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DairyBusiness Update: July 18, 2014


June Milk Production Up 2% / Sequester Still Skewing Data
   The Agriculture Department’s preliminary data issued this afternoon in its latest Milk Production report, shows June milk output in the top 23 producing states at 16.177 billion pounds, up 2 percent from June 2013. The 50-state total, at 17.265 billion pounds, was up 1.9 percent from a year ago.
   Revisions added 25 million pounds to the original May 23-state estimate, now reported at 16.9 billion pounds, up 1.6 percent from a year ago.
   June cow numbers in the 23 states, at 8.57 million head, were up 11,000 from May. Year ago data was not available due to the Sequester.
   June output per cow in the 23 states averaged 1,888 pounds, down from 1,976 pounds in May, but is the highest production per cow for the month of June since the 23 State series began in 2003. Again, year ago data was not available due to the Sequester.
   The Second Quarter, April to June period, saw U.S. milk output hit 52.8 billion pounds, up 1.6 percent from the same period in 2013. The average number of milk cows during the quarter totaled 9.25 million head, up 39,000 from First Quarter, January to March, 2014.
   Selected state data is posted below:

State          Cow #s                        Milk lbs./Cow        State Change vs.’13
Arizona       193,000                       2,000                      +2.1%
California    1.779 mil                      1,995                     +1.7%
Colorado    145,000                        2,110                     +9.7%
Florida        123,000                        1,685                     +2.5%
Idaho          577,000                        2,045                     +2.1%
Illinois           95,000                        1,650                     +2.6%
Indiana       177,000                        1,830                     +1.6%
Iowa           207,000                        1,870                     +1.0%
Kansas       142,000                        1,845                     +7.4%
Mich.          386,000                        2,060                      +3.2%
Minn.          460,000                        1,655                      +0.1%
N Mex.        323,000                       2,130                      +1.3%
New York    615,000                       1,870                      +0.3%
Ohio            266,000                       1,695                      -1.5%
Oregon       125,000                        1,745                     +1.4%
Penn.          530,000                       1,665                      +0.2%
S Dakota       97,000                       1,825                     +5.4%
Texas          468,000                       1,850                     +8.3%
Utah              95,000                       1,890                     +4.0%
Vermont      131,000                       1,710                     +1.4%
Virginia          93,000                       1,600                    +4.2%
Wash.          274,000                       2,050                     +3.9%
Wisconsin    1.269 mil                     1,825                     +0.6%

April Fluid Milk Sales Data Revised Slightly, Still Down 4.5% from 2013
April 2014 packaged fluid milk sales totaled 4.15 billion lbs., down 4.5% from April 2013. (Sales were not adjusted for calendar considerations as in previous monthly reports).
April sales of conventional products, at 3.94 billion lbs., were down 5.1% from a year ago; organic products, at 205 million lbs., were up 7.6% Organic represented about 5.2% of total sales for the month.
January-April 2014 total packaged fluid milk sales, at 17.04 billion lbs., were down 2.2% from the same period a year earlier. Year-to-date sales of conventional products, at 16.21 billion lbs., were down 2.9%; organic products, at 828 million lbs., were up 13.5%. Organic represented about 5.1% of total sales.

Source: Dairy Market News

We’re “Kinda Divorced” 
   U.S. dairy product prices appear to amaze traders but clouds are appearing on the “price horizon.” Jerry Dryer’s recent Dairy and Food Market Analyst warned that global milk production will overwhelm demand for the next five years, according to a recent analysis by Goldman Sachs.
   We talked about those clouds in Friday’s DairyLine with FC Stone dairy broker, Dave Kurzawski. Kurzawski explained the jump in butter to a “tight market” and said cheese was “acquiescing to that.” He explained that cream is very tight in the country as ice cream sales are good.
   “We’re pretty much divorced from the world market,” Kurzawski stated, “But we are still alive and well on the butter market and probably aiming at that $2.50 (per pound) mark.”
   Regarding the prediction on milk production, Kurzawski argued that it’s hard enough to look three or four months ahead as to what will happen to milk supply and demand but “They’re (Goldman Sachs) probably not too far off in the fact that we should expect more milk production in 2015 and probably more still in 2016. Without question, that’s the trend that we’re going to be on,” he said, “But right now I still think we’re going to be hovering around 1 1/2 percent for the balance of the year.”
   Kurzawski doesn’t see any big moves in the U.S. milk supply but globally, New Zealand coming back strong and will come back strong in the new season “so we have to expect that but more than that is the demand out of China.”
   Kurzawski said “It’s hard to believe when you see butter over $2.40 per pound and cheese over $2, at sustaining levels, so it’s easy to become complacent but reality is that China is currently overstocked on powder and anhydrous milkfat and that will eventually make its way through the global market chain and it’s going to come back to roost here in the U.S. with probably lower prices some time by the Fourth Quarter.”

Mielke Market Daily / Week’s End Review
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Cheese traders awaited this afternoon’s release of USDA’s preliminary June Milk Production report but they inched prices a little higher. The first two sales took the 40lb. blocks to $2.05/lb. and, while the sales kept coming, the prices kept slipping, with the final sale at $2.0275/lb., up 0.5¢ on the day, following yesterday’s 2¢ jump. A total of 5 cars traded hands and a bid at $2.0250/lb. was left on the board. The 500lb. Cheddar barrels were up 1¢, following a 2¢ rise yesterday, and closed at $2.07/lb., the highest barrel price since May 1. Five cars of barrel also traded hands this morning, with the price creeping up to $2.0750/lb., before retreating. A bid at $2.07/lb. went unfilled.
   The blocks are up 5.75¢ on the week and 28¢ above a year ago. The barrels are up 8.25¢ on the week, 33¢ above a year ago, and 4.25¢ above the blocks so the inversion continues for now. Nineteen cars of block traded hands on the week and 20 of barrel. The ever lagging NDPSR-surveyed U.S. average block price slipped 0.9¢, to $2.0315/lb. The barrels averaged $2.0502/lb., up 0.2¢.
   FC Stone risk management consultant, Derek Nelson wrote in this morning’s Insider Opening Bell that "The spot market has certainly turned into a bull. The question is, how   long will it last in the face of a slumping international market?"    
   Cash butter, after shooting up 6¢ yesterday, tacked on another 3¢ today to close at $2.48/lb. Four cars were sold this morning, two at $2.46/lb. and two at $2.48/lb.
   The spot butter closes the week, up 10.75¢, a whopping 99¢ above a year ago, and the highest it has been since June 30, 2014. The record high is $2.81/lb. in September 1998. Twenty four cars traded hands this week. NDPSR butter averaged $2.3120/lb., up 3¢.
   Cash Grade A nonfat dry milk, on 2 uncovered offers, dropped another 2¢ today, following a 2¢ loss yesterday, and closed the day and the week at $1.6950/lb.
   The powder is down 4¢ on the week and is at the lowest level since June 12, 2013. Two cars were sold in the cash market this week. NDPSR powder averaged $1.8845/lb., up 2.6¢, and dry whey averaged 68.76¢/lb., down 0.7¢.

Today’s Market Closing Prices 
Butter: Up 3¢, to $2.48/lb.
Cheddar blocks: Up 0.5¢, to $2.0275/lb.   
Cheddar barrels: Up 1¢, to $2.07/lb.
Grade A nonfat dry milk: Down 2¢, to $1.6950/lb.
Class III milk (prelim.): July $21.51/cwt., Unchanged; Aug. $21.33, -9¢; Sept. $20.33, -9¢, Oct. $19.83, -12¢; Nov. $19.42, -2¢; & Dec. $19.18, +1¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.06, -6¢ from Thursday. The Fourth Quarter average is now at $19.48, -4¢ from Thursday. The First Quarter 2015 average is now at $18.26, +4¢ from Thursday.
Looking ahead: 

   The Agriculture Department issues its weekly Crop Progress report Monday afternoon. The preliminary June Cold Storage report is out Tuesday afternoon. The August Federal order Class I base milk price is announced by USDA Wednesday afternoon and the weekly National Dairy Products Sale Report (NDPSR) is out Wednesday. The monthly Livestock Slaughter report is issued Thursday afternoon.

Monday on DairyLine:
   World Outlook Board Chair Seth Meyer discusses the latest dairy outlook.
   Nutritionist Maureen Bligh on the "gluten free" craze.


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