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DairyBusiness Update: August 13, 2014


Northeast Butter Output Down, Fluid Milk Orders Rising
   Maintenance undertakings at various northeast butter manufacturing facilities have reduced output this week in the Northeast, according to USDA’s Dairy Market News. Multiples remain competitive, consequently, cream volumes are circumventing a few churning operations to Class II manufacturing.  Brokers are centering their attention on balancing current inventory levels, in order to minimize risk as market uncertainty prevails. Domestic demand is active as seasonal consumption picks up.
   Northeast cheese production varies at manufacturing facilities, with overall levels experiencing marginal declines. The impact of increasing fluid milk orders and fall-off in milk production are lessening milk intakes for cheesemakers. Cheddar inventories are adequate and growing in some channels.  A surge in mozzarella sales is reducing stocks as school orders increase.

Growing Milk Supply Doesn’t Bow Well for World Prices
   Stronger-than expected US milking herd growth in Second Quarter and sharply lower feed costs to come during second half 2014 give us more confidence that USDA’s 3.5% year over year milk production growth July-Dec will be achieved, warns HighGround Dairy’s Eric Meyer in his new U.S. Dairy Commodity Snapshot. He adds that, combined with strong gains already made in New Zealand and the EU-28, and the supply situation appears to be much better than it was six months ago.
   US cheese and butter markets will continue to remain much higher than global competitors through Third Quarter and may extend into Fourth Quarter due in part to inventories remaining well behind 2013. Also, domestic cheese and butter demand has remained robust with little to no erosion as would have been expected with extremely high prices this year.
 CME spot NDM prices have plunged over the past month and US dairy now finds itself largely uncompetitive on the global stage. Even though NDM exports have remained at record levels through June, expectations are for volumes to roll back considerably during the second half of the year.
    The US will have a difficult time competing in the international market for cheese and butter at today’s levels once product becomes available from Oceania during Fourth Quarter. Last season, New Zealand focused on whole milk powder to service the Chinese market. But with milk powder interest from China drastically diminished from the hyper-growth period (Q4’14thruQ1’15), New Zealand will shift some production back to skim milk powder/butterfat and cheese this season to capture better stream returns for their farmers. New Zealand will likely win back some of the marketshare lost to the US and EU over the past 12months
   To read Meyer’s complete analysis and view his price forecasts, write him at ericm@highgroundtrading.com.

Lagging NDPSR Prices: Butter Drops 4.8 Cents
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released this afternoon, shows the U.S. average block Cheddar cheese price at $2.0156/lb., up 0.5¢ from the week before, while the barrels averaged $2.0443, down  2.8¢. Butter, after three weeks of solid gains, reversed gears and dropped 4.8¢, to $2.4807/lb. Nonfat dry milk averaged $1.7958/lb., down 4.6¢, and dry whey averaged 69.71¢/lb., up 0.4¢. These prices are used in determining Federal order Class milk prices.

California Powder Price Slips 6.5 Cents
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $1.7786/lb. for the week ending August 8, on sales of 9.68 million lbs. The price was down from $1.8438/lb. the week before, on sales of 11.25 million lbs.

IDFA Says Goodbye to 25 Year Veteran
   After almost 25 years of working together, we are saying good bye to a dear friend and colleague, Clay Detlefsen, this week,” said Connie Tipton, IDFA president and CEO. “I am proud of all that Clay has achieved for IDFA, our member companies and the dairy industry. The programs and projects that IDFA has developed with Clay and our team of subject matter experts will continue and IDFA will provide the expertise that has proven to be so critical to the advancement of our member companies and other stakeholders.”
   Read more at IDFA’s website at www.idfa.org.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Cash cheese saw more strength today. Sales took the blocks up another 2¢, after jumping 2¢ yesterday and 1¢ on Monday, and are now trading at $2.13/lb. The first load went for $2.12/lb. and the second at $2.13/lb. A trade rolled the barrels up another 1¢, after gaining 1.5¢ yesterday and 1.25¢ on Monday, and now sit at $2.16/lb., 3¢ above the blocks.
   The sellers brought it to the CME today and the buyers took it, to the tune of eleven carloads of Double A butter. The spot jumped 7¢, to $2.50/lb., the highest it has been since July 29, after ticking up 2¢ yesterday and 1¢ Monday. Thirty three loads have sold so far this week and that after 37 cars found new homes last week. The first load today was at $2.4425/lb. and the price shot up from there, with two bids at $2.50/lb. going unfilled.  
   FC Stone dairy analyst Ryan Cox wrote in this morning’s Insider Opening Bell that "Butter continues to be supported by inventory concerns while NFDM leads the way lower, and weather in Oceania seems to be a non-factor going into the start of the season."
   Four offers took the cash Grade A nonfat dry milk down another 1¢, to $1.49/lb. A bid at $1.45/lb. was unfilled. The spot powder has now lost 16¢ in eight consecutive sessions.  

Today’s Market Closing Prices 
Butter: Up 7¢, to $2.50/lb.
Cheddar blocks: Up 2¢, to $2.13/lb.   
Cheddar barrels: Up 1¢, to $2.16/lb.
Grade A nonfat dry milk: Down 1¢, to $1.49/lb.  
Class III milk (prelim.): Aug. $22.05/cwt., +3¢; Sept. $22.06, Unchanged, Oct. $20.93, -11¢; Nov. $19.77, -16¢; & Dec. $19.11, -9¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $19.94, -12¢ from Tuesday. The First Quarter 2015 average is now at $18.12, -3¢ from Tuesday. The Second Quarter 2015 average today stands at $17.94, -1¢ from Tuesday.

Looking ahead:
   There no additional USDA reports which we regularly monitor the rest of this week but next week has plenty for the markets to feed from. The monthly Livestock, Dairy, and Poultry Outlook is issued Monday, along with the weekly Crop Progress report. The Global Dairy Trade auction is Tuesday and USDA issues its preliminary July Milk Production report Tuesday afternoon. The September Federal order Class I base milk price is announce by USDA on Wednesday, the weekly National Dairy Products Sales Report is out Wednesday afternoon, Livestock Slaughter report is out Thursday, and preliminary data from the July Cold Storage report is issued Friday afternoon.

Thursday on DairyLine:
    NMPF's Chris Galen gives us a preview of National Milk's Dairy Market Report to be
            released soon
   Greg Larson, from GEA Farm Technologies, checks in with his monthly "Robotic
            Milking Minute"

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