer can be spread on fields under different conditions;
• A greater distance between water wells and where manure can be spread; Rosendale must meet a 200 foot well “setback,” double the 100 foot setback laws require.
• Groundwater monitoring. Most permitted farms are not required to conduct groundwater monitoring; the few that do monitor quarterly. Rosendale has been required to monitor monthly. Under the permit modification, Rosendale will be allowed to revert to quarterly monitoring if none of their water samples exceed groundwater quality standards for 24 straight months.
• Greater scrutiny of their plan for managing how, when and where they apply manure and other nutrients.
• Additional monitoring of pipelines carrying liquid manure.

An Environmental Impact Statement examining potential impacts associated with doubling the operation size was completed during the first permit issuance process.

Indiana hay supplies up

Hay stocks in Indiana were up 14 percent from a year earlier, totaling 1.4 million tons on December 1.

Nationally, stocks of all hay on December 1, 2009 were up 3 percent at 107 million tons. The National Ag Statistics Service (NASS) says hay production and lower cattle inventories contributed to the increase.

Next Page »