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DairyBusiness Update: March 14, 2014


Fluid Milk Sales Soar, Up 10%
   I saw that headline in a dream one night. Wouldn’t the dairy industry be happy with that? It is a dream come true for Larry and Debbie Stap and Mark and Michelle Tolsma, owners of Twin Brook Creamery near Lynden, Washington. Larry talked about it on Friday’s DairyLine.
   While the dairy industry continues to struggle with falling fluid milk sales around the country, Stap has seen anything but declines in his dairy’s fluid consumption. He said his dairy started processing milk as a producer handler in2007 and they “found a niche market that exploded beyond what they realized they were getting into.”
   Stap is not selling raw milk but uses low temperature pasteurization and they do not homogenize their milk, a process that a promotional brochure says, “alters the natural state (cream or butterfat) of milk by forcing it through small openings at high pressure.” And, they only milk Jersey cows.
  Those two factors, he says, increase the number of enzymes that aid in digestion and “The higher the temperature of pasteurization; the more the enzymes get destroyed.”
   Stap has also learned from customers who were lactose intolerant or allergic to milk that those two factors may allow them to consume his milk without problems. He believes that people’s digestive systems may reject homogenization’s altering of the milk.
   “Those three things are getting people back, drinking milk again,” Stap says, “And it’s been really rewarding to hear testimony after testimony concerning that and the more people we can get drinking milk again, it’s better for the whole industry.”
   Stepping on some udders, as I put it, Stap confidently argues that Jersey milk tastes better than the other breeds of dairy cattle, because it has a higher solids content and “solids in milk is what gives milk its flavor.”
   He adds that, because Jersey milk has a higher yield factor for manufactured products like cheese, it’s less likely to be bottled as fluid milk but that is what his dairy does and last year’s sales were up at least 10 percent from the year before. His customer base is growing as more grocery outlets throughout Western Washington from the Canadian border to Portland, Oregon, feature his milk, which by the way, comes in old fashioned glass bottles so flavor is not affected.
   Stap uses no hormones, his cows are registered with the American Jersey Cow Association, are pastured in grass fields for as many months of the year as weather allows, and they raise their own calves.
   It’s hard to argue with success and perhaps there are some lessons to learn here from a family run dairy that’s truly outstanding in its field. Learn more at www.twinbrookcreamery.com.

USDA Dairy Outlook: Milk Prices to Remain High for Rest of 2014
   As it always does, USDA’s monthly Livestock, Dairy & Poultry Outlook mirrored dairy projections contained in its latest World Agricultural Supply & Demand Estimates report issued Monday.
   The Outlook says dairy cow culling remains strong, but prices for replacement heifers and dairy calves are higher than last year, suggesting that herd expansion could be in the offing. Last month’s forecast of an expansion beginning during in 2014 was held over this month.
   Milk per cow was also unchanged from the February forecast of 22,230 pounds per cow. Growth in output per cow was below the 5-year average in January. It is likely that the colder than normal winter in the upper Midwest, combined with the apparent variable forage quality of last year’s hay crop, contributed to lower than expected output per cow. In contrast and despite drought conditions, milk per cow increased in California and underpinned January’s nearly 5-percent year-over-year rise in milk output in that State. A return to more normal forage quality this spring in most of the United States will likely boost milk per cow in the second quarter. The milk production forecast was unchanged from February at 205.7 billion pounds for the year.
   Commercial milk equivalent exports were raised this month to 12.4 billion pounds on a fats basis based on strong year-to-date movement of cheese to Mexico and South Korea. In addition, butter exports to North Africa and Middle East countries were stronger than earlier forecast, helping lift export forecasts. Exports on a skim solids basis were unchanged from last month’s forecast at 38.2 billion pounds as increased lactose and cheese sales were offset by slightly lowered forecasts of skim milk powder and whey exports.
   Imports on both a fats and skims-solids basis were unchanged from February to 3.7 billion and 5.3 billion pounds, respectively.
   Dairy product prices, and consequently milk prices, are expected to remain high for the remainder of 2014. Strong demand, both foreign and domestic, will support record and near-record prices despite increased competitor supplies.

Whey Market Firm/No Excess  
   FC Stone’s March 13 Insider Closing Bell reports that Dairy Market New’s (DMN) weekly whey price report shows the midpoint of the mostly Central price at 62.25 cents per pound, up 0.75 cents from last week. The Western midpoint price is 64.5 cents, up 1.38 cents from the previous week.
   "The market tone is firm as dry whey manufacturers have little excess supplies to offer in the spot market," says DMN in its commentary on the Central whey market.   
   "Production rates for dry whey are steady to slightly higher as cheese orders continue to pick up. Demand domestically is good, but buyers are having some difficulty finding supplies. International interest is steady to lower as a few countries are backing off on export orders."

“Down Under” Update
   Australian milk production is generally stable with recent weeks, according to DMN. Weather conditions are tracking at dryer than normal patterns across much of the dairy regions. Supplemental watering and irrigation are being utilized to compensate for rainfall shortages and to keep pastures and crops in decent shape.
   The impact of high milk prices is aiding dairy farmers by offsetting input costs. A trade source is noting the record difference between Australian and New Zealand milk prices. 
   According to Dairy Australia, January 2014 milk production in Australia was 3.1% above January 2013. Australia's milk production season to date is -2.2%, compared to last season.
   Dairy Australia states exports for the July-January period total 425.4 thousand tons, down 9.6% from the year ago period. The largest export categories are skim milk powders (SMP) and whole milk powders (WMP).The total value of export is 19.6% higher over the prior year period. The highest value items are WMP and SMP. 
   New Zealand milk production trends remain well above year ago marks and are indicated to be tracking nearly 5% higher for the season through February. February trade indications are tracking 10.6% higher than during the same month in 2013. Another seasonal forecast by a financial institution is projecting a 10% increase. 
   Production is being tempered by dry conditions on the North Island. Higher pay prices for milk are providing an incentive for farmers to keep cows in the string longer. The forecasted milk price for the current season was increased by 35 cents to NZ$8.65/kilogram of milk solids, a new record high price.
   The higher price is a result of sustained high commodity pricing and good demand for milk powders from global accounts, most notably from China. Areas of Waikato and other parts of the North Island are indicated to be in drought like conditions, even though there is no official drought declaration. News reports are that some dairy farmers dried off herds due to dry conditions of pastures. Yet other farmers are utilizing the higher milk prices to offset higher production costs of buying supplemental feed. Additionally, feed, hay, and silage supplies are in greater supply than a year ago.   
   Holdings of dairy products are trending lower seasonally as the milk production season winds down and the product mix is shifted to products of greatest needs and those needed to maintain carryover stocks. Demand remains fair to good across product categories.

PDPW Conference Draws Producers from 21 States
   Approximately 1,500 dairy farmers and other professionals emerged from the long Wisconsin winter for the 2014 Professional Dairy Producers Conference in Madison, Wis. this week. Farmers from 21 states and four countries gathered for five keynote speakers, 17 specialty sessions and networking with fellow farmers and other professionals.
   Economist Dan Basse headlined day two of the conference, noting that “milk prices are projected to be up between 6-8% over last year as the dairy export market is very strong right now and feed costs are going down.”
   “Fluid milk consumption in other countries is trending up as people are beginning to make more money in industrial nations like China,” Basse added. ”And with red meat prices being so high, dairy products have become the cheapest source of protein on the table.”
   Wednesday evening’s keynote featured former White House Chef Walter Scheib, an outspoken champion of America’s bounty and the privileges shared by chefs and farmers.
   “Food is the most distinctive mark of a culture,” Scheib said. “To me, American cuisine is like the farmers who grow it: friendly, accessible and broad shouldered.”
   The message from Keynote Charlie Arnot, CEO of the Center for Food Integrity, was clear: Transparency is not an option. It is the path that must be taken if dairy farmers want to build trust with consumers and have the social license to operate. Arnot said building trust and being transparent requires an understanding that today’s consumer is disconnected from agriculture and does not understand the “why” behind dairy practices. This not-knowing leads to angst. Instead of turning to science and hitting consumers with scientific facts or trying to educate the public with our own knowledge, Arnot urged attendees to convey shared values. “Shared values are three to five times more important in building trust than demonstrating competence,” he said.
   Summaries of all the speakers and conference highlights can be found at www.pdpw.org.
   Professional Dairy Producers of Wisconsin is a dairy-producer founded organization that provides educational programs and services to fellow dairy producers. PDPW’s mission is “to share ideas, solutions, resources, and experiences that help dairy producers succeed.”
   Read more: http://dairybusiness.com/seo/headline.php?title=1-500-attend-pdpw-conference&date=2014-03-13&table=headlines#ixzz2vwrn9xsA

Milk Drive to Benefit Food Banks
   Milk Life is a movement created to show how starting mornings with milk can help power the potential of every day. With 8 grams of high-quality protein in each 8 oz. glass, including milk at breakfast can help you make the most of your day. Milk Life means wringing every last drop out of every single moment, and represents a way of living where milk helps power you to be your best.
   Milk is one of the most asked for nutrition staples at food banks, yet of the 37 million Americans served, less than a gallon of milk goes to each person every year.
   The Great American Milk Drive is here to change that, giving Americans a simple way to make a difference and donate milk to help food insecure families in their communities.
   Consumers are encouraged to explore http://milklife.com/why-milk-life for recipes, tips and videos for inspiration to “Milk Life” every day.
   The site invites visitors to return April 2 at 10am EST to watch the kickoff.

City Folks Just Don’t Get It
   So says “FarmersOnly.com” founder Jerry Miller. Speaking in Thursday’s DairyLine, Miller reported that he started FarmersOnly.com in the spring of 2005, inspired by a friend. Miller, himself an advertising executive in the agriculture industry, talked of a close friend, a farmer, who found she could not relate with the people on mainstream dating sites and was about to give up on finding love.
   Miller recognized that this problem was true for farmers across the country and the sit boasts over 1 million users, according to Miller, who explained the website’s tagline, “City folks just don’t get it!” He said he tried to explain what that tag means on the Today show “in 20 different ways,” but he’s not sure they got it.
   He adds that technology has enabled subscribers to access the site on their cell phones and tablets and, while not all of them are farmers per se, they all have a strong tie to agriculture, perhaps having been a farmer in the past. He says ages range to over 90 and it’s pretty much an even mix of men and women. “You have to understand the lifestyle,” Miller says. “That’s the bottomline.”

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)
   CME cash block cheese set a new record high this morning on 2 unfilled bids at $2.3625/lb., up 1.25¢ on the day. That’s the good news. The Cheddar barrels, however, rolled 1.25¢ lower on an uncovered offer, following yesterday’s 1¢ loss, and closed today at $2.2626/lb. That widened the spread to 10¢.
   Cheese saw its fourth week of climb. The Cheddar blocks are up 7¢ cents on the week and 75.25¢ above a year ago.
   The barrels are up 1.25¢ on the week and 67.25¢ above a year ago however they lost ground yesterday and today. Only two cars of barrel traded hands on the week at the CME. Blocks have not sold there since February 20.
   FC Stone dairy broker, Dave Kurzawski, wrote in this morning’s Insider Opening Bell:  "Barrel cheese appears to be freeing up, but there is tightness in cheese overall. As we see more milk coming out of the Midwest over the next couple of weeks, cheese could become more available, but for now the market is firm."
   Class III futures saw double digit gains, Mar.-Sept. April and May were up 56¢ and 57¢ respectively.
   Butter was down 0.5¢ this morning, slipping to $1.88/lb. Two cars traded hands both at $1.8750/lb., but an unfilled bid brought it back up to $1.88/lb. Three offers at $1.8850/lb. were left on the board.
   You’ll recall the Double A price inched up 0.5¢ Monday but gave it back today to close unchanged on the week but 22.5¢ above a year ago. Eight cars traded hands on the week.
   Kurzawski says "Butter is the tightest, followed by cheese, and then nonfat. Butter is still moving into export markets, we're in the Easter demand period, and we are not putting any butter away. That will underpin the butter market for awhile."
   Cash Grade A powder was unchanged for the 6th consecutive session today, holding at $2.04/lb. A bid at $2.00/lb. went unfilled and an offer at $2.06/lb. was left on the board.
   Nonfat dry milk demand has cooled off, according to Kurzawski. "People likely got their fill on nonfat."
Today’s Market Closing Prices:
Butter: Down 0.5¢, to $1.88/lb.
Cheddar blocks: Up 1.25¢, to $2.3625/lb.
Cheddar barrels: Down 1.25¢, to $2.2625/lb.
Grade A nonfat dry milk: Unchanged, at $2.04/lb.
Class III milk: Mar. $23.29, +12¢ (+43¢ on the week); Apr. $22.37, +56¢ (+95¢ on wk.); May $20.76, +57¢ (+41¢ wk); & Jun. $20.26,+33¢ (+16¢ wk). Based on today’s CME settlements, the Second Quarter 2014 average now stands at $21.13, +49¢ from Thursday. The 2nd half average is now at $19.33, +14¢ from Thursday.
Looking ahead:
   Next week the market will have plenty to feed on. The Global Dairy Trade Auction is Tuesday, the Agriculture Department issues its preliminary February Milk Production report Wednesday afternoon, and the April Federal order Class I base milk price is announced. The Livestock Slaughter report is issued Thursday and the February Cold Storage report is out Friday afternoon.
Monday on DairyLine:
   California dairyman Brian Medeiros gives us his definition of 'sustainability.'
   Dillon Feuz, Utah State Agriculture Economist, explains the correlation between milk
     and feed prices.


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