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DairyBusiness Update: April 8, 2014


Update on “Down Under”
   High Ground Dairy’s Eric Meyer reports March 2014 Fonterra New Zealand milk collections were up 20.4% versus last year. North Island production was up 28% and South Island production was up 12%.
     Year-to-date (Jun-Mar) milk collections are 6.3% higher than last season.  N. Island was up  6.6% and S. Island was up 6.2%.
   New Zealand suffered a major drought during the tail end of last season that sent Mar-May 2013 milk volumes DOWN 24.5% vs. 2012.
  Also, Fonterra will be offering two opportunities for their Farmer Shareholders to lock in the price paid for a percentage of their milk in the 2014/15 season. The second iteration of the Guaranteed Milk Price Program will be offered on 60 million kgMS (132 million pounds) in two separate tranches, according to Meyer.

February Dairy Trade Data Has Some Cracks
   That is the read from High Ground Dairy’s Eric Meyer. Meyer writes; “As anticipated, February US dairy exports remained firm as most dairy commodity prices held within an extremely elevated range. Cheese, butter and whole milk powder continued to shine versus the previous year.
   However, there were some cracks in the data suggesting some typical trends in seasonal exports are breaking down due to prices at or near all-time highs. While we do anticipate exports to remain firm in certain commodities through at least the first half of 2014, recent international price weakness in milk powder markets may prompt the US to lose a bit of market share in global trade as more competitive product makes its way into the supply chain. To learn more of Meyer’s analysis, write him at dairy@highgroundtrading.com.

World Market Decline/Powder Shipments Very Telling
   February was another good month for U.S. dairy exports but a softening world market is cause for concern, according to Alan Levitt with U.S. Dairy Export Council (USDEC). Speaking in Monday’s DairyLine, Levitt reported that, on a daily-average basis, U.S. export volumes in February were the highest in six months. By volume, U.S. exports were up 19% from last year and by value, exports were up 37%.
“We saw very good sales of cheese, whey proteins and butterfat,” he said. Mexico remains our largest customer, but like last year, our fastest-growing markets are Southeast Asia, China and the Middle East/North Africa region.
   “However, the one number that makes me nervous is the slowdown in milk powder shipments in the last few months,” Levitt said. From April-October last year, The U.S. moved more than 51,000 tons of NDM/SMP per month. But in the last four months, just 41,000 tons per month were shipped.
   “With less powder going overseas, inventories are building,” he said . In just three months, December, January and February, U.S. NDM stocks increased 59%.
   The recent drops in the Global Dairy Trade auction reflect the changing sentiment in the world market, according to Levitt.
“It appears we plateaued a couple months ago and now we’re moving in a new direction,” Levitt reported. “World milk supplies have come on like gangbusters over the last 8-9 months, and after buying up everything in sight since last fall, China seems to be satisfied for the time being.”
   In the last six weeks the overall on GDT price index has dropped 18%, according to Levitt, and the lowest it’s been in more than 13 months. Even though the results of the auction just reflect product traded on the auction, Levitt said it’s a precursor to lower prices in the U.S. market in the months ahead.
   “We’ve already seen all the U.S. powder price series start to slide in the last few weeks. But the SMP auction price is now well-below any of the U.S. price series, so our prices are going to continue to adjust downward,” he concluded.

CWT Moves More Offshore
   Cooperatives Working Together (CWT) accepted 17 requests for export assistance from Dairy Farmers of America, Maryland & Virginia Milk Producers Association, Michigan Milk Producers Association, Northwest Dairy Association (Darigold), and Tillamook County Creamery Association to sell 4.556 million pounds of Cheddar, Gouda and Monterey Jack cheeses and 2.480 million pounds of 82% butter to customers in Asia, Central America, and the Middle East. The product will be delivered through August 2014.
   Year-to-date, CWT has assisted member cooperatives in selling 40.792 million pounds of cheese, 31.903 million pounds of butter and 3.366 million pounds of whole milk powder to 27 countries on five continents. These sales are the equivalent of 1.098 billion pounds of milk on a milkfat basis, according to CWT.

Raw Milk Becoming ‘Udderly’ Political
   Kimberly Kindy, writing in the Washington Post, reports that an alliance of food activists and anti-regulation libertarians is battling to legalize raw, unpasteurized milk, despite warnings from health officials about the rising toll of illnesses affecting adults and children alike.
   As the popularity of raw milk has grown, so too have associated outbreaks. They have nearly doubled over the past five years, with eight out of 10 cases occurring in states that have legalized sales of the unpasteurized product, according to Centers for Disease Control and Prevention data. Public health officials have also documented how pathogens in raw milk have produced kidney failure in more than a dozen cases and paralysis in at least two.
   But distrust of government and a thirst for the milk have helped fuel the movement to do away with federal and state restrictions despite the warnings. In states where raw milk remains banned, black and “gray” markets have emerged for enthusiasts seeking “moonshine milk” in the belief that bacteria-killing heat from pasteurization also kills powerful enzymes and eliminates other properties that can cure allergies, asthma and even autism.
   During this legislative session, 40 bills have been introduced in 23 state capitals, all seeking to legalize unpasteurized milk within state borders.
   Read more at http://www.washingtonpost.com/politics/political-push-for-raw-unpasteurized-milk-is-increasing-access-but-illinesses-are-up-too/2014/04/04/e62bc884-b443-11e3-8020-b2d790b3c9e1_story.html?hpid=z1

CDFA: California 2013 Recap
   California’s total milk production in 2013 was down 1.3 percent from 2012, according to the California Department of Food and Agriculture’s Annual Dairy Statistics. The number of dairy cows was down 2.5 percent, milk per cow was up 1.2 percent, and the number of dairies decreased 4.3 percent.
   The annual average prices paid to producers was $18.49 per hundredweight (cwt.), with the lowest average price in 2013 at $17.30/cwt. in March and the highest average price at $20.77/cwt. in December.
   The year 2013 started with lower milk production in comparison to 2012, with net decreases through July when compared to the same months in 2012. Milk production began to increase in August and recorded net increases through December when compared to 2012. However, total milk production for the year finished at a negative 1.3 percent (-545.2 million pounds) when compared to 2012.
   The five leading milk producing counties recorded 73 percent of the milk production in 2013: Tulare, Merced, Stanislaus, Kings, and Kern counties.
   Grade B milk production in 2013 recorded an increase of 92.2 percent (+317.7 million pounds) when compared to 2012. Milk production per cow in 2013 was estimated at 23,234 pounds and the number of cows estimated to be at 1.77 million head.
   In 2013, utilization of butter and dried milk powders (Class 4a) dropped slightly to 34.4 percent (compared to 35.2 percent in 2012), while the percentage of the milk supply going into cheese production (Class 4b) increased slightly to 44.2 percent in 2013 (from 43.4 percent in 2012).
   In comparison to 2012 production, California butter production showed a decrease of 3 percent, nonfat dry milk production significantly decreased by 29.8 percent (offset by a 70.4 percent increase in the production of “other dry milk products” including skim milk powders), while cheese production increased by 2.7 percent in 2013. For the top three cheeses (comparing 2013 to 2012): Mozzarella increased 2.7 percent, Cheddar increased 7.9 percent, and Monterey Jack showed a slight decrease of 1.8 percent.
   In 2013, utilization of pooled milk for Class 1 (fluid milk) products was at 13.1 percent, similar to the utilization in 2012. Class 1 sales continued to decline, recording a decrease of 1.4 percent compared to 2012. Whole, lowfat, and skim milks showed decreased sales compared to 2012, while reduced fat milk sales displayed insignificant change and half-and half sales showed an increase of 6.5 percent.
   The 12-month average prices paid to California producers in 2013 was $18.49/cwt., compared to $16.59/cwt. in 2012. Average prices paid peaked in December at $20.77/cwt. At the end of 2013, milk production was on the increase, inventories of dairy products were strong, exports of dairy products continued to be robust, and prices paid to producers were above last year levels.
   To view the entire report, log on to: http://www.cdfa.ca.gov/dairy/pdf/Annual/2013/2013_Annual2012_Data.pdf.  

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   The bleeding continued in this morning’s cash cheese market where the 40lb. blocks dropped 3.5¢, following yesterday’s 5¢ loss, and are now trading at $2.2650/lb., down 16.75¢ from their most recent record peak. Two cars were sold, the 1st at $2.29/lb., the 2nd at $2.27/lb., but again an uncovered offer took the price down further. The 500lb. barrels, also on an uncovered offer, succumbed to the downward pull of the blocks and plunged 7.5¢, to $2.15/lb., down 22.75¢ from their most recent record high. And, the spread is back up to an unsustainable 11.5¢.
   Butter was unchanged for the third session in a row, holding at $1.97/lb., with no activity.
   FC Stone market analyst Ryan Cox says "The path of least resistance for butter is to the downside. For all practical purposes, Easter buying is over."
   Grade A nonfat dry milk was also unchanged today, holding at $1.9975/lb., again with no activity.

Today’s Market Closing Prices
Butter: Unchanged, at $1.97/lb.
Cheddar blocks: Down 3.5¢, to $2.2650/lb.
Cheddar barrels:  Down 7.5¢, to $2.15/lb.
Grade A nonfat dry milk: Unchanged, at $1.9975/lb.
NOTE: Due to technical problems on the CME Group's futures and options platform, trading in dairy and other agricultural commodities was halted today before 1 p.m, CDT. Futures and options trading in dairy, corn, wheat, live cattle, and other contracts was halted, and the CME said it would cancel some orders while others would stand. The market was back about a hour and a half later.
Class III milk: April $24.02 +7¢; May $21.58, +15¢; & Jun. $20.60, +13¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $19.96, -3¢ from Monday. The 2nd half average is now at $19.45, unchanged from Monday.
Looking ahead:
   The Agriculture Department issues its latest Crop Production report tomorrow along with the monthly World Agricultural Supply and Demand Estimates report, which will include the latest milk production estimate and milk price forecasts. California’s May Class I milk prices are announced by the California Department of Food and Agriculture on Thursday.
Wednesday on DairyLine:
   Ag Secretary Tom Vilsack updates us on farm bill and livestock disaster     
   PR counselor Renea Heinrich discusses the importance of having a communications