DairyBusiness Update: February 5, 2014

January Federal Order Benchmark Milk Price Jumps $2.20
The Agriculture Department announced the January Federal order Class III milk price this afternoon at $21.15 per hundredweight (cwt.), up $2.20 from December 2013, $3.01 above January 2013, the highest it has been since August 2011, and equates to about $1.82 per gallon. The Class IV price, at a record high $22.29, is up 75 cents from December and $4.66 above a year ago. The Class II price is $22.21, up 55 cents from December, $4.02 above a year ago, and the highest it has been since August 2007.
   The February Class III futures contract settled this afternoon at $23.08/cwt.; March, $20.83, and April at $19.62/cwt.
   The 4-week AMS-surveyed cheese price used in calculating this month’s prices averaged $2.0838 per pound, up 20.8 cents from December. Butter averaged $1.6475, up 1.7 cents. Nonfat dry milk averaged $2.0335, up 8 cents, and dry whey averaged 60.25 cents per pound, up 3.2 cents from December.

California 4b Closer to Federal Order Class III Milk Price
The January Federal order Class III milk price, announced this afternoon at $21.15 per hundredweight (cwt.) is just 84 cents above California’s Class 4b cheese milk price. While, that is the smallest gap in nine months, it’s not likely to give much comfort to California producers who saw that gap average $1.57 per cwt. in 2013, varying from 67 cents in April to as much as $2.30 in January 2013.

Farm Bill Becomes Law on Friday
   The new five-year Farm Bill passed by the Senate yesterday will be signed by President Obama on Friday on the campus of Michigan State University. Obama is expected to see MSU agricultural research in action and deliver a speech about how agriculture creates jobs and feeds the country before signing the legislation, according to the White House and reported by the Detroit News: http://www.detroitnews.com/article/20140204/POLITICS03/302040101#ixzz2sTUytp92
   National Milk’s Chris Galen will talk about the Dairy Title on Friday’s DairyLine Radio broadcast.
Dairylea Members Approve Merger With DFA
Members of Dairylea Cooperative Inc., meeting today in Syracuse, New York, approved the proposed merger with Dairy Farmers of America (DFA).The merger will become official on April 1, and combines Dairylea’s Northeast-based 1,200 members with DFA’s 13,000 nationwide dairy farmer members.
   “The cooperatives have enjoyed a successful working relationship since DFA was formed in 1998, a joint press release stated. “Working together, Dairylea and DFA have created efficiencies in milk assembly, transportation and marketing, as well as joint management of Farm Services and membership operations in the Northeast.”
   “In many ways, it will just be business as usual as we expand upon the working relationship DFA and Dairylea have established over the past 15 years,” said Rick Smith, DFA president and chief executive officer.
   Greg Wickham, Dairylea’s chief executive officer, highlighted that the merger brings brands, plants and end products back to Dairylea members while maintaining the values, strategic goals and vision of Dairylea.

GDT Auction is “Bullish”
   High Ground Dairy’s Eric Meyer is encouraged from yesterday’s Global Dairy Trade (GDT) auction. Writing in his daily report, Meyer said “Though the chatter at last week’s International Dairy Foods Association (IDFA) Annual Dairy Forum in California seemed to favor the long-term bulls, by the end of the week there seemed to be a growing sense that a downward correction was coming on the GDT auction. A last minute increase in Fonterra’s volume forecast, increased offerings of US NFDM both on and off the Chicago Mercantile Exchange and the Chinese New Year holiday led us to believe the major commodities were poised for weakness. But with slight price strength in WMP, Fonterra SMP, butter and only slight weakness on the other commodities, another record was set for the average winning price ($5,042MT, $2.29/lb) and we view this week’s GDT results to be bullish versus expectations.”
   Meyer does admit that participation yesterday was the lowest seen at a GDT auction since mid-October. Only 185 bidders showed up (down 8 from last auction), he said, and there were only 124 winners, ten fewer (7.5%) than two weeks ago.
   “But even though Fonterra added volume to this week’s auction as well as to their 12 month forecast, total quantity sold only came to 35,399MT (78 million lbs) which was 13.7% lower than two weeks ago and 7.6% below the corresponding auction last year.”
   Meyer adds, “It is difficult to make a conclusion as to why the results turned out to be fairly stable. Fewer buyers (bearish) competing over less volume (bullish). But were some market participants on holiday for Chinese New Year? With this market remaining at extremely high levels along with a flat forward curve, we believe market sentiment remains bullish until further notice.”
   He cites as a reason the latest soil moisture levels in New Zealand, “a dry January and deteriorating pasture conditions, the threat of drought looms once again.”

$3.5 million Available in Water Quality Funding for Eastern San Joaquin River
The USDA Natural Resources Conservation Service (NRCS) in California has announced that $3.5 million is available to dairy producers east of the San Joaquin River in Merced and Stanislaus counties for water conservation and water quality improvements. This financial assistance is being made available through the Bay Delta Initiative (BDI), which was created in 2011 to help farmers in California’s Central Valley apply enhanced water quality-improvement practices on their land through a multi-year process.
   Western United Dairymen together with Sustainable Conservation applied to bring this additional funding to California to improve water quality. BDI is one of a dozen national initiatives aimed at assisting farmers to put added conservation practices on the ground using a landscape-level approach. Applications are due Feb. 21, 2014.  Contact the Merced and Stanislaus County NRCS office at 209-491-9320.

California Develops Drought Resources
The California Department of Food and Agriculture (CDFA) has developed a drought resources web page, which is intended to be a central location for information about the drought in California and assistance programs available to farmers, ranchers and farmworkers. The web site is also available in Spanish.
   The page features links to the USDA’s Risk Management Agency, the Farm Services Agency, the Natural Resources Conservation Service, and Rural Development. There is also a link to the US Small Business Administration. All of these groups have programs that could be of help to farmers and ranchers harmed by the drought.
   Additionally, there is a link to the California Department of Community Services and Development, which partners with private, non-profit, government and community-based organizations working to help low-income individuals and families. The partners include four regional migrant and seasonal farmworker agencies that can help with rental assistance, employment services, and food and nutrition services.

California powder up 1.58 Cents
The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $2.0243/lb. for the week ending January 31, on sales of 10.968 million lbs. The price was up from $2.0085/lb. the week before, on sales of 7.687 million lbs.

California Processor Adds New Product
California Dairies, Inc. (CDI), the state’s largest member-owned milk marketing and processing cooperative producing 47 percent of California’s milk, is expanding its powdered milk and butter export business. A CDI press release states that it is adding the production of anhydrous milkfat (AMF) to its export product portfolio. “The entry into a new export category demonstrates CDI’s progress in achieving its vision to become the leading source of dairy nutrition for a healthy world.”
   “Responsive to a strong global demand for U.S. dairy products, CDI is consistently looking for ways to distinguish itself through the delivery of products that the world demands. The production of AMF is natural extension of CDI’s butter portfolio and meets the needs of its international customers for butterfat in a different form,” the press release states.
   AMF is 99.8 percent pure butter oil. Packaged for commercial use as a food ingredient, AMF has an extended shelf life and is an excellent form for storage and transportation of butterfat.

California Drought to be Addressed at World Ag Expo
   Top City and water agency officials will address California's historical drought, its anticipated impacts and water supply actions during World Ag Expo's (WAE) Water Forum on Thursday, February 13th, from 12:30-3:00 p.m. at the International Agri-Center's Heritage Complex, 4500 South Laspina Street, Tulare, California.
   High state and federal water representatives will be participating. Governor Brown and Resources Secretary John Laird have also been invited. The master of ceremonies will be KMPH TV news anchor, Rich Rodriguez
   As California faces the worst drought in decades, the Central Valley will once again be ground zero for water supply shortages and economic impacts due to the combination of lack of rain, snow, low reservoir levels, major declines in its groundwater levels and the ongoing shifting of its reliable water supplies to the environment. City officials and farmers will discuss their concerns, challenges and will be asking for help from State and Federal Water Departments through a panel moderated by Mario Santoyo, Executive Director of the California Latino Water Coalition. Details are posted at www.worldagexpo.com.

Jersey Cattle Association Names New Rep.
   Shawn Styer, Elmwood, Wis., has been named an Area Representative for the American Jersey Cattle Association and National All-Jersey Inc., effective February 3, 2014. Styer will provide on-farm service in Iowa, Minnesota, Nebraska, North Dakota and South Dakota. For the past year, he has worked on a part-time basis as an evaluator for the AJCA Linear Type Traits Appraisal program. He will continue in that role as part of his new assignment.
   Styer earned a B.S. in dairy science-management option from the University of Wisconsin-River Falls, where he was a member of the National Dairy Challenge team in 2012. While pursuing his studies, he worked three years as an assistant herdsman for Jon-De Farm, a 1,500-cow Holstein dairy.
   The American Jersey Cattle Association, organized in 1868, compiles and maintains animal identification and performance data on Jersey cattle and provides services that support genetic improvement and greater profitability through increasing the value of and demand for Registered Jersey™ cattle and genetics, and Jersey milk and milk products.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   We knew it would happen and, perhaps the Cheddar fall (Down 4.3% to $2.2385/lb.U.S.) in yesterday’s GDT contributed to it, but the block cheese price reversed gears this morning for the first time since Dec. 5, 2013. A sale took it down to $2.34/lb. A bid at $2.20/lb. went unfilled, but an offer at $2.3250/lb. brought no buyer so the price is down 3.5¢ on the day. Barrel, which hadn’t lost ground since Dec. 30 and 31st, remained at $2.32/lb., with no activity.
   There was lots of activity in the butter market where 11 carloads found new homes. The first 6 sales were at $1.85/lb., but the price rallied and climbed back to $1.88/lb., down 1¢ from yesterday. Two bids at $1.85/lb. went unfilled and 2 offers at $1.89/lb. went nowhere.  
   FC Stone risk management consultant Chris Hildebrand wrote in this morning’s Insider Opening Bell; "There's still a lot of cream going into churns and manufacturers are putting more butter into inventory." He adds that “Easter demand hasn't generated much market discussion yet.”
   Cash Grade A nonfat dry milk held at $2.00/lb., following yesterday’s 4¢ drop. A bid at $2.00/lb. was left on the board.

Today’s market closing prices:
Butter: Down 1¢, to $1.88/lb.
Cheddar blocks: Down 3.5¢, to $2.3250/lb.
Cheddar barrels: Unchanged, at $2.32/lb.
Grade A nonfat dry milk: Unchanged, at $2.00/lb.
Class III milk: Feb. $23.08, +24¢; Mar. $20.83, +31¢; Apr. $19.62, +21¢, May $18.95, +13¢, & Jun. $18.80, +5¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $19.12, +13¢ from Tuesday. The 2nd half average is $18.32, +3¢ from Tuesday.
Looking ahead:
   There are no more regular USDA reports that we monitor the rest of the week. Next week, Monday, the Agriculture Department releases its monthly World Agricultural Supply and Demand Estimates report, which will include the Department’s latest 2014 milk production estimate and milk price projections. The California Department of Food and Agriculture announces the state’s March Class I milk prices. Then, on Friday, USDA issues its Livestock, Dairy, and Poultry Outlook.
Thursday on DairyLine:
   The process of passing a new Farm Bill has been quite a journey, NMPF’s Chris
     Galen reports.
   National Mastitis Council attendees learned about a new tool that “sees” mastitis
     before symptoms appear.


This Week in DairyBusiness Weekly:

Click here to view the latest issue! Click here to subscribe for 48 FREE issues!