In dairy politics, Dairy Profit Weekly Editor Dave Natzke reported in Friday’s DairyLine that “One point of emphasis of the Obama Administration was targeting antitrust activities, and the largest U.S. milk processor, Dean Foods, and largest dairy cooperative, Dairy Farmers of America, were squarely in their sights.”

Three lawsuits alleging antitrust activities by Dean Foods were underway at the same time, according to Natzke, and are in various stages of being resolved.

In a class-action lawsuit filed in the U.S. District Court of Vermont on behalf of dairy farmers in 11 states, Dean reached a $30 million settlement. The deadline for dairy farmers to submit claims and gain a portion of that settlement, after $6 million in attorney costs, was Aug. 23.

In a case filed in a Wisconsin U.S. District Court, one provision of an out-of-court settlement called for Dean to sell a fluid milk processing plant in Waukesha, Wis. Dean purchased the plant from Foremost Farms in 2009. In an announcement earlier this month, OpenGate Capital, a global private equity firm, signed a definitive agreement to acquire the Dean’s plant and related assets, including the Golden Guernsey brand name.

Resolution of another class-action lawsuit, filed in the Eastern District of Tennessee, remains less clear, Natzke said. Dean originally agreed to a $140 million settlement with dairy farmers in the Southeastern region of the U.S. After that settlement was announced however, members of Dairy Farmers of America, who make up well over a third of the dairy farmers in that part of the country, were exempted as members of the “class,” because DFA is a co-defendant in the lawsuit. As a result, Dean vacated the settlement, and is considering other options, Natzke reported. A trial date has been set for Sept. 13. Dean Foods has admitted no wrongdoing in all three cases, Natzke concluded.

Cash cheese prices decline
Cash cheese prices saw a third week of sharp decline the week of Aug. 22, but ended on an up note. The blocks plunged to $1.73, but regained a nickel on Thursday and a penny on Friday, to close at $1.79 per pound, down 11 cents on the week, down 36.5 cents from its July peak, but still 9.5 cents above a year ago. A penny movement on cheese equates to about a dime on the milk price.

The barrels rolled down to $1.6925, but also rallied and closed Friday at $1.7225, down 14 cents on the week, 41.25 below its peak, but 5.75 cents above a year ago. The NASS-surveyed U.S. average block price slipped a penny and a half, to $2.1322, while the barrels averaged $2.1489, down 1.2 cents. Twelve cars of block traded hands on the week and 25 of barrel, 13 on Friday.

University of Wisconsin emeritus professor Dr. Robert Cropp said in Tuesday’s DairyLine that cheese could come back up in October but $2 was not sustainable even though milk production was impacted by the weather in July and August.

Looking for the “silver lining in the dark cloud,” eDairy Economist Bill Brooks said in their Aug. 25 executive edition that “while the declines in cheese prices occurred more quickly than many expected, lower cheese prices could spur demand and get product moving.

The industry could see better fourth-quarter sales now than had cheese prices remained above $2.”

Butter closed the week at $2.0925, up a half cent, but 8.75 cents below a year ago when it had jumped 14 cents. Only three cars found new homes this week. NASS butter averaged $2.0668, down 2.7 cents. NASS powder averaged $1.5537, down 3.3 cents, and dry whey averaged 57.08 cents, up 0.6 cent.
The $2 butter price is more understandable, according to Bob Cropp, because butter stocks remain fairly tight, though they have increased some, but sales are good. He warned that the price could soon fall below $2 as there’s more cream available with schools reopening, thus more milk going to fluid use, and there’s less ice cream being produced. Our guess is that buyers are likely holding off holiday butter purchases, hoping the price will slip.

High corn, soybean, and hay prices will keep a lid on milk production, according to Cropp, especially for those who have to buy most of their feed. The drop in July output per cow is reflective of those high feed prices, he said, and he believes output per cow will remain on the low side and you may see a slowdown in cow numbers, which have been building every month since last October.

He sees U.S. milk output remaining close to a 1 percent increase from a year ago, which he said will maintain a “reasonable milk price;” not $20 plus but $17 or $18 is realistic, he said. USDA revisions, lowering its corn and soybean crop estimates impacts things as well, he said, along with the international market, which is expected to be a little soft, he concluded.

Cow slaughter down from June
Speaking of cow numbers; USDA estimates 207,100 culled dairy cows were slaughtered under federal inspection in July, down 18,800 head from June and 12,000 less than July 2010.

Looking “Back to the futures;” the Federal order Class III contract’s average for the last half of 2011 was $18.54 per cwt. on July 8, $19.29 on July 15, $19.75 on July 22, $19.92 on July 29, $19.75 on Aug. 5.

USDA’s July Cold Storage report says butter inventories declined 2.6 million pounds after increasing 48.6 million in May and June. Stocks totaled 187.7 million pounds, down 1 percent from June, and 3 percent below July 2010.
American type cheese amounted to 648.6 million pounds, up 30.9 million or 5 percent from June, and just 9.1 million or 1 percent above a year ago. The CME’s Daily Dairy Report (DDR) said this was the largest one-month increase in 17 years. The total cheese inventory, at 1.084 billion pounds, was up 34.8 million or 3 percent from June, and 14.6 million or 1 percent ahead of a year ago.

Meanwhile, fluid milk continues to struggle in the beverage market. The U.S. Department of Agriculture estimates June sales totaled 4.1 billion pounds, down 1.3 percent from June 2010 after adjusting for calendar composition. Conventional fluid sales were down 2.1 percent while organic sales were up 10.4 percent.

Retail milk prices in the April to July period were up 10.7 percent from a year ago and July’s consumer price index (CPI) for milk was the highest since September 2008, according to the DDR. The April to July cheese CPI was up 6.3 percent from last year and butter was up 22.3 percent. Interestingly, butter sales were up about 5.5 percent in the first half of 2011, though prices closed at or above $2 in all but three weeks of that period.

Back on the farm; USDA reports that temperatures have moderated across all but the Southern tier of states and milk production is slowly recovering from the excessive heat of recent weeks. Schools are reopening across many parts of the country resulting in Class I capturing more of the milk supply.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.