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Organic Milk Pay, Retail And Feed Prices: April 2019

The Agricultural Market Service (AMS) reports total organic milk products sales for January 2019 were 233 million pounds, down 1.3 percent from January 2018. Total organic whole milk sales for January 2019 are 99 million pounds, up 5.6 percent compared with January last year. This mirrors the data from 2018 compared with 2017. In 2018, total sales of organic milk were 2,588 million pounds and sales of only whole milk were 1,062 million pounds.

In 2017, retail sales of all types of organic milk were 2,577 million pounds and retail sales of whole milk was 1,012 million pounds. This represents an increase in whole milk retail sales of 5% in 2018 over 2017, which balanced out the decrease in sales of Non-Fat packaged milk to show level sales of the total of all retail organic milk. USDA AMS reports demand for organic whole milk powder has steadily improved, with significant sales increases reported in both domestic and foreign markets. Processing applications that target organic whole milk powder’s utilization in fermented milk foods, yogurt, UHT milk, confectionary, bakery, ice cream and infant formulas are being assembled by many organic dairy manufacturers. Important factors that contribute to active demand are lower transportation costs and extended shelf life. As milk continues to be in surplus, manufacturers in the organic milk powder market are investing heavily in pioneering the development of innovative drying technologies that center on organic powder production. These statistics illustrate that organic dairy is not losing market share but may need to look at different models for the supply side that reward higher components and fat, plus tackle long term supply management.

CROPP Cooperative released its 2019 pay price in January 2019. CROPP is the only buyer that is transparent in its pay price structure and publishes the information on its website. Currently, there is no breakdown by region or a pay price for the Grass Fed standard. These pay prices are set by the CROPP Board of Directors and may change during the year as the market changes.

CROPP Cooperative/Organic Valley - 2019 farm gate pricing

Month/Year $/cwt
Jan-19 $32.42
Feb-19 $32.42
Mar-19 $29.24
Apr-19 $29.24
May-19 $27.13
Jun-19 $27.13
Jul-19 $27.13
Aug-19 $29.24
Sep-19 $29.24
Oct-19 $29.24
Nov-19 $29.24
Dec-19 $32.42
National Average Quality Premium $1.80
12-month Average Price* $31.30

In this edition of the NODPA News, we have an in-depth look at the newly re-launched Grass-Fed label and all the many challenges and opportunities that brings. Of as much interest is the new contract that Maple Hill is sending out to its producers that reflects the company’s major problems with trucking and balancing. Maple Hill has accepted that the organic milk market in the Northeast will come under even more pressure as larger organic operations move to Missouri and other areas in the Midwest, leaving no regional market for balancing Grass-Fed milk that is not utilized in Grass Fed product. For this reason, in July 2019 they are moving to a quota system with the ability for annually updating the base volume and a stable year-round base pay-price of $35.58, with an expected average quality and component price of $2.58 per hundred pounds. The base production allocation for each farm resets every July based upon each farm’s total prior year’s production and farms may request an increased in base to reflect internal growth or growth via purchased animals. Maple Hill is also offering an incentive for those operations that can match their demand for supply with what they are calling an Over-or-Under Base Premium so that those producers that can go over their base in December will be rewarded with a higher base price and those that can go under their base in the Spring will also receive payment for milk not produced. Trucking charge will be increased to $740 per month which will obviously affect smaller operations more, and there will be a $.90 per hundred pounds deduct from July 2019 to July 2020 for the cost of managing the 2019 spring flush. They will also not pick up any farm that does not have 1,000 lbs. every other day. While there will be challenges with this new system, especially with an annual update of the quota base which will eventually decrease the Over/Under Premium, this is a good faith attempt at supply management with financial rewards for the producer. See chart below for more detail:There are unconfirmed reports that Danone NA is looking for more milk in the Northeast but we have no details on the volume they may be looking for or the location of the farms.

July 2019 through June 2020 OVER/ UNDER Pricing, Maple Hill

Jan Feb Mar April May June July Aug Sept Oct Nov Dec
Base $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38 $35.38
Avg. Quality+ Comp $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62 $2.62
Base with Avg. Quality and Comp $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00 $38.00
Premium Over Over Over Under Under Under Under Over Over Over Over Over
Penalty None None None Over Over Over Over None None None None None
Over $50.00 $42.00 $38.00 ($20.00) ($8.00) ($8.00) ($20.00) $36.00 $36.00 $38.00 $45.00 $50.00
Under $5.00 $25.00 $25.00 $10.00

As many had predicted, CROPP cooperative had a second poor year in 2018, with a record loss of $12.6 million before tax on gross sales that increased one percent. CFO David Poremba said in the company’s annual report that the company, “continue to experience similar headwinds that have challenged us in recent years: continued increase in demand for butterfat-rich products, which creates an unprofitable milk balance; pricing pressures from non-dairy alternatives; low conventional farm prices, which drives down retail prices; and transportation inflation.” In 2018, the company reduced gross inventories of non-fat powder by 23 percent or about $37.5 million from 2017’s levels by selling both the current year’s powder and the inventory into the conventional market for a loss on their balance sheet. In 2017, CROPP reported a $10.8 million net loss. CROPP is also facing more problems with its joint venture with Dean Foods which is also one of their distributors and packagers. Dean Foods is currently trying to sell the whole company or break it down into different parts that can be more easily marketed. Some of the major players in the industry, like DFA, are rumored to be interested in buying Dean Foods and any new owner might cause problems for CROPP. Difficult times are ahead for the company and its farmer owners.

The drive to stop the import of fraudulent organic grains that has been championed by OFARM appears to be making progress in the most important place, the market. USDA FAS reported organic import volume totals for 2018 of: Corn 8,677,613.60 bu.; Soybeans 12,001,843.19 bu.; Durum Wheat 809,616.68 bu. Compared to USDA FAS organic import data from 2017, corn imports are down 43 percent; soybean imports are down 25 percent; and durum wheat imports are down 42 percent.

Corn is trading steadily up from 2016-2017 lows with an average bushel price of $9.50. Trade in other grains has been inactive, with little movement on price. USDA NASS National Crop Progress Report released April 8, 2019 reported only small amounts of crop planted: Corn Planted, 2 percent; Sorghum Planted, 14 percent; Oats Planted, 27 percent, Emerged, 25 percent; Winter Wheat Headed, 3 percent; Spring Wheat Planted, 1 percent; Barley Planted, 2 percent.

Please click on the links, below, for pay price and feed price graphs.

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