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Optional for serving: Assorted toppings such as jam, fresh fruit, syrups, granola ... whatever floats your boat!
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Prepare a water bath for the yogurt by adding about two inches of water to a wide, deep pot (for example, a canning pot, pasta pot, soup pot, etc.).
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Place the pan over high heat and bring the water to a temperature where a great deal of steam is rising from the surface of the water but it is not boiling.
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Place a tight-fitting lid on the pan and turn off the heat.
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Put a separate kettle of water over medium heat on another burner.
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While that heats, prepare the yogurt as follows.
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In a large mixing bowl, whisk together the sweetened condensed milk and water until thoroughly combined.
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Whisk in the cold milk.
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Set aside.
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Measure the cup of yogurt into a medium-sized mixing bowl.
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Gently whisk in a ladleful of the warm milk/water/condensed milk mixture until smooth.
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Repeat with two more ladles of milk.
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When it is completely smooth, pour into the remaining hot milk and whisk gently until smooth.
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Position a fine-mesh strainer or a colander lined with cheesecloth over another bowl and pour the liquid through the strainer.
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Use a spatula or wooden spoon to press any lumps through the strainer.
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This guarantees a silky finished yogurt.
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If you dont mind a few lumps, you can skip this step.
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Pour the prepared yogurt into clean and empty jelly or baby food jars or into small drinking glasses.
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If using 8-ounce jars, this will fill about five or six jars.
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It is helpful to use jars or cups of a uniform height since you will be putting them in a water bath.
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Do not put lids on the jars.
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Remove the lid from the pan of hot water.
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Steam should still be coming from the surface of the water, but not quite as vigorously.
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If there is no steam, reheat the water slightly.
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Transfer the pan of hot water to a heat-proof surface.
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Arrange the jars in the hot water.
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Use the kettle to add enough water, if necessary, to come about 4/5 of the way up the sides of the jars.
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Lay a bath towel over the pot in such a way that it covers the top of the pot but does not fall down into the yogurt or water.
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Now the hard part is done.
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All that remains is to let the water return to room temperature.
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In my house, this takes about four or five hours.
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You may have to adjust this time slightly depending on how warm your climate (or thermostat) is at the time you make it.
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When the water is room temperature, the yogurt should be set (in other words, it may wiggle like a firm jelly when gently shaken, but it wont be liquid.)
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If using jars, you can screw or clamp on lids.
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If using cups, cover lightly with plastic wrap.
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Either way, refrigerate for two hours or more before eating.
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Around these parts, we like them with a dollop of homemade blueberry or strawberry jam or a scoop of crushed pineapple.
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Note: dont tell anyone I said this, but its also really good with a healthy spoonful of dulce de leche (yes, I am aware of the irony inherent in that statement) on top for dessert.