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DairyBusiness Update: February 20, 2014


January Milk Production Up 1%/Dec. Revision Down 0.3%
   The Agriculture Department’s preliminary data shows January milk production in the top 23 producing states totaled 16.1 billion pounds, up 1 percent from January 2013. The 50-state total, at 17.26 billion pounds, was up 0.9 percent from a year ago.    
   Revisions reduced the original December estimate by 19 million pounds, to 15.7 billion pounds, down 0.3 percent from December 2012. That put 2013 annual production in the U.S. at 201 billion pounds, up 0.3 percent from 2012. Revisions to 2012 output increased the total 213 million pounds and revised 2013 output was up 32 million pounds from last month’s report.
   January cow numbers in the 23 states totaled 8.51 million head, up 6,000 head from December and 7,000 more than January 2013. Output per cow averaged 1,891 pounds, up 17 pounds from a year ago.
   Checking the top states, California’s January production was up 4.7 percent, thanks to a nice 90 pound increase per cow and 1,000 more cows. California will be the state to watch in coming months as to the effects of the severe drought there. Wisconsin was down 2.9 percent, as the cold weather took its toll, dropping per cow production by 55 pounds. Cow numbers were unchanged. New York was up 0.3 percent, despite a 10 pound drop per cow. Cow numbers were up 5,000 head. Idaho was up 0.4 percent, on a 55 pound gain per cow, though cow numbers were down 14,000. Pennsylvania was up 0.4 percent, thanks to a 20 pound gain per cow but cow numbers were off 4,000 head, and Minnesota was down 2.1 percent, again with weather reducing output per cow by 20 pounds. Cow numbers were down 5,000.
   The biggest decline was in Illinois, down 4.8 percent, followed by Missouri, down 4.4 percent, and then Wisconsin. The biggest increase was in Colorado, up 5.8 percent, followed by Kansas at 5.3 percent, and then California.
   Other states of interest include Arizona, up 0.8 percent on 2,000 more cows. Output per cow was off 5 pounds. Michigan was up 1.3 percent, thanks to a 10 pound gain per cow and 3,000 more cows. New Mexico was off 0.9 percent, due to a 40 pound loss per cow. Cow numbers were up 3,000. Texas was up 3.3 percent on a 40 pound gain per cow and 5,000 more cows. Washington was up 1.7 percent on a 10 pound gain per cow and 3,000 more cows.

January Dairy Cow Slaughter Up from December
USDA’s Livestock Slaughter report, issued this afternoon, estimated 270,200 culled dairy cows were slaughtered under federal inspection in January 2014, up 13,500 from December 2013, but 26,700 less than January 2013.

March FO Class I Sets New Record High
   USDA announced the March Federal order Class I base milk price today at a record high $23.64 per hundredweight, up $1.62 from February, a whopping $5.84 above March 2013, and equates to about $2.03 per gallon. It is the price that all Federal orders use to determine the order’s Class I milk price after adding local Class I differentials.
   The First Quarter average stands at $22.38, up from $18.33 at this time a year ago and compares to $17.38 in 2012 and $16.44 in 2011.
   The two-week, NDPSR averages used in calculating the Class I value showed butter at $1.8476 per pound, up 25.4 cents from February. Nonfat dry milk averaged $2.0718, up 4.5 cents. Dry whey averaged 62.38 cents, up 3 cents, and cheese averaged $2.3213, up 29.1 cents from February.

NDPSR Dairy Product Prices
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released today shows the U.S. average block Cheddar cheese price at $2.3216/lb., up 4.4¢, while the barrels averaged $2.3244, up 2.3¢. Butter averaged $1.8595, up 2.2¢. Nonfat dry milk averaged $2.0766/lb., up 0.8¢, and dry whey averaged 62.83¢/lb., up 0.8¢. These prices are used in determining Federal order Class milk prices.

Dairy Margins Show Slight Weakening Ahead
   Commodity & Ingredient Hedging, LLC’s latest Margin Watch says dairy margins were mixed over the last couple of weeks, improving in nearby Q1 and Q2 while weakening slightly in Q3 and Q4. From a historical perspective, forward margins still remain very strong in the second half of 2014 near the 90th percentile of the past 10 years.  Continued strength in milk futures, particularly nearby contracts, paced the margin improvement while higher projected feed costs since the end of January weighed on deferred margins slightly.
   Milk prices continue to be supported by strong demand, with powder in particular pacing that strength. Nonfat dry milk (NDM) stocks ended 2013 at 133.1 million pounds, down 27.2% from 2012 and the lowest year-end stocks since 2006. Exports of NDM and SMP in 2013 totaled 1.2 billion pounds which accounted for 58% of total production last year, a record export to production ratio.
   On the feed side, USDA released the February World Agricultural Supply and Demand Estimates which showed corn ending stocks well below trade expectations. USDA increased corn exports 150 million bushels from January which lowered ending stocks by the same amount down to 1.481 billion bushels. The figure was 125 million bushels below the average pre-report estimate and outside of the range of expectations.
   USDA also increased their soybean meal export projection by 200,000 tons while raising the average price forecast from January.

CA. Federal Market Order to be Discussed at WUD Convention
   The challenges and opportunities of Federal and California Milk Marketing Orders will be the topic of a panel discussion set for Thursday, March 6, at Western United Dairymen's annual convention in San Luis Obispo. Those in attendance can expect an in-depth discussion as attorneys Chip English, a partner at Davis, Wright, Tremaine LLP and John J. Vlahos, Partner, Hanson Bridgett LLP, and WUD's long-time legal advocate, are joined by Dana Hamilton Coale, Deputy Administrator, USDA Agricultural Marketing Service (AMS) Dairy Programs.
   The panel will be moderated by Michael Marsh, CEO, Western United Dairymen. Increasing attention is being paid to Federal Milk Marketing Orders as California dairy families face an ongoing economic crisis. The session will wrap up with a question and answer session allowing for audience participation. The panel begins at 9:30 a.m. on the second day of the convention Thursday, March 6. Details are posted at www.wudconvention.com.

California Powder Price and Sales Slip
The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $2.0360/lb. for the week ending February 14, on sales of 8.121 million lbs. The price was down from $2.0452/lb. the week before, on sales of 11.732 million lbs.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Cash traders had lots to anticipate this morning, namely the January Milk Production report and the Livestock Slaughter report, both of which were issued after today’s trading. They must have had an inkling of what they would see in those reports as cash cheese took a healthy jump this morning. The Cheddar blocks closed at $2.13/lb., up 2.25¢, after pausing yesterday and inching up 0.25¢ on Tuesday. Two trades at $2.1250/lb. were followed by an unfilled bid, which took it to $2.13/lb. The barrels gained 4.25¢, after pausing yesterday and gaining 0.5¢ on Tuesday. Three carloads traded hands this morning, the 1st at $2.0825/lb., 2nd at $2.09/lb., and the 3rd at $2.1025/lb., but an unfilled bid took it to its close of $2.11/lb.
   In heavy trading (14 carloads) cash butter was up 1¢, to $1.78/lb. The 1st 7 cars sold at $1.77/lb., 1 at $1.7725/lb., 4 more at $1.77/lb., and the final 2 at $1.78/lb. Two offers at $1.79/lb. attracted no additional buyers .
   USDA data shows butter stocks in selected storage centers as of Feb. 17 were down  27.1% from a week ago to 7.6 million pounds, and down 36.7% from a year ago.
   FC Stone vice president and head of its Foods Division, Robert Chesler, wrote in this morning’s Insider Opening Bell that "Butter is the least bullish in the dairy complex at the moment. On GlobalDairyTrade (GDT) this week, the butter price made the sharpest decline among products, down 3.8% from Feb. 4. He notes that butter promotion last year contributed to strong domestic sales, but marketing dollars have shifted toward procurement budgets.”    
   Two unfilled bids took the Grade A nonfat dry milk price up another 0.25¢ today, after gaining 1.25¢ yesterday and 1¢ on Tuesday. Today’s closing price was $2.0450/lb.
   Chesler says “Skim milk powder and whole milk powder tenders by Algeria and Japan and buying by Mexico in recent weeks have supported nonfat dry milk prices,” but he warned; "The question longer term is what is forward demand. The spot market looks top-heavy. Many market participants expect the next significant price move on spot to be lower.”

Today’s Market Closing Prices:
Butter: Up 1¢, to $1.78/lb.
Cheddar blocks: Up 2.25¢, to $2.13/lb.
Cheddar barrels: Up 4.25¢, to $2.11/lb.
Grade A nonfat dry milk: Up 0.25¢, to $2.0450/lb.
Class III milk: Feb. $23.15, +1¢; Mar. $21.49, +16¢; Apr. $20.65, +12¢; May $19.79, +10¢, & Jun. $19.46, +11¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $19.97, +11¢ from Wednesday. The 2nd half average is $18.56, +6¢ from Wednesday.
Looking ahead:
   The Agriculture Department issues its January preliminary Cold Storage report tomorrow afternoon. Tomorrow is the final day of USDA’s Agricultural Outlook Forum in Arlington, Virginia. Details are posted at: www.usda.gov/oce/forum.
   Next week’s USDA report lineup is a bit thin. The Economic Research Service issues its Dairy Situation and Outlook report on Wednesday, containing the latest dairy product commercial disappearance data. The monthly Ag Prices report is out Friday, which will include the latest milk feed price ratio.
Friday on DairyLine:
   Washing State Dairy Federation’s Jay Gordon talks about a court case involving 4
    dairies that could have big ramifications for dairy farms in every state
   Dr. Mike Hutgens has his weekly “Feed Facts” program


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