Digest Highlights: • Dean Foods becomes majority shareholder of plant-based Good Karma • Land O'Lakes, CalBio form ‘barn to biogas’ partnership • June Class III, IV prices change little • August California Class 1 prices fall • MPP-Dairy margins forecast: Payments possible into October • Grain stocks, use both higher
Dean Foods becomes majority shareholder of plant-based Good Karma
Dean Foods Company increased its ownership percentage and has taken a majority stake in Good Karma Foods, a producer of flaxseed-based milk and yogurt alternatives. Good Karma will continue to operate as a Boulder, Colorado-based independent company led by its existing leadership team.
Meanwhile, news continues to trickle out regarding Dean Foods’ dairy plant closures. Thus far, employees at seven plants (Huntley, Illinois; Louisville, Kentucky; Thief River Falls, Minnesota; Lynn, Massachusetts; Erie, Pennsylvania; Braselton, Georgia; and Livonia, Michigan) have been receiving layoff notices, with most occurring in September.
On July 5, the Kentucky Dairy Development Council announced that 11 of the 19 Kentucky dairy farmers who had their milk marketing contracts canceled by Dean Foods had signed new contracts with Scioto Milk Producers Cooperative of Hillsboro, Ohio, and Dairy Farmers of America – Southeast Area Council, Kansas City, Kansas. Milk pickup begins July 16 on all farms. The remaining eight Kentucky farms involved made the decision to sell their herds privately.
Dean Foods’ next quarterly investor call is scheduled for Aug. 8.
Farmers Union to hold webinar on cooperative dairy base/excess plans
The Wisconsin Farmers Union (WFU) will host a webinar to share ways dairy cooperatives are adopting base/excess plans to prevent accepting more milk from producers than they have the capacity to process or market. The webinar will be held July 19, 11:30 a.m. (Central).
A base/excess plan, often referred to as two-tiered pricing, works by determining each co-op member’s level of milk production based on their historic average. The farmer is paid for milk produced up to their base, but any excess milk receives no compensation. WFU officials are urging more cooperatives to consider this option as a way to discourage rapid dairy expansions that drive milk prices down.
“While these internal programs alone will not bring up farmers’ milk price, they reduce the financial incentive to overproduce milk,” said WFU government relations associate Bobbi Wilson. “They also cut costs incurred by having to haul or even dump excess milk.”
The webinar will feature a panel of members from Land O’ Lakes, Dairy Farmers of America and Scenic Central, three cooperatives that already have base/excess plans in place. Panelists will describe what prompted their co-op to implement these plans and the challenges and benefits. They will also respond to questions about how other co-ops can start their own plan.
The webinar is open to anyone affiliated with the dairy industry, but will be especially useful to members, board members and management of dairy cooperatives who are considering whether a base/excess plan is right for them.
Contact Bobbi Wilson at (608) 234-3741 or email for more information and to register for the webinar.
Land O'Lakes, CalBio form ‘barn To biogas’ partnership
Land O'Lakes Inc. and California Bioenergy LLC (CalBio) are collaborating to support the financing, installation and management of on-farm methane digesters to generate renewable compressed natural gas (R-CNG) fuel in California.
The partnership will help Land O'Lakes dairy member-owners in California meet new state standards that call for a 40 percent reduction in dairy and livestock manure-related methane emissions from 2013 levels by 2030. Officials say the innovative farmer-led model for "barn to biogas" could shape nationwide solutions to agricultural methane emissions reduction and unlock new revenue streams for dairy farmers.
Land O'Lakes is a member-owned cooperative with operations spanning the spectrum from agricultural production to consumer foods.
CalBio is a developer of dairy digesters generating renewable electricity and vehicle fuel in California. It provides the expertise needed to develop, execute and manage on-farm methane digesters, as well as market R-CNG credits in California.
June Class III, IV prices change little
June 2018 federal order Class III and Class IV milk prices posted meager gains.
The June Class III price is $15.21 per hundredweight (cwt), up 3 cents from May but still $1.23 less than June 2017. The year-to-date Class III price average stands at $14.41 per cwt, down $1.70 from the same period a year earlier.
The June Class IV price is $14.91 per cwt, up 34 cents from May but 98 cents less than June a year ago. The January-June Class IV price average is $13.67 per cwt, down $1.42 from the same period a year earlier.
August California Class 1 prices fall
The California Department of Food and Agriculture (CDFA) announced the August Class 1 price at $16.14 per cwt for the north and $16.41 for the south. Both are 72 cents less than July 2018 and $2.18 less than August 2017. Through the first eight months of 2018, the north average is $16.12 per cwt; the south average is $16.40 per cwt. They are about $1.71 per cwt less than the same period in 2017.
MPP-Dairy margins forecast: Payments possible into October
Margin Protection Program for Dairy (MPP-Dairy) margin calculations use National Ag Statistics Service price data, which is delayed one month. For example, June MPP-Dairy margins will be announced on July 30.
Based on milk and feed futures prices as of July 9, the Program on Dairy Markets and Policy and USDA’s Margin Protection Program Decision Tool project monthly MPP-Dairy margins will climb above $7 per cwt for June, perhaps to $7.50 per cwt. However, margins are then expected to weaken again in July and August to $7 per cwt or lower, and not surpass $8 per cwt until October.
Grain stocks, use both higher
Potentially impacting the feed cost factor in MPP-Dairy margin calculations, the USDA’s Grain Stocks report revealed the corn inventory at 5.31 billion bushels as of June 1, up 1.4 percent from prior-year levels. Soybeans in inventory totaled 1.22 billion bushels, 26.5 percent above 2017 levels. Inventories are at a record-high for soybeans and the third-highest level ever reported for corn, according to John Newton, director of the American Farm Bureau Federation’s Market Intelligence.
While inventory levels were at or near all-time highs, so too was implied consumption of corn and soybeans. March 1-June 1 corn “disappearance,” a measure of use, was a record 3.6 billion bushels, 6 percent above prior-year levels. Soybean disappearance was a record 888 million bushels, up 15 percent from 2017 consumption levels.
July corn futures traded below $3.40 per bushel in recent weeks and is 70 cents per bushel below the mid-May settlement price. Similarly, July soybeans are trading at $8.44 per bushel, nearly $2.40 per bushel below the contract highs reached in March.
The uncertainty surrounding trade policy and the evolving weather for crop development will continue to dominate corn and soybean prices over the near term, according to Todd Hubbs, ag economist at the University of Illinois. He said the implications from USDA’s latest World Ag Supply and Demand Estimates and Grain Stocks reports were not supportive for corn prices. Given the current pace of consumption in feed and residual now being experienced, year-ending stocks for corn will likely be higher than the 2.102 billion bushels projected by USDA on June 9. In addition, the increase in corn acreage points to adequate supply during the next marketing year. A record June 1 stocks for soybeans combined with a moderate rise in acreage continues to place the focus on China-U.S. trade issues.
Global report predicts continued dairy consumption growth
The coming decade should bring good news regarding global dairy consumption, according to the newly released “Agricultural Outlook 2018-2027,” produced by the Organization for Economic Cooperation & Development (OECD) and the U.N. Food & Agriculture Organization (FAO).
Based on the report, global consumption of fresh dairy products will increase at an annual rate of 2.2 percent in the coming decade, the highest growth rate among agricultural commodities covered in the report. Increasing incorporation of dairy in the diets of people in developing countries – especially in Asia – as well as a growing preference for butter over plant-based alternatives in higher-income countries will drive the increase. 
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Dave Natzke
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