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DairyBusiness Update: May 14, 2014

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Dairy Margin Protection Program is on Schedule
  
The main dairy provision from the new farm bill is the Margin Protection Program and  Agriculture Secretary Tom Vilsack reassured producers last week that implementation is on schedule.
  
“I’m confident we will be ready to go by September 1st,” he told farm broadcasters in Washington, D.C. “This is part of what we’ll be doing this spring and summer – getting the educational information out to producers so they can make an evaluation and determination about precisely what’s in their best interest.”
  
The Margin Protection Program will be a new safety net program that will provide dairy producers with indemnity payments when actual dairy margins are below the margin coverage levels the producer chooses on an annual basis. The goal is to protect farm equity by guarding against destructively low margins, not to guarantee a profit to individual producers.
  
“Right now we are looking at a pretty healthy dairy market and milk market,” Vilsack reported. “We know that changes and we are very cognizant of the responsibility we have to get this thing set up and set up right, and getting information to producers as quickly as we can.”
  
The farm bill requires the Margin Protection Program to be established no later than September 1, 2014. In the interim, producers have access to the Milk Income Loss Contract (MILC) program so that there is still some protection if high milk prices suddenly and precipitously drop.
   As for the new program, “We have to do it right and that’s why Congress basically gave us two tranches of $3 million each,” he said. One tranche goes for outreach to help get information to producers during this spring and summer. Another tranche will go to a handful of universities who will create the decision making tools for producers.
   “That second tranche is complicated because, depending upon how you set the model up, it could favor one commodity or one type of item more,” Vilsack said. “So you have to be real careful that you have sort of a neutral model so that people can make the best possible decision.”
   That’s why USDA is taking a little time to make sure they get it right. Once implemented, all dairy operations will be eligible to participate in the program. Producers will be able to select margin protection coverage at 50 cent increments beginning at $4 per cwt. Premiums will be fixed for 5 years.
   Vilsack is hopeful the educational materials will be available in the coming months to give dairy producers time to really think about it because it is obviously an important set of decisions they have to make.

Butter Traders Anticipate a Downfall in Butter Prices
   Northeast butter production is mixed at plants, dependent upon cream volumes necessary to fulfill contractual butter orders, according to USDA’s Dairy Market News (DMN). Returns on cream sales to other Class products remain favorable. Churning is active in some channels more so than others, as those manufacturers plan production schedules around 82% unsalted butter for export.
   Domestic purchases are fair with most orders placed for immediate needs, as buyers speculate an easing of prices in the near future. Inventories are tight, but adequate for near term contractual commitments.  The market tone is firm.

Cheese Output & Inventories Increasing With Milk Supply  
   Northeast cheese plants are seeing substantial milk intakes, according to Dairy Market News, which is prompting extended production schedules in some cases, with additional cheese volumes clearing to inventories. Declines in domestic cheese demand are prevailing as spring courses at many educational institutions prepare to end. With the easing in purchases, manufacturers look to manage inventory levels. Interest from export markets remains active.

Lagging NDPSR Prices Dropping Except Butter  
   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 $2.2125/lb., down 3.4¢ from the week before, while the barrels averaged $2.2299, down 2.6¢. Butter jumped 8.5¢, to $1.9894/lb. Nonfat dry milk averaged $1.8987/lb., down 4.9¢, and dry whey averaged 67.17¢/lb., down 0.3¢. These prices are used in determining Federal order Class milk prices.

California Powder Drops 9 Cents
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $1.8386/lb. for the week ending May 9, on sales of 15.42 million lbs. The price was down from $1.9277/lb. the week before, on sales of 16 million lbs.

Raw Milk is an Ongoing “Hazard”
    That’s according to Food Safety News. Last week, the U.S. Centers for Diseases Control and Prevention sent a letter to state and territorial public health officials with information and resources on the risks of consuming raw milk and other unpasteurized dairy products.
   Raw milk is a recognized source of severe infections from pathogens such as E. coli O157, Campylobacter and Salmonella, but pasteurization prevents infections.
   “Adherence to good hygienic practices during milking can reduce, but not eliminate, the risk of milk contamination,” states the May 9 letter signed by Dr. Robert Tauxe, deputy director of CDC’s Division of Foodborne, Waterborne, and Environmental Diseases. “Pasteurization is the only way to ensure that fluid milk products do not contain harmful bacteria.”
   It’s not just CDC and the U.S. Food and Drug Administration recommending that all animal milk be pasteurized. The American Academy of Pediatrics, the American Academy of Family Practitioners, the American Veterinary Medical Association and the National Association of Public Health Veterinarians agree.
   Pasteurization of milk became routine in the U.S. starting in the 1920s and was widespread by 1950. Transporting raw milk across state lines to sell directly to consumers is prohibited today, but it is available within many states.
   “CDC data shows that the rate of raw milk-associated outbreaks is 2.2 times higher in states in which the sale of raw milk is legal compared with states where sale of raw milk is illegal,” reads Tauxe’s letter.
   According to the CDC National Outbreak Reporting System, between 2007 and 2012, there were 81 outbreaks of infections due to consumption of raw milk, resulting in 979 illnesses. In addition, 59 percent of the outbreaks involved at least one person under the age of five.
   Most infections were caused by Campylobacter, Shiga toxin-producing E. coli, or Salmonella bacteria, which come from cattle that appear healthy. Severe, long-term consequences of these infections include hemolytic uremic syndrome (HUS), which can result in kidney failure, and Guillan-Barré syndrome, which can result in paralysis.
   “To protect the health of the public, state regulators should continue to support pasteurization and consider further restricting or prohibiting the sale and distribution of raw milk and other unpasteurized dairy products in their states,” Tauxe wrote.
   Click here to read the full letter and see the list of resources for consumers,  public health officials and health care providers.

National Jersey Youth Scholarship Applications Due July 1
   Tuesday, July 1, 2014 is the deadline to submit applications for seven scholarships administered by the American Jersey Cattle Association, Reynoldsburg, Ohio. These awards provide financial support to Jersey youth enrolled in colleges or universities or, in some cases, gaining hands-on experience in the development and management of Registered Jersey™ cattle. Applicants must be a Junior or Lifetime member of the association upon submitting their application. A minimum grade point average of 2.5 (on a 4.0 scale) is required to apply for these scholarships. Copies of the applicant’s high school and college transcripts must be submitted.
   A Russell–Malnati Scholarship for Advanced Studies in the amount of $5,000 will be awarded. Undergraduate students who have completed at least one-half of coursework credit hours required for a degree in dairy science, animal science (dairy emphasis), large animal veterinary practice, dairy production or manufacturing, or dairy product marketing, and graduate students in those program areas are eligible to apply.
   Two scholarships of $1,750 each will be presented. Students who will begin a program of study at an accredited college or university in the fall of 2014 may apply for the William A. Russell Memorial Scholarship. Students who have completed at least one year of study toward their degree are eligible for the V. L. Peterson Scholarship.
   In addition, three scholarships will be awarded in the amount of $1,500. The Paul Jackson Memorial Scholarship is for continuing college students in any degree program area. The Cedarcrest Scholarship will be awarded to an undergraduate or graduate student seeking a degree in large animal veterinary practice, dairy production, dairy manufacturing, or dairy product marketing. The Bob Toole Jersey Youth Award can be used for educational expenses or a well-defined practical experience related to breeding, developing and showing Registered Jerseys.
   The Reuben R. Cowles Jersey Youth Award will be presented to a resident of Georgia, Florida, North Carolina, South Carolina, Tennessee and Virginia. Applicants must be at least high school graduates, but not older than 36 years of age as of January 1, 2014. Applicants must state whether the award money will be used for to support their education or to fund a trip to the All American Jersey Show and Sale, the AJCA-NAJ Annual Meetings or other Jersey educational activities. The value of this award is variable.
   Applications are posted on the USJersey website at http://bit.ly/1iD5jir

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   After yesterday’s loud drop in cheese prices, you could have heard a pin drop this morning. Nothing happened so there was no change in prices. The blocks remain at $1.9975/lb., after dropping 4.75¢ yesterday on a trade. The barrels held at $1.96/lb., after losing 6¢ yesterday on a trade.
   Butter reversed gears this morning after inching up 0.75¢ yesterday on a trade, and gave up 1.5¢, slipping to $2.16/lb., the first decline since April 16. Four cars traded hands today, 2 at $2.1750/lb., 1at $2.17/lb., and 1 at $2.16/lb.  
   Cash Grade A nonfat dry milk was unchanged for the 3rd consecutive session, holding at $1.78/lb. One carload was sold at that price and 2 offers at that price were left on the board.

Today’s Market Closing Prices
Butter: Down 1.5¢, to $2.16/lb.
Cheddar blocks: Unchanged, at $1.9975/lb.
Cheddar barrels: Unchanged, at $1.96/lb.
Grade A nonfat dry milk: Unchanged, at $1.78/lb.
Class III milk: May $22.64, -1¢; Jun. $20.94, +24¢; Jly $20.25, +8¢; Aug. $20.10, +5¢; & Sept. $20.00, -4¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.12, +3¢ from Tuesday. The 2nd half average is now at $19.64, +1¢ from Tuesday.

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Looking ahead:
   The Agriculture Department issues its monthly Livestock, Dairy, and Poultry Outlook Thursday. That’s it for the week as to USDA reports we regularly monitor.

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Thursday on DairyLine:
   The U.S. is in a massive trade deal with the European Union. National Milk's Chris Galen updates us on the latest.
   Dr. Tom Earleywine, from Land O' Lakes Animal Milk Products, provides his monthly "We Care for Calves" segment. 
http://dairyline.com/thursday.mp3

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