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DairyBusiness Update: August 11, 2014


Cheese Production Below Expected Levels
   Cheese production is mixed last week, according to USDA’s Dairy Market News. Milk production levels were moving seasonally lower and cheese plants were having a harder time finding surplus milk for manufacturing. Midwest cheese production is reported to be below expected levels. Availability of condensed skim and nonfat dry milk has allowed plants with increased orders to fortify cheese vats and build on production. Export demand has slowed, while domestic demand remains good.

Butter Market is Stable but No Stocking Building
   Butter prices are mostly steady behind a stable domestic market, says Dairy Market News. Some butter operators took advantage of lower cream prices to churn at higher levels last week, while others had lower production rates due to declining milk receipts, lower butterfat tests, or maintenance updates. Even with additional cream available, many butter makers are unable to build stocks comfortably for upcoming demand. Domestic interest is mostly steady with a few buyers waiting to see what direction the price goes before taking a position. Various global butter markets moved lower, putting U.S. export opportunities at a bigger disadvantage.

New California Butterfat Pricing Has Manufacturers Weighing Options  
   U.S. milk production is experiencing incremental declines across the Southwest, Pacific Northwest, Southeast and the Central regions as summer advances and warm temperatures progress, according to USDA’s weekly update. A stretch of cooler weather increased cow comfort and milk production in the Northeast and Mid-Atlantic.
   Class I demand is improving and expecting to build over the next month, as the school year commences. Ample condensed volumes are stretching dryer capacity in the Northeast, Mid-Atlantic and Midwest. Declines in butterfat component levels have tightened cream supplies in the Southwest.
   A seasonal slowdown in ice cream production has added to cream availability in the Midwest. With the start of new butterfat pricing in California, manufacturers are weighing the option between selling and churning.
   Rainy conditions are slowing the alfalfa harvest in Utah and Idaho as overnight frost hampers the hay harvest in New Mexico.

Corn Crop 52% in Good Condition 
   The Agriculture Department’s latest Crop Progress report, issued this afternoon, shows that 21% of the nation’s corn is rated in excellent condition, as of the week ending August 10. That’s down 1% from the previous week and compares to18% a year ago. Fifty two percent is rated good, up from 51% the previous week, and compares to 46% a year ago. The 18 states which comprised 91% of the 2013 crop and their current rating are listed below:

State                               Week Ending   August 10, 2014
                Very poor           Poor          Fair          Good       Excellent  
Colorado       1%                  5%          24%          51%        19%
Illinois           1%                   3%          14%          52%        30%
Indiana         1%                   5%           22%         51%        21%
Iowa             2%                   5%          17%          51%        25%
Kansas         5%                   9%          31%          42%        13%
Kentucky      6%                  13%         24%          46%        11%
Michigan       2%                   6%          19%         57%        16%
Minnesota     1%                   6%          23%         57%        13%
Missouri        -                       2%          15%         50%         33%
Nebraska      3%                   6%          20%         51%         20%
N Carolina    4%                  11%         25%          45%        15%
N Dakota       -                       4%         19%          55%         22%
Ohio              1%                   4%          20%         54%         21%
Penn.            1%                   3%          17%         45%         34%
S Dakota      2%                    5%          22%         58%         13%
Tennessee    -                       4%          19%         54%         23%
Texas           1%                    6%          28%         49%         16%
Wisconsin     3%                    8%         20%         46%          23%

   The report shows 96% of the corn is silking, up from 90% the previous week and 93% a year ago, and 1% ahead of the five year average. Fifty four percent is in the dough stage, up from, 36% the previous week, 30% a year ago, and 8% ahead of the five year average. Eleven percent is showing dent, up from 5% a year ago but 5% behind the five year average.
   Ninety two percent of the soybean crop was blooming, as of the week ending August 10, up from 85% the previous week, up from 87% a year ago, and 1% ahead of the five year average. The report shows 72% of the crop is setting pods, up from 57% the previous week and 55% a year ago, and is 7% ahead of the five year average. Seventeen percent of the soybean crop is rated as excellent, with 53% rated as good.
   There is 83% of the cotton setting bolls, up from 68% the previous week, up from 70% a year ago, and 3% ahead of the five-year average. The report shows 7% of the cotton has bolls opening, up from 5% a year ago, but 2% behind the five year average. The report indicates that 11% of the cotton crop is rated in excellent condition and 41% as good.

Dairy’s New Margin Protection Program in the Making
   The Farm Bill’s new dairy Margin Protection program is in process. National Milk’s latest newsletter reports that many program details won’t be final until the implementing regulation is published, but NMPF has been urging USDA to make the program farmer-friendly. There will be a USDA handbook on the program, and a consortium of land-grant universities will also be helping producers calculate farm-specific margin coverage options.
   NMPF will schedule webinars and will have a simple, downloadable web-based tool to help producers navigate the decision-making process. The online tool will allow farmers to plug in their own numbers and quickly and easily see the program’s potential impact.
A detailed summary of what was in the legislation that created the program can be found at www.futurefordairy.com. Following is a rundown of some of the key areas that USDA will be addressing in the final program announcement:
Registration – NMPF anticipates an initial sign-up period of approximately 90 days, probably stretching to the end of November or early December. The program will operate on a calendar-year basis. After the first year, the annual sign-up period may be moved forward from this year’s later start. It is anticipated that sign-up in 2015 and subsequent years could begin in mid- to late-summer and run to October.  Participating producers will be able to adjust their level of participation each year.
Margin calculations – USDA will use National Agricultural Statistics Service data to make the margin calculations. Margins will be averaged over specific two-month periods, starting with January-February. Preliminary margin numbers are expected to be announced mid-month, with final numbers by the end of that month. In any month in which margin payments are authorized, USDA has indicated it will try to process them as soon as possible after the final margin numbers are announced.
LGM v MPP – Producers can’t be in both programs, so they will have to pick one or the other. Initially, for those already in the Livestock Gross Management Program, USDA has announced rules to provide some flexibility.
Conservation compliance – As with other farm programs, farmers are expected to be required to comply with conservation regulations to participate in MPP.
Premiums – NMPF believes Congress intended for lower premiums to apply to the first 4 million pounds of milk enrolled by every producer for coverage under the program. NMPF has urged USDA to implement the program that way.
Ownership structures – One producer can have more than one farm, and each will be treated individually under MPP. Also, one farm can be owned by multiple producers, but USDA will need approval from all the owners to make payments.
Moving production history – If a dairy farm is sold, NMPF has recommended that the production history can either move with the farmer to a new facility or stay with the farm, but not both.
   NMPF and its member co-ops will provide additional information and analysis as USDA decisions are announced.

CWT Exports Record Level in June
    The United States exported 17.3 percent of its milk production in June, the highest percentage ever achieved for the month of June and one of the highest monthly percentages ever, reports the National Milk Producers Federation.
   The increase from the previous June record - 16.5 percent in June 2013 - resulted partly from increased butter and cheese exports since last year. An important factor boosting butter and cheese exports was assistance provided by NMPF's Cooperatives Working Together, the voluntary, farmer-funded program that helps member cooperatives expand markets for U.S. dairy products overseas.  Read more

Minnesota “Test” for Politicians
   The Minnesota Milk Producers is calling on its members, “Before you go to the voting booth next Tuesday for Minnesota’s Primary Election, check to see if your candidate has taken and supports the 5-point MN Farm and Food Pledge. If they have not, send them a quick note and ask them to take the pledge that supports issues important to the growth and competitiveness of the Minnesota’s food and ag sector.
   Also, take time to spread the news to your friends and family. The farmandfoodmn.org website has a lot of great information that showcases why strong Minnesota agriculture is critical to all Minnesotans.

No Easy Answer for California Water Issue
   Water in California is shared across three main sectors, according to Jeffrey Mount and Jay Lund, UC Davis, and Emma Freeman of the Public Policy Institute of California (PPIC). Statewide, average water use is roughly 50% environmental, 40% agricultural, and 10% urban. However, the percentage of water use by sector varies dramatically across regions and between wet and dry years. Some of the water used by each of these sectors returns to rivers and groundwater basins, and can be used again.
   Environmental water use falls into four categories: water in rivers protected as “wild and scenic” under federal and state laws, water required for maintaining habitat within streams, water that supports wetlands within wildlife preserves, and water needed to maintain water quality for agricultural and urban use. Most water allocated to the environment does not affect other water uses. More than half of California’s environmental water use occurs in rivers along the state’s north coast. These waters are largely isolated from major agricultural and urban areas and cannot be used for other purposes. In the rest of California where water is shared by all three sectors, environmental use is not dominant (33%, compared to 53% agricultural and 14% urban).

   Agricultural water use is holding steady even while the economic value of farm production is growing. Approximately nine million acres of farmland in California are irrigated, representing roughly 80% of all human water use. Higher revenue perennial crops—nuts, grapes, and other fruit—have increased as a share of irrigated crop acreage (from 27% in 1998 to 32% in 2010 statewide, and from 33% to 40% in the southern Central Valley). This shift, plus rising crop yields, has increased the value of farm output (from $16.3 billion of gross state product in 1998 to $22.3 billion in 2010, in 2010 dollars), thereby increasing the value of agricultural water used. But even as the agricultural economy is growing, the rest of the economy is growing faster. Today, farm production and food processing only generate about 2% of California’s gross state product, down from about 5% in the early 1960s.
  Despite population growth, total urban water use is also holding steady. The San Francisco Bay and South Coast regions account for most urban water use in California. These regions rely heavily on water imported from other parts of the state. Roughly half of urban water use is for residential and commercial landscaping. Despite population growth and urban expansion, total urban water use has remained roughly constant over the past 20 years. Per-capita water use has declined significantly—from 232 gallons per day in 1990 to 178 gallons per day in 2010—reflecting substantial efforts to reduce water use through pricing incentives and mandatory installation of water saving technologies like low-flow toilets and shower heads. Coastal regions use far less water per capita than inland regions—145 gallons per day compared with 276 gallons per day in 2010—largely because of less landscape watering.
   The current drought exposes major water use challenges. In the Central Valley, where most agricultural water use occurs, the failure to manage groundwater sustainably limits its availability as a drought reserve. The increase in perennial crops—which need to be watered every year—has made the region even more vulnerable. In urban areas, the greatest potential for further water savings lies in reducing landscaping irrigation—a shift requiring behavioral changes, not just the adoption of new technology. Finally, state and federal regulators must make tough decisions about how and when to allocate water to the environment during a drought. They are faced with balancing short-term economic impacts on urban and agricultural water users against long-term harm—even risk of extinction—of fish and wildlife.
Link to item on PPIC web site

World Ag Expo Lists Top-10 New Products
   When a World Ag Expo exhibitor's new item is chosen as a 'Top-10 New Product,' the recognition often brings a flood of publicity, media exposure and much attention from potential buyers before, during and after the Expo.
   "We were very thrilled to win the World Ag Expo Top-10 award," said Dirk Lennie, vice president of marketing for the Lindsay Corporation, headquartered in Omaha, Nebraska.
   "We had a unique new product at Expo which brought us into a different area of agricultural irrigation," said Lennie. "For Lindsay, World Ag Expo was the perfect opportunity to gain visibility for the new product."
   Lindsay showcased a multi-function irrigation controller that works with its FieldNet micro-irrigation program which can be programed with a laptop or Smartphone.
   "World Ag Expo was a 'perfect storm' for Lindsay," Lennie said. "As a Top-10 winner, we gained more press for our products. In addition, the California drought brought many people to our booth interested in irrigation methods to reduce water use."
   The Lindsay booth also drew attention from a journalist with the Los Angeles Times newspaper.  "The result was a picture of the new product and I on the front cover of the business section of the Times," added Lennie.Earning the Top-10 award allowed Lindsay to market the product before World Ag Expo. At the show, people knew about the product and stopped by the booth to see it. 
   The Santa Fe, New Mexico start-up company, CAFOweb won the Top-10 award for its new online software program.
   CAFOweb software enables operators of confined feeding operations to protect water quality from nutrient contamination by making real-time, science-based management decisions when applying green water, manure solids and chemical fertilizers to fields.
 Over the three-day Expo, several thousand people visited the CAFOweb booth.
    "Our overall experience was extremely positive at World Expo and the Top-10 New Product award," said Tara Vander Dusse, CAFOweb's executive director.  "It was extremely useful for our start-up company. World Ag Expo was a great location to meet different people at one place."
    Click here to view a complete list of 2014 Top-10 New Product winners and for information about applying for the 2015 competition.

Farm Group Takes Issue on USDA Ruling on Dow Product
   The National Family Farm Coalition says it was outraged to learn that USDA's final environmental impact statement determined that Dow's 2,4-D-resistant corn and soy pose no threat to the environment, despite concerns raised by thousands of farmers, consumers, science and health professionals, and legislators. USDA will likely deregulate the crops sometime later this year.
   Diverse produce and livestock farmer Margot McMillen stated: "In making this approval, only the rights of industrial farms have been taken into consideration - not the rights of neighbors. Worse yet, plants that thrive without chemicals will be extinct. Organic farms all over my county have suffered losses due to chemical drift this summer, and with approval of 2,4-D-resistant crops there will be much more spray and many more losses. The right to farm without toxic chemicals has been completely wiped out with this pending approval."
    Jim Goodman, organic dairy and beef farmer, added: "Now that weeds have developed resistance to Roundup, it is OK, not only to use those 'dangerous' herbicides again, but to genetically engineer crops to withstand ever increasing application rates of 2,4-D and dicamba. It was never about safety, it was always about profit."

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Two trades took the cash 40lb. block Cheddar down 1¢ this morning, to $2.09/lb., the first decline since July 30. There were no bids or offers. An unfilled bid took the 500lb. Cheddar barrels up 1.25¢ however, to $2.1350/lb., widening the inverted spread to 4.5¢.
   In heavy trading, butter gained 1¢, hitting $2.41/lb. and the first positive move since July 23. Sixteen carloads found new homes this morning, with the first three loads at $2.39/lb., but the price slowly rose from there. A bid at $2.41/lb. was not filled and an offer at $2.42/lb. got no takers.  
   "Weekly cold storage numbers continue to disappoint, but not enough to drive the market in any one direction," says FC Stone analyst, Chris Hildebrand in this morning’s Insider Opening Bell. “Spot butter has stalled at $2.40, while the NFDM spot price has retreated back to $1.56. NFDM supplies are still heavy on a global scale, and softer prices (for now) should continue to put pressure on the Class IV markets."
   The “daily drop” continued on the cash Grade A nonfat dry milk, after plunging 11¢ last week. Three offers took the powder down another 2¢ today, dipping to $1.52/lb., a level not seen since March20, 2013.    

Today’s Market Closing Prices 
Butter: Up 1¢, to $2.41/lb.
Cheddar blocks: Down 1¢, to $2.09/lb.   
Cheddar barrels: Up 1.25¢, to $2.1350/lb.
Grade A nonfat dry milk: Down 2¢, to $1.52/lb.  
Class III milk (prelim.): Aug. $21.87/cwt., +10¢; Sept. $21.80, +26¢, Oct. $20.81, +16¢; Nov. $19.80, +10¢; & Dec. $19.15, +1¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $19.92, +9¢ from Friday. The First Quarter 2015 average is now at $18.14, -2¢ from Friday. The Second Quarter 2015 average today stands at $17.93, -4¢ from Friday.

Looking ahead:
   The Agriculture Department’s makes available its latest milk production and milk price projection in tomorrow’s World Agricultural Supply and Demand Estimates report. The weekly National Dairy Products Sales Report is out Wednesday afternoon.


Tuesday on DairyLine:
   CDFA Secretary Karen Ross will propose new pricing legislation, we’ll get the latest
   It’s back to school time, we’ll talk with Diane Pratt-Heavner of the School Nutrition