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  September 2, 2010

Margins are improving

by Sherry Bunting, Farmshine, Sept. 3, 2010

Increases in the all-milk price are finally beginning to outpace feed costs by a margin that is approaching $10 per hundredweight -- close to where it was in early 2008 before the long dairy crisis began. The milk price will need to continue improving to stay ahead of the rising cost of grain.

Dairy farmers will be glad to know that cheddar cheese prices hit new highs for 2010 this week on the CME: Blocks were quoted at $1.71/lb and barrels just over $1.67/lb Wednesday (Sept. 1). Butter continued its rally, at $2.22/lb Wednesday, and nonfat dry milk blinked at $1.21/lb.

This, along with higher prices Tuesday on Fonterra’s internet auction for whole milk powder ($1.60/lb) skim milk powder ($1.45/lb) and milkfat ($2.12/lb), helped push future contracts higher in the close up months. However, futurets for 2011 declined this week with April through July setting new contract lows.

Tuesday’s USDA Ag Prices report pegged the August all-milk price at $16.60, up 60 cents from July and the highest since Nov. 2008. Manufacturing milk was up $1.00; fluid was up 60 cents. (The Sept. advance Class I base price for fluid sales was announced last week at $15.50/cwt, which is 27 cents lower than the August Class I base.)

Meanwhile, the USDA Ag Prices report estimated corn was 16 cents higher than July at $3.65/bu.; soybeans up 31 cents at $10.10/bu.; and alfalfa hay down $1 at $116/ton.

The cost of feed to produce 100 pounds of milk was estimated at $7.03, putting "income over feed costs" (or milk margin) at $9.57/cwt, up 47 cents from July, according to calculations derived from USDA numbers as reported by Alan Levitt in Tuesday’s Daily Dairy Report.

Leprino goes BIG in Colo.

Monday’s Denver Postthe Colorado-based Leprino Foods plans to build a $270 million mozzarella factory near Greeley.

To supply the plant, Colorado dairy producers are expected to double the state's current production by adding a collective 80,000 cows to their herds in the coming years.

At full capacity, the plant "expects to produce a staggering two billion pounds (of mozzarella) per year." That is said to be enough to cover 2.6 billion pizza pies annually.

The Denver Post story noted that Leprino’s closely guarded, proprietary process "turns milk into frozen shredded mozzarella in five hours," versus processes taking days or weeks.

In addition to being the world’s largest mozzarella producer, with pizza kitchens and taco kitchens that replicate the cooking processes used by major pizza and restaurant chains, Leprino is also a major producer of whey and lactose as byproducts of making cheese.

Fonterra USA ramps up its warehousing for imported ingredients in Chicago

According to New Zealand press reports Monday, Fonterra rented a big new warehouse just down the highway from its U.S. headquarters near Chicago’s O’Hare Airport. The 500,000 square feet of warehouse space is "expected to channel significant amounts of Fonterra’s billion-dollar exports to the U.S."

The Shorewood, Illinois location has access ramps to I-55 and I-80. It is also close to the research and development center Fonterra opened two years ago in nearby Rosemont (a stone’s throw away from the Innovation Center for U.S. Dairy, which was funded and established by U.S. dairy farmers through DMI.)

According to the New Zealand press, Fonterra plans to develop its Rosemont, Illinois technical center into "a major sensory application center to work directly with North American customers for dairy proteins and other ingredients, including HP Hood, Nestle and Unilever."

Fonterra USA is estimated to have annual turnover of nearly $1 billion (U.S. dollars) from its imports of caseins, whey powders, proteins, protein concentrates, hydrolysates, cheese, cream products and milk powders.




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