DairyBusiness Update: June 10, 2014

California Class I Milk Prices Inch Up 3 Cents
The California Department of Food and Agriculture announced the state’s July Class I milk prices this afternoon at $25.13 per hundredweight for the north and $25.40 for the south. Both are up 3 cents from June and $5.54 above July 2013.
 The northern average now stands at $24.62, up from $19.82 at this time a year ago and $17.79 in 2012. The southern Class I average is now at $24.89, up from $20.09 a year ago and $18.06 in 2012. The Federal order Class I base price is announced by USDA on June 18.

April Dairy Product Production Stronger than Expected
   That’s the read from HighGround Dairy’s Eric Meyer, based on last week’s Dairy Products report. Cheese, butter and skim milk powder/nonfat dry milk output was a bit stronger than expected, he said. “Given US milk producers’ inability to show sharp upward growth during a period of strong on-farm margins and both the cheese and butter inventory shortfall versus last year, these numbers suggest manufacturers are responding to the high prices and production trends are turning.”
   “Though we view these production volume totals to be slightly bearish versus our expectations, the US still needs to work through what is typically a supply-deficient 3rd quarter before the potential for the medium or long-term bull trend can turn over.”
   Read more of Meyer’s analysis by writing him at ericm@highgroundtrading.com.

NMPF Praises Decision Allowing More Time on Waterways Regulation
The National Milk Producers Federation today praised the Environmental Protection Agency (EPA) for agreeing to allow more time to examine a controversial draft regulation expanding the waterways subject to pollution controls under the federal Clean Water Act. 
   “Dairy farmers are committed to protecting U.S. waters both voluntarily and under the Clean Water Act,” said NMPF President and CEO Jim Mulhern, “but the EPA needs to go about this effort in the right way. Allowing more time to consider EPA’s draft will give everyone the chance to adequately consider the issues raised in the draft and make it less likely the final regulation will be harmful to dairy farmers.”
   NMPF represents dairy farmers producing most of the nation’s milk supply. In a May 30 letter, NMPF asked that the public comment period on EPA’s draft regulation be extended at least 90 days.  
   NMPF cited two reasons for requesting more time to consider the regulation:  First, the EPA and the Army Corps of Engineers have not completed the report providing the scientific underpinning for the regulation; and second, many of the key concepts discussed in the draft are unclear or subject to interpretation by government regulators. 
   For dairy farmers to understand and assess the proposed changes, the science behind them must be clear and conclusive,” Mulhern said. “And yet, the draft relies on the scientific conclusions of an EPA report still under review by the agency’s Science Advisory Board.” Likewise, Mulhern said, many of the terms used in the draft, including terms like ‘‘floodplain’’ and ‘‘tributary,’’ and not well defined. “These terms are as murky at best, and, therefore, will create confusion for dairy producers.  
   “Given the scope and complexities of the proposed rule and its supporting documents, it was essential that EPA allow more time to consider the issues it raises,” Mulhern said. “NMPF appreciates that the agency has allowed the time needed to clarify these issues.”
   EPA extended the comment period on the regulation 90 days, until October 20.

China Slowdown Has the “Down Under” Concerned
   The New Zealand Herald’s, Liam Dann, warns in Monday’s edition that milk is still our economic lifeblood but a continuing slowdown in China could turn things ugly fast. How worried should we be about the slump in global dairy prices? After all these years, New Zealand is still a giant grass-processing factory and milk remains the lifeblood of our economy.
   In fact, dairy products now account for nearly 30 per cent of the country's merchandise exports, by value. That figure was closer to 20 per cent when I first started covering the sector more than a decade ago.
   Dairy exports are on track to generate a record return in excess of $17 billion this year - about $4 billion more than they delivered on average across the previous three years.
That big return is due to a historically unprecedented spike in dairy prices that peaked in February.
   So the 23 per cent fall in dairy prices since then is certainly significant. It has prompted Fonterra to lower its payout forecast for the 2014/15 season and is finally starting to put downward pressure on the dollar.
   The currency traders woke up last week and the kiwi dollar slumped nearly half a cent after Fonterra's latest milk powder auction recorded a larger than expected drop.
   That's good. At least it shows the system is working. Our dollar should fall when dairy prices do, it provides a natural hedge for our exporters and will be blessed relief for exporters in other sectors.
Dairy may be ahead of the curve in terms of New Zealand commodity export prices. It seems likely that a boom in log prices will peak this year. Other commodities like beef and lamb are also contributing to a record balance of payments.
   If they start to fall too, that will add to the downward pressure. But really, for the bloke on the Wall Street trading desk who keeps an eye on this part of the world, the New Zealand story is all about dairy.
   To put the other sectors in perspective, the $4 billion fluctuation in dairy returns between 2013 and 2014 is likely to be in excess of the total return for all lamb, mutton and wool exports combined last year.
   So much for New Zealand living off the sheep's back. Dairy prices are also where the attentions of the Reserve Bank are fixed.
   Read more at http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11270091.

CWT Sends More Dairy Products Packing
   Cooperatives Working Together (CWT) accepted 12 requests for export assistance today from Dairy Farmers of America and Northwest Dairy Association (Darigold) to sell 2.138 million pounds of Cheddar, Gouda and Monterey Jack cheese, 440,925 pounds of butter (82% butterfat) and 1.250 million pounds of whole milk powder to customers in Asia, South America and North Africa.
   The product will be delivered through November and raises CWT’s 2014 cheese exports to 56.403 million pounds, plus 46.725 million pounds of butter and 12.022 million pounds of whole milk powder to 40 countries on six continents. These sales are the equivalent of 1.651 billion pounds of milk on a milkfat basis.

NMPF to Produce Margin Protection Program Calculator
   The National Milk Producers Federation’s (NMPF) Board of Directors met last week in Arlington, Virginia, for an update on several key issues of interest to dairy farmers and cooperatives, including the progress being made on implementing the new farm bill’s dairy safety net.
   NMPF President and CEO Jim Mulhern reported to the board that the organization’s staff continues to interact with USDA officials developing the specific regulations that will govern the new Margin Protection Program established by the 2014 Farm Bill.    
   NMPF has been anticipating farmer questions and urging USDA to make the program as easy as possible for farmers to understand and use.  Karla Thieman, Senior advisor to USDA Secretary Tom Vilsack, reported to the NMPF Board that the agency is on track to release the rules governing initial program enrollment by the end of the summer.  
    NMPF is developing an online dashboard calculator that will allow farmers to estimate future margins in order to help them make choices about MPP coverage levels. That calculator will be available once final program details are known. NMPF will continue to make available information and tools to help cooperatives explain the new MPP to farmers.
   In other development s, given the continued interest and focus from customers about dairy farm animal care, the NMPF board discussed two updates to the National Dairy FARM program that will be voted on at its next meeting in October.  
    The first measure is a resolution for consideration by the board that would require all FARM program participant companies to conduct second party evaluations on their direct-ship farms. All farms would also be included in the pool for third party verification.    The resolution is being shared with NMPF’s members (and other co-ops and processors not represented by NMPF) so that each organization can review the resolution and vote on adopting it in October.  
    The second measure specifies a protocol to address allegations of willful animal mistreatment on farms enrolled in the program. Willful mistreatment is a violation of existing FARM program guidelines; the new protocol establishes procedures to address such violations.  The focus of this process is to ensure a farm’s practices are consistent with the program’s guidelines – not to exclude the farm from future participation in the FARM program. This new process will help enhance the integrity of the FARM program to customers while helping farms regain full FARM program participant status by implementing the steps identified in the animal care improvement plan. 

FarmFirst Adds New Staff Member
   FarmFirst Dairy Cooperative welcomed Bill Burri to their team recently, fulfilling a position within the Family Dairies USA division. Burri will serve as a field representative for Northeast Wisconsin and the Upper Peninsula of Michigan.
   A fourth generation cheesemaker, Burri is very familiar with the dairy industry. In 1978, he earned his cheesemaker’s license and began making cheese out of Central Cheese and Butter Cooperative in Rice Lake, Wis. He eventually transitioned into a field representative role, servicing farms for S&R Cheese (now known as Sartori Foods) in Plymouth, Wis. In 1990, he joined White Clover Dairy – Arla Foods where worked as a Field Service Manager. His responsibilities there taught him more detailed management skills, working with a diverse team of field personnel and milk truck haulers. He most recently has been making cheese at Land O’Lakes in Kiel, Wis. Through these experiences, he realized that he most enjoys working with farmers, helping them achieve high quality milk production and to reach their business goals.
   For additional information on FarmFirst Dairy Cooperative, visit their Facebook page at www.facebook.com/FarmFirstDairyCooperative, go to: www.FarmFirstDairyCooperative.com or call: (608) 244-3373.

AgVentures Day Teaches Students
   The International Agri-Center hosted its second annual “AgVentures Day” for 4th grade students to explore farming, food and fun on Friday, May 23, 2014 in Tulare.  Presentations were aimed at teaching students about agriculture, safety and nutrition.  
    Students saw a sheep dog demonstration and  enjoyed the "What Does My Plate Say" skit by the UCCE Cal Fresh team while learning about nutrition.  The event also featured many live animal demonstrations with a dairy cow, horse and sheep on-site.  Participants also sampled products from Rosa Brothers Milk, Sun Maid Raisins, Raisels, California Dried Plums and Musco Family Olives.  
    With support from UCCE and the Tulare County Farm Bureau, the International Agri-Center's AgVentures! Day educated 1,600 students from Tulare and Visalia schools about California's abundant agricultural industry and healthy food choices.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Traders are anticipating tomorrow’s World Agricultural Supply and Demand Estimate report from USDA and Crop Production report but left the cash block cheese at $2.06/lb. this morning after gaining 1¢ yesterday. Two carloads traded hands, 1 at $2.07/lb. but the next was at yesterday’s close of $2.06/lb. A bid at $2.05/lb. went unfilled. The barrels slipped 0.25¢ on an offer, after gaining 0.5¢ yesterday on a trade, and are now at $1.97/lb.
   FC Stone risk management consultant, Brendan Curran, wrote in this morning’s Insider Opening Bell: "If we see further strength and follow-through to the upside in cheese, I expect the bull market will resume. Until cheese production ramps up, the downside will be limited." He added that “Industry talk indicates milk production has gained a little in the Midwest, with most of the increase going into cheese. Domestic demand is good but international demand is easing with prices at these levels.” Over-all, Curran considers the cheese market “well supported.”
   Cash butter was steady at $2.21/lb., after losing 1.25¢ yesterday. Two offers at that price went nowhere.
   "Spot butter is still at a pretty lofty level," according to Curran. "The market got a little ahead of itself,” he wrote, “And is moving lower, looking for support levels.” However, he says the market is still “well supported and supplies are a little tight.”    
   Cash powder was unchanged again, holding at $1.8575/lb., again with no activity.

Today’s Market Closing Prices
Butter: Unchanged, at $2.21/lb.
Cheddar blocks:  Unchanged, at $2.06/lb.
Cheddar barrels: Down 0.25¢, to $1.97/lb.
Grade A nonfat dry milk: Unchanged, at $1.8575/lb.
Class III milk: June $21.28, +1¢; July $20.71, +17¢; Aug. $20.49, +5¢; & Sept. $20.45, +4¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.55, +9¢ from Monday. The Fourth Quarter average is now at $19.53, Unchanged from Monday. The First Quarter 2015 average is now at $18.37, -2¢ from Monday.
Looking ahead:
   The Agriculture Department issues its latest milk production and milk prices estimates in its monthly World Agricultural Supply & Demand Estimates report tomorrow, along with the National Dairy Products Sales Report (NDPSR) prices, but that’s it for the week as far as USDA reports which we regularly monitor..

Wednesday on DairyLine:
   Jodi Hoynoski, Holstein Foundation Programs Manager, previews the upcoming
          Holstein National Convention.
   Dan Basse from AgResource gives us his global dairy outlook.