← Return to Home Page

DairyBusiness Update: July 29, 2014


Fonterra Reduces Milk Price Forecast
In a dose of current reality in the international market, New Zealand-based dairy cooperative Fonterra today reduced its forecast Farmgate Milk Price for the 2014/15 season from $7.00 to $6.00 per kgMS and announced an estimated dividend range of 20-25 cents per share - amounting to a Forecast Cash Payout of $6.20-$6.25 for the current season.
   Chairman John Wilson said the lower forecast Farmgate Milk Price reflected continuing volatility, with the GlobalDairyTrade price index declining 16 per cent since the start of the season on June 1.
    “We have seen strong production globally, a build-up of inventory in China, and falling demand in some emerging markets in response to high dairy commodity prices.  In addition, the New Zealand dollar has remained strong. Our milk collection across New Zealand last season ending 31 May 2014 reached 1,584 million kgMs, 8.3 per cent higher than the previous season.
   “This drop in the forecast Farmgate Milk Price will have an impact on our farmers’ cash flows. We continue to urge caution with on-farm budgets in light of the continuing volatility in international dairy markets,” said Mr. Wilson.
    Chief Executive Theo Spierings said the estimated dividend reflects the Co-operative’s expectations for improved returns on its value-add and branded products, given volume increases and lower input costs.
   “As we continue to drive for growth in our consumer and foodservice businesses, during the first half of the current financial year we expect reduced cost of goods arising from lower dairy commodity prices to have a positive impact on returns.
   “It is important to note that in light of the significant volatility, our dividend estimate is based on zero ingredients stream returns at this early stage in the season.
   “We continued driving our V3 strategy throughout the previous season and that is why we can support an increased estimated dividend range for the 2014/15 financial year.
   “Our forecasting anticipates some recovery in global dairy prices but it is too early to predict how strong this recovery will be or when it will kick in.
   “We will provide an update on business performance when we announce our Annual Result on 24 September 2014,” said Mr. Spierings.

CWT Ships More Cheese & Powder
   Cooperatives Working Together (CWT) accepted 8 requests for export assistance today from Dairy Farmers of America and Tillamook County Creamery Association to sell 1.645 million pounds of Cheddar cheese, and 2.222 million pounds of whole milk powder to customers in North Africa, Central and South America. The product will be delivered through January 2015.
   Year-to-date, CWT has assisted member cooperatives in selling 78.313 million pounds of cheese, 47.995 million pounds of butter and 18.290 million pounds of whole milk powder to 42 countries on six continents. These sales are the equivalent of 1.936 billion pounds of milk on a milkfat basis.  The year-to-date sums have been adjusted for cancellations.

rbST Use Causes No Serious Cow Health Issues
   That’s the message of Feedstuffs columnist Sarah Muirhead. Writing in the July 23 issue, Muirhead says the commercial form of recombinant bovine somatotropin, known as sometribove zinc formulation (rbST-Zn), is approved as safe by the Food & Drug Administration and has been successfully used by the U.S. dairy industry since 1994. To date some 35 million dairy cows in the U.S. have received the technology.
   However, a meta-analysis by an expert panel assembled at the request of Health Canada concluded in the late 1990s that the commercial use of rbST would cause serious health and welfare problems. This study continues to foster questions in regard to cow health and well-being and is what prompted a just-completed meta-analysis collaboration between multiple universities that looked at 26 peer-reviewed papers and 13,784 cows. In contrast to the Canadian study, the more recent analysis focused on efficiency and safety of rbST-Zn when used according to label. Use according to label directions was not a requirement of the Canadian work.
   Involved in the new meta-analysis were Norm St. Pierre of The Ohio State University, G.A. Millikin of Kansas State University, D.E. Bauman of Cornell University, R.J. Collier of The University of Arizona, J.S. Hogan of The Ohio State University-Wooster, J.K. Shearer of Iowa State University and K.L. Smith of the University of Florida.
   Presenting at the 2014 Joint Annual Meeting of the American Dairy Science Assn. and the American Society of Animal Health, Bauman said the meta-analysis results indicated that milk, fat, protein, and 3.5% fat-corrected milk yields were all increased (P < 0.001) by rbST-Zn (average of 4.00, 0.144, 0.137, and 4.04 kg/day, respectively), whereas milk concentrations of fat, protein, and lactose were unaltered (P < 0.09, 0.07, and 0.26, respectively).
   A 5.4% improvement in pregnancy proportion from rbST-Zn was detected for the first two breeding cycles after the voluntary wait period (P < 0.01). However, a 5.5% decrease (P < 0.05) in pregnancy proportion during the length of the trials was likely due to reduced estrous behavior. There was no effect of rbST-Zn on fetal loss, days open, services per conception, twinning, or cystic ovaries (P < 0.65, 0.96, 0.12, 0.68, and 0.43, respectively); on the odds of clinical mastitis or milk somatic cell count (P < 0.12 and 0.54, respectively); nor on rates of clinical lameness, lameness lesions, or traumatic lesions of the integumentary system (all P < 0.99). The rbST-Zn reduced body condition scores by 0.06 point (1 to 5 scale), a difference in bodyweight of about 3 kg (P < 0.03). No change to culling rate was associated with rbST-Zn (P < 0.63).
   Bauman said it was concluded from the meta-analysis that rbST-Zn is effective and presents no unmanageable effects on cow health or welfare when used according to label.

Entry Deadline Approaching for Expo Forage Contests
The entry deadlines this year’s World Forage Analysis Superbowl is quickly approaching. The entry deadline for the standard and brown midrib corn silage is Thursday, August 14. The deadline for all other forage samples including dairy hay, haylage, bagelage, commercial hay and grass hay is Thursday, September 4. The official entry form and contest rules can be found at foragesuperbowl.org or by calling 920-336-4521. The cost to enter is $25 per sample and includes complete nutritional analysis of forage samples.
   Over $22,000 in cash prizes will be awarded during the Mycogen Seeds Forage Superbowl Luncheon on Wednesday, October 1, including $1,500 for each category winner and quality counts award in silage and hay/haylage. Additional cash prizes will be awarded to the Grand Champion Forage, First-Time Entrant winner and second through fourth places in each category.
   All winning entries will be on display in the Arena Building at World Dairy Expo. Finalists will be notified in September and invited to attend the Mycogen Seeds Forage Superbowl Awards Luncheon in Madison, Wis.
   Cash awards are made possible thanks to generous sponsors, including Platinum Sponsor, Mycogen Seeds. Additional sponsors include Ag-Bag, Agri-King, Barenbrug USA, Blue River Hybrids, CROPLAN by Winield, Kemin, Kuhn North America, National Hay Association, NEXGROW alfalfa and W-L Research.  
   The World Forage Analysis Superbowl is organized in partnership with Dairyland Laboratories, Inc., DairyBusiness Communications, Hay & Forage Grower, U.S. Dairy Forage Research Center, University of Wisconsin-Madison and World Dairy Expo.  

Processors Team with Cornell on Leadership Development
   The International Dairy Foods Association (IDFA) is joining with Cornell University to offer leadership development opportunities for the next generation of leaders in the dairy foods business. Through its newly-launched NextGEN Dairy Network, IDFA will partner with Cornell University to provide a series of training opportunities for dairy professions with less than 15 years in the industry.
   “As dairy companies continue to grow and their operations evolve, one of the most critical requirements is to create a strong pool of dairy professionals who are prepared to fill senior-level management positions in their companies and in our member organizations,” said Connie Tipton, IDFA president and CEO. “Our collaboration with Cornell is an important step towards strengthening the knowledge, skills, and leadership abilities of our industry’s employees.”
   The first joint program will be the NextGEN Symposium, October 6-8, at Cornell University. The symposium will feature exposure to the dairy industry from production to processing to supply chain distribution and is designed to enhance personal and professional networking, increase self-awareness, and improve leadership skills in a way that can drive change within an organization.
   “Teaming up with an organization such as IDFA will help to bridge the gap in workforce development for the next generation of leaders in our industry,” said Kathryn J. Boor, dean of the College of Agriculture and Life Sciences, Cornell University. “Cornell and IDFA share a commitment to create opportunities for industry professionals at all levels to develop the skills, connections and confidence to be successful in the dairy industry.”
   The symposium is limited to 50 participants, and registration is now open. For more information and to register, visit NextGen Symposium.
   IDFA developed its NextGEN Dairy Network to engage the next generation of leaders in the dairy foods industry. It is intended to help professionals with less than 15 years of experience to connect with peers, enhance their careers and prepare for leadership opportunities within their companies and the industry.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   The 40lb. block Cheddar is pounding on the $2 door again, up 0.75¢ this morning on an unfilled bid, after inching up 0.25¢ yesterday, and is now trading at $1.98/lb. The 500lb. Cheddar barrels were unchanged with no activity, after four consecutive sessions of loss, and held at $1.9475/lb., a typical 3.25¢ below the blocks.     
   Class III futures prices continued to push higher. “No fresh news is being construed as bullish,” says FCStone dairy operations manager Mary Ecklund in this afternoon’s Insider Closing Bell, “As Class III futures continued to advance on the heels of a quiet spot session. With July expiring today, and August being priced, it predisposed the September, October, and November contracts to tack on additional upside premium. Class III futures sprung double digits gains today through November," Ecklund wrote, and "Front month futures are currently pricing a $2.05 cheese price."
   Cash butter plunged to $2.53/lb. on today’s first trade. The next four trades were at $2.5250/lb. but the price started ticking higher and made it back to $2.5550/lb on the eighth and final sale, but an offer brought it back down to $2.5250/lb., down 4.5¢ on the day. The spot butter has lost 9.5¢ in three sessions. 
   Cash powder held at $1.6750/lb. for the sixth session in a row. A bid at $1.60/lb. went unfilled.  

Today’s Market Closing Prices
Butter: Down 4.5¢, to $2.5250/lb.
Cheddar blocks: Up 0.75¢, to $1.98/lb.   
Cheddar barrels: Unchanged, at $1.9475/lb.
Grade A nonfat dry milk: Unchanged, at $1.6750/lb.  
Class III milk (prelim.): July $21.54/cwt., +1¢; Aug. $21.62, +2¢; Sept. $21.38, +31¢, Oct. $20.46, +27¢; Nov. $19.74, +22¢; & Dec. $19.33, +10¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.51, +11¢ from Monday. The Fourth Quarter average is now at $19.84, +19¢ from Monday. The First Quarter 2015 average is now at $18.30, +9¢ from Monday. The Second Quarter 2015 average today stands at $18.06/cwt., +9¢ from Monday.
Looking ahead:
   The weekly National Dairy Products Sales Report (NDPSR) is issued by USDA tomorrow afternoon and the Agriculture Department will announce July Federal Order Class II, III, and IV milk prices. Comparable California prices are announced by the California Department of Food and Agriculture on Friday. USDA also issues its monthly Dairy Products report Friday afternoon.

Wednesday on DairyLine:
    Are spying drones over your farm? Bob Naerebout of the Idaho Dairymen’s Assn.
           joins us to discuss.
   Plus, dairy consultant, Dr. David Rhoda explains the shifting mindset of lowering drug