November 2013 Issue No. 412
Inside this month’s
Major Factors Point to Tight Milk Supplies Relative to Strong Demand (p. 1):
Our “Story of the Month” here.
DFA’s Debts & Liabilities Cloud Dairylea Merger (p. 1):
In early October, the proposed merger of two major dairy cooperatives was announced: Dairy Farmers of America and Dairylea Co-op. DFA’s massive indebtedness (at least $100,000 per member) and possible liabilities in two big lawsuits make DFA a scary merger partner. Dairylea’s debt per member equals just under $5000.
Late April 2014 Date for B-I-G Northeast Antitrust Trial
vs. DFA & DMS (p. 2):
In the Northeast antitrust litigation, plaintiffs’ lawyers are seeking $600-$700 million dollars in damages. If damages are awarded by the jury, the damages will be tripled, under antitrust rules. The trial is set for late April 2014. Defendants are Dairy Farmers of America and Dairy Marketing Services.
Farm Bill: House and Senate are Finally Talking (p. 2):
More than one year after they failed to achieve a 2012 federal farm bill, House and Senate conferees have sat down to talk. Big deal.
CDFA Keeps Temporary Milk Price Hike: No change for Whey
Formula (p. 2):
Following a mid-September 2013 hearing, California’s Department of Food and Agriculture has rejected any proposed changes in the formula for calculating whey factors in the state’s 4b (cheese) milk formulae. CDFA will continue the temporary price hike on all classes of milk 12.5-cent per hundredweight on all classes of milk.
Yogurt Wars … From Supermarket Dairy Case Courtroom (p. 3):
How can a product as nutritious as yogurt be such a battleground? We look at retail sales trends of Chobani Yogurt (up 30X in 40 months ending mid-May 2013)! Chobani’s gains come at the expense of yogurt sellers like Stonyfield Organic. In the courtroom, a trial is set for mid-December 2013 pitting Chobani founder Hamdi Ulukaya against claims by his ex0wife that she’s due 53% of the entire firm’s assets plus $530 million in damages.
Global Dairy Prices Fall at Second Consecutive Fonterra
Online Auction (p. 3):
On Nov. 5, average prices for dairy commodities offered at Fonterra’s every-other-week on-line auction declined.
Oct 2013 Class III Price $18.22 – Class IV Price $20.17 (p.
The numbers tell it all.
Infant Formula Firms’ Combined Damages Nearly $600 Mil.
from Fonterra’s WPC 80 Recall Goof-Up in Aug 2013 (p. 4):
Following the August 2013 recall of WPC 80 by New Zealand’s Fonterra, two global firms – Danone and Abbott Labs – have announced costs associated with the recall totaling nearly $600,000,000. That amount will challenge Fonterra’s finances and credibility.
Outside Evaluation of Fonterra’s WPC 80 Debacle (p. 4):
An internal report on Fonterra’s August 2013 WPC 80 recall details many, many problems in the firm’s system.
Kraft Foods’ Patent Restores “Dairy Flavor” to UF Milk (p.
Amazing! Kraft Foods has a patent application pending that uses dairy elements added back to ultra-filtrated (UF) milk to restore lost flavor. Milk Protein Concentrates are UF milk. Wonder why the critics blasted Kraft for years concerning poor flavors and quality of dozens of the firm’s MPC-laden food products.
Milk Powder & Butter Prices Stronger as CME; Cheddar Mostly
Flat (p. 5):
Pete Hardin takes a long look at the market factors behind tighter butter and nonfat dry milk prices – reduced inventories and stronger global demand for U.S. production. Some very interesting data trends are developing.
USDA: Record Corn, Big Soybean Crops (P. 4):
In early November, USDA announced its crop production estimates for 2013. The U.S. corn crop is projected at 13.99 billion bushels. Soybean volume is estimated at 3.26 billion bushels.
Empire Specialty Cheese, LLC at the Trough … Again (p. 6):
Writer Nate Wilson details how a New Jersey-based Italian cheese company – Empire Specialty Cheese, LLC – has gained over $1.25 million in various taxpayer subsidies to refurbish an old slaughterhouse in western New York to cheese production. This is the same firm refused to pay local Amish Grade B milk producers for $1.2 million in 2011. New York politicians chirped a merry tune over all the jobs that will be created. Empire Specialty Cheese: Company & Owners’ Sketchy History (p. 6): Pete Hardin digs into the sketchy history of Empire Specialty Cheese, including: the cheese plant manager’s failure to pay $1.25 million to local Amish producers in 2011, the main owner’s history with the Concord Marketing (NJ Italian cheese firm) in the late 1990s, and the main owner’s son-in-law status with the infamous, cheesy bankrupt, Ben Scheps. “It’s a family tradition …”
2014: New York Dairy Plants’ Capacity Will Dramatically
Exceed Milk Supplies … (p. 7):
Next year will see a wave of new dairy processing plants come on line in New York State. On top of recent dairy plant constructions and expansions, New York State will end up with more dairy plant processing capacity than available milk.
“Inequitable” Merger: Dairylea’s Assets & DFA’s
Debts/Liabilities (p. 8-9):
Pete Hardin analyzes the merits of the proposed DFA/Dairylea merger. Issues such as debt per member and potential legal liabilities raise questions about the wisdom of this merger, for Dairylea members. Questions provided.
Is “Tricky Rick” Throwing Old Buddies’ Assets Under the DFA
Garbage Truck? (p. 8):
DFA CEO/President Rick Smith was formerly Ceo of Dairylea Co-op. Now Smith’s overseeing a merger of the two. But are Dairylea’s members’ assets being sacrificed to DFA’s mountain of debt and pending lawsuit liabilities?
Fuel Ethanol By-Product Grains Still Causing Sulfur
Toxicity (p. 9):
Writer Paris Reidhead revisits a subject he covered 18 months ago. Heavy use of distillers’ grains (from corn ethanol production) poses a potential problem: too much sulfur.
Holsteins Evolving as Dual Purpose Breed: Dairy/Beef (p.
Increasing numbers of Holstein heifers are headed to beef feedlots – as the U.S. beef industry faces its lowest commercial cattle numbers in 60 years. Dairy cull cows bring a pretty good return, these days, also. What’s happening: prices for dairy livestock are being bid up by the beef trade.
Brush, Colorado Top Springers Up $200-$300 in Past Month
The price-trend leading dairy auction market in the West – Brush Livestock in Colorado – saw top-end Holstein springers top the $2000 market in early November. That’s a price jump of $200-$300 per head on the top end. Pete Hardin theorizes that after a couple years of relatively low prices for dairy livestock, both dairy and beef interests are bidding up the value for heifers.
Southeast Dairy Industry in Turmoil: No Strength (p. 11):
The Southeast dairy industry is in a mess. Producers have been devastated by years of high marketing costs (deductions) from a succession of dairy co-ops. Fluid milk processors are hurting. No basis of strength in the region.
Five Problems Defining Southeast Dairy Industry (p.11):
Pete Hardin details five major flaws in the Southeast dairy industry’s history, culture and structure that limit the region’s dairy producers from taking advantage of what should be an excellent regional supply-demand opportunity.
Dairy Cattle Replacement Prices … (p. 14):
We track dairy livestock prices from around the country. Springer prices are rising. Open heifers’ prices are flat, at best.
Future Milk Pricing? Follow the Cement Trucks … (p. 15):
Classified pricing has no future in the dairy industry. All milk should be priced the same, Pete Hardin opinionates. Just look at all the “ingredients” plants recently on line, under construction, or in the planning stages. Valuing “ingredients” plants’ milk at the Class IV (butter-powder) price would fail to return honest value to dairy producers. High-balling fluid milk prices of Class I processors is a bad idea, also.
Like “NO-Bamacare”? You’ll Love TP and FSMA (p. 15):
The bureaucratic incompetence surrounding implementation of the Affordable Care Act is just the beginning. Watch out for the Trans Pacific Partnership “Free Trade” deal. U.S. officials have been hiding details from the American public. And FDA is rolling out implementation of the Food Safety Modernization Act – with dangerous implications for both small and medium farmers and food processors.
DFA/Select Milk Producers to Fuel Southwest Milk (p. 15):
A region-wide transportation system using trucks powered by Compressed Natural Gas (CNG) is almost ready to roll in the Southwest. Start-up time is scheduled for January 2014. Fuel savings of up to $1.50 to $2.00 per gallon-equivalent are possible.
South Dakota Ranchers Devastated by Freak Blizzard in Early
October (p. 16):
Contributor Jim Eichstadt – who grew up on a South Dakota livestock/grain farm – details the tragic blizzard that hit western South Dakota’s cattle ranchers in early October. Losses are still being counted, and are believed to range from 30,000 to perhaps three times that amount. U.S. cattle inventories are the lowest since 1952.
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