WEEKLY UPDATE July 25, 2014 WUD to host Margin Protection Program workshops in August and September Western United Dairymen will host a series of informational workshops in August and early September on the new Margin Protection Program, which is part of the 2014 Farm Bill signed into law earlier this year. There will be 12 workshops held throughout the state at dates and locations which will be announced soon. The first workshop is set for Aug. 11 in Orland. The workshops will be open to anyone interested: WUD members, nonmembers, their bankers and CPAs as well as allied industry members. WUD President Tom Barcellos said, “This is a tool that will be available to all U.S. dairy producers. WUD wants to ensure California dairymen are comfortable enough in understanding the program details and how it can affect their operation to make the participation decision that is best for them.” Participation in the Margin Protection Program is voluntary. For those who choose to enroll, it should help prevent the type of catastrophic losses of equity that distressed so many dairy producers in 2009. The risk management program will help address margin volatility by targeting combinations of low milk prices and high feed costs. But as with any risk management tool, understanding the nuts and bolts is crucial to the program’s efficacy. The workshops will cover how the program works; how the program would have performed in previous years; what this means for California dairy producers; pros and cons of the program; available resources to producers; and a question and answer period. 1315 K Street, Modesto, CA 95354 Telephone: 209.527.6453 Fax: 209.527.0630 www.westernuniteddairymen.com Week l y Up d a te d e li ver y op tion s Send change of address or request for Update delivery to Western United Dairymen by phone or fax, or email to [email protected]. Mi s sin g S om eth in g ? Su b sc r ib e to W UD H e ad lin e New s Industry leaders turn to Western United Dairymen’s daily enewsletter to keep up on the latest developments. California Dairy Industry Headline News is a reliable source for the latest news on pricing, industry events and meetings, state and federal legislation, and environmental regulations. To sign up email WUD Communications Director Mark Looker at [email protected]. The workshop schedule is: August 11: Orland Glenn County Farm Bureau 10 a.m.-noon August 26: Riverdale Veterans Memorial Auditorium 9:30-11:30 a.m. August 12: Hanford Farm Service Agency 9: 30-11:30 a.m. August 26: Fresno Fresno County Farm Bureau 1:30-3:30 p.m. August 12: Tulare UCCE 1:30-3:30 p.m. August 27: Bakersfield UCCE 10 a.m.-noon August 14: Stockton Cabral Center 1:30-3:30 p.m. September 2: Ferndale UCCE 1-3 p.m. Like u s on Fac eb oo k Western United Dairymen has a Facebook page. “Like Us” today and join in on the conversation about California dairy families. We can be found at https://www.facebook.com/pages/ Western-United-Dairymen/ Inside this issue: Market Reports 2 Strip till tour August 5 3 District 6 Dairy Princess crowned August 18: Modesto Ag Center 1:30-3:30 p.m. September 3: Petaluma Two Rock Fire Hall 9:30-11:30 a.m. August 21: Ontario Doubletree 10 a.m.-noon September 4: Merced Merced County Farm Bureau 1:30 – 3:30 p.m. 80% of CA in extreme drought 4 Mark your calendars for WUD Golf Tourney 4 Hay Report 4 July 25, 2014 Weekly Update P AGE 2 USDA Dairy Market News Butter 10 sales, 3 bids unfilled, 1 offer uncovered. Butter prices gained 11 cents this week. Butter production is generally declining as milk production and components are seasonally lower. Cream supplies are mostly priced above profitable production margins causing many churn operators to sell cream spot loads for better returns. Several butter manufacturers are microfixing sought-after bulk butter to fill print orders. Cheese 11 sales, 4 bids unfilled, 1 offer uncovered. Block prices lost 5.75 cents this week. Cheese production is mixed this week, with steady to higher production in the East, but steady to lower production in the West and Midwest. Cheese manufacturers are often looking for additional milk or are fortifying cheese vats with nonfat dry milk or condensed skim to increase yields. Some Midwest producers are having increasing issues finding surplus milk. Domestic demand is good and some manufacturers are warning about possible delays in orders for August. Milk Production CALIFORNIA milk production is variable from area to area, and generally trending steady to seasonally lower. Bottled milk demand is steady at customary summer levels. Milk sales into ice cream/mix plants are decreasing as those manufacturers review inventories. Some milk processors are selling milk or condensed skim loads to lessen NDM or SMP production. Other plants are buying milk to maintain dryer schedule efficiencies. Dry Products Prices on the Western low/ medium heat nonfat dry milk price series are mixed. The market tone is weak. Some confusion is apparent as market participants noted a recent unexpected uptick in some contract bases while others stepped lower. With several signals in the global market pointing to a downward trend, buyers expressed some disbelief in these higher prices. Others offered possible explanations of how timing on sales price entries ultimately could lead to a shortterm shift in direction for some price series. Source: USDA Dairy Market News Commodity Markets: CME – California Plants Average AA Butter NFDM 40# Blocks Barrels Dry Whey June $2.2461 $1.8431 $2.0172 $1.9753 $0.6575 July $2.4483 $1.8131 $1.9938 $2.0083 $0.6625 July 25 $2.5900 $1.8109 $1.9700 $1.9525 $0.6700 Week to date 11 cents  0.66 cents 5.75 cents  11.75 cents - Estimated* Producer CWT. Prices Month Class 1 4a 4b Overbase Quota May $25.89 $22.57 $19.34 $21.07 $22.77 June $25.12 $23.19 $19.07 $21.05 $22.75 July $25.14 $23.72 $18.69 $21.06 $22.76 *Actual announced prices are in BOLD, estimates are in Italics What’s up and what’s not—your weekly market update By Annie AcMoody, MS, Director of Economic Analysis A few months ago, CME butter prices reaching the $2.60/lb mark seemed about as likely to work out as an ashtray on a motorcycle. Nevertheless, the price managed to climb over that mark Wednesday, to $2.62/lb, and even stayed there for an extra day. The daily price increases that had been lasting for two weeks came to an end Friday when the price retreated 3 cents to $2.59/lb. Still, at that price level, there’s not too much room for complaining. Butter prices have been supported by the feeling that domestic supplies are very tight. This week’s Cold Storage report did not ease such concerns as June stocks were down 42% from last year. This seems like a bit of a repeat from previous reports but, in addition to stocks being down from last year, they also decreased from May. Looking at the last decade’s average change from May to June shows that there typically isn’t much change in butter stocks between those two months (+0.5%). This year’s change was -3%. Seasonal cream demand continues to keep cream away from the churn. With these high prices, it may also be hard for manufacturers to justify building inventory at this point. And since we are getting close to the typically higher demand holiday season, this may bode well for butter price support in the short term. The main concern remains trade: with the US price well above other countries, exports may dwindle and imports may start increasing to fill the supply gap in this country. The CME cheese blocks and barrels relationship seemed as volatile as a tired toddler’s mood this week. After starting the week with a 3-cent premium on blocks, barrels dropped every day this week while blocks gained some before losing some. The resulting gap between the two was 1.75 cents, with barrels at a discount to blocks. Typically, blocks are priced about 3 cents higher but since the beginning of this month barrels have been priced on average 1.64 cents higher than blocks. After moving up and down, blocks settled 5.75 cents lower than last week to land exactly where they were two weeks ago, at $1.97/lb. According to USDA’s latest report, American cheese stocks in June were down 7% year-over-year. Total cheese stocks fared even a bit better, down 8% from last year. The Western dry whey price returned to stability this week, staying unchanged from last week at 67 cents per pound. Dairy Market News (DMN) reports that “the market tone is also mixed as downward pressure from other milk protein sources weigh on the market. Conversely, whey production is lower as milk supplies into cheese plants contract. Whey stocks are tight with some brokers mentioning forward commitments for available supplies reducing spot availability”. In the near term, the futures market is expecting whey prices to remain fairly steady, with September’s contract closing at 64 cents today. Looking a little further down the road, the fourth quarter contracts averaged 58 cents. (Continued on pg. 3) July 25, 2014 Weekly Update P AGE 3 (Continued from pg. 2-Market Update) The California nonfat dry milk price stopped its descent this week, gaining 0.66 cents to $1.8109/lb. DMN reported the Western states’ price average at $1.7950/lb, down 2 cents from last week and the lowest since August 2013. DMN reports “the market tone is weak. Some confusion is apparent as market participants noted a recent unexpected uptick in some contract bases while others stepped lower.” Feed prices – drought in California aside – continue to bring positive news to those on the purchasing end of the equation. September corn futures continued their downward trend this week, losing 8 cents from last week to settle at $3.63/bu today. Good growing conditions where crop is in the ground continue to be reported and has no doubt been fueling this bearish price trend. Strip till tour set for Aug. 5 in Merced, Madera counties A tour of dairies in Merced and Madera counties that are using strip till methods for reliably producing quality corn silage is set for Tuesday, Aug. 5. The tour will depart from the Hilmar Cheese Visitor Center, 9001 Lander Ave, Hilmar at 7 a.m. and return by 12:30 p.m. There will be a luncheon and grower panel discussion on return to the visitor center. The cost of the tour and luncheon is free for those who RSVP by Friday, July 25. More information is available from Ladi Asgill at [email protected] (209) 576-7729 and Mikel Winemiller at [email protected], (209) 626-6440. Dairy margin management seminar in Las Vegas Aug. 20 -21 A two day program designed to help dairy producers identify and protect forward profit margins is set for Aug. 21-21 in Las Vegas. The seminar is sponsored by Commodity & Ingredient Hedging (CIH.) Registration is available by calling 866-299-9333 or on-line at http://www.cihedging.com/education/dairy-margin-seminar/?product_id=cih_event_136_1 Abaigeal “Abby” Zuppan crowned District Six Dairy Princess Abaigeal “Abby” Zuppan was crowned District 4 Dairy Princess on June 25. District 4 Chairperson Michelle Ferreira, crowned the new Dairy Princess during a luncheon at the I-5 Café in Orland, CA. Retiring Dairy Princess Mackenzie Gomes ended her reign by turning over the title over to Abby, wishing her well as she represents the California dairy industry throughout the coming year. Abby will serve her reign through 2014 and early 2015. Abby is the daughter of John and Mary Zuppan of Orland, CA. Along with serving the community as the District 4 Dairy Princess, Abby will be attending Hamilton High School. The Dairy Princess will represent the dairy industry in District 4, which is comprised of Butte, Colusa, Glenn, Lassen, Modoc, Nevada, Placer, Plumas, Shasta, Sierra, Siskiyou, Sutter, Tehama, Trinity and Yuba counties. She will serve the area as ambassador for the dairy industry at schools, service groups and with the media. First Alternate, Andrea Boer, is the daughter of Martin and Heather Boer of Willows, CA Andrea attends Willows High School. High Milk Prices Still Keeping Dairy Cows in the Herd Commercial red meat production for the United States totaled 3.82 billion pounds in June, down 1 percent from the 3.85 billion pounds produced in June 2013, according to USDA’s latest Livestock Slaughter report issued Thursday. Beef production, at 2.07 billion pounds, was 4 percent below the previous year. Cattle slaughter totaled 2.61 million head, down 5 percent from June 2013. The average live weight was up 7 pounds from the previous year, at 1,307 pounds. Veal production totaled 7.6 million pounds, 10 percent below June a year ago. Calf slaughter totaled 45,300 head, down 21 percent from June 2013. The average live weight was up 35 pounds from last year, at 285 pounds. An estimated 199,000 dairy cows were slaughtered under Federal inspection in June, down 11,000 head from May and 21,000 head below June 2013. Looking at the first six months of 2014, USDA estimates that 1.391million head were “retired” from the dairy business, 176,000 less than the same period a year ago. -DairyBusiness Update: July 24, 2014 July 25, 2014 Weekly Update P AGE 4 80% of California is now in extreme drought, new data show More than 80% of California is now in an extreme drought, according to new data by the National Weather Service. The NWS' Drought Monitor Update for July 15 shows 81% of California in the category of extreme drought or worse, up from 78%. Three months ago, it was 68%. The map shows that drought conditions worsened in parts of Riverside, San Bernardino and San Diego counties. The new data comes as officials are getting tough on water wasters. Saying that it was time to increase conservation in the midst of one of the worst droughts in decades, the State Water Resources Control Board adopted drought regulations that give local agencies the authority to fine those who waste water up to $500 a day. Many Southern California cities, including Los Angeles, Santa Barbara and Long Beach, already have mandatory restrictions in place. Updated results of a state board survey show that statewide, urban water use in May increased 1% compared to the May average of the previous three years. That rise was mostly driven by an 8% jump in coastal Southern California. In most other hydrologic regions, May use declined. The biggest drop was in the Sacramento River area, where it fell 13%. - July 17, 2014 Los Angeles Times WUD Golf Tournament September 15 in Visalia The 10th annual Western United Dairymen south valley golf tournament will take place at the Visalia Country Club on Monday, September 15. Proceeds from the golf tournament fundraiser will go to the WUD Federal PAC, which supports congressional candidates who share WUD’s legislative goals and philosophy. The four-person scramble gets underway with a noon shotgun start. The day culminates with a dinner at which awards and fantastic prizes will be presented. The cost is $150 per player and includes green fees, golf cart, practice balls, lunch, tee prizes, refreshments and dinner. Registration information will become available in the coming weeks. Meanwhile, anyone with questions about playing or sponsoring may contact Heidi Savage at (209) 614-5625 or email [email protected]. California Water Prices Soar for Farmers as Drought Grows Farmers in California’s Central Valley, the world’s most productive agricultural region, are paying as much as 10 times more for water than they did before the state’s record drought cut supply. Costs have soared to $1,100 per acre-foot from about $140 a year ago in the Fresno-based Westlands Water District, which represents 700 farms, said Gayle Holman, a spokeswoman. North of Sacramento, the Western Canal Water District is selling it for double the usual price: $500 per acre-foot, about 326,000 gallons (1.2 million liters). The drought gripping the state that supplies half the fruits, vegetables and nuts consumed in the U.S. has led federal and state providers to curtail the water they distribute to California’s farmers. That’s prompted districts representing growers to buy and sell for escalated prices from other parts of the state as thousands of acres go unplanted. The drought threatens to boost produce costs that are already elevated following a December frost, according to the U.S. Agriculture Department. The price of fresh fruit is forecast to rise as much as 6 percent this year, the department said last month. Dairy products, of which California is the biggest producer, may rise as much as 4 percent. - July 24, 2014 Bloomberg Businessweek Hay & Grain Report All prices FOB Unless noted as (DEL) USDA Market News 7/25/2014 Region 1: North Inter-Mountains Tons Wtg. Supreme 400 300.00 Premium/Supreme 250 270.00 Region 2: Sacramento Valley Good 245 265.00 Fair 140 255.00 Region 3: N. San Joaquin Valley Supreme 240 340.00 Premium 330 312.88 Good 1070 284.16 Save the Dates! Fair (DEL) 1000 290.00 Western United Dairymen Annual Convention Premium March 18-20, 2015 Tenaya Lodge in Yosemite For more information, visit: www.WUDconvention.com Region 4: Central San Joaquin Valley Good/Premium (DEL) 75 270.00 2000 290.00 Region 5: S. California Supreme 150 288.33 Good 650 260.00 Fair 750 252.00 Region 6: S.E. California Fair 5750 214.35