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Storm hits West Coast, brings cautious optimism on drought

December 19, 2014

By Emily King

MADISON, Wis. — Last week a powerful storm system — a phenomenon known as the Pineapple Express — swept into California, bringing with it tempered optimism for the state’s drought-battered agricultural industry.

“When you wake up at 2 a.m. to raindrops you haven’t heard in years, it does have you feeling more optimistic,” says Michael Marsh, CEO, Western United Dairymen. “The drought has been going on for so long and it has been so dry, but we still need more moisture.”

Pineapple Express refers to when warm air and considerable moisture are transported from near Hawaii to the Eastern Pacific Ocean and West Coast. The National Weather Service in Sacramento, Calif., says the region had not seen a storm this intense since 2008.

Heavy precipitation fell across California, with amounts ranging from 1-6 inches across a large portion of northern California and parts of the central and southern coastal areas. Up to 3 inches of precipitation were reported in the southern Sierra Nevada mountain range.

The San Francisco Bay area and northern California were hit with rainfall totals upwards of 9 inches, causing flooding issues and landslides. Strong winds and power outages also were associated with the storm.

Gary Stueve, vice president of operations for Dairy Farmers of America’s (DFA) Western Area, says the flooding prevented the organization from obtaining milk from a farmer in Petaluma, Calif. The farmer held the milk, so it did not result in any loss, but other than this incident, any problems were isolated and only caused minor complications.

As of midweek, rain totals are between 1 and 2 inches for much of the middle of San Joaquin Valley, says Dave Kurzawski, a risk management consultant at FCStone LLC in Chicago.

Marsh says the normal rainfall total for Modesto, Calif., for the year beginning July 1 is 3.17 inches. Currently, Modesto has received 8.17 inches of rain. Last year at this time Modesto had only experienced 1.74 inches of rain.

California’s Tulare and Kern counties are in extreme need of additional rainfall, Marsh adds.

“The storms we’ve had in December have been very welcome,” Marsh says. “They aren’t close to breaking the drought; we’ll need six or seven more of the same size to get additional waters into the state’s reservoirs.”

The Pineapple Express was a welcomed relief for most dairy farmers, Kurzawski says.

“There are inconveniences that arise and concerns around animal health, but reports have been relatively mild with the benefits outweighing the costs so far,” Kurzawski says. “Anecdotal evidence suggests that any type of milk per cow losses have been relatively minimal to date. Production is still strong in California.”

Stueve says farmers are now more optimistic because there has been more than just one storm and the precipitation is coming early in the season.

“There has been speculation on whether or not we are experiencing an El Niño; currently it is believed we are,” Stueve says. “I think the recent storms are proof of that. We have a ways to go. Farmers are not thinking we’re out of the woods. It took years for us to get in and it will take years to get out, but we’re above average for the season for rainfall totals in most areas.”
In the coming months the situation will be monitored very closely, Kurzawski says. Too much rain too quickly can knock down milk per cow, but if there is too little rain, California could lose its foothold to climbing out of drought.

“It will take an entire season of good weather to quell the stress on water conservation,” Kurzawski says. “California received a few good rain events in November of last year, and it was barely a blip on the radar in terms of solving their water issues. We ought to be careful to not count our chickens before they hatch.”

Marsh says the countryside is much greener this year in comparison to last year, when most of the crops looked dead.

“I’m hopeful that we may not have so many acres fallow in California and that additional farmers will bring their alfalfa fields back,” Marsh says. “We might have a shot at getting the alfalfa price under control. We’re cautiously optimistic more forages will be available next year when we start harvesting.”

The Pineapple Express and other storms have eased the drought somewhat, but there is a long way to go. A current analysis by NASA shows it will take about 11 trillion gallons of water — around 1.5 times the maximum volume of the largest U.S. reservoir — to recover from California’s three driest years on record.

A team of scientists led by Jay Famiglietti of NASA’s Jet Propulsion Laboratory in Pasadena, Calif., used data from NASA’s Gravity Recovery and Climate Experiment (GRACE) satellites to develop the first-ever calculation of this kind — the volume of water required to end an episode of drought.
Famiglietti cautions that while the recent California storms have been helpful in replenishing water resources, they aren’t nearly enough to end the multi-year drought.

“It takes years to get into a drought of this severity, and it will likely take many more big storms, and years, to crawl out of it,” Famiglietti says.

Marsh says farmers are hoping for additional storms and for it to cool to replenish the snowpack so reservoirs can be filled for next summer’s irrigations.

Early 2014 data from NASA’s Airborne Snow Observatory indicate that snowpack in California’s Sierra Nevada range was only half of previous estimates.

“The recent storms have brought good, short-term drought relief to California,” Kurzawski says. “The key issue, however, is that very little of the precipitation fell as snow. Statewide snow levels are still less than 50 percent of normal. That’s still a problem. So the long-term water deficits and ensuing problems still remain after three years of extreme drought.”

Stueve says the Pineapple Express brings a lot of moisture, but is it too warm. The storms this week were a little cooler, he adds.

“The 2014 snowpack was one of the three lowest on record and the worst since 1977, when California’s population was half what it is now,” says Tom Painter, airborne snow observatory principal investigator of NASA’s Jet Propulsion Laboratory in Pasadena, Calif. “Besides resulting in less snow water, the dramatic reduction in snow extent contributes to warming our climate by allowing the ground to absorb more sunlight. This reduces soil moisture, which makes it harder to get water from the snow into reservoirs once it does start snowing again.”

Marsh also notes the increasing population of California.

“We’ve been using the same infrastructure since the 1960s,” Marsh says. “It has not kept pace with the production or need. It is imperative that the state recognizes this and that the federal government allows us to update the system moving forward.”

Stueve says the water situation varies farmer to farmer depending on water rights and how wells are operating.

“There was a general feeling this last year that farmers could get through this third year of drought, but a fourth year would be a detriment,” Stueve says. “It’s a sigh of relief, and a fourth year of drought would be devastating as many are at the end of their rope. It’s a wait and see.”


U.S. moves toward improved business relations with Cuba

December 19, 2014

WASHINGTON — This week the Obama administration announced that the United States is taking steps to normalize relations with Cuba. USDA Secretary Tom Vilsack says this will expand opportunity for U.S. farmers and ranchers to do business in Cuba.

“It removes technical barriers between U.S. and Cuban companies and creates a more efficient, less burdensome opportunity for Cuba to buy U.S. agricultural products,” Vilsack says. “It also makes those products far more price competitive, which will expand choices for Cuban shoppers at the grocery store and create a new customer base for America’s farmers and ranchers.”

According to USDA’s Foreign Agricultural Service, in fiscal year 2014 the United States exported $300.4 million worth of agricultural products to Cuba, the lowest value in the last five years. The largest portion of U.S. agricultural exports to Cuba in fiscal 2014 — almost half — came from poultry meat and products. The United States exported $2.1 million worth of dairy products to Cuba in fiscal 2014, down from $6.6 million in 2012.

The U.S. Dairy Export Council (USDEC) says it welcomes the proposed steps to ease trade sanctions with Cuba after 53 years.

“Though the administration’s measures don’t immediately unlock the market for U.S. dairy products, USDEC supports open markets and is interested in exploring the prospects to help the U.S. dairy industry develop sales to the nation of 11 million people,” says Tom Suber, USDEC president. “In addition to the geographic proximity and general familiarity with U.S. products, a boost in the Cuban economy resulting from normalized relations would likely also boost U.S. tourism, thereby creating both retail and foodservice sales opportunities.”

National Farmers Union (NFU) President Roger Johnson says that NFU has worked hard over the last five years to push for a normalization of relations with Cuba.

“Acknowledging that Cuba is one of our closest neighbors and a potentially valuable trading partner, and allowing the relationships between the two nations and its citizens to renew and blossom is good for both nations,” he says.

“The Obama administration’s announcement will not only help the people of Cuba — who clearly need economic development — but will also open new markets for U.S. family farmers, who are always interested in new trade opportunities,” Johnson adds.

In other trade news, Trans Pacific Partnership (TPP) officials on Dec. 12 concluded five days of meetings in Washington, where they say progress was achieved across several areas of the text. Among the topics discussed in the meetings were rules of origin, technical barriers to trade, goods market access, legal and institutional issues, textiles, state-owned enterprises, environment and e-commerce.

In remarks made Dec. 11 at a meeting of the President’s Export Council, President Obama indicated that he is hopeful for a strong TPP agreement and that Congress will support a good trade deal.

“I’m much more optimistic about us being able to close out an agreement with our TPP partners than I was last year,” Obama told Export Council members, adding that the agreement would help American businesses by offering greater access to markets and reducing non-tariff barriers.
Prior to the latest meetings, USDEC, National Milk Producers Federation and International Dairy Foods Association sent letters urging U.S. negotiators to prioritize market access for U.S. dairy farmers and processors and to avoid pressure from other countries to regionalize all new market access opportunities. (See “Industry groups push to prioritize market access for U.S. dairy in TPP trade agreement” in the Dec. 5, 2014, issue of Cheese Market News.)


Butter at the CME plummets, moves closer to global price

December 19, 2014

By Alyssa Mitchell

MADISON, Wis. — The price of butter at the Chicago Mercantile Exchange (CME) plummeted this week as the holiday buying season comes to a close and U.S. commodities are under pressure to match prices with their global counterparts, analysts say.

CME butter dropped 23 cents Tuesday to $1.61 per pound. Butter fell another 5.5 cents Wednesday to $1.555 before bumping up 4.5 cents Thursday and 1 cent Friday to settle at $1.61.

Eric Meyer, president of HighGround Dairy, Chicago, says some volatility is anticipated as the lower price could bring more buyers back to the table and lend some support to the market over the next couple of weeks.

However, “the writing is on the wall that we are poised for a year of lower-than-average prices,” Meyer says.

He adds that excess cream to be made into butter in the next couple of weeks is anticipated, which will add to stocks and lead to further price weakness.

Sara Dorland, managing partner with Ceres Dairy Risk Management LLC, Seattle, notes there is an expectation for more milk to head to manufacturing in the coming weeks.

“The bottom line is, we need to see buyers come back into the market, and at these prices, we could begin to see more opportunity for exports, which have dropped off,” she says.

“I think holiday demand and concerns that people would have enough product kept the price supported longer than usual, but that’s done now,” she adds.

Looking at global prices, Dorland says a CME butter price around $1.50 is likely in the coming weeks.

However, “we may overcorrect to the downside like we did to the upside,” she adds.


Major fire breaks out at AMPI cheese plant in Wisconsin

December 19, 2014

By Emily King

PORTAGE, Wis. — The Associated Milk Producers Inc. (AMPI) cheese processing and packaging plant in Portage, Wis., experienced a fire the evening of Dec. 12. The fire started at 7 p.m. last Friday and smoldered until 6:30 a.m. Saturday. More than 25 area fire departments responded and took shifts.

There were about 70 employees in the building at 301 Brooks Street in Portage when the fire broke out. They were immediately evacuated and no one was injured, AMPI says.

“We are very thankful there were no injuries,” says Sarah Schmidt, communications director, AMPI.

“The fire departments responded quickly and appropriately.”

The fire was contained to the first floor dry storage and ingredient warehouse. After the fire was put out, it was determined there was minimal damage to the production equipment. There was reported loss of cheese packaging supplies and ingredients.

This week, employees and a restoration company worked on cleaning. Typically, 350 people work at the facility.

“Every day the number continues to grow and now we have more than 225 employees working,” Schmidt says. “The majority of the Portage work force is back.”

Schmidt says the company plans to begin production and to have all employees welcomed back Dec. 26.

“In the meantime we’ve been working with industry partners to ensure orders are fulfilled in a timely fashion,” Schmidt says.

The cause of the fire is still under investigation according to the Portage Fire Department.





Old Europe Cheese adds flavors, dough to innovate Brie category

By Kate Sander

BENTON HARBOR, Mich. — With more than a quarter of a century of business in the United States, Old Europe Cheese continues to work diligently on new and exciting items to expand offerings to consumers in the soft-ripened cheese category.

While traditional Brie and Camembert are the company’s mainstays — and are products the company does quite well — Old Europe Cheese continues to spread its wings with Baked Brie in Pastry and flavored soft-ripened cheese varieties, says National Sales Manager Michael Balane.

“We don’t want to get too crazy with flavors because they’re a novelty,” Balane says. “The goal is to make them be like Cheddar flavors that have become more mainstay.”

While traditionalists may turn their noses up at flavored cheeses, Balane says he believes flavored varieties are becoming more popular with U.S. consumers who are looking to save time and try new things in a safe sort of way.

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Pop-up cheese shops, events connect companies, consumers

December 12, 2014

By Rena Archwamety

MADISON, Wis. — In efforts to provide new, spontaneous and convenient shopping experiences for their customers, some cheesemakers and purveyors are looking outside the big box of in-store marketing and sampling and to host “pop-up” cheese shops and events.

Pop-ups can range from on-time dinner or tasting events held in off-site locations to temporary retail locations that showcase specific items. All aim to provide a unique experience for customers to help them better connect with the cheeses and other featured products.

• Brand awareness

Castello, one of the major cheese brands under Denmark-based Arla Foods, this year opened pop-up stores in Copenhagen, Denmark, April 4-May 31; New York May 2-July 6; and London Sept. 9-Oct. 26. In addition to offering daily samples and a selection of premium cheeses, the pop-up stores also invited visitors to participate in special activities such as free cheese classes and contests.

“We were able to really be interactive and one-on-one,” says Susan Burris, Castello brand manager. “Consumers were coming in without any other agenda or shopping list. They were interested in cheese, and in Castello products.”

The main point of the pop-up stores was to drive awareness of the specialty cheese brand and get people talking about it, she says. Castello also recently went through a new branding, and over the past two years labels such as Rosenborg and Denmark’s Finest have been rolled under the Castello brand. The pop-up stores have helped in this rebranding process.

“Our inspiration was about drawing awareness of Castello as a brand of specialty cheese and giving consumers the opportunity to experience the brand in a new way,” Burris says.

Castello’s New York City Pop-up Store featured some cheeses for sample and sale that weren’t widely available in the United States. Positive feedback from customers at the pop-up store helped steer the launch of Castello Aged Havarti, which soon will be available nationwide in a new retail format.

This is the first year Castello has had pop-up stores, and the brand is planning additional locations in other countries throughout 2015. Burris says Castello definitely considered the New York store a success, with hundreds of customers, about 15,000 samples given away, 2 million social media impressions and about 24 million total media impressions from the shop.

“It’s a broad consumer market and a good media target,” she says. “We had to make sure we would have the traffic and media that could come through the store to publish articles. We had a consumer base that is knowledgeable about specialty cheeses.”

• Holiday shopping

Pop-up stores are particularly popular during the holiday seasons, and Di Bruno Bros., which has five retail locations throughout Philadelphia, this weekend is opening the doors to its first Pop-up Gift Shop, featuring “Holiday Magic,” “Philly Traditions” and “Cheese Elves,” according to its blog.

The 75-year-old, family-owned cheese and meat market is known for its crowds and long lines during the holidays, so this year it is opening the Pop-up Gift Shop next to its Italian Market location as a sort of express lane.

“Our line is pretty legendary in Philadelphia. People will wait up to two hours the week before Thanksgiving. This is a way for people to ‘cut in line’ if they are only looking for one or two things,” says Rocco Rainone, cheesemonger at Di Bruno Bros.’ Italian Market store.

The Pop-up Gift Shop highlights most of Di Bruno Bros.’ private label items, vacuum sealed cheeses, olive oils, holiday gift baskets, the store’s book House of Cheese and other gift items.

“It’s a little different from our stores,” Rainone says. “The focus in our store is cutting and wrapping cheese, and the focus in the Pop-up Gift Shop is more on stuff that is a little easier to grab.”

Di Bruno Bros. received a lot of positive feedback when it opened the Pop-up Gift Shop for a test run for a day. It has advertised the pop-up shop on its blog, worked with local food bloggers and through social media, and its marketing team has created signage to draw in people walking by the store.

“If it goes well tis year, we definitely would love to do it every year,” Rainone says.

• Special menus

The pop-up model also can be used as a way to showcase cheeses through unique dining or tasting events that create a spontaneous vibe for attendees and reduce the overhead costs of having a more permanent menu or location.

Rosemont Market and Bakery, Portland, Maine, last week hosted about 30 people for a pop-up cheese tasting event called “Praise Cheeses!” in a private downtown loft.

Rosemont advertised the event in its newsletter and on its website and Facebook page, as well as in some other event postings online. Tickets to the event were $30. The tasting featured Alpine cheese and wine pairings, as well as cheese-based dishes and holiday party ideas. Cheese importer Alberto Aurilio of Seacrest Foods and Rosemont’s cheese buyer Caitlin Marshall guided the guests through the line-up of cheeses, which included Raclette, Comté, Tarentaise, Monte

Veronese d’Allevo, and Scharfe Maxx. Those who attended were offered discounts on cheeses and wines ordered during the event.

“The mood was like a private dinner party,” says Joe Appel, director of the wine program and communications at Rosemont Market and Bakery. “It felt slick and interesting. They showed up at an address in the middle of the city and went up to the sixth floor. It was an ‘in the know’ kind of thing.”
Appel says Rosemont has hosted other off-site events such as farm dinners and wine dinners, but this was its first cheese-focused event. He says Rosemont definitely plans to use this format again.

“It was great, and I think people were really excited about it,” he says.

Pop-up food events also can be a way for cheesemakers to market their products in menu items and settings that attract new, diverse customers.

Consider Bardwell Farm, West Pawlet, Vt., last Friday held its first grilled cheese pop-up at Brouwerij Lane beer store and bar in Brooklyn, N.Y. The store was hosting a “Tis the Saison!” event that evening featuring eight draft Saison ales along with a special grilled cheese menu from Consider Bardwell.

Peter Henry, New York City sales and marketing manager for Consider Bardwell, says this was an opportunity to showcase Consider Bardwell’s cheeses in a new way and in front of a new crowd.

“We have this great product at our disposal, and this is just another fun thing to do with it,” Henry says. “It’s not just something you slice on a cheese plate and have with quince jelly. It can be the main attraction in a good sandwich.”

During the Tis the Saison! event, which ran from 5-10 p.m., Consider Bardwell offered a menu that featured three of its cheeses — cow’s milk Pawlet and Dorset and goat’s milk Manchester — that could be customized with a variety of toppings such as sautéed kale, local honey and bacon, or ordered as part of two combo sandwiches.

Part of the attraction of a pop-up event for Consider Bardwell was the relatively low overhead, as it was able to use its own cheese and acquire ingredients from connections made at the various farmers’ markets it sells at in New York. The sandwiches sold for about $8-$9 a piece.

“I realized we had a unique opportunity to do grilled cheese since we’re vertically integrated,” Henry says. “It’s easier for this to be profitable with low overhead like a pop-up and offer a pretty reasonable price point.”

The bar setting provided some good exposure as well, he says, as customers included some people who wouldn’t necessarily make a special trip to the farm or farmers’ markets just to get their cheese.

Henry is interested in exploring more opportunities for pop-ups in the city, as well as adding other menu items such as salads and soups to serve with the grilled cheese.

“I want to see where this will go, to figure out when to do it again and what other places,” he says. “All the farmers’ markets we do are in city neighborhood markets. It would be nice to work at some of the bars in these neighborhoods. Any rising awareness of the farm is good. Mostly it’s just a fun thing to put on.”


CDC study offers argument against consuming raw milk

December 12, 2014

ARLINGTON, Va. — The National Milk Producers Federation (NMPF) says a new food safety study from the U.S. Centers for Disease Control and Prevention (CDC) — “Increased Outbreaks Associated with Nonpasteurized Milk, United States, 2007–2012” — presents a powerful argument against efforts to ease restrictions on the sale of raw milk to consumers.

According to the study, which will appear in the January 2015 issue of the CDC journal Emerging Infectious Diseases, the average number of foodborne illness outbreaks associated with drinking nonpasteurized milk has more than quadrupled in recent years, as states approved more laws allowing retail sale of raw milk.

From 2007 to 2012, the study reported 81 foodborne illness outbreaks nationwide associated with raw milk — an average of 13 per year. The outbreaks, which sickened nearly 1,000 people and sent 73 to the hospital, were concentrated in states where raw milk sales are legal, the study says.

Of the 78 outbreaks with a single etiologic agent, Campylobacter was the most common pathogen, causing 62 (81 percent) outbreaks, followed by E. coli causing 13 (17 percent) outbreaks, Salmonella enterica causing two (3 percent) outbreaks and Coxiella burnetii causing one (1 percent) outbreak. Three outbreaks were caused by multiple pathogens.

According to the study, the number of outbreaks associated with nonpasteurized milk increased from 30 during 2007-2009 to 51 during 2010-2012. During 2007-2009, outbreaks associated with nonpasteurized milk accounted for approximately 2 percent of outbreaks with an implicated food. During 2010-2012, this percentage increased to 5 percent.

In an earlier study, covering 1993 to 2006, CDC found an average of only three foodborne illness outbreaks per year associated with raw milk consumption.

“The more raw milk that is available to people, the more people become sick; the connection is crystal clear,” says Beth Briczinski, vice president for dairy foods and nutrition, NMPF. “Since 2004, eight more states have allowed raw milk sales, and foodborne illnesses associated with raw milk consumption have increased.

“In the face of these findings, state and federal regulators and legislators must resist pressure from those seeking to make raw milk more accessible. Caving in to their demands will translate into more illnesses, more hospital visits, more state resources spent investigating outbreaks, and more lives harmed from consuming raw milk,” she adds.

Retail sales of raw milk are now legal in 30 states, while 10 more states allow consumers to obtain raw milk by paying a farmer to help care for a cow in return for a percentage of the milk the cow produces. In addition, legislation was introduced in Congress this year to lift the ban on raw milk sales in interstate commerce.

NMPF notes sales of raw milk are not permitted in interstate commerce, and both the CDC and FDA recommend against consuming unpasteurized milk.

NMPF has led opposing efforts to make raw milk more accessible to consumers through changes in laws or regulations.

“Consuming raw milk is like playing Russian roulette with your health,” Briczinski says. “It is especially dangerous for children and seniors. The last thing any state or the federal government should do is encourage consumers to consume raw dairy products by legalizing their sale.”

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FDA responds favorably to milk protein GRAS status

December 12, 2014

WASHINGTON — The American Dairy Products Institute (ADPI) recently announced that FDA has responded favorably to a notice submitted by ADPI and the U.S. Dairy Export Council (USDEC) regarding the generally recognized as safe (GRAS) status of milk protein concentrate (MPC) and milk protein isolate (MPI) for multiple uses in a variety of food categories.

ADPI, in partnership with USDEC, originally submitted a GRAS notification for MPC and MPI to FDA in September 2012 but temporarily withdrew that notification last year. The notification was resubmitted earlier this year, and additional information was submitted to FDA in May, July and August.

The notification informs FDA of the view of ADPI and USDEC that MPC and MPI are GRAS, through scientific procedures, for use as protein sources, emulsifiers, flavoring agents, formulation aids, nutritive sweeteners (for ingredients containing more than 20 percent lactose), stabilizers, thickeners, humectants and texturizers in the following food categories, at varying use levels depending on technical effect: meal replacements and meal supplements; milk drinks; yogurt; fermented milks; milk-based toppings, spreads and dips; non-standardized cheese products; cream substitutes; frozen dairy desserts and mixes; confections and frostings; soft candy; chewing gum; snack foods; puddings and fillings; salad dressings; soups and soup mixes; sweet sauces, toppings and syrups; gravies and sauces; baked goods and baking mixes; condiments; jams and jellies; nut and peanut spreads.

ADPI and USDEC say they have determined that concentrated milk proteins, MPC and MPI, are GRAS based on the following:

• The fact that concentrated milk proteins are manufactured under cGMP for food and meet appropriate food grade specifications;

• That potential contaminants such as pesticides and heavy metals are either absent (not detected) or below toxicological and regulatory limits;

• The digestibility and nutritional quality of the concentrated milk proteins;

• The intended uses and the estimated consumption of the concentrated milk proteins;

• The proper labeling of the products; and

• Supportive evidence from the long history of safe use of milk and milk protein as food. (For more information on the notification, see “ADPI and USDEC resubmit GRAS notification to FDA for milk protein concentrate, isolate” in the Feb. 7, 2014, issue of Cheese Market News.)

In a letter dated Nov. 21, 2014, FDA says that based on the information provided by ADPI and USDEC, as well as information available to the agency, FDA has no questions at this time regarding the organizations’ conclusion that MPC and MPI are GRAS under the intended conditions of use.

However, FDA says it has not made its own determination regarding the GRAS status of the subject use of MPC and MPI.

“As always, it is the continuing responsibility of ADPI and USDEC to ensure that food ingredients that the firm markets are safe and are otherwise in compliance with all applicable legal and regulatory requirements,” FDA says.

To view a copy of FDA’s letter and information on the notification, visit noticeinventory.


USDA lowers 2015 milk production forecast in report

December 12, 2014

WASHINGTON — USDA has slightly lowered its U.S. milk production forecast for 2015 to 212.2 billion pounds as growth in milk per cow is expected to be more moderate. Meanwhile, the forecast for 2014 milk production remains steady at 206.2 billion pounds.

In its “World Agricultural Supply and Demand Estimates” report released Wednesday, USDA says its forecast for fat-basis imports is reduced to 4.1 billion pounds for 2014 as milkfat imports have been lower than expected. For 2015, the forecast imports on a fat basis are unchanged at 3.8 billion pounds.

Meanwhile, the export forecast on a skim-solids basis is raised to 38.7 billion pounds for 2014, up from 38.3 billion pounds in last month’s forecast, due to stronger whey product sales to date. Fat and skim-solids basis trade forecasts for 2015 are unchanged.

USDA raised its 2014 butter price forecast by a half cent, reflecting recent price movements, but the price forecast for 2015 is unchanged at the midpoint of the range. Butter now is forecast to average $2.125-$2.155 in 2014 and $1.665-$1.775 in 2015.

The forecasts for both cheese and nonfat dry milk (NDM) prices are reduced for both 2014 and 2015 as supplies are expected to remain large. Cheese is forecast to average in the $2.150-$2.160 per pound range this year and in 2015 to fall in the $1.625-$1.705 range.

Whey prices, at $0.650-$0.660 for 2014 and $0.560-$0.590 for 2015, are unchanged from last month’s forecasts.

Class III prices for 2014 and 2015 are lowered on weaker cheese prices. The Class III price now is forecast to fall in the $22.30-$22.40 per hundredweight range in 2014. In 2015, the Class III price is forecast at $16.55-$17.35.

The Class IV price forecast is unchanged at $22.05-$22.25 for 2014 as a higher butter price is offset by a lower NDM price. For 2015, a lower NDM price results in a reduced Class IV price forecast, with the forecast range now $16.45-$17.35, down from last month’s forecast of $17.05-$18.05.

The all-milk price forecast is lowered to $24.05-$24.15 in 2014 and $18.45-$19.25 in 2015.



Analysts bearish on outlook for U.S. dairy in early 2015

December 5, 2014

By Alyssa Mitchell

MADISON, Wis. — Various market fundamentals including growing U.S. inventories, lower global prices and a projected delayed slowdown in milk production have analysts feeling bearish about U.S. dairy prices for the first half of next year.

Following the release of October’s “Dairy Products” report by USDA’s National Agricultural Statistics Service on Wednesday, Eric Meyer, president, HighGround Dairy, Chicago, notes that an extra 620 million pounds of U.S. milk produced in October vs. the prior year contributed to a large volume of storable commodities. (See chart on page 6.)

“In October, the clear winner of the growth contest was nonfat dry milk (NDM), with more than 54 percent or an additional 46.5 million pounds produced vs. last October,” Meyer says. “This is a bearish signal for domestic prices that remain largely uncompetitive within the global market.”

Meyer adds that building NDM inventories in the United States between September and October is somewhat rare. Over the past 15 years, manufacturers’ stocks grew between those months five times (2001, 2004, 2007, 2008 and 2014), he notes. In those four years prior to 2014, September-October inventories grew by a combined 11.8 million pounds, and in each year, September was the seasonal inventory low. In 2014, the October monthly build was 17.3 million pounds.

“In our view, this is quite bearish as it suggests NDM manufacturers’ stocks will remain at all-time highs without an export market to move large volumes,” he says. “As a result, expect NDM prices to continue eroding in the coming months as domestic manufacturers must compete to move this product off our shores as the U.S. milk supply still has at least 6-9 months before showing signs of contraction.”

Indeed, NDM has been the “canary in the coal mine” in recent months, showing steadier declines and moving closer to global milk powder prices than cheese and butter have compared to their global counterparts, for example, Meyer notes.

This week, NDM at the Chicago Mercantile Exchange (CME) settled at $1.11 per pound, still a bit higher than the near-$1 milk powder price levels seen in the European Union and New Zealand, Meyer notes.

Dave Kurzawski, senior broker, FCStone, Chicago, says the consensus seems to be $1 per pound or lower for NDM at the CME.

“If we end up with a billion pounds of excess, I suspect that the market has more downside and that 90 cents could be a reality,” he says. “But NDM led the entire dairy complex lower, and market sentiment is generally most bearish near the bottom. While there is not a good reason for a strong rebound to prices today, be wary of the extreme bearishness around NDM right now. An alternative possibility is that we end up trading sideways around current levels for months to come.”
Bob Wellington, senior vice president of economics, communications and legislative affairs, Agri-Mark Inc., Methuen, Mass., agrees that $1 per pound NDM looks likely.

“There is a lot of milk out there,” Wellington says. “Between increasing U.S. milk production and falling exports, we could see 5 to 10 percent more milk looking for a market. Markets are reacting accordingly.”

Phil Plourd, president and CEO, Blimling and Associates, Madison, Wis., notes that for the past few months, U.S. dairy markets have been somewhat insulated by lower stocks and the calendar, but that insulation is getting thinner and thinner.

Plourd notes that holiday demand is ebbing, diminishing the calendar’s influence on affairs. In addition, talk about imports has turned more detailed, export interest has slowed notably and milk production remains strong.

“Stocks are presumably building; or, at least, industry participants have line of sight to how quickly inventories could build in the months ahead,” he adds.

“Yet, even with recent and significant retrenchment, U.S. pricing is still above world market pricing,” Plourd says. “The U.S. is still not competitive. Meanwhile, suppliers from Europe and Oceania have
almost certainly captured sales that call for deliveries well into 2015. In other words, even if U.S. product became price competitive tomorrow, some prospective customers won’t be looking for product for months.”

USDA’s latest quarterly Ag Trade Outlook report released Tuesday shows fiscal year 2015 (October 2014 through September 2015) dairy exports are now expected to have totaled $6.7 billion, down $300 million from the August forecast, and down about $700 million from the fiscal year 2014 total of $7.4 billion.

Meanwhile, the fiscal year 2015 U.S. dairy import forecast was left unchanged from August projections at $3.2 billion. However, the forecast for fiscal year 2015 cheese imports specifically was raised slightly to $1.3 billion.

Plourd notes that China’s appetite for milk powders has dwindled. October imports of whole milk powder, skim milk powder and combined powder imports were down from the prior year.
“Logic suggests that November and December figures will also fall far short of last year’s blistering pace,” he adds.

CME cheese prices have been weakening over the past month, settling at $1.55 per pound for barrels and $1.58 for blocks this week.

“Midwest cheese production is mostly steady but ahead of current buyer interest,” notes USDA’s Dairy Market News. “Surplus milk is being purchased by some cheesemakers near $3 below class. This is encouraging cheese production beyond current buyer interest, keeping production schedules active.”

Dairy Market News adds that surplus milk near $5 below class is anticipated near the week of Christmas.

“Buying interest for retail sales is lower this week, but foodservice demand for cheese remains strong in terms of the normal seasonal pattern of foodservice sales,” Dairy Market News says.
Kurzawski says that while finding a market bottom is only easy to recognize once it has already happened, the spot cheese market has lost more than 50 cents over the past five weeks, and a short-term bounce to at the end of the year cannot be ruled out.

“That said, the bigger issue is that the larger cheese price trend has turned down now,” he says. “I look for a short-term bottom here in December but then another wave of selling in the beginning part of the year, and I don’t think we should rule out $1.40 or lower.”
Meyer says he thinks cheese prices are a bit lower than previously anticipated for this point in December.

“I think people thought it would be later December or early next year, but excess milk became available quickly a few weeks ago,” he notes. “I think we’ll see steady to lower prices for the duration of this month.”

Meyer adds that in order to signal to dairy producers that less milk is needed, milk pricing needs to drop $2-$3 below the cost of production for a few months.

“In order to get there, we would need to have sub-$1.30 cheese,” he says.

Meanwhile, butter has been the “lagger” in the increasingly bearish market, Meyer notes.

“We still don’t have the inventories built, but we have lost export share,” he says. “Once the holidays are past us, we will hit a lull for butter demand until Easter.”

CME butter has been somewhat volatile in the past couple of months, moving above and below the $2 per pound level. CME butter was at $1.9850 to close out this week, up from $1.9225 on Monday.

“Butter sales continue to be very good following strong promotions at retail stores for Christmas and Hanukkah,” says Dairy Market News. “The market tone is firm in the near term with some market participants expecting a softening post-holidays. Some butter makers note full production schedules for the next two weeks to complete current orders.”

Kurzawski notes that butter is consolidating around the $2 level right now as inventories of butter that can be traded at the exchange remain relatively tight.

However, cream is widely available and multiples are soft, he adds.

“Expect to see more butter production and a growing butter inventory situation as we move through the first quarter of 2015,” he says.

Wellington says that while butter remains strong, it should show declines near $1.75 or lower early next year.

“There is strong demand for butter and cream products,” he says. “A drop is coming, but the need to rebuild inventories should keep prices near $1.75 or higher initially.”

Looking ahead, analysts anticipate weaker U.S. dairy prices to kick off 2015.

Meyer notes, for example, he thinks the U.S. dairy market already has lost a lot of opportunity to export in the first half of 2015.

“I think we’ll be at historically low prices for cheese, butter and NDM in the first quarter, also bleeding into the second,” he says.

Meyer adds that it’s a bit unnerving that cheese has gone down this much this quickly.

“The U.S. has to absorb a lot of this product because export demand has waned, and in order to do that, prices have to come down,” he says.

Kurzawski says that currently, the posture of the markets is lower.

“Expect that U.S. milk supplies will continue to grow into the New Year and inventories of butter, cheese and NDM will also grow,” he says. “The export possibilities look very limited for the first quarter of 2015. That could change later in 2015, but all else being equal, price rallies on both spot and futures should be limited in duration amid current market news.”

Wellington says in 2015 he anticipates “a lot of price stress for NDM and cheese — maybe less for butter initially — but that could drop even more once inventories recover better.”


U.S., Australia, New Zealand urge against havarti GI status

December 5, 2014

By Rena Archwamety

BRUSSELS, Belgium — This week the Consortium for Common Food Names (CCFN) and government officials from the United States joined officials from Australia and New Zealand in Brussels, Belgium, to present objections to Denmark’s application for protected name status of havarti.

Earlier this year, the European Union ruled that Denmark could proceed with its geographical indication (GI) application that would grant it exclusive use of the name ‘havarti’ in the EU. CCFN filed an objection to the proposal in June as part of the EU’s GI review process. (See “Consortium for Common Food Names files objection to GI application on ‘havarti’ use in EU” in the June 27, 2014, issue of Cheese Market News.)

This latest meeting, which took place Wednesday, was another step in the GI process consisting of formal consultations with countries that object to giving ‘havarti’ GI status.

“We reiterated the same points as in our filings from earlier this year,” says Shawna Morris, CCFN senior director. “We have companies with serious concerns that they will not be able to export havarti to Europe or other countries.”

Morris notes that dozens and dozens of U.S. companies make havarti, and it is of interest to those companies and the cheese industry at large to preserve as many opportunities as they can.

“We have seen that first GIs are approved in the EU, but then they are sent around the world through free trade agreements,” she says. “We can understand the interest in establishing some sort of GI for Danish-produced havarti. Our suggestion is that instead of monopolizing the term ‘havarti,’ they use a compound GI like “Danish Havarti” that will allow others to use the term but also carve out a certain niche for Danish-produced havarti.”

In addition to serious concerns companies have about not being able to export to Europe or other countries, Morris says the application also raises a broader question over the international Codex Alimentarius standard for havarti that was renewed in 2007 with the EU’s approval.

“The EU was a very active participant in the Codex discussion and very active in renewing that standard and other standards,” Morris says. “To see a few years later, the proposal to take what was established and argue that it can only be made in one place in the EU, strikes a very deep concern over trade impact. We believe it’s a very serious trade violation.”

While in Brussels, CCFN staff is meeting with European Commission officials to express concerns over EU actions on common name usage around the world. CCFN continues to monitor and weigh in on developing GI policies in the EU and other countries.

Though CCFN and more than a dozen countries have called for an open door, the Lisbon Agreement committee within the World Intellectual Property Organization (WIPO) has decided for now that only its members, which are mostly European, will be allowed to vote on expansion to the Lisbon Agreement GI scheme next May. CCFN says it will continue working with concerned governments on a way forward with the Lisbon Agreement that is in the interest of all countries, not just current participants.

CCFN also is working on battling current restrictions or weighting in on developing GI policies in other areas including Mexico, the Philippines, Vietnam, South Africa and Costa Rica. For example, CCFN and the U.S. government are working to address the announcement that South Africa is planning to register then names “feta,” “gorgonzola” and “asiago” under the new South African-EU trade agreement.


U.S. cheese production climbs 2.3 percent in Oct.

December 5, 2014

WASHINGTON ­— Total U.S. cheese production in October was 976.8 million pounds, up 2.3 percent from October 2013’s 955.1 million pounds, according to preliminary data released this week by USDA’s National Agricultural Statistics Service (NASS). (All figures are rounded. Please see CMN’s Dairy Production chart on page 6.)

October cheese production was up 3.5 percent from September 2014’s 943.6 million pounds (up 0.2 percent on an average daily basis).

Mozzarella was the most-produced cheese in the United States in October with 329.8 million pounds produced in October, up 3.4 percent from the 318.9 million pounds produced a year earlier. Total production of Italian-type cheese, of which Mozzarella is the largest component, was 420.8 million pounds in October, up 2.9 percent from a year earlier’s 408.7 million pounds.

Cheddar production totaled 270.9 million pounds in October, up 0.8 percent from October 2013’s 268.9 million pounds. Total American-type production, of which Cheddar is the largest component, was 383.5 million pounds, up 3.2 percent from October 2013’s 371.5 million pounds.

Wisconsin led the nation’s cheese production in October with 252.3 million pounds, up 2.1 percent from its production a year earlier. California followed with 201.4 million pounds, also up 2.1 percent from its production a year earlier.

The next four cheese-producing states were Idaho with 75.3 million pounds, up 4.9 percent from a year earlier; New York with 73.5 million pounds, up 7.0 percent; New Mexico with 64.4 million pounds, down 2.7 percent; and Minnesota with 56.5 million pounds, up 2.2 percent.

Total U.S. butter production in October was 148.1 million pounds, up 1.5 percent from October 2013’s 145.9 million pounds. October 2014 production was up 13.8 percent from September 2014’s 130.2 million pounds (up 10.1 percent on an average daily basis).

California led the nation’s butter production with 46.0 million pounds in October, down 9.5 percent from its production a year earlier.


Glanbia Foods announces $82M Idaho expansion

December 5, 2014

TWIN FALLS, Idaho — Glanbia Foods has announced a major expansion to its manufacturing and production plants in Gooding and Twin Falls, Idaho, projecting an $82 million investment and creating up to 50 new jobs.

“This expansion is strongly aligned with our strategy of adding further value to our whey stream,” says Daragh Maccabee, executive vice president and CFO, Glanbia Foods. “The company considered various options and locations for these new activities but ultimately came to the conclusion that Idaho was the right location. We have a long track record in Idaho, and the support of the state and local communities was instrumental in our choice of Idaho for renewed expansion.”

Specifically, Glanbia will invest in manufacturing processes to meet the growing demand for high-quality whey products, such as:

• The expansion of high-end whey protein production in Gooding to include whey protein isolate;

• The creation of a center of excellence for the in-house blending and agglomeration of high-end nutritional products; and

• The introduction of lactoferrin production to the Twin Falls location and the internal drying capacity expanded to cater for both Twin Falls and Gooding production.

To facilitate these developments and further future growth, Glanbia will pay for a 30 MW energy substation on current Glanbia land at the Gooding facility and will free up 12 MW of existing capacity for alternative uses in the area.

The new facilities will be fully operational by 2016.

“This is yet another exciting announcement for the Magic Valley to see one of its own home-grown companies expand and create new jobs,” says Idaho Gov. C.L. “Butch” Otter. “We are particularly thrilled that we were once again able to leverage the Tax Reimbursement Incentive to support the growth of an existing Idaho company.”

Glanbia Foods has been headquartered in Southern Idaho for 25 years and processes more than 12 million pounds of milk per day, one-third of all milk in Idaho. Over that time, Glanbia has experienced significant growth, with the total workforce in Idaho projected to exceed 800 for the first time in 2015.

The company says it is approved to receive a Tax Reimbursement Incentive credit of 23 percent for 10 years, which was matched by the local community. The Gooding County Board of County Commissioners approved a property tax exemption on the incremental new capital investment.



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Today's Cheese Spot Trading
December 19, 2014

Barrels: $1.5500 (-3 3/4)
Blocks: $1.6100 (+1/4)

Click here for more market activity
Cheese Production
U.S. Total Oct.
976.795 mil. lbs.

Milk Production
23 State Total Oct.
16.048 bil. lbs.

Guest Columnist

Changing food trends means good things for dairy demand

John Talbot, California Milk Advisory Board

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