DairyBusiness Update: July 10, 2014Print
California August Class I Milk Prices Up $5.07 from 2013
The California Department of Food and Agriculture announced its August Class I milk price today at $25.28 per hundredweight for the north and $25.55 for the south. Both are up 15 cents from July, $5.07 above August 2013, and 10 cents shy of the record high set in March 2014.
The eight-month northern average now stands at $24.70, up from $19.87 at this time a year ago and compares to $17.82 in 2012 and $20.27 in 2011. The southern average, at $24.97, is up from $20.14 a year ago, $18.09 in 2012 and $20.54 in 2011. The August Federal order Class I base price is announced by USDA on July 23.
Declining Fluid Milk Sales Gets Attention
Members of the Milk Industry Foundation (MIF) and IDFA staff called on key administration officials yesterday to discuss their concerns about declining milk consumption in America and its impact on nutrition. Starting at the U.S. Department of Agriculture and ending at the White House, the members made sure the administration was aware of current consumption trends, which show Americans, especially children, are falling short of federal milk intake guidelines.
The four members were Jeff Kaneb, executive vice president of HP Hood LLC and MIF chair; Gregg Tanner, CEO of Dean Foods Company and MIF vice chair; Jay Bryant, CEO of the Maryland and Virginia Producers Cooperative Association, Inc.; and Ed Mullins, executive vice president and CEO of Prairie Farms Dairy, Inc. They were joined by Dave Carlin, IDFA senior vice president of legislative affairs and economic policy; Ruth Saunders, IDFA vice president of policy and legislative affairs; and Tyson Redpath and Randy Russell of the Russell Group, a Washington, D.C. consulting firm.
The group began the day at USDA to meet with Secretary of Agriculture Tom Vilsack. They traveled in the afternoon to the Eisenhower Executive Office Building, next to the White House, to meet with Sam Kass, the administration’s senior policy advisor for nutrition policy. Kass is also the executive director of Let’s Move, First Lady Michelle Obama’s initiative dedicated to solving the challenge of childhood obesity.
For more information, contact Saunders at firstname.lastname@example.org.
Cream Tight, High Prices Not Hurting Retail Sales
Some Midwest butter churn operators were able to secure additional cream supplies over the holiday weekend, according to USDA’s Dairy Market News. However, many manufacturers noted tighter cream supplies as the week progressed. The market tone remains firm on account of constricted bulk butter and cream supplies hindering the rebuilding of stocks.
Production rates are steady to slightly higher compared to a week ago. Export activity has stalled recently, however U.S. butter prices and various global markets have been converging. Domestic sales are very good for food service, retail, and industrial use. Contacts noted the higher butter price generally hasn't affected retail demand. Industrial buyers and resellers are valuing fresh over frozen product at a greater precedence. Manufacturer supplies are steady to declining in some instances.
Prices for Western butter are unchanged on the domestic market. Western butter production is unchanged to lower, with decreases in milk intake volumes yielding fewer loads of cream to send to the churns.
Ice cream/frozen novelties and cream cheese production also continue to channel cream volumes away from the churns. Manufacturers report inventories are comfortable for near term contract fulfillment.
Churn operators are also looking ahead to inventory building for meeting Q4 retail holiday needs. Butter makers have longstanding orders for the last quarter, and cream supplies at that time are not sufficient to cover those orders. Thus, many churn operators will send a large portion of their available cream volumes to retail butter production through the balance of Q3.
Extra Milk Not Easily Found for Cheese
Fourth of July holiday weekend milk was readily available to Midwest cheese plants looking for extra milk, according to Dairy Market News. This post-holiday week some Wisconsin cheese manufacturers seeking extra milk this week were unsuccessful in finding it. Both manufacturers who have not been buying surplus milk in recent weeks but are now seeking a bit more milk to compensate for milk production declines, as well as manufacturers who have regularly been buying surplus milk during recent weeks, are not finding surplus milk this week. This tighter milk supply situation has kept cheese production at less than desired levels.
Condensed skim is being used in some cheese plants to extend vat yields. Nevertheless, some distressed milk found its way to some other cheese manufactures. Location seems to matter more this week as to surplus milk availability. Sales of cheese overall are strong, with some manufacturers struggling to fill contracted orders.
Barrels are being purchased in Wisconsin this week at a premium to CME Group pricing due to some supply tightness. Cheese prices are mostly lower, following declines in CME Group weekly average prices. Cheese producers report domestic buyers are taking contract cheese loads as agreed. Buyers are watching prices and limiting many buying agreements to near-by timeframes.
Western cheese production is active, with steady milk supplies in Idaho, Utah, and the Pacific Northwest. In the Southwest, milk clearing into cheese production is variable as daytime temperatures have had some impact on manufacturing milk volumes.
2014 U.S. Average Corn Yield: Big or Really Big?
Dr. Scott Irwin and Dr. Darrel Good, Department of Agricultural and Consumer Economics at the University of Illinois, address the question in their latest FarmDoc posting, writing; There has been widespread discussion in recent weeks that the U.S. average corn yield in 2014 will set a new record, perhaps exceeding the previous record yield of 164.7 bushels in 2009 by a considerable margin. High yield expectations are based on generally favorable growing conditions to date and on the high percentage of the crop rated in good or excellent condition.
The USDA's Crop Progress report estimated that 75 percent of the crop in the 18 major producing states was in either good or excellent condition as of July 6. That is the largest percentage in those two categories for that week since 1999, the fifth largest since the report was initiated in 1986, and 10 points above the average for 1986 through 2013. The high crop ratings have undoubtedly contributed to the continued downward slide in corn prices.
In a farmdoc daily article last week, Carl Zulauf provided estimates of the level of "high" U.S. average corn yields under good growing conditions, which turned out to be in the low- to mid-170s range. In related and earlier work, Gary Schnitkey showed that for the U.S. to have an average corn yield significantly above trend the majority of corn producing counties must have above trend yields. The purpose of the today's article is to specifically identify the summer weather conditions that contribute to high U.S. corn yields and compare weather conditions to date in 2014 with those previous very favorable conditions.
We first start with a brief discussion of the calculation of the trend of U.S. average corn yields. The most common way to identify the trend is illustrated in Figure 1. Actual average yields over a specified period of time are plotted and a trend line is fit to those yields. In this case, yields from 1960 through 2013 are plotted and the best fit is a linear trend. As indicated by the equation in Figure 1, the U.S. average corn yield increased by an average of 1.7928 bushels per acre from 1960 through 2013 and the trend yield explained 88 percent of the variation in actual annual yields (R2 = 0.8804). The calculation of the linear trend and the fit of the trend may vary according to the time period considered. This method of calculating trend is "unconditional," in the sense that the influence of weather conditions and technology on the average yield in each year is not explicitly disentangled.
An alternative for trend calculation is to measure the underlying trend in corn yields associated with changing technology and management practices independent of variation in weather conditions from year-to-year. Typically, a regression crop weather model is estimated in order to separately estimate the influence of weather and technology on yield. These models basically "correct" for weather so that the coefficient associated with time is expected to more accurately reflect the underlying trend in corn yields. Since the influence of weather on yield is not symmetric (bad weather reduces yield more than good weather increases yield) the trend calculation using this methodology will be slightly higher than the trend calculation using the fit of actual yields.
Read the entire posting at: http://farmdocdaily.illinois.edu/2014/07/2014-us-average-corn-yield-big-or-really-big.html
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
Cash cheese reversed direction this morning with the blocks inching up 0.25¢, to $1.95/lb. on a trade. Two bids at $1.95/lb. went unfilled however and an offer at $1.96/lb. went nowhere. The barrels were up 1.5¢, to $1.96/lb., 1¢ above the blocks. Two cars sold at yesterday’s $1.95/lb. but an unfilled bid at $1.96/lb. took today’s price higher.
"Location seems to be playing a big role in whether market participants are bullish or bearish,” writes FC Stone risk management consultant, Kyle Schrad, in this morning’s Insider Opening Bell. “The upper Midwest still seems a bit tight and most there think a pop is warranted from oversold levels while there are reports of readily available product in the West, and the feeling there is that lower prices seem inevitable." He adds that the weekly cold storage holding report for selected storage centers estimated cheese holdings for the week ending July 7th at 92.151 million pounds, up 1.2% week over week while still 22.6% lower than during the same period last year.
Cash butter was unchanged again this morning, holding at $2.3850/lb., with no activity.
Schrad reports that the weekly cold storage holding report for selected storage centers estimated butter holdings for the week ending July 7th at 21.395 million pounds, down 1.3% week over week while 11% higher than during the same period last year.
Grade A nonfat dry milk, after holding steady the previous three sessions, dropped 3.75¢ this morning on a trade, dipping to $1.7350/lb., the lowest price since August 8, 2013.
Today’s Market Closing Prices
Butter: Unchanged, at $2.3850/lb.
Cheddar blocks: Up 0.25¢, to $1.95/lb.
Cheddar barrels: Up 1.5¢, to $1.96/lb.
Grade A nonfat dry milk: Down 3.75¢, to $1.7350/lb.
Class III milk (prelim.): July $21.39/cwt., +9¢; Aug. $20.60, +25¢; & Sept. $19.87, +6¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.62, +13¢ from Wednesday. The Fourth Quarter average is now at $19.40, +2¢ from Wednesday. The First Quarter 2015 average is now at $18.24, +3¢ from Wednesday.
The Agriculture Department issues its monthly Crop Production report tomorrow, along with the monthly World Agricultural Supply and Demand Estimates (WASDE) report, which will include USDA’s latest projections for 2014 and 2015 milk production and milk prices.
Friday on DairyLine:
Jerry Dryer, editor of the Dairy and Food Market Analyst, discusses his latest dairy product commercial
Dr. Mike Hutjens talks about lessons learned in Denmark in his weekly “Feed Facts” program.