Digest Highlights Wisconsin’s ‘cow of the year’ to be honored at World Dairy Expo January-August dairy cow slaughter tops 2 million head California entry into FMMO system enters final stages Borden delivers 45,000 milk servings for Hurricane Florence CMPB jumping at chance to reward kids ‘Quality Chekd’ dairy award finalists named PMMB extends over-order premium at 75 cents Cheese, butter inventories see slight drawdown FarmFirst Dairy Cooperative seeks more tariff-related support LGM-Dairy policies on sale Sept. 28
Wisconsin’s ‘cow of the year’ to be honored at World Dairy Expo
Hilrose Advent Anna-Red EX-94, an 8-year-old Red and White Holstein bred and owned by Hilrose Holsteins of Sherwood, Wisconsin, will be honored as the 2018 Wisconsin Cow of the Year during next week’s World Dairy Expo.
Each year, a different Wisconsin purebred cattle association selects a cow to represent her breed at World Dairy Expo. The honor rotates annually among Wisconsin’s seven major dairy breeds.
Anna has a long list of honors in the Red and White breed, including Reserve All-American 125,000-pound Cow in 2017, Reserve All-American Aged Cow in 2016 and nominated All-American 5-year-old in 2015.
Hilrose Holsteins is owned and operated by Joe and Chris Brantmeier, and their sons Andy and Jeff. The Hilrose prefix originates from Joe’s parents, Hilard and Rosemary Brantmeier, who registered their first cow in 1959. Since then, the farm has bred and developed 212 Excellent and 621 Very Good cows.
Today, Hilrose is home to 100 registered Holsteins with a rolling herd average of 32,293 pounds of milk, 1,236 pounds of fat and 1,006 pounds of protein.
World Dairy Expo is scheduled Oct. 2-6 in Madison, Wisconsin. The Cow of the Year ceremony will be held Oct. 4, during the Red and White Holstein Winter Calf Class.
January-August dairy cow slaughter tops 2 million head
Federally inspected milk cow slaughter was estimated at 279,700 head in August, the third-highest monthly total of the year. The August 2018 total was 14,100 head more than August 2017 and 39,900 more than July 2018, according to the monthly USDA Livestock Slaughter report, released Sept. 20.
Through the first eight months of 2018, the culling total is 2.09 million head, about 101,000 head more than the same period a year ago. Dairy cow culling has topped 2 million by the end of August only two other times in the past 20 years – in 2012 and 2013.
The USDA’s latest milk production report indicated there were 9.4 million cows in the U.S. dairy herd in August 2018. Based on the slaughter estimates, about 3 percent of the herd was culled during the month. Cow culling so far in 2018 has averaged about 10,000 head per day (including weekdays and Saturdays), up about 400 head per day from a year ago.
Regionally, August 2018 dairy cow culling topped 77,000 head in an area including Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin; and nearly 71,000 head in an area covering Arizona, California, Hawaii and Nevada.
Based on the latest USDA forecasts, U.S. cull cow prices could average under $60 per hundredweight for the second half of 2018.
California transition into FMMO system enters final stages
Nearly four years in the making, California’s transition to Federal Milk Marketing Order (FMMO) is in the final stages. The California state milk marketing order will be in effect until Oct. 31, with the USDA taking over administration of the California FMMO on Nov. 1.
Among the final steps are calculations of minimum milk prices paid to California dairy farmers for October milk. The California Department of Food and Agriculture (CDFA) announced Class 1 prices on Sept. 10 and will announce Class 2 and Class 3 prices on Oct. 1, and Class 4a and Class 4b prices on Nov. 1. The final pool price will be announced Nov. 21.
For California dairy farmers, there will be some practical differences with the change in systems, according to Geoff Vanden Heuvel, director of regulatory and economic affairs with California’s Milk Producers Council.
One change is the timing of milk checks. Under an FMMO, producers will get two milk checks per month, not three. FMMO rules require producers be paid about one-half of the month’s milk value at the end of each month, and all of the remaining money due for the month must be paid by the 19th of the following month.
Producers will be paid based on butterfat, protein and other solids, instead of butterfat and solids nonfat. The FMMO uses “true” protein as its measure of milk protein, as opposed to crude protein under the state order. Although true protein is about two-tenths (0.2) of a point lower than the crude protein, protein carries a higher value than other solids in the formula used to calculate minimum milk prices.
Borden delivers 45,000 milk servings for Hurricane Florence
Fluid milk processor Borden teamed up with food banks in North Carolina to distribute 45,000 individual servings of whole, 2 percent and chocolate milk to those affected by Hurricane Florence.
Due to Hurricane Florence and related evacuation orders, Borden’s plant in North Charleston, South Carolina, was closed Sept. 11-16. Borden shifted production to 12 other plant locations.
The donated milk was processed and packaged in Borden’s plant in London, Kentucky. Borden also transported the milk, working with the Food Bank of Central & Eastern North Carolina and World Central Kitchen to distribute it to evacuee shelters and centers serving local communities in Wilmington and surrounding counties.
CMPB jumping at chance to reward kids
The California Milk Processor Board (CMPB) is launching a four-city trampoline park takeover to reward hundreds of kids with a day to jump, laugh and enjoy dairy products. The "Sunday Funday with got milk?" events will be held Sept. 30 in Thousand Oaks and Mission Viejo, California, and then move to Fresno and Sacramento on Oct. 7.
The events are free and open to children ages 6 through 14. The Thousand Oaks event will also feature an appearance by actress, social media star and America's Got Talent finalist Sofie Dossi. Participants are asked to obtain a pass.
CMPB, creator of the “got milk?” campaign, previously launched a multi-platform, multicultural campaign, “You Can Always Count on Milk.” It is designed to capture today's children facing daily challenges and powering through it all with milk as their trusted drink of choice before, during and after a long day.
‘Quality Chekd’ dairy award finalists named
Six U.S. dairy companies are finalists for awards recognizing their efforts to meet consumer demands for dairy product quality and transparency.
The awards will be presented by Quality Chekd Dairies Inc., a member-owned organization of independent dairy processors, during the 2018 QCS Leadership Conference in Austin, Texas, in November.
Finalists for the Quality Chekd Irving B. Weber Award, which recognizes companies for overall process and product quality, customer service and satisfaction at a single plant location, are: Belfonte Dairy, Kansas City, Missouri; Hiland Dairy Foods Co., Little Rock, Arkansas; and Umpqua Dairy Products, Roseburg, Oregon.
The Quality Chekd Production Excellence Award recognizes outstanding processors in three categories: fluid milk, cultured dairy and ice cream. Finalists are:
• Fluid Milk Category: Hiland Dairy Foods Co., Omaha, Nebraska; Prairie Farms Dairy, Anderson, Indiana; and Prairie Farms Dairy, Dubuque, Iowa.
• Cultured Dairy Category: Prairie Farms Dairy, Quincy, Illinois; Sunshine Dairy Foods, Portland, Oregon; and Umpqua Dairy Products, Roseburg, Oregon.
• Ice Cream Category: Belfonte Dairy, Kansas City, Missouri; Lochmead Dairy, Junction City, Oregon; and Umpqua Dairy Products, Roseburg, Oregon
Winners of Quality Chekd Production Excellence Awards will be announced in November.
PMMB extends over-order premium at 75 cents
The Pennsylvania Milk Marketing Board approved an order retaining the state’s over-order premium at 75 cents per hundredweight (cwt), effective Oct. 1, 2018, through March 31, 2019. An 8-cent-per-cwt diesel fuel add-on to the over-order premium will continue unchanged. The over-order premium applies to all Class I milk produced, processed and sold in Pennsylvania.
Cheese, butter inventories see slight drawdown
Although milk production increased, cheese and butter inventories declined slightly in August, according to USDA’s monthly Cold Storage report, released Sept. 24. The report reflects volumes of dairy product inventories as of Aug. 31, 2018.
• Butter stocks were estimated at 290.8 million pounds, down 9 percent from July 31, 2018, but up 4 percent from Aug. 31, 2017.
• Total natural cheese stocks were estimated at 1.36 billion pounds, down 4 percent from July 31, but up 2 percent from a year earlier. American cheese stocks, at 787.3 million pounds, were down 4 percent from July and down 2 percent from a year earlier.
FarmFirst Dairy Cooperative seeks more tariff-related support
The head of FarmFirst Dairy Cooperative has asked USDA Secretary Sonny Perdue for greater financial support for U.S. dairy farmers in light of the retaliatory tariffs from Mexico, China and other countries.
“We are disappointed in the small amount of assistance provided to dairy farmers in the dairy mitigation package, as it represents a fraction of the economic harm to dairy farmers,” Jeff Lyon, FarmFirst general manager, said in a letter to Perdue. “Of course, our number one goal is to have trade restored and avoid any federal assistance at all. Until the retaliatory tariffs are suspended, dairy farmers will continue to suffer economic losses, which will continue to challenge many to stay in business.”
The letter outlines two requests: 1) to commit to a second round of tariff mitigation payments to dairy farmers, to be available through the end of the year; and 2) significantly increase the payment rate for dairy farmers to more fully reflect market losses related to the retaliatory tariffs.
“We recognize and appreciate the distinction between economic harm related to the retaliatory tariffs versus normal market volatility,” the letter stated. “However, since the retaliatory tariffs were announced in late May, milk futures prices through December of this year have declined by $1.2 billion, and milk prices are estimated to be about $1.10 per hundredweight lower than price estimates just prior to the imposition of the retaliatory tariffs.”
This request is the second letter sent to the USDA from the cooperative, calling attention to the issue dairy farmers are facing.
“The rate of dairy farm loss in the Upper Midwest is quite alarming and very devastating to the rural economy of our region,” the letter stated. “As the region of the nation with the most concentration of dairy farms, many of our rural communities are deeply dependent on the economic health of the dairy farms in the area. In Wisconsin alone, dairy farm losses through the first nine months of 2018 have been about 40 percent higher than the average attrition rate for the same nine-month period over the previous five years. The trade disruption and related market price declines have greatly exacerbated those trends.”
LGM-Dairy policies on sale Sept. 28-29
Regardless of the risk management tools used, low feed prices mean dairy farmers can now protect a margin above the five-year average, according to Alan Zepp, risk management program manager at Pennsylvania's Center for Dairy Excellence (CDE).
Zepp reviewed various risk management options – including hedging on the futures market, as well as the Margin Protection Program for Dairy (MPP-Dairy) and the Livestock Gross Margin-Dairy (LGM-Dairy) program – during his monthly “Protecting Your Profits” conference call, Sept. 26.
• At the time of the call, Chicago Mercantile Exchange (CME) Class III futures for the next 12 months averaged $16.14 per cwt; Class IV futures averaged $15.38 per cwt. The January 2019 CME Class III futures contracts settled at $16.09 per cwt on Sept. 25. An at-the-money put at $16 per cwt would cost 44 cents; a $15 put, reflecting similar risk protection to a $1 deductible LGM-Dairy policy, would cost 12 cents. If purchasing a put option, there will also be a small charge to cover the difference in the bid-ask spread.
• As of Sept. 25, the LGM-Dairy insurable margin for the next 10-month period averaged about $8 per cwt. Cost for coverage for the entire period was estimated at 51 cents per cwt for a $0 deductible policy, 12 cents for a $1 deductible policy. The costs could vary slightly by the start of the Sept. 28-29 LGM-Dairy sales period.
For those Tier II herds (above 5 million pounds of milk) who did not enroll in the 2018 MPP-Dairy program, the current $1 deductible LGM-Dairy policy would replicate $8.25 per cwt MPP-Dairy coverage. However, the LGM-Dairy cost would be 12 cents per cwt, compared to the MPP-Dairy Tier II premium cost of $1.06 per cwt.
• Based on current futures prices, August will be the final month for MPP-Dairy payments in 2018. The projected August 2018 margin (to be announced on Sept. 27) was about $7.50 per cwt. The MPP-Dairy margin is expected to grow to $9 in October and then to $9.50 in December. Class III milk futures prices are now above $16 per cwt for all of 2019, translating into MPP-Dairy margins in the $9.50 per cwt neighborhood for all of next year.
Market fundamentals
Zepp’s overview of market fundamentals was mixed, with U.S. dairy cow numbers remaining at about 9.4 million head, although August 2018 dairy cull cow slaughter was up 5.3 percent from the same month a year earlier. Dairy product inventories remain strong, although both U.S. and global milk powder stocks are dropping slowly. Affecting domestic demand, consumer confidence remains strong and unemployment is low.
Impacting exports, the value of the U.S. dollar is stable, but tariff wars continue to cloud the picture. World milk production growth has slowed, on pace with a year ago. From an export competitiveness standpoint, U.S. dairy product prices remain at or below the world market. As of Sept. 25, the Chicago Mercantile Exchange (CME) cash block cheddar price of $1.65 per pound was above the latest Global Dairy Trade (GDT) auction price of $1.58 per pound, but below the European Union (EU) price of $1.79 per pound. CME butter was trading at about $2.22 per pound, below the GDT average of $2.59 per pound and the price in Germany of $3.33 per pound. Finally, the CME nonfat dry milk powder was trading at about 87 cents per pound, compared to 90 cents per pound on both the GDT and in Germany.
Zepp’s next Protecting Your Profits call will be Oct. 24. All calls are recorded and archived. 
PHOTO: Hilrose Advent Anna-Red EX-94, an 8-year-old Red and White Holstein bred and owned by Hilrose Holsteins of Sherwood, Wisconsin, will be honored as the 2018 Wisconsin Cow of the Year during next week’s World Dairy Expo. Photo courtesy of the Wisconsin Department of Agriculture, Trade and Consumer Protection.
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Dave Natzke
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