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DairyBusiness Update: August 14, 2014


Cash Dairy Prices Soar in Chicago
Cash cheese and butter prices had a great day today in Chicago, with prices soaring and lifting Class III futures contract settlements. Unfortunately the blast did nothing to stop the bleeding in the cash nonfat dry milk market. Read the full account below in our Mielke Market Daily recap.

Butter Shortage Driving Prices?
   Butter prices in the Central region increased following the CME Group cash trading, reports USDA’s Dairy Market News. However, buyers note limited bulk butter available in the F.O.B. spot market. The undertone is firming with active interest for butter going into retail and food service accounts. Bulk butter is sought after as many manufacturers comment on being in a butterfat deficit situation. Production levels are steady for the most part with the primary focus on salted butter manufacturing. New export orders are slow as some European and Oceania butter market prices fell, while U.S. prices went higher.
   Butter production in the West is mostly steady. Milk production continues to trend seasonally lower, but some increased cream volumes are becoming available in the region. Schools have begun to open. With stronger fluid demand and active skimming, additional cream is available for manufacturing from bottlers. Some butter manufacturers are still selling cream to ice cream and cream cheese accounts, but are interested in running churns as heavily as possible to fill butter demand. 
   Retail butter demand is good, with buyers looking to purchase additional loads when possible. Manufacturers are aware of the need to increase print butter supplies and are beginning to schedule increased production time. Bulk butter continues to move well under both contract and spot offerings. Export demand has slowed as international prices are well below U.S. domestic prices. Butter stocks are below year ago levels and buyers are looking to secure inventories for their third and fourth quarter needs.

Midwest Cheesemakers Need Milk, the West Has it
   Milk tightness is constricting cheese production in the Midwest, according to Dairy Market News. Some scheduled and expected milk deliveries to plants have been reduced in volume this week. Cheese plant managers have received calls from other cheese producers looking for extra milk, to no avail. This has led some contracted buyers of barrels to be told that expected order delivery will have to be reduced. Barrels are already in tight supply, so future reduced contract deliveries with further tighten the situation. 
   Relief to the milk tightness is not expected in the immediate future. Some NDM producers are moving milk from dryers to cheese when the capabilities are available.  Higher cheese prices are giving some buyers pause but other buyers have obtained extra deliveries, sometimes from inventory rather than current production. Cheese manufacturers are more eager to sell inventories with recent cheese price increases.
   Western cheese production is mostly steady. Hot weather and seasonally lower production levels have slowed milk intakes, but additional milk is available to meet demand. Increased supplies of nonfat dry milk at lower prices are also helping to add to milk solids to be used to fortify cheese vats. Wholesale cheese prices moved higher and have tempered some of the demand for additional loads above contracted needs.    
   Those companies with various outlets for their milk supply are often prioritizing cheese production above alternative products. Export demand for cheese is showing some increased interest, but buyers are price conscious and often waiting for price breaks to make purchases. Domestic demand is good and supplies are ample to fill most orders. 

Eastern Weather is Right for Milk Production
   Northeast and Mid-Atlantic milk production is holding steady as temperatures conducive to cow comfort continue, although component levels are seeing slight declines, according to Dairy Market News. Sales to bottlers are improving with solid demand from educational institutions. Manufacturing milk volumes at balancing plants are steady. Southeast milk production increased slightly in some areas, as cooler temperatures prevailed. Sales are increasing in parts of the region due to schools starting back up. Contacts note unusually heavy milk volumes are going to manufacturing compared to previous years.
  Florida has seen up to 6 inches of rain over the past three days leaving farm pastures soaked and muddy, as the heat index ranges over 100. The milk production level continues to fall given those conditions. Class I demand has strengthened with steady ordering expected as classes resume. The situation of increased demand and lackluster milk production sparked 80 imported loads of spot milk. 

Weekly Cold Storage: Butter Down/Cheese Up
     USDA’s weekly cold storage holdings from selected storage centers shows the following in thousand pounds - including government stocks:   

                           BUTTER :  CHEESE                      
                08/11/14   21,498 :   89,849                 
                08/01/14   21,609 :   87,906                     
                Change       -111 :    1,943                     
              % Change         -1 :        2                     

   Big Cheese Nominations Requested
The National Cheese Institute is now accepting nominations for its highest honor, the NCI Laureate Award. The award winner will be recognized at a special ceremony during IDFA's Dairy Forum 2015, January 25-28, at the Boca Raton Resort & Club in Boca Raton, Fla. Nominations must be submitted by September 19, 2014, and there is no fee to enter.
   Candidates should be business or academic leaders who have made significant, prolonged contributions to the development and growth of the cheese industry. The award recipient is selected by a panel of industry professionals based on the nominee's overall career achievements.
   "The success and continued growth of the U.S. cheese industry is driven by people who are dedicated to quality cheesemaking and open to innovative ideas," said Connie Tipton, NCI president and CEO. "We look forward to celebrating these individual contributions with the presentation of the 2015 award."
   For more information, contact Tracy Boyle, IDFA director of boards and employee relations, at tboyle@idfa.org or download the nomination form here.    

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Cash cheese and butter prices in Chicago continue to defy “logic,” gravity, and certainly world levels. The block Cheddar pole vaulted 6¢ this morning, following yesterday’s 2¢ jump and 2¢ on Tuesday, and that after slipping 1¢ on Monday. The blocks are now trading at $2.19/lb., the highest they have been since April 28, 2014. Four loads traded hands this morning, the first at $2.16/lb. and the final sale at $2.19/lb. Two bids at $2.17/lb. went unfilled. A sale took the Cheddar barrels to $2.1875/lb. but an unfilled bid rolled them up hill to $2.1950/lb., up 3.5¢ on the day, following yesterday’s 1¢ advance, 1.5¢ Tuesday and 1.25¢ on Monday. The inverted spread has shrunk to just 0.5¢ above the blocks.
   Class III futures responded with double digit gains: Aug. +12¢, Sept. +64¢, Oct. +31¢, Nov. +19¢ & Dec. +11¢.
   But the rocket fire came in butter today which blasted off 16¢, to $2.66/lb., a new high for 2014 beating late July’s $2.62/lb., and may pound on the door of the all time record of $2.81/lb. in September 1998. Thirteen carloads found buyers this morning, the first load selling at $2.5225/lb. and the price kept climbing. A bid at $2.62/lb. was left on the board as was an offer at $2.67/lb. In case you’re keeping track, 46 cars of butter passed through the CME this week, up from 37 last week. That’s a whole lot of butter!
   The bad news remains in the powder however, which dropped 7¢ this morning on a sale, to $1.42/lb., the lowest price since August 8, 2012. Two offers at $1.43/lb. were left on the board. The spot has plunged 23¢ in the past nine sessions.  

Today’s Market Closing Prices 
Butter: Up 16¢, to $2.66/lb.
Cheddar blocks: Up 6¢, to $2.19/lb.   
Cheddar barrels: Up 3.5¢, to $2.1950/lb.
Grade A nonfat dry milk: Down 7¢, to $1.42/lb.  
Class III milk (prelim.): Aug. $22.17/cwt., +12¢; Sept. $22.70, Up 64¢, Oct. $21.24, +31¢; Nov. $19.96, -19¢; & Dec. $19.22, +11¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $20.14, +20¢ from Wednesday. The First Quarter 2015 average is now at $18.16, +4¢ from Wednesday. The Second Quarter 2015 average today stands at $17.96, +2¢ from Wednesday.

Looking ahead:
   There are no additional USDA reports this week which we regularly monitor. Next week has a pretty good lineup however. The Agriculture Department issues its monthly Livestock, Dairy, and Poultry Outlook on Monday, along with its weekly Crop Progress report. The Global Dairy Trade auction is Tuesday and USDA issues its preliminary July Milk Production report Tuesday afternoon. USDA announces the September Federal order Class I base milk price Wednesday afternoon as well as the weekly National Dairy Products Sales Report. The monthly Livestock Slaughter report is out Thursday and preliminary data from the July Cold Storage report is issued Friday afternoon. As always, we will have complete details right here.

Friday on DairyLine:
   Cash cheese and butter prices defy logic and world levels. FC Stone dairy broker, Dave Kurzawski, talks about it.
   It’s corn silage season. University of Illinois’ Mike Hutjens has three important factors when we make this important
      forage crop for dairy cows in his weekly “Feeding Facts” segment.


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