October 2009 Patron Newsletter

To: FDA Members, Association Creamery Members, Employees, and Milk Haulers

The First District Association 2009 fiscal year ended on September 30, 2009. Admittedly, I am looking forward to a better 2010 along with improved market conditions for dairy producers in the coming year. We believe your cooperative has provided significant leadership in competitive milk prices during 2009 with the sole intent of assisting our members the best we were able. Considering the difficult challenges the dairy industry was confronted with, we believe FDA experienced an acceptable year while maintaining a strong financial profile. We sincerely appreciate your support and input as we review FDA’s past year and future during our upcoming meetings. I would like to express my gratitude to all FDA members, excellent employees and milk haulers along with the FDA Board of Directors for everyone’s collective contribution toward the success of FDA.

FDA members should have received a formal invitation to attend your designated upcoming unit meeting. The unit meetings are important toward preserving the grass roots governance structure of your cooperative. The three year terms of Dan Hallberg, Tom Middendorf, and Keith Overman are expiring this year. The FDA nominations committee has selected the following slate of candidates for presentation and election.

Please review the enclosed biographies drafted by each candidate. Also, please mark your calendar for the FDA annual meeting to be held at the Litchfield Middle School on Saturday, December 12, 2009. FDA dividends and equity checks will be distributed at the annual meeting as customary.

The FDA Board of Directors pursued the important task of reviewing FDA Articles and Bylaws over the course of the past year. Most of the emphasis was directed toward clarification and simplification in an effort to improve our documents for ease of interpretation. I believe the committee did an outstanding job. The amended Articles and Bylaws that you received will be presented and voted on at your designated unit meeting.

The USDA September Class III milk price was announced at $12.11/cwt., up 91 cents from August. The cheese market for blocks and barrels during September averaged $1.3251 ($1.3458 in August) and $1.2983 ($1.3248 in August) respectively. Both Blocks and Barrels were down slightly in September. According to analysts from eDairy Inc., "The Class III market has developed and continues to display technical strength and indicators are pointing to higher prices. Dry Whey prices have also developed technical strength. USDA commercial disappearance tables indicate that demand is slowly improving with cheese demand up 1%. No doubt that the declining western milk production, Dairy Export Incentive Program, and CCC purchases of nonfat dry milk have contributed toward modest price recovery". According to the Blimling Research Report, "Everything is still fragile and rapid deterioration of basic economic conditions has stopped and perhaps even reversed."

The weakness in the U.S. dollar which is likely to continue as a function of economic sluggishness and lack of confidence in U.S. economic policy should result in improved U.S. dairy product exports in 2010. Asia continues to experience strong growth with China forecasted at 9% GDP next year. Other Asian countries are expected to grow by 4% or more. This is good news for FDA since we export a significant quantity of whey products to Asian countries.

Milk production in the 23 major states during August totaled 14.59 billion pounds, down (-0.2%) from August 2008. The negative national data reported has undoubtedly motivated the market resulting in escalating cheese prices during October. Minnesota September milk production was +4.4%, Wisconsin +3.7%, Michigan +4.6%, Texas +3.5%, California (-4.5%), Idaho (-2.7%), New Mexico (-1.1%), Washington (-3.1%) and Arizona (-7.4%). We are pleased that Upper Midwest Dairy producers have admirably endured with a reasonably strong expression of long-term sustainability during 2009.

Our Litchfield production facility continues to operate as efficiently as possible considering the seasonal time of year. Plant operations are taking full advantage of any available down time to perform routine annual maintenance along with needed periodic disruptions created by the plant whey evaporator project underway. During September 2009, FDA processed over 114 million pounds of milk (up 11% from September 2008). Product sales and inventory are well balanced.

First District Association is truly committed to the success of our dairy producer families. We believe FDA continues to be a truly unique and successful grass roots cooperative. We look forward to your presence at your upcoming member meetings.

Remember the five rules to be happy

The FDA unit meetings provide an important opportunity for members to inquire, discuss, participate, and vote on important governance issues pertaining to your cooperative. We hope to see you.

Monday, November 9 11:30 a.m. D The Oaks on Eagle Creek in Willmar

Friday, November 13 11:30 a.m. C Roadside Tavern in Roscoe

Monday, November 16 11:30 a.m. B Greenwald Pub in Greenwald

Wednesday, November 18 11:30 a.m. E Biscay Liquor

Wednesday, November 18 7:30 p.m. A Eagles Club in Litchfield

Friday, November 20 11:30 a.m. F Freddies Restaurant - Mora

First District Association is recognized as a quality food company with consistent high quality products meeting or exceeding customer expectations. FDA members contribute toward this excellent reputation by producing high quality milk. FDA will honor members at the upcoming unit and annual meetings for the amazing accomplishment of receiving the FDA milk quality award for ten years (not necessarily consecutive). To honor this great accomplishment, FDA will provide each award winner with a signed, framed print by noted rural artist and FDA dairy producer family, Bonnie Mohr.

After weeks of negotiations, $350 million was approved as part of the House-Senate compromise version of the fiscal year 2010 Agriculture Appropriations Bill. The Bill will likely be signed into law by President Obama this week. The compromise leaves $290 million for "Direct" support to dairy farmers using guidelines to be determined by the Secretary of Agriculture. At this time, we remain uncertain how these direct payments will be administered. The other $60 million is to be used for cheese and dairy product purchases for food banks and other nutrition and feeding programs.

Thank you to all who attended the Young Cooperator banquet in Avon. First District and the Young Cooperators are proud to announce Paul and Heather Wright as Young Cooperator of the Year. We are sure they will represent FDA well at the National Milk Conference in Grapevine, Texas this November.

Mark your calendars for the winter conference to be held February 5, 6 and 7 2010 in Alexandria.

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.

For Sale: Plastic twine, Netwrap, bunker covers and bale wrap. All sizes available. Can Deliver. Chris Kerfeld 320-333-9255.

For Sale: Registered Holsteins, 2 yr. old, good udders. Call Floralawn Holsteins - Scott Rickeman 320-587-4439.

For Sale: Eight (8) Holstein heifer calves. One week to six weeks old. Call 507-829-2955

For Sale: 25 Registered Holstein cows, 11 bred heifers, 11 heifer calves between the ages of 0-4 months. Plus milking equipment. Call Mark at 507-227-5836 or 507-723-6672.

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