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Weekly Digest: 2018 dairy cow slaughter highest in three decades

Progressive Dairyman Editor Dave Natzke Published on 01 March 2019
Amp America

Digest Highlights

2018 dairy cow slaughter highest in three decades 

Federally inspected milk cow slaughter was estimated at 3.153 million head in 2018, up about 164,600 head (5.5 percent) from 2017, according to the USDA’s Livestock Slaughter report. Annual dairy cow culling was higher only once in more than three decades – in 1986, during the whole-herd buyout program.

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Regionally, 2018 dairy cow culling topped 844,000 head in an area including Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin; and was about 783,000 head in an area covering Arizona, California, Hawaii and Nevada.

Dairy cow slaughter in December 2018 was estimated at 261,200 head, down about 6,800 from November, but 13,900 head more than December 2017 despite with the same number of weekdays/Saturdays as a year earlier.

The USDA’s latest Milk Production report indicated there were 9.351 million cows in U.S. dairy herd in December 2018. Based on the slaughter estimates, about 2.8 percent of the herd was culled during the month. Cow culling so far in 2018 has averaged about 10,100 head per day (including weekdays and Saturdays), up about 500 head per day from a year ago.

Dean Foods considering business options

Dean Foods' officials announced the company will explore potential strategic business alternatives, including staying its current course, selling off assets, forming joint ventures, selling the business or a combination of any those. Dean officials discussed the announcement during a quarterly investor relations webcast, Feb. 27.

The company did not set a timetable for the conclusion of the business review. Financial advisory firm Evercore Group LLC will work with Dean’s legal adviser, Gibson, Dunn & Crutcher LLP, in conducting the exploration.

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“As one of America’s largest dairy providers, Dean Foods is committed to delivering significant value to all our stakeholders, including our customers, consumers, shareholders, communities and employees,” said Ralph Scozzafava, chief executive officer of Dean Foods.

The company has annual sales of about $7.7 billion and owns more than 50 national, regional and local dairy brands and private labels. Scozzafava said the 2018 financial results reflect volume declines coupled with significant inflation in fuel, freight and resin costs.

Renewable Dairy Fuels expands at Fair Oaks Farms

Renewable Dairy Fuels (RDF) has expanded biogas production at Fair Oaks Farm in Indiana. The 30 percent expansion raises the operation’s production capacity to over 2.3 million gallons per year of 100 percent renewable transportation fuel from dairy waste.

The Fair Oaks RDF project, which has been operating since 2011, now converts over 800,000 gallons of manure per day from 20,000 cows into renewable methane that is then captured, purified and compressed to become renewable natural gas (RNG). The RNG is injected into the Northern Indiana Public Service Company (NIPSCO) natural gas pipeline system to be used as transportation fuel.

According to RDF, a business unit of Amp Americas, the company now has the two largest dairy biogas-to-transportation-fuel projects in the country. The largest is RDF’s facility in Jasper County, Indiana, which came online in August 2018.

Nationwide, Amp Americas partners with dairy farmers to produce 5 million gallons of RNG per year. It also supplies compressed natural gas to fueling stations for truck fleets operated by UPS, US Foods, and haulers for Select Milk and Dairy Farmers of America.

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GI cheese name restrictions mean severe economic consequences to U.S. dairy

A new study commissioned by the U.S. Dairy Export Council and the Consortium for Common Food Names (CCFN) forecasts severe consequences for U.S. cheese exports if the European Union (EU) is successful in further expanding restrictions on the use of generic terms such as parmesan, asiago and feta. The study provides timely information in light of U.S.-EU trade negotiations.

If the EU’s geographical indication (GI) initiatives were to be enforced on U.S. cheeses, the study, conducted by Informa Agribusiness Consulting, predicts the dairy industry could see a dramatic drop in demand for U.S. cheeses, with prices falling 14 percent and resulting revenue losses between $9.5 billion and $20.2 billion depending on consumers’ willingness to pay for recognizable cheese names.

The impact of GI restrictions would also have grave effects on the broader dairy industry, through plummeting milk prices and shifting demand, as well as on the broader U.S. economy. Informa's study reveals that between 108,000 and 223,000 jobs could be at risk, while GDP could fall $12 billion to $25 billion over three years.

In recent testimony to the Office of the U.S. Trade Representative, CCFN Executive Director Jaime Castaneda urged the Trump administration to be as strong and persistent in protecting market access opportunities for U.S. agriculture on this issue as the EU has been in fighting to impose GI-related market restrictions.

February Class IV price improves

Federal Milk Marketing Order (FMMO) Class III and Class IV milk prices moved in different directions in February. The February 2019 Class III milk price declined to $13.89 per hundredweight (cwt), 7 cents less than January 2019, but 49 cents more than February 2018.

The February Class IV price is $15.86 per cwt, up 38 cents from January and $2.99 more than February 2018. It’s the highest Class IV price since September 2017.

Idaho company plans large aseptic milk facility

Gem State Dairy Products LLC announced plans to build an aseptic milk processing plant in Twin Falls, Idaho. Construction of the 200,000-square-foot plant is anticipated to begin in the summer of 2019. Upon completion, it will create more than 100 milk processing jobs by the end of 2020.

"This vertically integrated bottling facility will be one of the newest and largest aseptic processing facilities in the country," said Tom Mikesell, spokesperson for Gem State Dairy Products.

The plant will further diversify Idaho’s dairy industry. Only 3 percent of the state's milk supply currently stays in fluid form, while the rest is made into cheese, butter, yogurt and whey protein powders.

"Idaho is known globally for its high-quality and readily available milk supply," Rick Naerebout, CEO of Idaho Dairymen's Association, said. "Gem State will be a welcome addition to the existing milk-processing landscape in Idaho."

Idaho is home to more than 20 dairy processing plants and currently ranks third in the nation in milk production. On average, Idaho has roughly 592,000 milk cows that collectively produce more than 40 million pounds of milk per day. Dairy accounts for more than 33 percent of all Idaho agriculture receipts. With more than 450 dairies, Idaho produced more than 15 billion pounds of milk last year – with approximately 2 million pounds of that milk exported every day.

Pennsylvania farm bill includes focus on dairy

Pennsylvania’s Gov. Tom Wolf and Secretary of Agriculture Russell Redding unveiled the Pennsylvania Farm Bill, a proposal modeled after the governor’s six-point plan to cultivate future generations of farmers and others in the agricultural industry. The proposal allocates $24 million in additional funding for business development and succession planning, creates accommodations for a growing animal agriculture sector, removes regulatory burdens, strengthens the ag workforce, protects infrastructure and makes Pennsylvania the nation’s leading organic state.

Among specific pieces of the plan, a Pennsylvania Agricultural Business Development Center would be established to serve as a resource for farmers to create business, transition or succession plans.

The plan would continue to fund the Center for Dairy Excellence. Funding for the Pennsylvania Dairy Investment Program covers organic transition assistance, value-added processing and marketing grants in support of Pennsylvania’s dairy industry.

The proposal also creates a Pennsylvania Rapid Response Disaster Readiness Account to allow for a quick response to agricultural disasters, including animal disease outbreaks and foodborne illness.

Minnesota program offers cash flow loans

Minnesota farmers may seek assistance from the Rural Finance Authority’s (RFA) Restructure Loan program if they have good credit but are having trouble with cash flow. The Restructure Loan program is available for refinancing debt related to agricultural activities only and requires collateral of a first mortgage on farm real estate. The current interest rate is 4.25 percent, and the participation term may be up to a maximum of 10 years.

The RFA will participate on 45 percent of a qualifying loan up to a maximum of $525,000. There is a $50.00 nonrefundable application fee on all loans. Applicants must be the principal owner of a Minnesota domestic family farm corporation or family farm partnership, have a total net worth that does not exceed $1,777,000, have received 50 percent of their gross income from farming over the past three years and have expenses that do not exceed 95 percent of income.

Dairy Forward Pricing Program reauthorized

The USDA reauthorized the Dairy Forward Pricing Program (DFPP), one of the first implementation actions of the 2018 Farm Bill.

The DFPP allows milk handlers to voluntarily enter into forward-price contracts with producers or cooperative associations of producers for a negotiated price for raw milk.

Establishing new contracts under the DFPP has been prohibited since the expiration of the program on Sept. 30, 2018. The 2018 Farm Bill reauthorized the program to allow handlers to enter into new contracts until Sept. 30, 2023. Any forward contract entered prior to the Sept. 30, 2023, deadline is subject to a Sept. 30, 2026, expiration date.  end mark

PHOTO: The Fair Oaks Renewable Dairy Fuels project converts over 800,000 gallons of manure per day from 20,000 cows into renewable methane that is then captured, purified and compressed to become renewable natural gas. Photo courtesy of Amp Americas.

Dave Natzke
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