WEEKLY UPDATE July 1, 2016

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CONTENTS Page

Market Update 2

CA Overbase Prices 3

FMMO Pricing 3

Dairy Cattle Slaughter 3

Headline News 3

Mark Watte Passes Away 4

NRCS Incentives 4

Industry Events 4

* Weekly Update is provided from WUD as part of your membership benefits. Enjoy the latest information on issues impacting the dairy industry and WUD’s work to represent you at the local, state and national level.

It’s that time of year again, where dairy producers around the country have another opportunity to take time out of their day to go visit their local FSA office. I can imagine this usually ranks pretty high on the list of fun stuff to do. This time, your chance at some face time in a government office is related to the Dairy Margin Protection Program (MPP). 2016 payments have been periodically discussed in this newsletter, and we will continue to do so, adding some information about next year. Indeed, the sign-up period for calendar year 2017 is officially open. For those who already know their strategy, going early may allow you to check that off your list. If you don’t, you don’t have to worry yet: since the deadline to sign up is September 30, 2016, there is still plenty of time to think about your decision. Waiting until the end of the summer may show a different picture as prices move along to the fall. Currently, margin expectations average $8.84/cwt for the first half of 2017. Please note USDA changed a feature of the program this year. In a press release, USDA stated that “the final rule also provides improved risk protection for dairy farmers that pay premiums to buy-up higher levels of coverage by clarifying that 90 percent of production is covered below the $4 level even if a lower percentage was selected above the $4 margin.”

Ashley Avila of Lemoore was selected as the 2016 Dairy Princess for the California Milk Advisory Board’s (CMAB) District 7. Brigit Simas of Lemoore was selected as the 2016 Alternate Dairy Princess. The coronation took place before a crowd of approximately 400 dairy industry members, their families and friends, on Friday, June 24, 2016, at the Hanford Civic Auditorium in Hanford.

Allied Business Members at a Glance

Who’s Down with MPP? Sign-up for 2017 starts July 1, 2016

Interested in joining this group of supporters?

Call WUD today!

Ashley Avila of Lemoore Selected as District 7 Dairy Princess

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Average AA Butter NFDM 40# Blocks Barrels Dry Whey

May $2.0555 $0.7315 $1.3189 $1.3503 $0.2350

June $2.2233 $0.7577 $1.4690 $1.4990 $0.2408

July 1 $2.3500 $0.7821 $1.6250 $1.6700 $0.2550

Week to date 0.5 cent 1.32 cents 11.25 cents 13.50 cents 0.62 cent

Estimated* producer CWT prices

Price $/cwt Class 1 4a 4b

June $14.50 $13.51 $13.03

*Actual announced prices are in BOLD, estimates are in Italics

by Annie AcMoody, Director of Economic Analysis

What’s Up and What’s Not — Your Weekly Market Update

Dairy markets displayed more enthusiasm than a cheerleader with new pompoms this week, proudly showcasing increases in all four commodities that matter to California pricing formulas. The big winner was block cheese, ascending an impressive 11.25 cents to reach $1.625/lb. At the peak during the week ($1.66/lb), it was the highest price since mid-November 2015. Class III futures contracts have been going up and down in quite the spectacular fashion these past few weeks, and this week was no exception. The August contract is a clear example of the yo-yo pattern, with the contract going from $15.86/cwt Monday, up to a high of $16.75/cwt Wednesday, before going almost full circle to settle at $15.89/cwt today.

The second best increase goes to the California nonfat dry milk, who gained 1.32 cents. This may not sound as exciting, but it brought the price to $0.7821/lb – the highest since March. The western states average reported by DMN increased 1.5 cents, to $0.85/lb – the highest level since November 2015. Dairy Market News (DMN) reports “end user demand is moderate to good. The market undertone is steady to firm.” Reports pointed that organic nonfat dry milk sold in the Western U.S. this week was in the low $3/lb. That is one significant premium compared to conventional prices. Organic powder prices are unfortunately not included in the California nonfat dry milk price average. While on the topic of organic, DMN is reporting that mainly due to low milk prices received on conventional dairies, more producers are showing an interest in transitioning to organic.

Even the dry whey price, who has lately been slower than the line at the DMV, managed to pick up its usual pace, gaining 0.62 cent to $0.2550/lb. The nice thing with this increase, is that it solidifies the dry whey price in the next bracket up in the dry whey scale. With the pricing formula change announced by CDFA in May, this means that a dry whey price between $0.24/lb and $0.27/lb will generate $0.3850/lb in the Class 4b formula. With the previous formula, a dry whey price between $0.25 and $0.30 would have generated $0.3125/lb. The higher the dry whey price goes, the more the difference between the two scales grows.

Butter may not have gone through the week with loud fireworks, but the commodity’s performance ahead of the long weekend was still worthy of mention. The net gain for the week, 0.5 cent, brought the price to $2.35/lb. This may not be quite as high as 2014’s record July average of $2.46/lb, but comparing it to the past five-year July average of $1.89/lb certainly highlights the prowess. Domestic demand continues to be strong, which is certainly helpful. In fact, USDA projects milkfats domestic consumption to go up 4% year-over-year in 2016. Strong consumer demand is certainly helping to boost buyers’ confidence in the market, despite the higher prices. DMN reports “retail outlets and end users are eager to lock in prices or set up contracts in order to assure coverage through the end of the year.”

Latest Class Prices

Commodity Markets: CME - California Plants

Federal Order Class Prices

Federal Milk Marketing Orders (FMMO) are a very timely topic. To keep you informed on what prices are doing in parts of the country under Federal Orders, we will frequently include those class prices in the Friday Update.

Month Class I Class II Class III Class IV April all-milk price

May $13.14 $13.53 $12.76 $13.09 $15.00

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Dairy Cattle SlaughterRegion 9 (AZ, CA, HI, NV) dairy cattle slaughter was ahead of last year these past few weeks, jumping up 5% for the past two weeks of data available (June 11 and 18). Still, the head count for week #21, 13,200 head, was the lowest since the beginning of April. The head count for total U.S. slaughter was down slightly (-1%) for the week of June 11. The total was 49,800 head.

Headline NewsCalifornia Dairy Industry news and topics of interest.

Stories of Interest

• Milk and Other Surprising Ways to Stay Hydrated - - Most Americans have heard that they should drink eight glasses of water a day to stay hydrated, but there is surprisingly little data to support this advice. But now, a new “beverage hydration index” provides evidence-based suggestions for how to most efficiently hydrate. The index was developed from a British study published in December that tracked how long 13 common beverages remain in the body after being consumed. The hydration index is modeled after the well-known glycemic index, which measures how the body responds to the carbohydrate content of different foods. (The glycemic index is used to help individuals keep their glucose-insulin response under control.) The guiding principle behind the new hydration index is that some fluids last longer in your body than others, providing more hydration. After all, if you drink a cup of water and then immediately excrete half that amount in your urine, you haven’t added eight ounces to your water supply, but only four. The British study determined the hydration index of 13 common beverages by having the participants, 72 males in their mid-20s, drink a liter of water as the standard beverage. The amount of water still remaining in subjects’ bodies two hours later — that is, not voided in urine — was assigned a score of 1.0. All other beverages were evaluated in a similar manner, and then scored in comparison to water. A score higher than 1.0 indicated that more of the beverage remained in the body as compared to water, while a score lower than 1.0 indicated a higher excretion rate than water. The results showed that four beverages — oral rehydration solution, like Pedialyte; fat-free milk; whole milk and orange juice — had a significantly higher hydration index than water.  <more> June 30, 2016 New York Times

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Below is the location, date and time for the next California Milk Advisory Board BOD meeting: DoubleTree Hotel-Modesto, 1150 9th Street July 20 from 7:30 a.m.-5 p.m. July 21 from 8 a.m.-12 noon.

CMAB July Board Meeting California Leopold Conservation Award®

Sand County Foundation, the California Farm Bureau Federation and Sustainable Conservation are accepting applications through July 8 for the $10,000 California Leopold Conservation Award. The award honors California farmers, ranchers and other private landowners who demonstrate outstanding stewardship and management of natural resources.

Nominations must be postmarked by July 8, 2016, and mailed to Leopold Conservation Award c/o Sustainable Conservation, 98 Battery Street, Suite 302, San Francisco, CA 94111. Nominations may be submitted on behalf of a landowner, or landowners may nominate themselves. For application information, please visit www.leopoldconservationaward.org.

California Farm Leader Mark Watte Passes Away

Mark Christopher Watte, a proud and dedicated California farmer, plus state and national farm leader who stood tall for the industry on drought and other issues, passed away June 17, 2016 after a bout with cancer.

Watte operated his family farm called George Watte & Sons (George was Mark’s father). Mark grew cotton, alfalfa, triticale and corn for silage, black-eyed peas, pistachios, plus operated a 1,000 Jersey-cow dairy in Tulare. The Watte farming operation included Mark’s loving wife Joanne, Mark’s brother Brian Watte, his nephew Matthew Watte, and his son-in-law Jason Starr.

He farmed for 40 years and was a leader over the years in bringing technology to their farm, including GPS and laser leveling, site specific soil sampling, and variable

rate fertility. Mark was an advocate of agricultural research and supported university research trials conducted on the Watte farm, including seed variety testing, roller ginning Acala cotton, plant mapping, and pressure bomb use for better irrigation decision making. At the civic level, Watte was heavily involved in giving back to agriculture and the community. He served on the boards of the California Cotton Growers and Ginners, the Friant Water Authority, and the local People’s Ditch (water) Company.

Previous leadership roles included past vice-chairman of the California-based Calcot Limited cotton marketing cooperative, Tulare City Council member, and as the city of Tulare’s ‘Man of the Year.’ Joanne served as the city’s ‘Woman of the Year.’ In 1992, Mark served as the volunteer chair for World Ag Expo – the largest outdoor farm exposition in the world held in Tulare – where he continued to volunteer annually. He is a past board member of the local Farm Credit association.

Watte told Western Farm Press that he was most proud to “walk in the boots of a farmer, and continue his family’s farming legacy as food and fiber providers" - a family tradition started more than 100 years ago.

USDA’s Natural Resources Conservation Service (NRCS) is making air quality funds available to help agricultural producers improve and maintain air quality within designated nonattainment areas of California. EQIP applications are accepted year-round, but interested producers need to be ready by July 29, 2016 to be considered for this year’s funding.

More information is available in the program description on the NRCS website or by contacting the local USDA Service Center.

Article from Western Farm Press

NRCS Makes Air Quality Incentives Available