Dairyline: Judge dismisses parts of antitrust case

By LEE MIELKE

For the Capital Press

A federal district judge pared back parts of a major dairy antitrust lawsuit but allowed the bulk of complaints to proceed, according to Dairy Profit Weekly. The class action suit, filed in October 2009 and amended in January 2010, was filed by Vermont dairy farmers Alice and Laurance Allen and New York dairy farmers Garret and Ralph Sitts against Dairy Farmers of America Inc., Dairy Marketing Services LLC, Dean Foods and HP Hood LLC.

Between 2005 and 2009, the Allens and Sitts marketed milk through DMS, a milk-marketing organization established in 1999 through an agreement between DFA and Dairylea Cooperative Incorporated, Natzke said.

According to court documents, DMS markets approximately 80 percent of the milk in the Northeast, with milk going to both Dean Foods and HP Hood. The suit alleges price-fixing and conspiracy to monopolize and monopsonize the fluid milk market in the Northeast against all the defendants. A monopoly is when there is a single source on the supply side; a monopsony is when there is a single source on the demand side.

DFA, DMS, Deans and HP Hood sought dismissal of the charges. Federal district judge Christina Reiss, U.S. District Court for the District of Vermont, heard oral arguments for dismissal on May 6 and issued the ruling on Aug. 30.

Reiss dismissed all claims against HP Hood and dismissed claims alleging a price-fixing conspiracy between DFA and DMS. However, she ruled against a DFA request for dismissal of price-fixing claims on the basis of Capper-Volstead immunity, and denied all requests for dismissal by Dean Foods.

Dairy prices

The August benchmark milk price took a big jump. The Agriculture Department announced the Federal order Class III price at $15.18 per hundredweight, up $1.44 from July, $3.98 above August 2009, 79 cents above California's comparable 4b price, and the highest Class III since December 2008. The 2010 average now stands at $13.80, up from $10.29 at this time a year ago, but compares to $18.14 in 2008.

The August Class IV price is $15.61, down 14 cents from July, but $5.23 above a year ago.

The NASS-surveyed cheese price averaged $1.6031 per pound, up 14.6 cents from July. Butter averaged $1.8508, up 11.3 cents. Nonfat dry milk averaged $1.1557, down 7.2 cents, and dry whey averaged 35.9 cents, down a half-cent.

Class III futures were trading late Friday morning as follows: September $16.18, October $15.71, November $15.02, and December $14.61 which would result in a 2010 average of $14.33, compared to $11.36 in 2009 and $17.44 in 2008.

California's August 4b cheese milk price is $14.39 per cwt., up $1.02 from July, and $3.10 above August 2009. The 2010 4b average is $12.69, up from an anemic $9.97 a year ago, and compares to $17.48 in 2008. The August 4a butter-powder price is $15.69, up 7 cents from July, and $5.48 above 2009.

Cash markets

Dairy industry eyes are fixed on the cash dairy markets to get some kind of signal, according to the University of Wisconsin's Brian Gould. Gould said the increase in milk production and high cheese stocks has many believing the peak in cheese had arrived.

The cheddar blocks closed the Friday before Labor Day at $1.72 per pound, up 2 1/2-cents on the week, and 45 cents above a year ago. Barrel caused a scare Thursday, inching back a half, but gained it back and then some Friday to close at $1.6850, up 2 cents on the week, and 43 3/4-cents above a year ago. One car of block traded hands on the week and five of barrel. The NASS U.S. average block price hit $1.6245, up 2.2 cents. Barrel averaged $1.6166, up 0.9 cent.

Cash butter moved higher for the 14th week in a row, closing Friday at $2.2250 per pound, up 4 1/2-cents on the week, and $1.0550 above a year ago. Two cars were sold. NASS butter averaged $1.9659, up 7.2 cents.

Cash Grade A nonfat dry milk closed Friday at $1.23, up 3 cents on the week. Extra Grade held all week at $1.2250. NASS powder averaged $1.1413, down 0.8 cent, and dry whey averaged 35.84 cents, up 0.3 cent. Prices for whole milk powder, skim milk powder, anhydrous milkfat, and butter milk powder up sharply in this week's Global Dairy Trade auction.

"We at a reasonable level in terms of cheese and butter prices, relative to recent history," Gould said. Still, he's advised dairy producers to think more seriously about risk management at this time.

One such tool is the Livestock Gross Margin Insurance program, he said. As of July, farmers in all of the lower 48 states can now participate. Previously, California and Idaho producers could not. The program sets a floor on income over feed costs so it's not locking anything but allowing for upward movement.

Other changes in the works that will make this program more palatable, according to Gould, are the insurance premiums will be subsidized and won't be due until after the insurance contract runs its course, and their level of deductible will increase, which should decrease the cost of this insurance program. He encourages producers to take a serious look at the program, especially with the changes that are being made.

The Agriculture Department's latest Dairy Products report lends some insight. July butter production, at 111 million pounds, was down 6.3 million pounds or 5.3 percent from June and 3.4 million pounds or 2.9 percent below July 2009.

Mozzarella cheese output totaled 291.8 million pounds, up 1.2 million pounds or 0.4 percent from June, and 18 million or 6.6 percent above a year ago.

Total Italian-type cheese, at 364.4 million pounds, was up 1.4 million pounds or 0.4 percent from June, and 18.3 million or 5.3 percent above a year ago.

Cheddar production totaled 276.5 million pounds, down 9.6 million pounds or 3.3 percent from June, but 7 million pounds or 2.6 percent above a year ago.

American-type cheese amounted to 368.9 million pounds, down 1.1 million pounds or 0.3 percent from June, but 14.2 million pounds or 4 percent above a year ago.

Total cheese output came to 882.3 million pounds, up 1.4 million pounds or 0.2 percent from June, and 39.5 million pounds or 4.7 percent above a year ago.

Nonfat dry milk output, at 131.8 million pounds, was down 4.4 million pounds or 3.2 percent from June, and 1.4 million pounds or 1 percent below a year ago.

Profits

Dairy profitability continues to improve. USDA's latest Ag Prices report put the August Milk-Feed Price Ratio at 2.36, up from July's revised estimate of 2.32 and compares to 1.80 in August 2009. The All Milk Price was estimated at $16.60 per hundredweight, up 60 cents from last month's estimate, and $4.50 above a year ago.

Corn averaged $3.65 per bushel, up 16 cents from July, and 32 cents above a year ago. The soybean price, at $10.10 per bushel, was up 31 cents from July, but 70 cents below a year ago. Alfalfa baled hay was $116.00 per ton, down $1 from July, and $7 above a year ago.

While dairy profitability has improved with strengthened milk prices, feed prices have also strengthened and futures prices for common feedstuffs like corn and soybeans are increasing. Dairy Profit Weekly's Dave Natzke pointed out that could trigger Milk Income Loss Contract payments in 2011, but he warned that dairy farmers need to act now to maximize potential payments next spring.

National Milk Producers Federation's Roger Cryan provides weekly updated MILC projections estimating payments based on milk and feed futures prices during the next fiscal year, which starts Oct. 1, 2010. Based on his latest estimates, dairy farmers could receive MILC payments during a six-month period beginning in April 2011. Cryan's estimated payments for that period average 22 cents per hundredweight, ranging from a high of about 38 cents in July, to lows of about 10 cents next April and 8 cents next September.

"It's important for any dairy farmers who produce more than the MILC cap of 2.985 million pounds of milk annually to designate a start month in which to receive payments," Natzke warned. "If they fail to declare a new start month in fiscal year 2011, payment months automatically default to fiscal year 2010, or begin the first month MILC payments are triggered."

Based on his latest projections, a farmer producing the MILC maximum 2.985 million pounds in a single month could see a payment of $2,850 in April 2011, according to Natzke, compared to a payment of nearly $11,000 in July 2011.

Cryan notes that if market conditions change, dairy farmers can change their MILC start months later, but it's important to visit a USDA Farm Service Agency office to make the adjustments before payments are triggered, he said.

Cryan's weekly MILC payment estimates are posted at www.dairyline.com .

Cooperatives Working Together

The Cooperatives Working Together program, in view of current prices, announced its last export assistance bids on butter on Aug. 30, totaling 291,000 pounds. The program drew criticism that it even included butter, but CWT chief operating officer Jim Tillison said the decision was made in July when butter was running around $1.79. CWT members were being undercut by foreign competition so the decision was made to assist those who had existing business.

July milk prices were still not at a level dairy producers wanted them to be yet, Tillison said.

"The real run up in the butter price happened in just a matter of days," Tillison said. Butter was at $1.95 and in four trading sessions it hit $2.15.

"Butter was very tight in this country," he said. "And we didn't want to do anything that would potentially push the price higher."

He listed other factors affecting the price, such as the hot weather impacting milk supply and yields. The remaining CWT export funds will be directed to exporting cheese, he said.

Herd audits for CWT's latest herd removal have been completed, though information is still being collected and analyzed. Tillison reported that about 31,000 cows will be removed, representing 600 million pounds of milk. Final numbers won't be available until all information has been collected.

School

School is getting under way and with it another year of partnership between the dairy checkoff and the National Football League in the "Fuel Up to Play 60" campaign.

DMI's Joe Bavido said over 60,000 schools will participate in the program and that, last year, many dairy producers got the opportunity to see this program in action in their local schools. He said they hope to see even more participation this year.

"The NFL's Back to Football Friday campaign is a great way for producers to get excited about the upcoming year and NFL partnership," Bavido said.

Schools and youth across the country can show their team pride and celebrate the return of the NFL season by wearing their favorite NFL team gear and participate in NFL-themed events. Producers should contact their local Fuel Up to Play 60 coordinator to learn more about school-focused efforts in their region and how they can participate.

Producers can also participate in the Show Your Pride photo contest that the NFL is offering to its partners and sponsors, including dairy farm families. The winning dairy entry will receive a visit from an NFL player to their farm, among other prizes. Details are available at www.backtofootballcelebration.com

Innovative farmers

The International Dairy Foods Association is seeking nominations for its annual Innovative Dairy Farmer of the Year award. IDFA's Peggy Armstrong said many dairy farmers are modernizing their operations in order to continue to support their families and to provide consumers with high-quality dairy products, but "too few farmers get the recognition they deserve for their efforts."

"Every year IDFA teams with Dairy Today magazine to honor an outstanding U.S. dairy producer," Armstrong said. "We look for producers that exemplify creativity and forward thinking to achieve greater on-farm productivity and improved milk marketing."

She invited DairyLine listeners to nominate a colleague, customer or community member. To be eligible, the nominee must be an active, U.S. dairy farm operation. Complete details and the nomination form are available online at www.idfa.org .

Last year's winner was Haubenschild Dairy of Princeton, Minn. Honored last January, Dennis Haubenschild operates on 1,300 acres with 14 full-time employees and 1,100 cows. The farm was selected for its continued emphasis on innovative solutions and ideas, particularly in the areas of renewable energy and sustainability, Armstrong said.

He was the first to sell carbon credits on the Chicago Climate Exchange and has teamed with the University of Minnesota to develop the prototype for a hydrogen-fuel-cell-technology system. They hope to find ways to fuel the farm's tractors with biogas from the farm's digester, she said.

This year's winner will receive an all-expenses-paid trip to the 2011 Dairy Forum, which will be held Jan. 23-26 at the Doral Golf Resort in Miami.