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DairyBusiness Update: August 7, 2014

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June Dairy Exports Paced by Powders and Cheese
  
Nonfat dry milk/skim milk powder (NDM/SMP) exports reached record levels in June, topping 60,000 tons for the second straight month, according to the latest data, reported by the U.S. Dairy Export Council (USDEC). Once again, sales to Mexico (24,735 tons, +72% vs. a year ago) were particularly heavy. Vietnam (6,432 tons, +244%) also was a major buyer. In the first half of the year, U.S. NDM/SMP exports were 300,764 tons, up 13% from last year’s record pace. U.S. manufacturers exported 55% of their NDM/SMP production in the first half of the year.
   In the first half, exports of WMP were more than double what they were a year ago. January-June shipments were 30,292 tons, up 132%. Cheese volumes remained strong as well. June shipments totaled 33,930 tons, up 33% from last year and the second-highest figure ever. For the third straight month, the largest customer was South Korea; in the second quarter U.S. suppliers shipped 21,047 tons to South Korea, 62% more than last year. Sales to Japan also improved significantly, with second quarter exports of 18,033 tons, up 162%. In the first half of the year, U.S. cheese exports were 199,013 tons, up 34% from last year’s record pace.
   With the reversal in pricing relationships (U.S. butter prices turning more expensive than Oceania or Europe offerings), U.S. butterfat exports have slowed considerably.   Second quarter sales were 36% less than first quarter sales.
   Since peaking in March, whey exports have declined for three straight months. In May-June, exports were 6% less than a year ago, with WPC exports in particular down 14%. Lactose exports also are lagging; in the second quarter, lactose export volume was down 13% from a year ago.
   By value, June dairy exports were $669.2 million, up 14% from a year ago. That brings year-to-date sales to $3.92 billion, up 26%. In total, U.S. suppliers shipped 182,743 tons of milk powders, cheese, butterfat, whey and lactose in June, up 6% from last year. In the first half of the year, aggregate volume of key products was 1,078,272 tons, up 14%.
   U.S. exports (on a total milk solids basis) were equivalent to 17.3% of U.S. milk solids production in June. Imports were equivalent to just 2.7% of production.
   Complete details with charts and graphs are posted at www.usdec.org.

Dairy Export Picture Has “Bearish Shadow”
   The first half is in the books with substantial gains in most US dairy export categories, according to HighGround Dairy’s Eric Meyer. Cheese has been the primary winner throughout 2014, he said, as substantial gains were held through the second quarter and continued shattering records. New and converted plants have begun pumping out more whole milk powder earlier this year, most of which is headed overseas and doubling year-over-year exports during the first six months of the year. And as prices decline, NDM/SMP exports continue reporting solid YOY gains with established customers back in the market.
   But there have been some setbacks as well. Butter exports have fallen below year ago levels for the second straight month as the US market has become extremely uncompetitive to the rest of the world. There is little chance of beating lofty butter export totals from last year for the remainder of 2014. And in the cheese byproduct categories, challenges are mounting. Lactose has fallen below last year’s export volumes for the past three months, WPC for two straight months and dry whey saw its first YOY decline in June after a four month stretch of positive growth. In most categories, the US has gone from being at a price advantage to the rest of the world to on an island with some of the highest prices in the industry. This casts a bearish shadow for US export prospects in the not-too-distant future.
   Read Meyer’s complete analysis by writing him at ericm@highgroundtrading.com.

Butter Price Dip on Hold
   Central butter prices are mostly steady on the week as buyers are waiting for a clear price direction before taking large positions, says USDA’s Dairy Market News. The market tone is unsettled. Butter operators are churning at steady to slightly improved rates. Decisions on cream are mixed as supplies are generally loosening. Some butter makers are microfixing bulk butter supplies to combat declining milk production and lower butterfat levels to keep pace with print demand. Interest for butter domestically is mostly steady.
   Prices in various international butter markets shifted lower, which are hampering new export orders. Currently most butter manufacturers do not have enough excess butterfat to build properly for fourth quarter demand. Bulk butter purchasers are having difficulty securing spot loads unless bought on the CME Group or were previously negotiated. Prices range from market to 6 cents over the market, based on the CME Group with various time frames and averages used.
   Schools are opening in some areas of the West and increased cream is becoming available. Weaker cream multiples have butter manufacturers looking to increase butter production for fall needs. Domestic demand for retail markets is steady with some buyers waiting for lower prices to increase holdings. Export demand is light as international prices are lower. Butter stocks remain tight.

Midwest Milk Output is Down therefore Less Cheese
   Midwest cheese inventories remain tight, according to Dairy Market News. Most cheese plants are operating on reduced schedules reflecting reduced milk supplies, even after supplementing vats with condensed skim and nonfat dry milk. In most of the region milk production is slowing and in some cases, falling below expectations.    Moreover spot load availability is not very good, especially in areas where schools are close to resuming classes and milk pipelines are beginning to fill. In small pockets of the region where milk production has ticked up, plants are operating at close to full capacity, scheduling production a hard 6 days a week.
   Western milk supplies are moving seasonally lower, but cheese plants are finding milk solids to keep production near steady. Export demand has slowed, but domestic orders are steady with buyers often looking to add to orders on any price breaks. Stocks of cheese are adequate.

Russia Counters Sanctions, Bans Food Imports
   Reuters reports that Russia will ban fruit, vegetables, meat, fish, milk and dairy imports from the United States, the European Union, Australia, Canada and Norway, Prime Minister Dmitry Medvedev told a government meeting on Thursday.
  
The decision follows a decree signed by President Vladimir Putin ordering the government to ban or limit food imports from countries that imposed sanctions on Moscow for its support of rebels in eastern Ukraine and the annexation of Crimea.
   "There is nothing good in sanctions and it wasn't an easy decision to take, but we had to do it," Medvedev said. The ban is valid from Aug. 7 and will last for one year, he said.
   The story is posted at http://af.reuters.com/article/worldnews/idAFKBN0G70JG20140807.

FDA Gets Earful from Dairy Processors
   The International Dairy Foods Association (IDFA), representing U.S. dairy processors, submitted comprehensive comments last week to the Food and Drug Administration regarding the proposed changes to the Nutrition Facts label. Overall, IDFA agreed that updating the label is important to ensure that consumers get the information they need and that it reflects the best nutritional science available. However, a number of the proposed changes raised concerns about the underlying science and their likely impact on consumer understanding.
   FDA’s proposal would increase the daily value of some nutrients like calcium, potassium and vitamin D so many products would lose their ability to make nutrient content claims, such as “excellent source of calcium and vitamin D” or “good source of potassium,” despite no change to the products themselves. IDFA asked FDA to consider the impact of the proposed changes on the eligibility of foods to qualify for content claims and to consider the potential consumer confusion that would result.
In addition, IDFA asked FDA to allow higher levels of vitamin D fortification in dairy products  so they could continue to meet “good” or “excellent” source claims. 
   IDFA opposed the proposal to require a declaration of added sugars, saying it would not “assist consumers in maintaining healthy dietary practices,” which is the legal standard for adding a new nutrient under the Nutrition Labeling and Education Act. No scientific support exists for distinguishing between “added sugar” and “naturally occurring” sugars, IDFA explained, noting that the body doesn’t distinguish a difference between naturally occurring and added sugars.
   If FDA does finalize the requirement to declare added sugars, IDFA said the definition would need significant revision and must be consistent with the definition for the “no added sugar” claim. Also, lactose and milk ingredients containing lactose, such as dried milk, concentrated milk and whey, should not be included in the added sugars definition.
   IDFA provided recommendations regarding proposed changes to serving sizes of foods that can be consumed in one eating occasion and the modifications to reference amount customarily consumed (RACC), which is basis for labeling a serving in multi-serving packages. IDFA urged FDA to keep the RACC for ice cream at ½ cup rather than the proposed 1 cup and not split the ice cream category into one for bulk ice cream and one for novelty ice cream. If FDA determines the RACC for ice cream should be split to provide a separate category for novelties, then a ¾ cup measure for ice cream should be set based on current consumption data and product composition.
   IDFA supported FDA changes for the RACC serving size of yogurt to be reduced from 8 ounces to 6 ounces.
   IDFA agreed with FDA that there is insufficient evidence to support lowering the Daily Value for sodium from 2400 mg to 1500 mg. IDFA recommended that FDA convene a credible scientific panel to consider all recent research concerning sodium and health, and to recommend a new Dietary Reference Value for sodium.
   Pointing out the large costs of product reformulation and revisions to packages and labeling associated with these changes, which would require updates to every retail package of foods and beverages sold in the United States, IDFA asked for an extended compliance date of four years following the publication of the final rule for all proposed changes.
Read the executive summary to IDFA’s comments here.
Read the full comments here.

MilkPep Has New CEO
   The Milk Processor Education Program (MilkPEP) board of directors has named Julia Kadison Chief Executive Officer. Kadison previously held the position of interim CEO/vice president of marketing for MilkPEP.
   “The dairy industry is in a state of transition, and I'm thrilled that we have Julia Kadison to lead MilkPEP through this evolution," said Jay Bryant, CEO of the Maryland & Virginia Milk Producers Cooperative and chairman of the MilkPEP board. "As interim CEO, she has proven that she has the experience and vision to lead our organization.
“She has already introduced a strategic new program direction, including a powerful new advertising campaign and a cause marketing initiative that is truly uniting the industry. Her vision for how MilkPEP can evolve its consumer marketing initiatives to spur milk consumption is exactly what the industry needs,” Bryant added.
   Since joining MilkPEP in 2006, Kadison has spearheaded several successful marketing campaigns. Most recently, she directed the development of the industry’s new “Milk Life" campaign, which spotlights milk's high-quality protein, and the launch of the Great American Milk Drive, which raises awareness of the need for milk donations in the nation’s feeding programs.
   Kadison also oversaw the industry’s entrance into the sports recovery market with the “BUILT WITH CHOCOLATE MILK” campaign, which touts the science-backed, post-exercise recovery benefits of chocolate milk.
   “I am grateful to the board of directors for giving me the opportunity to lead the MilkPEP program,” said Kadison. “This is a historically challenging time for the fluid milk category, but I feel optimistic about the future and the role that MilkPEP will play.”

California Cheeses Awarded by American Cheese Society 
    California cow’s milk processors that use the Real California Cheese and Milk seals brought home 24 awards from the 2014 annual cheese competition held by the American Cheese Society (ACS), July 31, 2014 in Sacramento. Two cheesemakers – Pt. Reyes Farmstead Cheese and Oakdale Cheese & Specialties – also were nominated as second and third Best in Show during the annual event.
   The American Cheese Society recognizes the finest cheeses produced in North America. A total of 1,685 cheeses and cultured dairy products were entered into the competition. California cheeses had another strong showing this year competing against 248 producers representing 39 states, plus Canada and Columbia.
   California cow’s milk cheeses that use the Real California seals won five first-place, nine second-place and 10 third-place awards in this year’s judging. Highlights from these wins include: 

  • Dairy Goddess Farmstead Cheese and Milk, Lemoore, 1st for “The Valley” Fromage Blanc, Flavored Cheeses/Fresh Unripened Cheese with Flavor Added – All Milk
  • Karoun Dairies Inc, Turlock, 1st for Blue Isle Mediterranean Yogurt Spread, Cultured Milk and Cream Products/Other Strained Cultured Products – All Milks
  • Oakdale Cheese & Specialties, Oakdale, 1st for Aged Gouda, American Made/International Style – Dutch Style – All Milks
  • Point Reyes Farmstead, Point Reyes, 1st for Point Reyes Bay Blue, Blue Mold Cheeses/Blue-Veined With a Rind or External Coating – Made From Cow’s Milk
  • Rumiano Cheese Company, Crescent City, 1st for Dry Monterey Jack, American Originals/Dry Jack Made From Cow’s Milk
  • Belfiore Cheese Company, Berkeley, 2nd for Belfiore Fresh Mozzarella Ovaline, Italian Type Cheeses/Fresh Mozzarella – under 8 oz. – All Milk
  • Di Stefano Cheese, Pomona, 2nd for Burrata alla Panna, Italian Style Cheeses/Burrata – Fresh Mozzarella Encasing a Distinctly Separate, Softer Curd and Cream, or other Soft Cheese, Core – All Milks
  • Marin French Cheese Company, Petaluma, 2nd for Triple Crème Brie, Soft Ripened Cheeses/Triple Crème – Soft Ripened/Cream Added – All Milks
  • Nicasio Valley Cheese, San Rafael, 2nd for Foggy Morning, Fresh Unripened Cheeses/Fromage Blanc, Fromage Frais and Quark – Made From Cow’s Milk
  • Sierra Nevada Cheese Company, Willows, for 2nd, Organic Raw Milk Monterey Jack, American Originals / Monterey Jack – Made From Cow’s Milk
  • Fagundes Old-World Cheese Company, Hanford, 3rd for Queijo St. John, Hispanic and Portuguese Style Cheeses
  • Sierra Cheese Manufacturing Company, Compton, 3rd for Part Skim Ricotta, Fresh Unripened Cheeses/Ricotta – Made From Cow’s Milk
       In total, 12 Real California cow’s milk cheese and dairy producers won awards with Oakdale Cheese & Specialties and Pt. Reyes Farmstead Cheese Co. named third and second Best in Show respectively. 
      Additional California wins included 2nd place for DiStefano for Smoked Scamorza and 3rd place recognition for Mascarpone and Fresh Ovoline; 2nd place for Nicasio Valley’s Loma Alta and 3rd for Nicasio Square; two 3rd place awards for Rumiano Cheese Company for Peppato Dry Jack and Organic Unsalted Butter; 2nd place for Karoun Dairies’ Canadian Style Sour Cream; 2nd place for Sierra Nevada Cheese Company’s Organic European Style Cultured Butter and 3rd for Heroes Greek Yogurt;  and finally, two 3rd place awards for Belfiore Cheese Company for Fior de Latte Mozzarella and Mediterranean Style Feta in Brine.
      California produces more than 250 varieties and styles of cow’s milk cheeses that carry the Real California Cheese seal, which certifies they are made with 100 percent California milk. Real California Cheeses can be found at retailers throughout the U.S., Mexico and Asia. For more information about California cheese and dairy products that carry the Real California Cheese or Milk seal, visit: RealCaliforniaMilk.com. For more information on ACS competition winners, go to: cheesesociety.org.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)  Cash block cheese is now trading at $2.10/lb., up another 1¢ this morning. Three cars traded hands, the first one $2.10/lb. the next at $2.11/lb., and the third at $2.10/lb. Again, there were no bids or offers. A sale rolled the barrels up another 1.5¢, to $2.1225/lb., enlarging the spread to 2.25¢. A bid at $2.12/lb. went unfilled.
   Front month Class III futures were up, the remaining months lost more ground.
   Cash butter held for the fourth consecutive session at $2.40/lb., despite another nine carloads exchanging hands. The first three cars sold at $2.38/lb., the next two at $2.3850/lb., the next one at $2.3875/lb., with the final three at today’s close. Two bids at $2.40/lb. went unfilled.
   Cash powder continued to weaken, down another 1¢ today, following a 2¢ loss yesterday, 5¢ on Tuesday, and 1¢ on Monday. The spot is down to $1.56/lb. Four cars traded hands today, three at $1.57/lb. and one at $1.56/lb., with an offer at $1.5625/lb. getting no takers.

Today’s Market Closing Prices 
Butter: Unchanged, at $2.40/lb.
Cheddar blocks: Up 1¢, to $2.10/lb.   
Cheddar barrels: Up 1.5¢, to $2.1225/lb.
Grade A nonfat dry milk: Down 1¢, to $1.56/lb.  
Class III milk (prelim.): Aug. $21.76/cwt., +12¢; Sept. $21.76, +21¢, Oct. $20.84, +19¢; Nov. $19.84, +3¢; & Dec. $19.22, -10¢. Based on today’s CME settlements, the Fourth Quarter 2014 average now stands at $19.97, +4¢ from Wednesday. The First Quarter 2015 average is now at $18.17, -6¢ from Wednesday. The Second Quarter 2015 average today stands at $17.97, -5¢ from Wednesday.

-----
Looking ahead:
   The California Department of Food and Agriculture announces the Golden State’s September Class I milk prices tomorrow (The Federal order Class I base is announced by USDA on August 20). Looking to next week, there won’t be a lot for the markets to feed on. The Agriculture Department’s weekly Crop Progress report is out Monday afternoon and the monthly World Agricultural Supply and Demand Estimates report is out Tuesday, which will include the Department’s latest milk production estimates and milk price forecasts.

  --- 
Friday on DairyLine:
   Dairy and Food Market Analyst editor, Jerry Dryer, discusses USDA’s corrected Dairy
         Products
report and says the additional cheese is NOT bearish.
   Dr. Mike Hutjens discusses his recent trip to Germany in his weekly “Feed Facts”
         program.

http://dairyline.com/friday.mp3

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