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Yogurt, milk are gaining new markets in fast food
Dairyline
By Lee Mielke

Yogurt and fluid milk are also making inroads in fast food, according to market analyst Jerry Dryer.

“What people say and what people do are two different things,” Dryer cautioned, based on data he has studied.

Fast food restaurants have been aggressive in getting milk and yogurt on menus, he acknowledged, but he cited a recent article in the New York Times which made the point that “the cheeseburger still rules, not the salad, not the health food, and it’s much the same way with everything else. People say they want to eat healthfully, but then they go order the cheeseburger instead of the yogurt or the Coke instead of the milk.”

The nation’s second-largest fast food chain, Burger King, now offers Hersey’s low-fat white and chocolate milk in resealable, 8-ounce plastic bottles in more than 7,500 stores. The milk is promoted as a beverage option for Kid’s Meals as well as a new menu option.

The National Dairy Council’s Sara Yost said nearly 30,000 restaurants now offer milk in single service plastic.

Retail dairy sales have been doing better recently, Dryer said. Natural cheese sales were up about 3.5 percent for the March, April and May period. Process cheese was off in retail, he said, but process sales were “probably up nicely in food service so we’ve moved a lot of cheese this year.”

Fluid milk sales are “on and off,” Dryer said. They got off to a good start in 2006, he said, but tanked in April. He hasn’t seen May data, yet. Dryer’s insights are published weekly in the Dairy and Food Market Analyst.

Tests confirm it, Canada has its seventh case of Mad Cow disease on its hands and the latest is a 50-month old Alberta dairy cow born after 1997 feed restrictions were implemented to help curb the spread of the disease.

National Milk’s Chris Galen said that was more bad news for Canada’s dairy industry and is the second such animal in two weeks.

The discovery, he said, will make it that much more difficult for the Canadian government to convince the United States to open its borders to older Canadian animals, including dairy replacements, something U.S. dairy farmers are interested in. Some of the previous restrictions have been relaxed on younger Canadian animals destined for slaughter and that won’t likely change, according to Galen.

That is what U.S. meat packers wanted, he said, because they were running under capacity, but the border remains closed to older animals, whether slaughter or breeding animals, including dairy replacements.

Tough times here at home have dairy farmers weighing the switch to organic production. These days organic is nothing to scoff about, according to Northeast DairyBusiness magazine Managing Editor Susan Harlow.

Harlow reported that demand for organic milk outruns supply by 20-30 percent, and the farm price is up about $5 per cwt. during the last year. Some states report a doubling of organic dairies in the last year.

Transitioning is a three-year process during which producers have a lot of changes to make, Harlow said. The cost varies among states and certifying agencies and depends on size. A medium size New York farm would pay $1,500 for certification, she said.

Farmland must be managed organically for three years, Harlow said, and animal health must be managed organically for a year. The herd must be fed 100 percent organic feed, even during the transition year before certification. And everything must be carefully documented.

Organic grain is about twice the cost of conventional grain, but producers aren’t paid the organic milk price during transition, she said. But, most processors help by paying a few dollars over the conventional price during transition and some pay the grain differential. Once shipping organic, farmers can receive a contract price that runs in the East, about $26, plus premiums and signing bonuses.

But, with processors scouring the countryside for every drop of organic milk, Harlow warned that there’s concern that organic producers won’t learn from the mistakes of the conventional market. They believe it’s crucial to maintain strong standards, Harlow said, or the market will be flooded with organic milk and drive down the price.

“That won’t happen any time soon, but it gives more import to the ongoing debate over changing standards,” she added.

The market is evolving, Harlow reported. A few years ago, cooperatives put producers on waiting lists while they found markets for their milk but that’s pretty much over now. Some cooperatives, like Organic Valley, control supply to meet demand, she said, but new processors jumping into the market are signing up milk as fast as they can. For now, that competition is good for farmers, she said.

One issue is whether replacements must be raised organically from the last third of gestation, or whether non-organic heifers can be brought into the herd one year before milking. Also, USDA regulations on access to pasture are vague and some dairies have taken advantage of that to basically run confinement operations.

Organic advocates are pushing for more specific requirements. USDA plans to propose new rules on these two issues in the next few months. USDA recently tightened the rule, which had permitted feeding 20 percent conventional feed for the first nine months of that year.

Dairy prices remain weak. Block cheese at the Chicago Mercantile Exchange closed Friday at $1.16 per pound, unchanged on the week, but 39 cents below a year ago. Barrel closed at $1.12, down 3 cents, and 39 cents below a year ago.

Five cars of each traded hands on the week. The NASS U.S. average block price fell to $1.1789, down 1.1 cents. Barrel averaged $1.1725, down 1.6 cents.

Butter closed at $1.1450, down three-quarter cents on the week, and 49.5-cents below a year ago. Three cars were sold. The NASS butter price averaged $1.1291, down 0.4 cent.

Dairy product prices are normally strengthening at this time of the year, but this year, continued strong milk production and heavy inventories are keeping prices moving sideways and even sliding down a little, reported Downes-O’Neill dairy economist Bill Brooks. The $1.16 block cheese price became somewhat of a support line in April.

Butter is back down at the year’s low of $1.1450 in April. Huge inventories are hanging over the market, according to Brooks, and will likely keep prices from gaining the normal amount for this time of the year.

Cheese could turn around fairly quickly, depending on milk production. Heat and humidity will impact that, Brooks said, as summer progresses. So far, output remains strong despite some isolated areas where it has dropped off quite a bit.

Nonfat dry milk prices may have bottomed out, according to Brooks, and maybe starting to move up as has the dry whey market. There were no price support sales of powder last week however 721,605 pounds was purchased this week. That put the year’s total so far at 66 million, compared to 31.8 million a year ago.

Whey has also tightened as some exports have helped clear the market. The price has rebounded off its lows and held steady. Brooks doesn’t see a downturn there for a while so that will be a positive for producers on the Class III milk price.

The USDA raised its 2006 milk production estimate from last month in its latest World Agricultural Supply and Demand Estimates report from 181.9 billion pounds to 182.1 billion. The 2007 forecast was unchanged at 183.1 billion.

7/19/2006