DairyBusiness Update for Jan. 22, 2013

DFA agrees to $159 million settlement in ‘Southeast Milk’ lawsuit

The book on the “Southeast Milk” class action antitrust lawsuit may finally be reaching its final chapter.

On Jan. 21, the day before the trial was begin, a $158.6 million settlement agreement was reached between lawyers representing dairy farmer plaintiffs and remaining defendants in the suit – Dairy Farmers of America, Inc. (DFA); Mid-Am Capital, LLC; National Dairy Holdings, LP; and Gary Hanman, the former DFA CEO. 

The U.S. District Court for the Eastern District of Tennessee approved the settlement on Jan. 22. According to the agreement, defendants will pay $140 million in a one-time cash settlement. Of that total, DFA will pay $70 million; $50 million will be paid by National Dairy Holdings, which DFA sold to Grupo LaLa in 2009; and $20 million will be paid by Mid-Am Capital, DFA’s finance subsidiary. It was unclear whether Hanman will be required to make personal payments.

DFA admitted no wrongdoing in agreeing to the settlement.

An additional $9.3 million/year for two years will be placed in a fund to guarantee stronger Class I (fluid milk) utilization in Appalachian (#5) and Southeast (#7) federal orders.

A “fairness hearing” on the settlement is scheduled for April 3, at which time dairy farmers can speak on the agreement.

For more details, visit www.dairybusiness.com.


MILC details still coming

USDA’s Farm Service Agency (FSA) announced updates to programs approved by Congress at the edge of the “fiscal cliff.” However, some details of the Milk Income Loss Contract (MILC) program remain to be answered.

When Congress approved the American Taxpayer Relief Act of 2012 on Jan. 1, it extended the authorization of the Food, Conservation, and Energy Act of 2008 (the 2008 Farm Bill) for many Commodity Credit Corporation (CCC) commodity, disaster and conservation programs through 2013.

The extended programs include, among others: the Direct and Counter-Cyclical Payment Program (DCP), the Average Crop Revenue Election Program (ACRE), and MILC.

FSA said all dairy producers’ MILC contracts are automatically extended to Sept. 30, 2013. Eligible producers do not need to re-enroll in MILC. However, FSA said specific details regarding certain modifications to MILC – presumably including “start month” information for farmers producing milk above the eligible payment cap – will be released soon.


November fluid sales

November 2012 packaged fluid milk sales totaled 4.53 billion lbs., down 0.5% from November 2011. After adjusting for calendar composition, sales totaled 4.48 billion lbs., down 1.7% from the year before.

November sales of conventional products, at 4.34 billion lbs., were down 0.9%; organic products, at 191 million lbs., were up 9.0%. Organic represented about 4.2% of total sales.

January-November 2012 total packaged fluid milk sales, at 48.41 billion lbs., were down 1.3% from the same period a year earlier (48.40 billion lbs., down 1.5%, calendar adjusted). Year-to-date sales of conventional products, at 46.43 billion lbs., were down 1.5%; organic products, at 1.98 billion lbs., were up 3.6%. Organic represented about 4.1% of total sales. Source: Dairy Market News


China, U.S. resolve dairy certificate issue

Chinese and U.S. regulators approved a dairy certificate ensuring that the flow of U.S. dairy goods into the largest dairy importer in the world continues unabated.

The issue dates back to early 2010 when China revised its dairy certificate as part of sweeping efforts to upgrade domestic food safety. While there never was a market closure, the unresolved certificate issue and threat of closure loomed over U.S.-China dairy trade, making some buyers hesitate and opting to source product from U.S. competitors.

USDEC estimates the uncertainty of the certificate situation depressed U.S. dairy ingredient sales by 5%-10% and cheese sales by as much as 50%. The impact was considerably greater in the case of cheese, given the foodservice industry’s need for consistent supply and more limited interchangeability of cheeses.


CWT assists with 6.2 million lbs. of cheese and butter export sales

Cooperatives Working Together (CWT) accepted 19 requests for export assistance from Dairy Farmers of America, Northwest Dairy Association (Darigold), Foremost Farms USA, Maryland & Virginia Milk Producers Cooperative Association, Michigan Milk Producers Association, United Dairymen of Arizona and Upstate Niagara Cooperative (O-AT-KA) to sell 3.814 million lbs. of cheddar and Monterey Jack cheese and 2.423 million lbs. of butter to customers in Asia, the Middle East and North Africa. The product will be delivered January through June 2013.

 So far in 2013, CWT-assisted sales will be going to 18 countries on five continents and are the equivalent of 252.4 million lbs. of milk on a milkfat basis. That is the annual production of 12,000 cows.


Early focus on the prospective 2013 U.S. corn crop size 

Corn prices have generally followed the expected short-crop pattern – "short crops have long tails" – as consumption and supply responses continue to unfold, according to Darrel Good, University of Illinois ag economist.  

The 2012-13 marketing year pace of consumption has been slower than that of last year, but modest, coming primarily in the export market and in the production of ethanol, rather than in the domestic feed market as earlier expected. Other elements contributing to the price decline are clearly occurring. In addition to a slowdown in consumption of U.S. corn, USDA projects another large corn harvest in Brazil and a rebound in production in Argentina. 

Then, there’s anticipation of a large 2013 U.S. crop. Planted acreage of 99 million would point to acreage harvested for grain near 91.5 million acres under non-drought conditions, Good said. Such acreage would point to prospects for an extremely large crop in 2013. Factors impacting yield projections remain to be determined, including extension of or recovery from 2012’s drought conditions.

While prices for the 2013 corn crop are currently about 70¢ below the peak reached in September 2012, they are well above the level that would be expected if the 2013 crop reached its full potential. Next month, USDA will release projections for the U.S. farm sector for the next 10 years. There will be a lot of interest in the 2013 corn acreage and yield projections contained in that report.


MARKETS: Cheese prices weaken; Class III futures mixed

Today's market closing prices:

Butter: unchanged at $1.5050/lb.

Cheddar blocks: down 2.75¢, to $1.66/lb.

Cheddar barrels: down 3.75¢, to $1.60/lb.

Grade A nonfat dry milk: unchanged at $1.53/lb.

Extra Grade nonfat dry milk: unchanged at $1.56/lb.

Class III milk: -12¢ to +7¢ through December 2013. Based on current CME closing prices, the 2012 average is $17.44/cwt.; the 2013 average is $18.11/cwt.; and the 2014 average is $16.37/cwt.


Corn futures steady; soybean & meal futures higher

Corn: -0.4¢ to +1.0¢ per bushel through September 2014. The 2013 average is $6.77/bu.

Soybeans: +15¢ to +22¢ per bushel through September 2014. The 2013 average is $13.99/bu.

Soybean meal: +$4.40 to +$7.300/ton through September 2014. The 2013 average is $394.67/ton.


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