The USDA announced Class III price for the month of August is $11.20/cwt up $1.23/cwt from July

but down $6.12/cwt from August 2008. Regardless, it is the highest Class III reported price yet this year. The 2009 average Class III prices now stand at $10.29/cwt, down from $15.51/cwt a year ago. The actual 2009 average price FDA paid to members through August is $12.19/cwt including premiums or $1.90/cwt over the announced average ytd Class III.

Despite terribly low milk prices, U.S. milk production in July was flat relative to 2008. Minnesota production was up +5.9% exceeding any other state in the country. Wisconsin production was up +5.8%, Michigan +4.6%, and Iowa +4.8%. Western States continue experiencing significant decline with California (-5.0%), Idaho (-3.5%), New Mexico (-2.8%), and Arizona (-8.3%). National cow numbers were reported down 145,000 in comparison to July 2008, although national production per cow is up 1.6%.

Last month I reported that the Secretary of Agriculture announced a temporary increase in dairy product price supports that are projected to end October 31, 2009. Shortly before they recessed in July, the Senate passed an amendment offered by Senator Bernie Sanders from Vermont to appropriate $350 million to USDA to assist dairy producers. The original proposal was focussed on further increasing support prices which are being viewed by some analysts as seriously unwarranted and disruptive to the market. National Milk Producers Federation (NMPF) is strongly urging that the needed federal assistance, if appropriated, be used for dairy product food and nutrition programs. NMPF analysts claim that U.S. dairy producers are much better off if USDA appropriated the funds toward properly managed food and nutrition programs such as food banks and other credible sources verses an increase in Dairy Product Price Supports (DPPS) that may possibly result in a slower milk price recovery.

I was invited to meet with Governor Pawlenty along with nine other Minnesota CEO’s on August 25. The Governor was interested in receiving an update from the small group representing a wide variety of Minnesota businesses. I was pleased with the Governor’s interest, concern, and support regarding the dairy industry in Minnesota. The meeting provided me with the opportunity to discuss a number of concerning issues pertaining to Minnesota’s dairy producers including health care, livestock and dairy profitability programs, permitting, increased costs including inspection fees, education in modern day livestock agriculture and other issues important to the sustainability of our dairy producers in Minnesota. I am pleased that we at least have his ear.

FDA milk receipts are seasonally down. The school pipeline is being filled resulting in less milk available for cheese production nationwide. FDA sales remain in balance as we begin the process of meeting with customers and budgeting 2010 sales. We remain cautiously optimistic that markets will continue to improve in the fourth quarter as we continue approaching the traditional high demand season.

FDA construction of the new whey evaporator complex is on schedule. Site work, electrical service mains, and massive footings have been poured for the building and equipment. The large evaporator calandrias are near completion and being built by Seitz Stainless Fabricators in Avon, MN. Precast walls are being supplied by Wells Concrete Products from Mankato, MN and will begin being erected in late October. We hope to have the building enclosed prior to winter and expect to commission the new equipment in early summer 2010.

FDA’s fiscal year ends September 30, 2009. We believe FDA will end the year with respectable results along with a strong balance sheet considering the challenging 2009 economic time period. We look forward to seeing you at the upcoming November unit meetings.

First District Association will forward contract milk based on Class III futures for FDA members and customers who desire to lock in base values for milk. First District Association also provides a valuable option for interested and qualified members to "Average Price" a portion of their deliveries. This process allows for a smooth cash flow with level prices. Market information can be obtained by accessing the FDA Internet web page at www.firstdistrict.com, calling our voice mail system toll-free at 1-866-593-4235 or locally dial 593-4235, phoning Blimling and Associates at 1-800-726-9928, or contact Glenn Kaping at (320) 593-4239.