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DairyBusiness Update: August 27, 2014


Margin Protection Program “Devil” is in the Details
Agriculture Secretary Tom Vilsack will host a media conference call tomorrow to announce final details on the startup of the new risk management program for dairy farmers, known as the dairy Margin Protection Program.
   The voluntary program, established by the 2014 Farm Bill, will allow dairy farmers to take steps to protect their business from economic risks beyond their control. The Margin Protection Program replaces the Milk Income Loss Contract program and gives participating dairy producers the flexibility to select coverage levels best for their operation.
    The National Milk Producers Federation has scheduled a media call with Jim Mulhern, President and CEO
You’ll recall that the Milk Producers Council’s Rob Vandenheuvel spelled some of the questions waiting for answers in a recent member newsletter. They include:
• What the enrollment period is for dairies.
• Whether the program is operated on a calendar year basis or fiscal year basis (like the Oct 1 – Sept 30 calendar for
  the MILC program).

• Exactly how “new producers” will be defined and how dairies that change locations will be handled.
• How much of your production will be eligible for the lower premium.
• How your premiums will be paid.
• Whether you actually have to produce the milk in order to be eligible for the payouts.
   Once those details are made clear, MPC and many other organizations and cooperatives around the country will help educate producers on how the program works and how to evaluate what may be the best option for individual dairies.
   Vandenheuvel also promoted an online tool for dairy producers from the University of Illinois. It can be found at: http://www.farmdocdaily.illinois.edu/tools/flash_dairy_dashboard_010514.html.

Milk Production Costs Tick Up From June
   The Agriculture Department’s National Milk Cost of Production report, issued yesterday, shows July’s total costs were up slightly from June.
   Total feed costs averaged $13.56/cwt., up 21¢ from the revised June estimates, and 8¢ above May. July 2013 estimates were not available due to budget sequestration. Purchased feed costs, at $6.91/cwt., were up 10¢ from June and 12¢ above the April figure.
   Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $25.21/cwt., were up 46¢ from June and 49¢ above the May level. Feed costs made up 53.8% of total costs, compared to 54.0% the month before.
   Read the complete report at: http://www.ers.usda.gov/data-products/milk-cost-of-production-estimates.aspx.

Lagging NDPSR Prices: Cheese & Butter Up Powder & Whey Down
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released this afternoon, shows the U.S. average block Cheddar cheese price at $2.0928/lb., up 5.2¢ from the week before, while the barrels averaged $2.1824, up 6.5¢. Butter reversed gears and shot up 12.2¢, after dropping 5.3¢ the previous week, and 4.8¢, the week before that, and was now at $2.5389/lb. Nonfat dry milk averaged $1.7887/lb., down 2.3¢, and dry whey averaged 67.40¢/lb., down 1.5¢. These prices are used in determining Federal order Class milk prices.

California Powder Price Up 3.7 Cents
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $1.7923/lb. for the week ending August 22, on sales of 10.37 million lbs. The price was up from $1.7551/lb. the week before, on sales of 14.44 million lbs.

Northeast Butter Output Still Limited/Cheese Stocks Tight
   Northeast butter production has improved as churning operations that were previously idle, due to maintenance activities, are now back online, according to USDA’s Dairy Market News. However, declining milk supply levels and good cream prices limit overall churning rates in the Northeast. New export butter interests are relaxed due to higher prices, while domestic demand is active as the Labor Day holiday approaches. Buyers are looking to obtain butter for Fourth Quarter sales, in lieu of immediate needs, with moderate activity taking place in contractual and cash markets. 
   Milk intakes at Northeast cheese plants are mostly steady with production around seasonal levels. Inventories are tight with good domestic demand, as active sale transactions occur at a premium, in the spot market. The market undertone is firm.

Fonterra Deepens Links with China
   New Zealand-based Fonterra, the world’s biggest dairy exporter, announced that it will pay NZ$615 million ($515 million) for a stake in a Chinese infant formula maker as it seeks to tap the nation’s lucrative baby milk market.
   The company will buy a stake of as much as 20 percent in Beingmate Baby & Child Food Co Ltd. (002570), a subsidiary of China’s fourth-largest infant formula maker, it said today. The companies also plan to set up a joint venture to buy Fonterra’s Darnum plant in Australia and a distribution agreement to sell Anmum, Fonterra’s own baby milk brand, in China.
   The deal will allow Fonterra to use Beingmate’s distribution network for its products, helping the New Zealand company increase the number of sales points in China much faster than if it expanded on its own, said Torsten Stocker, a Hong Kong-based partner at consulting firm AT Kearney Inc. Fonterra is seeking to boost its business in a country where the baby formula market is forecast to more than double from last year to 191 billion yuan ($31 billion) by 2017.
“There is still a large number of infants being born and there is still a lot of underlying growth,” Stocker said. “Breastfeeding rates are lower than in other markets, and parents will always buy the best for their babies.”
   The tie-up will also help Beingmate guarantee a supply of quality raw materials, which is difficult to find in the country, Stocker said.
   The tie-up with Beingmate is “a game-changer that will provide a direct line into the infant formula market in China, which is the biggest growth story in pediatric nutrition in the world,” Fonterra’s Chief Executive Officer Theo Spierings said.
   Read more at: http://www.bloomberg.com/news/2014-08-27/fonterra-deepens-chinese-links-with-infant-formula-partnership.html.

World Dairy Expo Entries Due
   Dairy cattle exhibitors are encouraged to submit their entries now for World Dairy Expo. The initial deadline, to avoid late fees, is Sunday, Aug. 31, 2014 by midnight (CDT). Paper entries must be postmarked by that date to avoid late fees.
   Exhibitors are encouraged to submit entries on the user-friendly Expo online entry system. The Premium Book is available online at worlddairyexpo.com. Animal entries, stalling requests, tent and/or booth space purchases and 2017 International Futurity entries can be submitted within the online entry system. World Dairy Expo’s Youth Fitting and Youth Showmanship Contest entries may also be submitted. Special thanks to AgriLabs for sponsoring the Premium Book and their support of the show.
   When submitting animal entries, please include an AIN 15-digit number (visual or electronic) for all animals. Acceptable forms of animal identification are: USDA AIN 840 tag (RFID or visual), Canadian CIA RFID 124 tag, Manufacturer Coded RFID 900, 982, or 985 tag. This information will be used for health check-in upon arrival. Breed show check-in will continue to use an original breed association registration paper.
   Entries may be made between Sept. 1 and Sept. 7 online or by paper at $50 per animal. After Sept. 7, all entries are $100 per animal. Online entries will be accepted until Sept. 14. After Sept. 14, all entries must be submitted via the paper entry form. You may utilize the online entry system and pay by credit card (online only) until 11:59 p.m. (CDT) on Sept. 14, 2014.
   Staff is available to answer entry and show-related questions as Expo approaches. Please contact either Ann Marie Magnochi or Laurie Breuch for assistance at 608-224-6455.
   World Dairy Expo is recognized as the meeting place for the global dairy industry. More than 70,000 diary producers and industry experts from 90 countries travel to Madison, Wis. annually. The world-class event includes 2,500 head of North American dairy cattle competing on the famed colored shavings, more than 850 exhibiting companies in the renowned trade show, Expo Seminars, Virtual Farm Tours and exciting youth competitions. World Dairy Expo’s theme is “Designer Dairy” and it will be held Sept. 30 through Oct. 4, 2014. Visit worlddairyexpo.com, follow us on Facebook or Twitter @WDExpo or #WDE14 for more information.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Cash Cheddar block cheese was up another 1¢ this morning, following yesterday’s 2.5¢ jump, and is now at $2.30/lb., matching the barrels, and 13.25¢ away from the record high $2.4325/lb. hit March 24, 2014. Three cars traded hands today, the first at $2.2925/lb., the second at $2.30/lb., and the last at $2.2950/lb., but an unfilled bid took it to $2.30/lb. The Cheddar barrels held at $2.30/lb., after jumping 4¢ yesterday, with one lonely bid at that price going unfilled.
   Class III futures retreated: Sept. -9¢, Oct. -14¢, Nov. -9¢, & Dec. -8¢.
   Four trades took the cash butter down to $2.73/lb. but the sales kept coming and rallied the price back up to $2.74/lb., down 1.5¢ on the day, after losing 2.5¢ yesterday and 4.25¢ on Monday. A total of 10 carloads came through the CME today and a bid at $2.7350/lb. was left on the board.
   Sales moved the cash Grade A nonfat dry milk to reverse gears this morning, up 2.25¢, the first upward movement since July 3. The first two sales were at $1.32/lb., the third at $1.31/lb., then two more at $1.32/lb., jockeying the price back and forth, but two unfilled solidified the closing at $1.3225/lb. An offer at $1.33/lb. got no response.

Today’s Market Closing Prices 
Butter: Down 1.5¢, to $2.74/lb.
Cheddar blocks: Up 1¢, to $2.30/lb.   
Cheddar barrels: Unchanged, at $2.30/lb.  
Grade A nonfat dry milk: Up 2.25¢, to $1.3225/lb.  
Class III milk (prelim.): Aug. $22.26/cwt., Unchanged; Sept. $23.98, -9¢, Oct. $23.05, -14¢; Nov. $21.08, -9¢; & Dec. $19.87, -8¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $21.33, -11¢ from Tuesday. The First Quarter 2015 average is now at $18.36, -1¢ from Tuesday. The Second Quarter 2015 average today stands at $18.00, -6¢ from Tuesday.

Looking ahead:
   The Agriculture Department issues its monthly Ag Prices report tomorrow afternoon, which will include the latest milk-feed price ratio. Looking to next week, Monday is the Labor Day holiday so the markets are closed and the weekly Crop Progress report will be issued Tuesday, the Global Dairy Trade Auction is Tuesday morning, and the California Department of Food and Agriculture announces the State’s August Class 4a and 4b milk prices. Wednesday, USDA issues the weekly National Dairy Products Sales Report, and Comparable Federal order (Class II, III, & IV) milk prices are announced by USDA Thursday afternoon, along with the July Dairy Products report.

Thursday on DairyLine:
   NMPF’s Chris Galen previews their joint annual meeting scheduled later in October in
   “The Silage Man” Keith Bolsen joins us for his monthly installment of Silage Solutions.


This Week in DairyBusiness Weekly:

·         Putting a real face on agriculture

·         Milk markets update

·         Mlsna East Town Dairy installing "Every dairy farmer's dream"

·         Dairy Coach: Your family, your farm, your future

·         Farm Bill dairy Margin Protection Program coming soon

·         Conversations: Ask your vet about producing milk and meat responsibly

·         Show, sale and event calendar

·         Industry briefs

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