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DairyBusiness Update: Dec. 13, 2013

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More Capitol Hill can kicking
The House of Representatives, which is scheduled to adjourn for the year today, Friday the 13th, yesterday, passed a bipartisan budget for the first time in four years and approved a stopgap Farm Bill measure. The hope is to buy some time and finish the process in January but it remains to be seen if the Senate will go along with either bill.

National Milk’s Chris Galen stated; “Whether or not a short-term extension is approved (and it doesn't look as if the Senate will do so, even though the House has), we need Congress to make passing a new farm bill a priority as soon as possible in January, not just to prevent a dairy cliff, but because we need the assurances of a new and better safety net for dairy farmers.”

Whey price dip is substantial, lack of Farm Bill not affecting dairy markets
FC dairy broker Dave Kurzawski said on this morning’s DairyLine that the large spread between block and barrel cheese will eventually come back in line and “the pattern the past several months is that when the spread gets out of whack the barrels rise to meet the blocks and that patterns seems to still be in people’s minds as we enter the second half of December.”

The big issue Thursday was the future’s response to the cash bidding. The response was relatively negative, he said, steady to about 8 cents lower. Class IV, nonfat, and butter futures were down as well, he said, and indications to him are that this is a short-lived scenario we’re seeing.

When asked if the failure to pass a Farm Bill was having any effect on the markets, Kurzawski replied, “Not really. The market hasn’t focused on the fact that Congress can’t get it together,” and commenting on Land-O-Lakes joining the Global Dairy Trade auction, Kurzawski said it was a “step in the right direction.” He believes there’s going to be more and more of the large U.S. dairy based processors getting involved with global export and certainly global pricing.”

The 3.4¢ fall in the AMS-surveyed dry whey price is also weighing on trader’s minds, according to Kurzawski. “The questions are coming fast and furious as to why this is going on,” he said, but he is also hearing that dry whey has been trading slightly below the AMS prices anyway. “It is a substantial drop,” he said, “And we’re not sure why that is but there’s been talk that there’s some supply out there that’s starting to make its way to the market.”

Whey up!
Dairy Market News (DMN), yesterday, reported slightly higher Central dry whey prices based on premiums for spot loads. "The dry whey market tone is steady to slightly strengthening as export interest has improved," said DMN. The Central mostly midpoint at 55.38¢/lb., is up slightly from last week's 55.25¢/lb. West prices are unchanged with the mostly midpoint at 58.13¢/lb. DMN reports the market is “mostly steady with a firm undertone.”

Powder prices not heading lower anytime soon
USDA’s Dairy Market News reports that prices for West nonfat dry milk are higher on a firm market.  Domestic and international demand for NDM/SMP is “insatiable,” according to some sellers. The one sector of the NDM market showing slower demand is cheesemaking operations that sometimes use NDM for vat fortification. Cheese manufacturers indicate use of NDM at current prices does not pencil out to positive cash flow for commodity cheese selling between $1.75 - $1.90/lb.

DMN says NDM contracting activity is increasing for the first few months of 2014 as “buyers now realize there is little chance of prices decreasing in the near term.”

Mielke’s Market Daily                  
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
Cash cheese was bid higher this Friday the 13th. The blocks jumped to $1.9250/lb. on 1 unfilled bid, the 4th day in a row of gain.  An unfilled bid took the barrels up 3¢, following yesterday’s 2¢ rise, and is now trading at $1.83/lb. The spread is now at 9.5¢, down from 11¢ yesterday. The 40lb. blocks are up 5.25¢ on the week and 20¢ above a year ago. The 500lb. barrels are down 0.25¢ on the week, 20.5¢ above a year ago. Seven cars of block were sold on the week and 2 of barrel.

Interest in blocks is reported as stronger than barrels by a number of cheese plants, according to DMN, and has led to decreasing barrel production in favor of blocks in some plants. Cheese inventories vary. Some plants report inventories as tight, causing order fulfillment to be delayed. Other plant inventories are reported to be stable, says DMN.

Cash butter gave up another 3¢ this morning on 3 uncovered offers, following yesterday’s 6¢ plunge, and closed today at $1.57/lb. This is the 3rd week of decline for the Double A butter, down 7.5¢ on the week and 2.5¢ below a year ago. Seven cars traded hands this week.

No sellers in sight in the powder again today. One unfilled bid took the Grade A nonfat dry milk up another 0.5¢ this morning, after gaining 0.5¢ yesterday, 1¢ Wednesday, and 0.25¢ on Tuesday, and closed the day and the week at $2.08/lb., 3¢ shy of the all time record. Extra Grade also inched 0.5¢ higher this morning on a bid and closed at $2.0450/lb.

FC Stone Risk Management Consultant, Chris Hildebrand, wrote in yesterday’s eDairy Insider Closing Bell that "Nonfat demand is still good on a global basis. In the panic last week people met needs where they had to and now the market appears to be steady to even slightly negative."

Today’s market closing prices:
Butter: Down 3¢ , to $1.57/lb.
Cheddar blocks: Up 1.5¢, to $1.9250/lb.
Cheddar barrels: Up 3¢ , to $1.83/lb.
Grade A nonfat dry milk: Up 0.5¢, to $2.08/lb.
Extra Grade nonfat dry milk: Up 0.5¢, to $2.0450/lb.
Class III milk: Jan. +18¢; Feb. +11¢; Mar. +11¢. The 2013 Q4 average stands at $18.69/cwt., with a total 2013 average of $17.99/cwt., and a 2014 average of $17.59/cwt.

Looking ahead: The Agriculture Department issues its monthly Livestock, Dairy, and Poultry Outlook Monday afternoon. The U.S. Bureau of Labor provides an update on the Consumer Price Index (including dairy product prices) on Tuesday. The January 2014 Federal order Class I base milk price is announced by USDA on Wednesday afternoon. Thursday is the monthly Livestock Slaughter report, along with the November Milk Production report, and the Cattle on Feed report is out Friday, Dec. 20.

This week in DairyBusiness Update:

NEWS: WASDE gives bullish outlook; ‘dairy cliff’ gets a one-month House guardrail
TRENDS: California Class 1 prices; dairy & feed price forecasts
NUMBERS: Ethanol output surges; cull cow numbers
INDUSTRY: LOL joining GDT; FUTP 60; Chobani in Idaho
WASHINGTON: FDA implementing antimicrobial plan

Monday on DairyLine:
• Dairy cliff averted, comments from lawmakers
• DMI’s Stephanie Cundiff on the latest dairy checkoff efforts
• FDA’s new regulations on antibiotics, Dr. Roger Saltman, Zoetis
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Enter the holiday dairy photo contest 
We want to see your best farm-related holiday photos. Maybe your Holstein is acting as Rudolph, or perhaps you’re dressed like elves by the farm sign. Either way, we hope you’ll share! A grand prize winner will be selected and will receive a new digital camera in addition to a possible future cover on DairyBusiness Weekly. To enter, send your best photo with caption to kjentz@dairybusiness.com by Friday, Dec. 20. 
Rules: One entry per contestant. Photos entered in previous contests are not eligible. High resolution photos are preferred. 
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