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DairyBusiness Update: July 23, 2014


August FO Class I Up 85 Cents/$4.99 above 2013
The Agriculture department announced the August Federal order Class I base milk price this afternoon at $23.87 per hundredweight, up 85 cents from July $4.99 above August 2013, and equates to about $2.05 per gallon. The eight month Class I average now stands at $23.13 per cwt., up from $18.39 at this time a year ago, $16.37 in 2012, and $18.91 in 2011. The Class IV advanced pricing factor was the “higher of” in driving the Class I value.
The two-week, NDPSR-surveyed butter price used in calculating the August Class I was $2.3379 per pound, up 15.3 cents from July. Nonfat dry milk averaged $1.8763, up 2.4 cents. Cheese averaged $2.0445, up 1.1 cent, and dry whey averaged 68.73 cents per pound, up 1.1 cent.

The “Bull” Will Continue in U.S. Market Until Milk Supply is Sufficient
   That’s the conclusion of HighGround Dairy’s Eric Meyer in view of the June Cold Storage report. Meyer writes that, “While last week’s Global Dairy Trade auction results and June US Milk Production report flashed bearish warning signals to the US dairy market, Tuesday’s Cold Storage report reminded industry players that today’s inventories are NOT in sufficient order. And as such, the bull market will continue in the United States until more milk is produced into cheese and butter to grow stocks toward a more comfortable position.
   Meyer warns however that “The US will eventually pay the price for becoming so uncompetitive on the global stage. Butter making a run for its all-time high of $2.80 (set in 1998) will undoubtedly encourage larger domestic butterfat buyers to look elsewhere in the near future to contract imported butter and/or AMF for import from New Zealand or other countries. Couple that with the inevitable demand destruction of a market in parabolic incline and we can make a very realistic case for an outright collapse in US prices by the end of 2014.
   As stated nearly word for word as last month, our conclusion from this month’s Cold Storage report remains the same. The industry remains in panic mode to protect themselves during the summer months when milk production and component levels reach their seasonal lows. The US cheese and butter markets still have the potential to rise in the near-term in an effort to ration demand but at these extremes, expect a choppy trade. But we believe - and with growing confidence - that the inverted forward curve is foreshadowing a likely collapse in US butter prices by the end of the year.
   To read Meyer’s daily analysis, write him at ericm@highgroundtrading.com.

Lagging NDPSR Prices: Butter Up, Everything Else Down 
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released this afternoon, shows the U.S. average block Cheddar cheese price at $2.0096/lb., down 2.2¢ from the week before, while the barrels averaged $2.0355, down 1.5¢. Butter jumped 5.6¢, to $2.3669/lb. Nonfat dry milk averaged $1.8694/lb., down 1.4¢, and dry whey averaged 68.69¢/lb., down 0.1¢. These prices are used in determining Federal order Class milk prices.

California Powder Price Inches Up
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $1.8109/lb. for the week ending July 18, on sales of 11.1 million lbs. The price was up from $1.88043/lb. the week before, on sales of 11.7 million lbs.

NMPF Announces Dairy Research Award
   Eduardo de Souza Ribeiro, a doctoral student in animal sciences at the University of Florida, received the National Milk Producers Federation Richard M. Hoyt Award for dairy-related research.  
   Ribeiro was recognized during the awards ceremony at the annual meeting of the American Dairy Science Association in Kansas City. NMPF Vice President for Dairy Foods and Nutrition Beth Briczinski made the scholarship presentation.
   A native of São Joaquim, Brazil, Ribeiro has done extensive research in reproductive physiology and management of dairy cows. He earned a master’s degree from the University of Florida in 2011 and is currently in the animal molecular and cellular biology program there. His research has resulted in 24 publications, of which he was the lead author on eight.
   The Richard M. Hoyt Award is a joint project of NMPF and ADSA, with NMPF providing the scholarship money. The award recognizes research efforts with direct application to problems in the dairy industry.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update Associate Editor Lee Mielke)
   Cheese traders are absorbing yesterday’s June Cold Storage report but 3 trades stair stepped the Cheddar blocks up another 1¢ this morning, to $2.04/lb., while the barrels rolled 3.75¢ lower on 6 trades, to $2.0325/lb., putting the blocks atop the barrels again and the first drop in 11 sessions. The first 4 sales of barrel were at $2.04/lb. and inched lower from there however a bid at $2.03/lb. went unfilled.  
   FC Stone risk management consultant Chris Hildebrand wrote in this morning’s Insider Opening Bell that total cheese stocks in yesterday’s Cold Storage report were below their expectations. He added that "Prices will continue to be supported for the near-term as we are hearing of domestic tightness for cheese."
   Sales took the cash butter 4¢ higher, after jumping 7¢ yesterday and 3¢ on Monday, leaving the spot at $2.62/lb. It has gained 23¢ in the past 5 sessions. The first 2 sales today were at yesterday’s $2.58/lb., the next 2 at $2.5825/lb. and the price kept inching higher until 9 carloads exchanged hands on the day.
   "Butter markets will continue upwards despite a bearish cold storage report verses expectations," Hildebrand stated. "We look for the market to shrug off the numbers as demand still continues to outweigh supply and as a result, could very well see new highs put in on today's session," he predicted.
   Cash Grade A nonfat dry milk was unchanged this morning, holding at $1.6750/lb., with no activity.

Today’s Market Closing Prices 
Butter: Up 4¢, to $2.62/lb.
Cheddar blocks: Up 1¢, to $2.04/lb.   
Cheddar barrels: Down 3.75¢, to $2.0325/lb.
Grade A nonfat dry milk: Unchanged, at $1.6750/lb.
Class III milk (prelim.): July $21.52/cwt., Unchanged; Aug. $21.80, +20¢; Sept. $20.98, +30¢, Oct. $20.21, +21¢; Nov. $19.64, +19¢; & Dec. $19.28, +16¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.43, +16¢ from Tuesday. The Fourth Quarter average is now at $19.71, +19¢ from Tuesday. The First Quarter 2015 average is now at $18.26, +1¢ from Tuesday.

Looking ahead:
   The Agriculture Department issues its monthly Livestock Slaughter report tomorrow afternoon. USDA’s Milk, Cost of Production report is issued Friday. Looking to next week, the monthly Ag Prices report is out Monday, which will include the latest Milk Feed Price Ratio, and the weekly Crop Progress report is out Monday afternoon. July Federal Order Class II, III, and IV milk prices are announced by USDA on Wednesday afternoon and California’s comparable July Class 4a and 4b prices are announced on Friday by the California Department of Food and Agriculture. USDA also issues its monthly Dairy Products report on Friday,

Thursday on DairyLine:
   NMPF's Chris Galen updates us on the GMO labeling issue from Washington, D.C.
   Mark Scharlau, of Hershey's Ice Cream, tells us about their new self-serve milkshake
            machine called Shake Shop Express.

http://dairyline.com/thursday.mp3 *

Note: this link will be active at 4pm Eastern today (7/23/14).

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