Suspect Milk Notification Policy CME markets remain weak for 2015

January 2015
Area Manager Joe Burke
Suspect Milk Notification Policy
Attached is the new Suspect Milk Notification Policy,
effective January 1, 2015. This policy replaces the
previous Dump Milk Policy.
Please keep a copy of the new Suspect Milk Notification
Policy for your records.
Area market update
The Central Area was challenged the past several weeks to
find markets for holiday surplus milk. With an increase in
milk production (December production was up 5.3 percent
compared with prior year) and the recent closing of
several customer plants, surplus milk options were
limited. Due to the unusually high volume of surplus milk,
milk was moved a greater distance and was significantly
discounted in order to secure a market. Thanks to the
efforts of the dispatchers, haulers and Area managers, all
member milk was able to get unloaded at customer plants.
CME markets remain weak
for 2015
Provided by DFA Risk Management
Milk price fundamentals within the United States remain
largely the same as in previous months. Strong milk
production, growing inventories and weak exports are all
headlines that dominate milk pricing. U.S. milk
production increased 3.4 percent for November, while
global milk production growth has moderated. Mixed
European production, seasonal declines in Australia, and
lower payout prices for New Zealand are slowing growth.
Nonetheless, dynamics exist that continue to put pressure
on CME dairy futures, bringing 2015 contracts to new
lows. The CME Group Class III price for 2015 is
indicating $15.23 per hundredweight.
November’s total U.S. milk production was reported 3.4
percent higher over last year, to about 16.5 billion pounds.
While this number was slightly lower than the previous
month, it still represents an abundance of milk in the
marketplace. Latest slaughter information indicates dairy
cow culling slowed toward the end of the year, bringing
2014 slaughter more than 9 percent lower than 2013. It is
expected that dairy cow slaughter will increase over the
next few months, as beef prices remain at historically high
levels and dairy margins are declining.
Much different than in 2014, exports are not offsetting
increases in milk production and dairy product
inventories. In November, exporters shipped 147,879 tons
of milk powders, cheese, butterfat, whey and lactose,
down 7 percent from a year ago, and down 1 percent from
October. Nonfat dry milk and skim milk powder exports
were down 7 percent on the year, but did experience an
improvement over August and September export volumes.
Exports to China declined for the fifth straight month,
down 13 percent from last year, though exporters found
markets for product in the Western hemisphere. Exports to
Mexico were up 15 percent from last year, with strength in
South American exports as well. U.S. exports on a total
milk solids basis were equivalent to 14 percent of U.S.
milk solids production in November.
The price spread between U.S. and global dairy products
continues to tighten. Declines in U.S. block cheese of
nearly 75 cents per pound since the beginning of October
bring U.S. prices closer to world cheddar prices. Similar
declines in butter occurred, down nearly $1.33 per pound
from its high at the beginning of October. U.S. exporters
could begin to regain market share as the price spread
continues to narrow.
Low feed prices have been a large factor in dairy producer
margins remaining profitable, despite the downturn in
milk prices. According to information from the latest
World Agricultural Supply and Demand Estimates report,
the U.S. average corn yield is expected to be 171 bushels
per acre, up 12.9 bushels from last year and the highest
corn production on record. Similarly, soybean yields and
acreage were also near record levels. However, weather in
South America is playing a larger role in soybean prices
and is limiting declines. Nonetheless, the average Class III
milk-over-feed margin for 2007-2013 was $6.87 per
hundredweight. Using DFA Risk Management’s feed
index, margins are expected to average $7.10 for 2015,
with a higher margin of $7.84 per hundredweight for the
second half of the year. Many members can still lock into
profitable milk price levels for 2015 using a milk price
forward contract.
If you have concern about milk prices in the upcoming
year, we invite you to give DFA Risk Management a call.
In many instances, there are still opportunities available to
10220 N. Ambassador Drive | Suite 800 | Kansas City, MO 64153 | Phone: 816-801-6200 | Fax: 816-801-6201
www.dfamilk.com
protect yourself from lower prices, while managing a
profit on your operation. To forward contract CME dairy
or grain prices, contact DFA Risk Management at 1-877424-3343, or visit www.dfariskmanagement.com to learn
more.
CWT Export Assistance update
for 2014
Cooperatives Working Together (CWT) helped sell the
equivalent of 2.5 billion pounds of milk to overseas
customers in 2014, according to its recent year-end report.
CWT accepted 582 of 1,285 bids received during the prior
year, resulting in the sale of 190.6 million pounds of
product and an estimated impact of 38 cents per
hundredweight on the dairy farmer milk price.
Cheese sales accounted for 102.5 million pounds of CWTassisted exports, with cheddar cheese accounting for 90
percent of cheese sales. Forty-six percent of cheese
exports were destined for Asia. The Middle East was the
second most popular destination for cheese at 27 percent.
The majority of butter sales (58 percent) were also
exported to the Middle East. CWT-assisted sales of world
standard butter in 2014 were 53.8 million pounds, down
37 million pounds from assisted sales in 2013. Decreased
U.S. butter production and strong domestic demand
contributed to the drop in 2014 butter exports.
Sign up for direct deposit
In December, several members not currently set up on
ACH direct deposit reported checks not delivered due to
increased holiday mail volume. With this in mind, we
strongly encourage members who still receive their milk
checks in the mail to sign up for ACH direct deposit to
avoid any delay in milk check delivery. It normally takes
about 30 days to set up ACH direct deposit with your
bank. ACH direct deposit funds will always be in your
account as soon or sooner than a mailed check. Your DFA
field representative has the ACH direct deposit
authorization form and can assist you in filling it out.
Direct deposit provides immediate access to funds that are
automatically deposited in a designated bank account of
your choice. Additionally, a copy of the check ledger,
noting deposit and detailed information, is mailed to you
monthly for your records. Once on direct deposit, you no
longer have to rely on the postal service for delivery of
your milk check, and you save a trip to the bank.
Direct Deposit Schedule
Milk Month
January
February
March
April
May
June
July
August
September
October
November
December
CWT-assisted exports for whole milk powder reached a
new high of 34.7 million pounds in 2014, with 11.7
million pounds (34 percent) of those exports destined for
Asia. Central and South America trailed Asia by just 1
percent, with 11.6 million pounds of whole milk powder
sold there.
The CWT Export Assistance program will continue to be
active in 2015, helping to make sure that U.S. dairy
products made from U.S. dairy farm milk keep their share
of world markets.
Central Area upcoming events
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Central Area Council Meeting, Monday, February 910, at the Embassy Suites in Kansas City, Mo.
Central Area Resolutions Meeting, Tuesday, February
10, at the Embassy Suites in Kansas City, Mo.
Corporate Resolutions Meeting, Wednesday, February
18, and Thursday, February 19, at the Embassy Suites
in Kansas City, Mo.
Leadership/Annual Meeting, March16-18 at the
Sheraton Crown Center in Kansas City, Mo.
Advance
Final
1/26
2/25
3/25
4/27
5/26
6/25
7/27
8/25
9/25
10/26
11/25
12/28
2/17
3/16
4/16
5/18
6/16
7/16
8/17
9/16
10/16
11/16
12/16
1/19/2016
DFA Farm Services
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DFA Risk Management – 1-877-424-3343
DFA Grazing – 816-801-6392
DFA Insurance – 1-877-358-9523
DFA Farm Supplies – 1-866-591-2925
DFA Energy – 816-801-6146
DFA Financing – 1-866-283-4629
Member Savings Network – DFA members have
access to exclusive savings through partnerships
with national companies. Call 816-801-6342 or
log on to myDFA at dfamilk.com.

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