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DairyBusiness Update: July 25, 2014


Milk Production Costs Up Slightly From May
The Agriculture Department’s National Milk Cost of Production report, issued this afternoon, shows June’s total costs were up slightly from May.
   Total feed costs averaged $13.39/cwt., down 9¢ from revised May estimates but 16¢ above. June 2013 estimates were not available due to budget sequestration. Purchased feed costs, at $6.82/cwt., were up 3¢ from May but 3¢ lower than April.
   Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $24.79/cwt., were up 7¢ from May and 32¢ above the April level. Feed costs made up 54.0% of total costs, compared to 54.5% the month before.
   Read the complete report at: http://www.ers.usda.gov/data-products/milk-cost-of-production-estimates.aspx.

Consumers Paying More for Dairy Products 
   Consumer dairy product prices will rise 3-4 percent in 2014, according to forecasts issued by USDA’s Economic Research Service. That’s slightly above the anticipated increase for all foods consumed at or away from home. The projections were unchanged from last month’s report.
   The Consumer Price Index (CPI) for food measures the average change over time in the prices paid by urban consumers for a representative market basket of consumer goods and services.
   June 2014 retail dairy product prices declined 0.6 percent from May, but were up 3.9 percent from June 2013. The report predicts that 2015 retail dairy product prices will rise 2.5-3.5 percent, compared to an expected all-food price increase of 2-3 percent. Dairy product prices rose just 0.1 percent in 2013, compared to a 2.1 percent rise in 2012.
   The ERS Producer Price Index (PPI) shows June 2014 farm-level milk prices declined 5.6 percent from May, but were up 19.5 percent from June 2013. June wholesale dairy prices declined 1.6 percent from May, but were up 10.7 percent from a year ago.
   The full-year 2014 PPI projection of farm-level milk prices looks for a 5-6 percent rise, following an 8.1 percent increase in 2013. Wholesale dairy prices are projected to increase 4-5 percent in 2014, after increasing 3.6 percent in 2013. The 2015 PPI projection indicates farm-level prices will rise 0.0-1.0 percent, while wholesale PPI prices will increase 1-2 percent.

Bullish or Bearish?
   I posed that question to HighGround Trading dairy broker Eric Meyer in Friday’s DairyLine, questioning his analysis on last Friday’s June Milk Production report which he said, fed the bears and not the bulls, but his take on Tuesday’s Cold Storage report gave a slightly different outlook.
   “That’s a good question,” Meyer responded. “Milk production was up 1.9 percent in the 50-State total, with cow numbers continuing to grow,” he reasoned, “And that’s longer term a bit of a bearish signal.” He said that “We’ve been waiting for the herd growth to kick in and with the revisions that we’ve seen over the last few months and with that number going up, this is something we’ve been waiting for so more milk is on the horizon once we get past summer.”
   “However,” Meyer cautioned, “When you look at this week’s Cold Storage report and you see both cheese and butter inventories still at severely shortage levels, the market here in the very near term needs to realize that, so we’ve seen prices on both cheese and butter move higher, with butter not too far away from its all time record high set in 1998,” ($2.81 per pound).
   “Our conclusion here, Meyer warned, “Is that near term, we’re still a bit bullish as those inventories need to get figured out but longer term, when looking at the combination of higher herd growth and production here, cheaper feed costs as well as the international market really starting to tank, in our view and analysis, this does set up for lower prices later this year and into 2015.” 
   The scenario sounds reminiscent of the dairy industry that, when milk prices go up, so does milk production and when milk prices go down, milk production still goes up. Meyer responded, “That’s true and, with lower feed prices, producers will hang on to those cows for a lot longer than we would anticipate,” but he adds the caveat that “I am not anticipating a doomsday scenario like that of 2008-2009 but we think it’s smart for dairymen to look at that long term picture and get themselves prepared and protected for what could happen down the road.”

Mexico Buying Less Powder Affecting the Market
   Prices on the Western low/medium heat nonfat dry milk price series are mixed, according to USDA’s Dairy Market News. The market tone is weak. Some confusion is apparent as market participants noted a recent unexpected uptick in some contract bases while others stepped lower. With several signals in the global market pointing to a downward trend, buyers expressed some disbelief in these higher prices.    
   Others offered possible explanations of how timing on sales price entries ultimately could lead to a short-term shift in direction for some price series. Buyers are only filling near term needs on the FOB spot market. Those buyers with various basis related contracts indicate they are receiving loads on a timely schedule. 
   A few market participants indicate Mexico has yet to return to the market in a big way.  Contacts indicate NDM loads placed near the border did not generate buying interest at prices within the current range. Historical buying patterns suggest buyers in Mexico will eventually purchase NDM from U.S. sources, but most Q4 needs are unfilled.   
   Manufacturers also indicate these are difficult times from either a cooperative or supply contract perspective. There is an obligation to process milk, but the downward trends for several end-product prices may be building in losses for manufacturers.   
   Nonfat dry milk production is steady to lower, depending on overall manufacturing milk supplies within the Western milksheds. Low/medium heat nonfat dry milk inventories are building. High heat nonfat dry milk prices shifted lower and higher on light FOB spot interest. Production is intermittent at most plants. 

Ethanol Mandate to be Increased?
   Illinois-based Allendale Incorporated reports that White House adviser John Podesta has indicated the administration plans to raise the amount of ethanol and other biofuels that must be blended into the nation's fuel supply.
    The U.S. House Republicans are weighing changes to the federal biofuel mandate, but serious efforts to overhaul the renewable fuel program will likely wait until next year.

Farmers Are the Best Messengers Regard GMOs
   As more states require labeling of foods made with genetically modified ingredients, Congress is being pressured to pass a law regulating the controversial technology found in much of the U.S. food supply.
   The National Milk Producers Federation (NMPF) continues to track the issue both from a policy and marketing standpoint after legislation was introduced to mandate the labeling of GMO’s, which NMPF opposes.
   “We do support a contradictory bill that would establish a voluntary labeling system so that if companies did want to provide absence claims there is a process for doing so,” NMPF’s Chris Galen told DairyLine. “We support that legislation but that also looks like it won’t get through Congress yet.”
   The House Agriculture Committee held a hearing to learn why farmers use GMO’s. A Vermont dairy farmer testified prompting NMPF to urge more farmers do the same because of the mounting pressure from the marketplace.
   “We’re still seeing a lot of pressure being brought to bear on companies like Starbucks to disavow the use of GMO’s in the production of milk that goes into their coffee,” Galen said. “We’re seeing big dairy companies like Ben & Jerry’s make decisions to source some of their ingredients from GMO free supplies.”
   Farmers are the best messengers when they communicate, not just the benefits of using GMO grains and oil seeds, but also explaining the meaning of GMO use to consumers. That’s because a lot of people assume that GMO’s only benefit Monsanto and that anyone who uses GMO’s is a factory farm.
   “That’s why we need people like this Vermont farmer who testified in Congress, who is a small producer but still sees some benefits in at least having the choice of using GMO’s,” Galen said. “If we don’t get that message communicated then there is going to be fewer choices for farmers as well as consumers.”
   To help farmers, NMPF and Dairy Management Incorporated (DMI) are training farmers this week to enhance their ability on social media and better communicate where food comes from, how it is produced, and who produces it. GMO’s are a front burner issue but there are other issues out there like antibiotics, growth hormones, and the argument between conventional food production and organic.
   “We need to make certain we have the right tools in the hands of the right people to help carry those messages,” Galen concluded.

Jersey Association Offers Sweet Deal
   The American Jersey Cattle Association has launched “Time 2 Transfer,” a limited-time promotion to boost filing ownership transfers of Registered Jerseys™ that introduces new discounts authorized by its Board of Directors and improvements in the association’s online services.
   Between now and December 8, Time 2 Transfer rolls back the transfer cost to the lowest, under 60-day fee for any Registered Jersey™ with a date of sale January 1, 2011 or later.
   The price will drop another $2 per animal when transfers are entered on infoJersey, the AJCA’s 24/7 service portal, or submitted in groups using Excel spreadsheets, reports generated from herd management software, or field-delimited text files.
   “With all the things that are on a Jersey breeder’s ‘To Do’ list each day,” observes AJCA Executive Secretary & CEO Neal Smith, “sending ownership transfers to the AJCA is one thing that might be put off to another day. But with new programming upgrades and the addition of a faster incoming internet connection, we are streamlining the filing process and making it quicker.
   “And that makes it much easier to complete the sale with the buyer,” Smith continues. “Transfers are the new owner’s key to accessing the full pedigree, performance records and genetic evaluations for the animals they have purchased. Plus, it allows them to record the offspring of their purchases with the AJCA.”
   Time 2 Transfer also highlights an added benefit of the REAP (registration-Equity-appraisal-performance) program introduced January 1. The cost of transfers filed within 60 days of sale date drops from the base fee of $12.00 per animal as more transfers are filed during the REAP enrollment period:
21st to 60th transfer, $10.00 each;
61st to 100th transfer, $8.00 each;
101st to 200th transfer, $6.00 each;
201st to 600th transfer, $4.00 each; and
all transfers after 600, $2.00 each.
   “Because Time 2 Transfer applies to all animals sold since January 1, 2011, this is an opportune time for REAP herd owners to catch up on all their transfer work,” adds Erick Metzger, AJCA Herd Services Manager.
   “The more catch-up transfers that are processed between now and December 8, the less they will cost the REAP herd owner.
   “It’s the ultimate step in assuring customer satisfaction,” Metzger continued, “because the transfer puts the AJCA registration number into the buyer’s business management software. Our goal is to make owning Jerseys more profitable than any other breed, and the AJCA registration number is the most cost-effective and efficient way to get vital information needed to operate more profitably.”
   The American Jersey Cattle Association, organized in 1868, compiles and maintains animal identification and performance records for dairy herd owners and provides services that support genetic improvement and greater profitability through increasing the value of and demand for Registered Jersey™ cattle and genetics. The flagship program is REAP, a comprehensive service package that includes registration, Equity milk marketing support, functional type appraisal, and performance testing. Over 160,000 cows are enrolled on all AJCA performance evaluation programs at mid-2014.
   For more information on USJersey services designed to enhance commercial profitability, contact the American Jersey Cattle Association by writing 6486 E. Main Street, Reynoldsburg, Ohio 43068-2362, visit www.USJersey.com, or connect at Facebook.com/USJersey.

Marketing Campaign Get USJersey Thumbs Up
   A marketing campaign introducing retail-based “Seriously Sustainable Stations” for consumer education, interwoven with social media, contests and merchandise, received the Finalist Award in the USJersey Sustainability Marketing Contest.
   The contest, announced at the start of World Ag Expo in February, cast a wide net seeking fresh ideas to turn the Jersey sustainability story into marketing action.
   Jason Stigora, an independent marketing consultant who lives on a farmette near Delta, Penna., with his family and a recently acquired Registered Jersey™ heifer, received a $1,500 Finalist award for his multi-faceted presentation that one judge complimented for being “strong on ideas and a robust marketing campaign.”
   Entries were reviewed by a four-person judging panel that represented producer-members of National All-Jersey Inc. and its Queen of Quality® brand, senior directors of marketing, public relations and education in allied dairy industries, plus a full-service advertising agency with numerous clients in the agriculture and food industries.
   The panel selected the submission by Emily King, Madison, Wis., for Honorable Mention recognition and a $750 award. The premise of her presentation was to not merely campaign for the use of Jersey products, but to create a movement through social media “to be as green as we possibly can, without sacrificing the industry we cherish.” The submission was complimented for its graphic creative materials.

Langmaids Named McKown Master Breeder
   Scott and Laurie Langmaid of Danville, Vt., have been selected by the Klussendorf Association as the sixth recipient of the Robert “Whitey” McKown Master Breeder Award. This award recognizes a well-managed breeder herd that has been successful at showing and judging and emphasizes all qualities of the Klussendorf Award, including ability, character, endeavor and sportsmanship. The award will formally be presented on Friday, October 3 during the 48th World Dairy Expo in Madison, Wis.
   Scott and Laurie, along with their sons Ross, Brad and Trevor, operate Vermont Pond View Farm. Scott grew up at Vermont Pond View Farm helping his father, Hugh, build a genetic base that has produced 170 Excellent cows. They have bred four Excellent 95-point cows and six Excellent 94-point cows.
   The farm has been in Scott’s family for six generations and more than 200 years. Hugh and his wife, Ann, began working with registered Holsteins in 1964. In 2001, Scott and Laurie took over the dairy and have continued to grow the recognition of the herd.
   The tradition of excellence runs deep in the cow families that the Langmaids develop. Several of the more prominent cows that wear the VT-Pond-View prefix (short for Vermont Pond View) come from lines that date back to cow families purchased by Hugh. This includes VT-Pond-View Round Oak Sue EX-94, whose line produced two Excellent 95-point cows, and VT-Pond-View Charisma-ET EX-95, whose line produced three Excellent 94-point cows. The Swampy Hollow Elevation Sweet EX-92 3E cow family also has played a large role in the herd.
   Another of the more prominent lines on the farm had its beginning with Twin-Wind TC Broker Lass EX-95. The cow was purchased by the dairy in 1990 and has left her mark producing nine Excellent daughters and several Excellent granddaughters. One of her daughters, VT-Pond-View Rubens Lilyana, also scored EX-95 points and produced many high-scoring offspring.
   In 2011, VT-Pond-View Goldwyn Libby-ET, the granddaughter of Lass, was recognized as the Unanimous All American and All Canadian Spring Yearling winning the spring yearling class and junior champion honors at the Royal Winter Fair, New York State Fair and Maryland State Fair. The family has also earned All American Best Three Females in 1991. That same year they earned Reserve All American Produce of Dam, an honor they repeated in 1994.
   The family stays busy on the farm and has been unable to do much showing in the last several years, but they have a strong history at the Northeast Fall National Show recording five premier breeder awards and two premier exhibitor titles. The farm has also exhibited many years at the Vermont State show winning premier breeder six times and premier exhibitor five times. They have also laid claim to premier breeder or exhibitor titles at the All American Dairy Show, Mideast Fall National and New York State Fair.
   A dedication to breeding and developing good cow families alongside the pond in northeastern Vermont has earned the Langmaids the honor of being named the 2014 McKown Master Breeder.
   The Robert “Whitey” McKown Memorial Breeder Award was made possible by the family and friends of the 1997 Honorary Klussendorf honoree after his passing in 2009. Whitey joined the Holstein World staff in 1956 and became widely respected as he traveled nationally and internationally, reporting on shows, sales, meetings, and other Holstein events. The 1987 National Dairy Shrine president also developed MooKown Holsteins at Belleville, N.Y. Whitey had great admiration for the farmer breeder.
   The Klussendorf Memorial Association, considered by many as the Hall of Fame for Dairy Cattle Exhibitors, began in 1937 in memory of Arthur B. Klussendorf, considered the outstanding dairy cattle showman of his time. Each year, the Klussendorf Association votes to add a new dairy cattle exhibitor to its roles with lifetime membership for their cumulative works including ability, character, endeavor, and sportsmanship.

Mielke Market Daily / Week’s End Review
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   The Cheddar blocks dropped another 1.75¢ this morning, following yesterday’s 5.25¢ plunge, and close the day and the week at $1.97/lb. Three carloads traded hands, the first at yesterday’s $1.9875/lb. and the next two at today’s close. A bid at $1.96/lb. went unfilled. The 500lb. barrels were down another 4.5¢, following yesterday’s 3.5¢ descent and a 3.75¢ loss on Wednesday, and are now at $1.9525/lb. Three cars were sold today, all at $1.9525/lb. Two bids at $1.95/lb. went unfilled and an offer at $1.96/lb. brought no response.  
   Cash cheese reversed two weeks of gain this week and fell below $2 per pound for the first time since July 14 on the blocks. They are down 5.75¢ on the week but still 20.75¢ above a year ago. The barrels are down 11.75¢ on the week, 19.25¢ above a  year ago, and 1.75¢ below the blocks, correcting the inverted spread. Eleven cars of block traded hands this week and 14 of barrel. The lagging NDPSR-surveyed U.S. average block price lost 2.2¢, averaging $2.0096/lb., while the barrels averaged $2.0355/lb., down 1.5¢.
   Class III futures prices continued to slide lower, with August down 24¢, Sept. -19¢, Oct. -20¢, and Nov. -19¢.
   FC Stone risk management specialist, Chris Hildebrand, wrote in this morning’s Insider Opening Bell: "It has been a pretty slow week on the cheese trade considering how volumes were last week. We look for futures to close out the week on a quiet note, unless we get a move down on spot past the $1.95 level. We could see some panic selling if the spot price breaches that level."
   Cash butter gave up 3¢ this morning on a trade and closed at $2.59/lb., with one offer at that price left on the board.
  The spot butter price gained almost 25¢ in two weeks and hit 16 year highs, but suffered its first loss since July 11 today, still up 11¢ on the week and $1.1575 above a year ago. Ten cars were sold on the week and the NDPSR butter average hit $2.3669/lb., up 5.6¢.
   Cash Grade A nonfat dry milk was steady again, holding for the fourth session in a row at $1.6750/lb. There was no activity today.
   The spot powder is down 2¢ on the week. Two cars were sold this week. NDPSR powder averaged $1.8694/lb., down 1.4¢, and dry whey averaged 68.69¢/lb., down 0.1¢.

Today’s Market Closing Prices 
Butter: Down 3¢, to $2.59/lb.
Cheddar blocks: Down 1.75¢, to $1.97/lb.   
Cheddar barrels: Down 4.5¢, to $1.9525/lb.
Grade A nonfat dry milk: Unchanged, at $1.6750/lb.
Class III milk (prelim.): July $21.53/cwt., Unchanged; Aug. $21.45, -24¢; Sept. $20.72, -19¢, Oct. $18.90, -20¢; Nov. $19.35, -19¢; & Dec. $19.10, -9¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.23, -15¢ from Thursday. The Fourth Quarter average is now at $19.45, -16¢ from Thursday. The First Quarter 2015 average is now at $18.15, -7¢ from Thursday.
Looking ahead: 
   The Agriculture Department issues its monthly Ag Prices report Monday, which will include the latest Milk Feed Price Ratio, and the weekly Crop Progress report is out Monday. July Federal Order Class milk prices are announced Wednesday afternoon by USDA and California’s comparable July Class 4a and 4b prices are announced by the California Department of Food and Agriculture on Friday. USDA also issues its monthly Dairy Products report Friday afternoon.
Monday on DairyLine:
   An update from Idaho with Bob Naerebout of the Idaho Dairymen's Assn.
   Why is protein so popular now, Nutritionist Maureen Blight reports.


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