- Hay inventories lower in many dairy states
- Land purchase approval advances proposed Idaho research dairy
- Craigs Creamery launches branded products
- CAFO water quality protection project grants available in New York
- Calgren dairy digester project supplies SoCalGas pipeline
- Did you know: Who holds farm debt?
- Class IV price to be ‘higher of’ through 2019
- WUD opposes California bill that provides plant-based school lunch incentives
- Cottonseed harvest, acreage plans updated
- 2018 fluid sales lower
- Global Dairy Trade index maintains upward streak
- Upper Midwest milk hauling charges rose in 2018
- Study provides winning growth formula for dairy companies
Hay inventories lower in many dairy states
Several major dairy states entered winter with substantially lower on-farm hay inventories compared to a year ago, based on a semiannual hay stocks report from the USDA.
All hay stored on U.S. farms as of Dec. 1, 2018, totaled 79.1 million tons, down 6 percent from a year ago, according to the USDA’s Crop Production report, released Feb. 8. This marks the lowest Dec. 1 hay stocks since the drought of 2012 and second-lowest inventory for that date since 1977.
Based on preliminary 2018 hay estimates, last year’s acreage, yields and total production were down from 2017. About 64 percent of all hay produced last year was in storage on Dec. 1, 2018.
The smaller inventories resulted even though “disappearance,” a measure of use, totaled 59.9 million tons for the period May 1-Dec. 1, 2018. That compares with 68.2 million tons for the same period a year earlier.
Whereas last year much of the hay inventory declines were located in the drought-stressed West, this year’s numbers are more geographically diverse. One common theme is that many of the states where hay inventories are lower are also states where the nation’s 9.4 million dairy cows reside (Table 1).
Among the 23 “major” dairy states listed by the USDA, 17 had less hay in storage compared to a year ago. Decliners were led by Texas, where hay stocks were down by a whopping 2.05 million tons. Wisconsin and Missouri hay stocks were each down 900,000 tons. Hay inventories slipped by 450,000 to 550,000 tons in Minnesota, Pennsylvania and California.
States with largest hay inventory increases compared to a year ago were North Dakota, Montana and Nebraska in the Northern Plains, and Tennessee and North Carolina in the Southeast.
Check out Progressive Forage magazine’s monthly forage market update.
Land purchase approval advances proposed Idaho research dairy
The Idaho State Board of Education approved the purchase of land to create a University of Idaho research dairy. The vote allows the University of Idaho to purchase 540 acres near Rupert, in southeastern Idaho.
The University of Idaho will pay $2.5 million, while the Idaho Dairymen’s Association (IDA) will contribute $2 million to the purchase of the land from the Whitesides family, who will in turn donate another parcel of land.
The land will house a research dairy, one of several south-central Idaho-based facilities planned as part of the $45 million Idaho Center for Agriculture, Food and the Environment (CAFE) initiative. When completed, the project will include the research dairy – said to be the nation’s largest — an outreach and education center, and a food-processing component.
IDA members first began working with the University of Idaho 15 years ago on the project.
“One of our key focuses will be to have this dairy represent what this industry looks like in the West,” said Rick Naerebout, IDA chief executive officer. “Being the largest research dairy in the country will help support the industry and put Idaho on the map as a premier location for environmental research.”
Brandon Whitesides, who is selling the property with his sister, Stacey Jackson, and father, Brent, said the family’s goal is supporting the dairy industry. As a student at Brigham Young University, he worked at the 500-cow university dairy. BYU no longer operates the dairy.
In 2017, the Idaho Legislature appropriated $10 million to help finance the project, with an additional $5 million investment anticipated as the project progresses.
Craigs Creamery launches branded products
Craigs Creamery, a joint venture of eight New York dairy farms and Dairy Farmers of America (DFA), has launched a branded cheese line. The marketing strategy carries a “sustainable” message to consumers, highlighting the brand’s locally sourced, high-quality milk and a focus on the environment.
The evolution of Craigs Creamery started in 2014, when the eight western New York farms and DFA formed Craigs Station Creamery, investing $12 million to build a cold separation plant producing standardized milk and cream. The Livingston and Wyoming county dairy farms include Lawnell Farms, Coyne Farms, McCormick Farms, Baker Brook Dairy, Southview Farm, Synergy Farm, Noblehurst Farms and Mulligan Farm. In 2017, a joint venture with Arla Foods led to the construction of a $49.7 million premium cheddar cheese processing facility.
The operation maintains the tradition of family farming while incorporating the forward-thinking, innovative practices of modern agriculture. One of the farms features a biodigester that powers the creamery. In addition to processing dairy manure, the digester also handles food waste that otherwise would have gone to a landfill. Other practices include solar panels and extensive water recycling.
Craigs Creamery offers a variety of product options, including whole-milk mozzarella, Swiss, mild, medium and sharp cheddar, and Muenster cheese, which are available in slices, shreds, chunks and snack bars. Craigs Creamery cheese products can be found in Giant Landover, Stop & Shop and ShopRite stores in New York, New Jersey, Pennsylvania, Delaware, Massachusetts, Rhode Island, Connecticut, New Jersey, Washington, D.C., Virginia and Maryland.
CAFO water quality protection project grants available in New York
A final round of grants, totaling $18.4 million, are available to help New York livestock farms implement water quality protection projects. The funding is provided through the Concentrated Animal Feeding Operation (CAFO) Waste Storage and Transfer System Program, a $50 million program launched in 2017. The application period closes April 16, 2019.
County soil and water conservation districts can apply for the grants on behalf of eligible farmers. The maximum award amount per proposal is $385,000, which includes funding for engineering and construction expenses. Grants can be used to help CAFO-permitted farms offset the cost of manure storage construction, site preparation and associated best management practices.
The program, administered by the New York Department of Agriculture and Markets, funds projects designed to meet state department of environmental conservation requirements. Since the program's launch, nearly $32 million has been awarded to 89 farms. New York has more than 500 CAFO farms, most of which are dairy farms with 300 or more cows.
The application and additional information are available on the New York State Department of Agriculture and Markets' website.
Calgren dairy digester project supplies SoCalGas pipeline
Natural gas produced by Calgren’s Dairy Fuels, a dairy manure digester facility in Pixley, California, has, for the first time, been injected into the Southern California Gas Company (SoCalGas) pipeline, the companies announced.
Calgren's facility is a dairy digester pipeline cluster, collecting biogas from anaerobic digesters at 12 Tulare County dairies, then cleaning it to produce pipeline-quality renewable natural gas. The cluster is expected to add nine other dairies later this year, making it the largest dairy biogas operation in the U.S. The facility will capture the methane produced from the manure of more than 75,000 cows. SoCalGas will be capable of adding up to 2.26 billion cubic feet of renewable natural gas each year to its pipeline system from the facility, enough to fuel more than 1,200 Class 8 heavy duty trucks.
Renewable natural gas can be produced from dairy manure, food waste, landfills, wastewater treatment plants and other sources. Capturing this otherwise wasted gas and turning it into a renewable fuel significantly reduces greenhouse gas emissions from these waste sources.
The Calgren project and others like it are partly funded under California's Dairy Digester Research and Development Program, which aims to reduce greenhouse gas emissions from manure generated at state dairy farms.
There are currently 24 California dairy methane capture projects either operating or in development, and officials estimate there could be as many as 120 projects funded and operating in next five years.
Did you know: Who holds farm debt?
When all the numbers are in, U.S. agriculture-related debt is expected to be a record-high $409.5 billion in 2018, up 4.2 percent ($16.4 billion) from 2017 levels. The estimate, based on a forecast from the USDA Economic Research Service, projects 2018 real estate debt at a record $250.9 billion and non-real estate debt at $158.6 billion. In 2018 inflation-adjusted dollars, farm debt in 2018 is the highest since the 1980s.
There are a variety of creditors that lend into agricultural credit markets. John Newton, chief economist with the American Farm Bureau Federation, provided a summary of institutions holding farm debt at the end of 2017 (Read: Who holds farm debt?)
Leading creditors, ranked by volume and percentage of total farm-sector debt at the end of 2017, were:
- commercial banks – $162 billion; 41.2 percent.
- the Farm Credit system – $159 billion; 40.4 percent.
- individual creditors – $40 billion; 10.2 percent.
- life insurance companies – $15 billion; 3.8 percent.
- the Farm Service Agency – $10 billion; 2.5 percent.
- Farmer Mac – $6 billion; 1.6 percent.
While the Farm Credit system was the second-largest creditor in agriculture at the end of 2017, these customer-owned cooperatives were the largest creditors in farm real estate, holding about 45 percent of the total.
For non-real estate debt, the largest creditors in agriculture are commercial banks, holding nearly 50 percent of the total. The Farm Credit system held about 33 percent with individual creditors holding 17 percent.
Class IV price to be ‘higher of’ through 2019
Class IV milk prices could continue to be the “higher of” in comparison to Class III prices throughout 2019, although the gap will narrow in the latter half of the year, according to the USDA’s February 2019 Livestock, Dairy and Poultry Outlook report.
The midpoint of the forecasted range for Class IV prices changes little during 2019, remaining near $16 per hundredweight (cwt) in each quarter. The projected Class III price improves incrementally throughout the year, but the weak first and second quarters leave the 2019 average at $15.05 per cwt at the midpoint.
As a result, the 2019 U.S. average all-milk price will average about $17.25 per cwt or about $1 per cwt more than 2018’s average of $16.20 per cwt. With the increasing Class III prices, highest all-milk prices are forecast for the fourth quarter of 2019 at $17.80 per cwt at the midpoint of the range.
Following a decline in the number of milk cows in November and relatively high slaughter rates during December, the forecast for the size of the milking herd has been lowered 5,000 head for the first half of 2019; however, the rounded estimate for the year remains at 9.365 million head. Based on relatively weak yield growth continuing in November, the 2019 milk per cow forecast has been lowered 50 pounds to 23,505. These changes result in a milk production forecast of 220.1 billion pounds for 2019, 0.5 billion pounds lower than the previous forecast.
WUD opposes California bill that provides plant-based school lunch incentives
Western United Dairymen (WUD) declared opposition to a proposal that would offer California schools financial incentives to incorporate plant-based “milk” alternatives in school lunch programs.
The “Healthy Climate-Friendly School Lunch Act” (AB 479), was sponsored by Adrin Nazarian (D-Van Nuys), a member of the California State Assembly. The bill is co-sponsored by Animal Hope in Legislation, Friends of the Earth, Physicians Committee for Responsible Medicine and Social Compassion in Legislation.
The bill does not mandate plant-based diet in schools, but incentivizes schools to offer plant-based options, according to the sponsoring organizations.
Entrees eligible for additional state reimbursement must be free of animal products or byproducts, including meat, poultry, fish, dairy or eggs to qualify for additional reimbursement. Schools are eligible to apply for reimbursement if they serve an increase in plant-based options from a baseline year.
The bill would also include state support for staff training, student engagement, recipe development and other technical assistance to move public school toward plant-based lunch programs.
Cottonseed harvest, acreage plans updated
Recent government and industry reports provide potential market insights for dairy farmers feeding cottonseed.
The USDA’s February Crop Production report indicated last year’s weather challenges led to the loss of substantially more cotton acreage than anticipated earlier, according to Nigel Adcock with Cottonseed LLC. The report estimated 2018-19 cottonseed production at 5.79 million tons, down 64,000 tons from a December estimate, and down more than 628,000 tons from the 2017-18 crop.
Most of the cotton crop acreage reduction resulted from the drought in Texas and hurricanes and flooding in Georgia. Total U.S. cotton acreage abandonment was estimated at 26 percent. There is further downside potential. About 10 percent of the 2018-19 cotton crop remains to be harvested and is in very poor condition with samples containing sprouted seeds, Adcock said.
In addition to the USDA report, the National Cotton Council (NCC) published their annual economic outlook. Based on surveys, growers intend to plant 14.2 million acres for the 2019-20 crop year, up about 2.8 percent from a year earlier.
Based on normal acreage abandonment (10 percent) and yield trends, cottonseed production would total about 7 million tons. That would be the largest cottonseed crop since 2006.
2018 fluid sales lower
Initial 2018 numbers are out and fluid milk sales continued to decline, according to the USDA’s Dairy Market News. Here’s a summary:
- At 47.1 billion pounds, 2018 overall sales of packaged conventional and organic fluid milk were down 2 percent compared to a year earlier.
- Sales of conventional products totaled 44.5 billion pounds, down 2.2 from the previous year. Sales of whole and flavored whole milk were up from a year earlier. Something to watch: November and December 2018 estimates of flavored whole milk sales could be the highest two-month total in 15 years.
- Sales of organic products, at 2.6 billion pounds, were up 0.6 percent. Organic products represented about 5.5 percent of total sales. Sales of whole and reduced-fat (2 percent) organic milk were up about 5 percent from a year earlier. (There is no estimate for flavored whole organic milk sales in the report.)
The U.S. figures represent consumption of fluid milk products in federal milk order marketing (FMMO) areas and California (now a part of the FMMO system), 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.
Global Dairy Trade index maintains upward streak
The index of Global Dairy Trade (GDT) dairy product prices posted a sixth consecutive increase during the auction held Feb. 19. The 1 percent increase followed a 6.7 percent increase on Feb. 5.
Prices for all major product categories were modestly higher:
- Skim milk powder was up 2.8 percent to $2,580 per metric ton (MT).
- Butter was up 1.2 percent to $4,495 per MT.
- Whole milk powder was up 0.3 percent to $3,022 per MT.
- Cheddar cheese was up 2.9 percent to $3,667 per MT.
The next GDT auction is March 5, 2019.
Upper Midwest milk hauling charges rose in 2018
Average milk hauling charges in the Upper Midwest FMMO rose substantially.
An annual study, “Milk Hauling Charges in the Upper Midwest Marketing Area, May 2018,” shows the weighted average cost across all milk deliveries was almost 28 cents per cwt, up from 20 cents (39 percent) per cwt in 2017. Total hauling charges for the month rose from $8.05 million in May 2017 to $11.32 million in May 2018, an increase of 41 percent.
Across all producers, the simple average hauling charge was 47 cents per cwt, up from 33 cents per cwt (14 cents or 42 percent) the year before. By production volume, simple average hauling charges ranged from nearly 88 cents per cwt (up from 64 cents in 2017) for those delivering less than 50,000 pounds of milk during the month to about 19 cents per cwt (up a penny) for those delivering 5 million pounds or more.
The report, prepared by Corey Freije with the Upper Midwest market administrator’s office, examined hauling charges to the first point of delivery for 4.1 billion pounds of milk from 11,417 producers in FMMO #30. Milk volume was up about 60 million pounds, but producer numbers were down 690.
Highlights of the study include:
- Wisconsin weighted average hauling charges rose from 17 cents per cwt in 2017 to nearly 24 cents per cwt in 2018, a 41 percent increase.
- Minnesota weighted average hauling charges rose from about 20 cents per cwt in 2017 to 30 cents per cwt in 2018.
- North Dakota again had the highest weighted average hauling charge (64 cents per cwt, 19-cent increase) in 2018, with a low number of farms and longest distance to point of first delivery.
- In counties where information was disclosed, the highest weighted average hauling charges were $1.61 and $1.53 per cwt in Tama and Story counties of Iowa, respectively.
- May 2018 diesel fuel prices averaged $3.18 per gallon, up 27 percent from a year earlier.
- The hauling charges consist of deductions shown on producer payrolls, submitted to the FMMO administrator’s office by handlers. Charges may not necessarily reflect the actual cost of the hauling, because in some cases handlers or cooperatives waive or subsidize hauling costs. Also, some producers pay the hauling costs directly.
Read also: Hauling charges a drag on basis in Midwest.
Study provides winning growth formula for dairy companies
Modest growth forecasts, shifting consumer tastes and increased domestic competition mean dairy companies will need new strategies at home and abroad to capture growth, according to research presented at the International Dairy Foods Association 2019 Dairy Forum. About 1,000 dairy executives from across the country attended the event, held in late January in Orlando, Florida.
The presentation, “Resilience and Growth: Perspectives from McKinsey & Company,” summarized interviews with 30 chief executive officers of international dairy companies and findings from a survey of more than 1,000 American households. McKinsey’s Roberto Uchoa de Paula, Ludovic Meilhac and Christina Adams told the dairy forum attendees that U.S. dairy manufacturers have the option of chasing international opportunities or competing for share in their home market.
Based on the research, the consultants believe U.S. dairy companies should consider four strategic responses – innovating to capture domestic growth; revamping the supply chain to serve a new type of demand; exporting to markets with high projected dairy deficits and attractive trade agreement groundwork; and investing directly in deficit markets to maximize long-term success.
Dairy companies can meet a diverging range of new consumer demands by strategically responding to six major factors: consumers’ desire to explore new or different brands and experiences; the growing volume of consumer data and highly personalized microsegments; the proliferation of smaller brands; consumers’ focus on health and wellness; the shifting retail landscape; and rising commercial costs.
Their report’s findings revealed that globally focused companies have increased their revenues significantly from 2007 to 2018, while those active in local markets have seen their revenues fall. Dairy’s future is global, the consultants stressed, and the greatest gains lie in markets beyond American borders, primarily in Africa and Asia.
McKinsey & Company released a white paper titled “A winning growth formula for dairy” that highlights the research findings.
- Progressive Dairyman
- Email Dave Natzke