Digest Highlights: The latest Global Dairy Trade auction provided some good news. Pacific Northwest dairy profitability faces large challenges in 2018, although there is slight optimism for the second half of the year. U.S. packaged fluid milk sales were down in November. Find a summary of this and other news here.
Global Dairy Trade index improves
The second Global Dairy Trade (GDT) auction of 2018 provided some good news on dairy product prices. The price index for the Jan. 16 auction was up 4.9 percent, with prices higher for all products offered.
Among major products, auction prices were higher for butter (up 8.8 percent, to $4,897 per metric ton [MT]), skim milk powder (up 6.5 percent, to $1,818 per MT) and whole milk powder (up 5.1 percent, to $3,010 per MT). Cheddar cheese was up 5.2 percent, to $3,486 per MT.
The next GDT auction is Feb. 6.
California activists suing over Tulare County dairy plan
Three anti-dairy activist groups are suing Tulare County over its recent adoption of a plan for permitting and regulating dairies, according to Kevin Abernathy, general manager of the Milk Producers Council.
The Center for Biological Diversity (CBD), the Sierra Club and the Association of Irritated Residents filed the lawsuit in the Tulare County Superior Court, asking that a judge order the county to set aside the new dairy plan and “identify steps to cut pollution from industrial dairies and feedlots.”
The plan is the first in the state (and likely in the nation) to include a fully developed dairy climate action plan that includes requirements for new or expanding dairies in the county to reduce air emissions, Abernathy said in MPC’s weekly newsletter.
Dairies in Tulare County, the nation’s largest dairy county, are regulated not only by the county, but also by the San Joaquin Valley Air Pollution Control District and the Regional Water Quality Control Board – and must obtain environmental permits from all three agencies. In addition, the California Air Resources Board is implementing a new law requiring dairies to achieve a 40 percent reduction in greenhouse gas emissions.
Class 1 prices weaker
California’s Class 1 milk prices are starting 2018 substantially lower than a year ago. The California Department of Food and Agriculture (CDFA) announced the February Class 1 price at $15.47 per hundredweight (cwt) for the North and $15.74 for the South. Both are about 60 cents less than January 2018 and $2.66 less than February 2017, and represent the lowest monthly Class 1 prices since July 2016.
Northwest dairy snapshot: Profitability will be a challenge
Pacific Northwest dairy profitability faces large challenges in 2018, although there is slight optimism for the second half of the year, according to the latest Northwest Farm Credit Service dairy market snapshot. Strong dairy product demand and low feed prices could limit the severity of losses.
Although 2017 was better than 2015 and 2016 in terms of milk prices, it left most producers only slightly profitable. Lower milk prices in the first half of 2018 will likely leave most producers unprofitable. Chicago Mercantile Exchange (CME) Class III and Class IV futures contracts indicate milk prices well be below the average cost of production in the first half of 2018.
Late fall/early winter weather has been favorable in the region, and many dairies were well prepared for any wet weather with ample supplies of straw and more active lagoon management. Feed inventory is adequate to carry dairies into the 2018 harvest season.
Local conditions
An oversupply of milk exists in Idaho, and processors are at full capacity, driving milk prices as much as $1 per cwt under futures prices. This negative basis is driving farm-gate milk prices to $13 per cwt.
Several dairies lost marketing contracts with a milk brokerage firm effective Jan. 1, 2018, representing the production of as many as 15,000 cows. An estimated 5,000 head of the affected cows have already left the state. A portion of the remaining contracts will be redirected to another processor until the end of February; after that, the milk has no clear market.
Supply pressure may have been reduced modestly when some processors prohibited the use of recombinant bovine somatotropin (rBST). Agropur producers were rBST-free by the end of the fourth quarter 2017, and Glanbia expects to be rBST-free by the end of the first quarter of 2018.
The conditions are similar for organic milk. Uncontracted organic milk is trading at conventional prices, well below the cost of production.
In Washington, cow sales to Canada – at robust prices – and lower feed costs are the bright spots for producers. Canadian support for cow prices could remain intact for the next 18 months until heifer replacements from the growing herd begin entering the milking herd.
Kansas: KSU plans youth ‘Dairy U’
Developing the next generation of dairy industry leaders is the goal of a newly created “Dairy U” program. High school students with an interest in discovering dairy industry career opportunities are encouraged to apply for this four-day immersive educational opportunity, scheduled for June 19-22, in southwest Kansas.
Dairy U is open to 10 students from across the country. It is coordinated by Kansas State University’s Department of Animal Sciences. Partnering on the project are Kansas dairy producers, including Ag Oasis, Forget-Me-Not Farms and Royal Farms. Adding financial support are the Kansas Dairy Council, Arm and Hammer Animal Health, Zoetis, American AgCredit and Southeast Select Sires.
Applications are due April 2. Once accepted, transportation to and from the event is the responsibility of the participant, along with a $50 deposit to reserve his or her space. Visit the KSU Dairy U website or contact coordinator Sharon Breiner by email or call (785) 532-6533.
Global dairy, ag export promotion spending rising
While the U.S. dairy industry steps up exporting efforts, global dairy competitors are also boosting export promotion spending, according to a report commissioned by the U.S. Dairy Export Council (USDEC).
A new economic study projects the European Union (EU) will increase expenditures on ag export promotion by 29 percent over three years. New Zealand and Australia are also ramping up promotions, based on analysis by Informa Economics IEG, a global agribusiness research and consulting firm. The full report is not being released to the general public, but is available to USDEC members.
Ag organizations to create rural opioid addiction awareness
The American Farm Bureau Federation and National Farmers Union are joining forces on a new “Farm Town Strong” campaign to raise awareness regarding opioid addiction in farming communities. Components of the program include the launch of a new website, which provides easy access to information and resources that can help struggling farm families and rural communities overcome the crisis.
November fluid milk sales lower
November 2017 total U.S. packaged fluid milk sales were estimated at just over 4.1 billion pounds, down 1.1 percent from November 2016, according to the USDA’s Dairy Market News. U.S. sales of conventional products totaled 3.9 billion pounds, down 1.2 percent from the previous year, while sales of organic products, at 222 million pounds, were down 0.1 percent. Organic represented nearly 5.4 percent of total sales for the month.
Compared to November a year earlier, sales of conventional and organic whole milk posted gains of 3.2 percent and 3.9 percent, respectively. However, sales of all other fluid categories were lower.
Through the first 11 months of the year, U.S. fluid milk sales totaled 43.9 billion pounds, down 2 percent compared to the same period a year earlier. Year-to-date 2017 sales of conventional products totaled 41.6 billion pounds, down 2.1 percent. January-November 2017 sales of organic products, at 2.4 billion pounds, were up just 0.2 percent. Organic represents nearly 5.4 percent of total sales for the year.
The U.S. figures represent consumption of fluid milk products in federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S. Sales outlets include food stores, convenience stores, warehouse stores/wholesale clubs, nonfood stores, schools, the food service industry and home delivery.
U.S. organic milk pay prices lower in 2018
Average milk prices paid to organic dairy producers in 2018 will be down 9 to 12 percent compared to 2017, according to data from the USDA’s Jan. 8-12 Organic Dairy Market News. The report summarized regional pay prices for milk contracted with a major national organic cooperative for 2017 and 2018.
Milk prices are based on 12.2 percent component levels (3.5 percent butterfat, 3.05 percent protein and 5.65 percent other solids). A $180 stop charge per month applies, and a $2 per cwt inventory management reduction remained in effect during January 2018. Market adjustment premiums may be applied by the processor.
Annual 2017 and 2018 contracted average prices (dollars per cwt), respectively, for selected regions, are:
• California North Coast – $30.67; $27.14
• Colorado – $29.80; $26.27
• Mideast – $31.13; $28.27
• Midwest – $30.13; $27.27
• New England – $32.39; $29.52
• Northeast – $32.14; $29.27
• New Mexico-Texas – $31.05; $27.52
• Virginia-West Virginia $32.14; $29.27
PROCESSOR NEWS
Prairie Farms plans Michigan expansion
Prairie Farms is planning a $29 million expansion to its facility at Battle Creek, Michigan, according to the Battle Creek Enquirer and Battle Creek Unlimited, a local economic development organization.
The bottling plant will produce ultra-high-temperature (UHT) pasteurized milk products. Prairie Farms has been operating in the Fort Custer Industrial Park since December 2003.
O-AT-KA Milk Products expanding in New York
O-AT-KA Milk Products Cooperative Inc. will construct a 20,000 square-foot addition at its production facility in Batavia, New York. The $34.5 million project, which will include a new retort (in-container pasteurization) beverage production line, is expected to be operational next fall.
New York’s Empire State Development is providing up to $750,000 for the project through a Finger Lakes Regional Economic Development Council grant. Genesee County Economic Development Agency also offered incentives.
The cooperative is majority-owned by Upstate Niagara Cooperative Inc., and also by Dairy Farmers of America.
DFA plant earns ‘sustainability’ award
The Dairy Farmers of America (DFA) milk plant in Garden City, Kansas, has been named “Sustainable Plant of the Year” by Food Engineering magazine. The facility, said to be the largest single milk dryer in North America, is a partnership between DFA and 12 of its member farms in southwest Kansas.
All the water utilized at the plant is recycled and ultimately used to water landscaping and parks throughout the city.
Construction started on the Garden City facility in October 2015, and the first load of milk was delivered in late September 2017. The plant processes about 4 million pounds of milk per day, producing whole and skim milk powder, nonfat dry milk powder and cream.
Lactalis to acquire U.S. maker of Icelandic yogurt
Lactalis, based in France and one of the world’s largest dairy companies, has agreed to acquire siggi's, a U.S.-based maker of Icelandic-style skyr yogurts. siggi's will continue operating out of its New York City office, and will remain a standalone company under its current senior leadership team. Financial terms were not announced, and the transaction is subject to anti-trust regulation review.
DannonWave teams up with Cowboys’ Prescott to promote yogurt
Dallas Cowboys quarterback Dak Prescott will be a face of DannonWave’s Oikos yogurt promotion campaign. The new campaign promotes Oikos Triple Zero as a great protein snack choice, without added sugar and artificial sweeteners. DanoneWave is a subsidiary of global dairy company Danone, with headquarters in White Plains, New York, and Broomfield, Colorado.
ELSEWHERE
New Zealand expanding mycoplasma testing program
Progressive Dairyman recently called attention to the growing emergence of mycoplasma mastitis in large U.S. dairy herds. The disease is also gaining attention in New Zealand.
New Zealand’s mycoplasma surveillance program has been limited to Canterbury, Otago and Southland. However, the Ministry for Primary Industries (MPI) and its dairy industry partners will extend the testing program nationwide.
The program – expected to begin in February and rolled out by region – will involve testing three milk samples from every dairy farm. One sample will be taken from bulk milk as part of the regular sampling process at milk collection. Farmers will also be required to provide two samples from milk discarded from cows with clinical signs of mastitis.
A recent U.S. National Animal Health Monitoring Service survey revealed up to 20 percent of U.S. dairy herds might test positive for mycoplasma mastitis. (Read Mycoplasma mastitis: An emerging disease concern.)
Finnish company offering animal well-being ‘responsibility bonus’
Progressive Dairyman recently reported on a Wisconsin dairy farm that received a discount on its annual farm insurance premium after becoming certified under a program designed to reduce drug residue risks and improve farm and food safety. (Read: Farm receives insurance discount for Food Armor certification, by Progressive Dairyman editor Audrey Schmitz.)
Now, we’ve learned a dairy processor in Finland is paying a “responsibility bonus” to farmers who promote animal well-being.
Valio, owned by dairy cooperatives comprising some 6,000 dairy farmers in Finland, will pay one cent extra per litre (about 44 cents per cwt) to producers meeting program standards.
The standards are extensive. According to a press release, all cattle on the farm must be covered by a herd healthcare plan and must be included in the centralized healthcare registry for Finnish cattle herds (Naseva). Annual farm visits by a veterinarian are required, along with regular hoof health monitoring. Pain relief and sedatives must be given to calves as part of dehorning, which must be carried out under the supervision of a vet. All barns must be freestall barns. Valio also requires that the animal feed is free of soy and genetically modified organisms. Valio estimates about 80 percent of its farmers meet certification standards and expects all farms to meet the standards by 2020. 
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