Digest Highlights

January Class I base price: $19.01 per cwt

The January 2020 Federal Milk Marketing Order (FMMO) Class I base price is $19.01 per hundredweight (cwt), down 32 cents from December 2019 but $3.89 per cwt more than January 2019.

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Dave Natzke
Editor / Progressive Dairy

The 2019 Class I base price averaged $16.99 per cwt, up about $2.15 compared to 2018.

Dairy margins deteriorated to start December

Dairy margins deteriorated over the first half of December as a sharp drop in milk prices combined with increased feed costs, particularly in nearby marketing periods, according to Commodity & Ingredient Hedging LLC.

Forward margins are still projected over the 80th percentile of the past 10 years, with first-quarter 2020 margins above the 90th percentile of historical profitability.

Despite the sharp selloff in spot cheese at the Chicago Mercantile Exchange (CME), there is still reason for optimism heading into 2020. Phase one of a U.S.-China trade agreement could pave the way for increased whey exports. And the U.S.-Mexico-Canada Agreement (USMCA) includes significant concessions from Canada to open up their dairy market to the U.S., as well as gradually phase out Class 6 and 7 milk pricing.

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On the feed side, both corn and soybean meal have moved higher in response to optimism for increased ethanol and soybean trade to China.

November 2019 dairy cow slaughter rate slows

The rate of dairy cull cow slaughter slowed in November but remains the highest since 1986, the year of a federal whole-herd buyout program.

Federally inspected milk cow slaughter was estimated at 256,100 head in November 2019, 30,000 head less than October 2019 and 11,900 head less than November 2018, according to the USDA’s Livestock Slaughter report.

At 2.967 million head, January-November 2019 slaughter was about 67,000 ahead of the same period a year ago.

Heaviest culling continues in the Upper Midwest (Illinois, Indiana, Michigan, Minnesota, Ohio and Wisconsin), where year-to-date slaughter has removed nearly 779,000 dairy cows. That’s followed by 694,400 in Arizona, California, Hawaii and Nevada; 507,400 head in Delaware, Maryland, Pennsylvania, West Virginia and Virginia; 330,800 head in Arkansas, Louisiana, New Mexico, Oklahoma and Texas; and 314,300 head in Alaska, Idaho, Oregon and Washington.

New Dairy West brand is ‘Unbottled’

Dairy West, a regional dairy promotion organization that works on behalf of Idaho and Utah dairy farm families, is changing the way it communicates with various audiences. To address that diversity, Dairy West created a two-brand approach: one for the dairy industry and one for consumers.

In late November, the checkoff-funded organization launched a new “brand” targeting consumers. Called “Unbottled,” it is designed to appeal to people who are concerned about health and nutrition and making good food choices for themselves and their families.

"The Unbottled brand captures how dairy foods can help unbottle everyone's inner greatness," said Kristi Spence, Dairy West's senior vice president of marketing. "No matter what someone wants to become, no matter their goals and ambitions, we want to be there to help them along that journey and demonstrate where dairy can play a role."

It can be challenging for the organization to go to market with a singular message for its diverse group of audiences, Spence explained. She said Dairy West's vast constituency ranges from dairy farmers, processors and supply chain partners to food manufacturers, food service operators, distributors and retail grocers, as well as school officials, health professionals, athletes and other market influencers and diverse consumer categories.

The new Unbottled website is currently a landing page, but by the end of the first quarter of 2020, visitors will be able to find details about everything from the nutritional benefits of dairy to what's going on at farms with respect to animal care, stewardship and environmental sustainability. On social media, Dairy West has transitioned its Facebook and Instagram accounts to Unbottled and created a Twitter account.

NMPF unveils new REAL Seal website

The National Milk Producers Federation (NMPF) unveiled a redesigned website for the REAL Seal, designed to help consumers find real dairy foods in an increasingly confusing retail marketplace. The new website includes a buyer’s guide that helps steer shoppers to those brands that feature the REAL Seal and use only real milk.

“NMPF continues to battle the misuse of dairy terms by plant-based products that seek to copy every aspect of real dairy, apart from nutrition,” said Jim Mulhern, president and CEO of NMPF. “The REAL Seal allows us to work with food marketers to apply a simple, highly recognizable icon on their products to help consumers separate the real from the fake.”

The new website will contain more content to educate consumers about why they should look for the REAL Seal on the foods they buy and how real dairy foods compare to imitators. It also continues to help those companies using the seal to enhance their product marketing. Only dairy foods made in the U.S. with American-produced cows’ milk are eligible to display the REAL Seal.

The website is part of the REAL Seal’s suite of digital tools, including its Facebook and Pinterest communities.

SUNY – Cobleskill receives USDA grant to expand dairy processing facility

The USDA awarded the State University of New York (SUNY) – Cobleskill a $490,883 Local Food Promotion Program (LFPP) grant to expand the capacity of its dairy processing center. The USDA’s LFPP grants fund the development and expansion of local and regional food business enterprises.

Created to help address diversification and profitability challenges faced by dairy producers in New York’s Mohawk Valley, SUNY – Cobleskill’s Dairy Processing Center offers processing space for area farmers who produce cow, goat and sheep milk. Processing and marketing of farm-branded and regionally branded value-added products may be an option for small producers struggling with price and scale realities of commodity markets. For smaller dairy producers, investment in on-farm processing capacity would not be feasible because of costs and regulatory requirements.

Grant funds will be used to add processing and distribution equipment and expand the reach of technical assistance offered through the college’s Farm and Food Business Incubator (FFBI). Dairy processing center users pay nominal overhead fees for equipment use and receive product development and production assistance.

In addition to the dairy processing center, SUNY – Cobleskill has a 200-cow dairy facility.

CoBank: Dairy remains in transition

The U.S. dairy sector remains in a state of transition, according to the latest Quarterly Rural Economic Review from CoBank’s Knowledge Exchange division.

The first part of 2019 was marked by high dairy cow culling and slower milk production growth, setting the stage for higher milk prices later in the year. While milk prices have posted a strong recovery, dairy producers are juggling higher feed costs. The combination of rising milk prices and mixed feed prices resulted in better margins on an annual basis, although most of the gains were made in the second half of 2019.

Domestic demand for value-added products soared in 2019, supporting higher milk prices, especially Class III milk, but Class IV milk prices did not see similar gains. The Class III milk price started the year at $13.96 per cwt and was $19.40 per cwt in mid-December. In contrast, Class IV started 2019 at $15.48 per cwt and in mid-December settled at $16.73 per cwt.

The rapid rise in milk prices will be a driving force to add more cows, and replacement animal prices are already climbing. A January 2020 cattle inventory report will provide a better indication for what to expect out of growing dairy cow numbers.

U. S. milk prices in 2020 are expected to be above a year ago, in part restrained by available heifer supply limiting rapid expansion in the short term. Domestic consumption is expected to continue to underpin the demand for dairy products and is dependent on continued growth in the U.S. economy.

On the producer margin side, feed costs are expected to come down in 2020 with additional corn and soybean acres coming into production and normal yields continuing to support alfalfa availability and lower prices. The improved feed and milk price outlook will bolster dairy profit margins next year.

The year will start with a limited U.S.-China trade deal and ratification of U.S.-Mexico-Canada Agreement (USMCA). The preliminary “phase one” trade deal with China will likely add some level of certainty to businesses that are looking to invest.

“The fourth quarter is certainly ending with much more optimism on trade and the economy compared to how it began,” said Dan Kowalski, vice president of CoBank’s Knowledge Exchange division. “Resolution on the USMCA deal, in particular, will deliver a collective sigh of relief for many businesses across North America.”  end mark

Dave Natzke