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DairyBusiness Update: June 18, 2014

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May Milk Production Up 1.5% / Sequester Still Skewing Data
   The Agriculture Department’s preliminary data issued this afternoon in its latest Milk Production report, shows May milk output in the top 23 producing states at 16.9 billion pounds, up 1.5 percent from May 2013. The 50-state total, at 18.06 billion pounds, was up 1.4 percent from a year ago. HighGround Dairy’s Eric Meyer called the report “slightly bearish to expectations at first glance.”
   Revisions added 27 million pounds to the original April 23-state estimate, now reported at 16.3 billion pounds, up 1.4 percent from a year ago.
   May cow numbers in the 23 states, at 8.55 million head, were up 10,000 from April. Year ago data was not available due to the Sequester.
   May output per cow in the 23 states averaged 1,976 pounds, up from 1,911 pounds in April but is the highest production per cow for the month of May since the 23 State series began in 2003. Again, year ago data was not available due to the Sequester.
   Selected state data is posted below:

State          Cow #s                        Milk lbs./Cow        State Change vs.’13
Arizona       192,000                       2,225                      +3.9%
California    1.78 mil                        2,110                     +1.0%
Idaho          572,000                        2,070                     +0.5%
Mich.          384,000                        2,145                      +3.3%
Minn.          460,000                        1,710                      -0.1%
N Mex.        323,000                       2,240                      +1.4%
New York    615,000                       1,935                      -0.3%
Penn.          530,000                       1,750                      -1.4%
Texas          460,000                       2,010                     +10.1%
Wash.          273,000                       2,100                     +2.7%
Wisconsin    1.269 mil                     1,880                     Unchanged

July FO Class I Milk Price Up 16 Cents   
   The Agriculture Department announced the July Federal order Class I base milk price this afternoon at $23.02 per hundredweight, up 16 cents from June, $4.11 above July 2013, and equates to about $1.98 per gallon.
   The seven month average now stands at $23.02, up from $18.32 at this time a year ago and compares to $16.34 in 2012 and $18.55 in 2011.
   The two-week, NDPSR-surveyed, butter price used in calculating this month’s Class I value was $2.1845 per pound, up 16.7 cents from June. Nonfat dry milk averaged $1.8526, down 2.4 cents. Cheese averaged $2.0334, down 17 cents, and dry whey averaged 67.67 cents per pound, up fractionally.

Don’t Get Too Excited About GDT Upturn
   That’s the read from HighGround Dairy’s Eric Meyer. Meyer writes; After a four month collapse adding up to eight straight losing auctions and shedding 25.8% of its value during that timeframe, the GDT Price Index finally settled higher at this week’s trading event. Broad gains were seen across most commodities with exception of SMP and AMF. But even within the skim milk powder category, advances were reported across nearly half of the individual results across sellers and delivery months.
   In our comments two weeks ago we predicted that a global market bounce was due as buyers stepped in to lock down contracts ahead of the southern hemisphere’s production season. With the northern hemisphere production peak in the rear-view mirror, buyers looking to re-build their inventories for the second half of the calendar year at cheaper prices from earlier this quarter are currently helping to support markets in Oceania, EU and the US.
   We also believe that dairy users are taking a more aggressive stance with their positions for the remainder of 2014 and even dipping their toes into 2015 ahead of schedule to prevent mistakes made on hedges (or lack thereof) in 2014 which is also lending support.
   However, we believe it is important to note the rebound in auction prices this week was quite muted for how sharp the decline has been over the past four months and by NO means suggests a change in the medium term down trend has occurred.
   Read more of Meyer’s analysis by writing him at: dairy@highgroundtrading.com.

USDA Dairy Outlook: June 18, 2014
   As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued this morning, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued June 11. Milk and dairy product prices remain near record levels on continued strong demand and forecasts were raised only slightly in June from May. However, higher expected production next year lowers milk and dairy product prices in 2015 compared with 2014.
   June projected corn prices were lowered slightly from May to $4.45 - $4.65 per bushel for 2013/14, based on reported prices to date. The 2014/15 corn price is forecast below current year prices but is unchanged from the May projection of $3.85 - $4.55 per bushel. The soybean meal price for 2013/14 is estimated at $485 per ton. The 2014/15 soybean meal price forecast is unchanged from May but is expected to be sharply lower than this year at $355 - $395 per ton.
   The preliminary alfalfa price was reported in the May Agricultural Prices report at $224 per ton; higher than April’s reported price and about the same as May a year ago.
Consequently, the milk-feed price ratio is likely to remain at a level that would support expansion in the dairy herd in 2015.
   Last month’s forecast of herd expansion in the second half of the year was based on strong milk prices and moderating feed costs. The June forecast is unchanged from May and cow numbers are placed at 9.26 million head for the current year. Cow numbers for 2015 are forecast up slightly from 2014 to 9.34 million head, also unchanged from the May forecast. Current-year output per cow is lowered fractionally from May to 22,270 pounds per cow and is based on lower expected output per cow in the second quarter. Next year’s forecast of output per cow is unchanged from May and is up nearly 2 percent from the 2014 projection. The June milk production forecast for 2014 rounds to 206.1 billion pounds, unchanged from May. For 2015, milk production is unchanged from May at 212.1 million pounds. The likely stronger milk-feed price ratios for both this year and next should presage expanded year-over-year production.
   Fats basis 2014 milk equivalent imports were raised in June to 3.5 billion pounds, but are expected to slip to 3.4 billion pounds in 2015. Skims-solids basis milk equivalent imports are raised this month to 5.6 billion pounds for the current year and to 5.2 billion pounds for 2015. The forecast increases from May are based on higher imports of food preparation items, whey products, and, to a lesser extent, casein and milk protein concentrates.
   June forecast fats-basis exports for 2014 are increased this month from May to 13.4 billion pounds and to 13 billion pounds for 2015. Butter exports have retreated as U.S. prices have become less competitive on the global market. The butter decline was more than offset by continued strong cheese exports. The higher June forecasts are expected to carry over into 2015. However on a year-over-year basis, the 2015 forecast export decline is based on expected strong foreign competition.
   Exports on a skims-solids basis are increased to 39.4 billion pounds for 2014 and are unchanged at 38.6 billion pounds for next year. Higher skimmed milk powder, whey, and cheese are the basis of the higher skim-solids export number this year.
   Although the United States is expected to remain competitive in the global market, foreign competition will likely lower exports on a year-over-year basis in 2015.
  Milk production is expected to increase in 2015 compared with this year. Lower feed prices will improve the profit outlook for producers next year. Continued strong demand, both foreign and domestic, will moderate price declines in 2015.
   To view the entire report log on to: http://www.ers.usda.gov/publications/ldpm-livestock,-dairy,-and-poultry-outlook.aspx.

Quarterly and annual milk prices and projections

Year           All milk         Class III         Class IV

2009

12.83

11.36

10.89

2010

16.26

14.41

15.09

2011

20.14

18.37

19.04

2012

18.53

17.44

16.01

2013

 

 

 

  Q1

19.53

17.44

17.71

  Q2

           19.57

          18.04                     

         18.62

  Q3

           19.60

          17.81

         19.13

  Q4

           21.50 

          18.67

         20.74

Year

           20.05

          17.99

         19.05

2014

 

 

 

  Q1

           24.53

          22.61

         23.10

  Q2

 

24.40-24.60

 

22.65-22.85

 

22.95-23.25

Q3

21.95-22.45

19.65-20.15

20.80-21.40

Q4

20.85-21.65

18.40-19.20

19.05-19.95

Year*

22.90-23.30

20.80-21.20

21.45-21.95

2015

 

 

 

  Q1

           20.50-21.50

16.45-17.45

18.05-19.15   

  Q2

 

 

 

Q3

 

 

 

Q4

 

 

 

Year*

19.75-20.75

16.95-17.95

18.65-19.75

 

                                     2012    2013    2014  1st      2nd  3rd     4th     2015  1st

Milk Output (bil.lbs.)  200.5   201.2   206.1  51.1  52.8  50.9  51.3  212.1  52.5  

Cow #s (mil)                 9.23     9.22    9.26   9.22   9.24  9.27  9.29   9.34    9.30

Lagging NDPSR Prices: Cheese & Butter Down Slightly
   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 $2.0172/lb., down 0.6¢ from the week before, while the barrels averaged $2.0176, down 0.3¢. Butter was off 0.2¢, at $2.1836/lb. Nonfat dry milk averaged $1.8624/lb., up 2¢, and dry whey averaged 67.67¢/lb., unchanged. These prices are used in determining Federal order Class milk prices.

California Powder Price Down Slightly 
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $1.8407/lb. for the week ending June 13, on sales of 11.24 million lbs. The price was down slightly from $1.8454/lb. the week before, on sales of 10.16 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 cheese trading went in opposite directions this morning as traders awaited today’s May Milk Production report. There were 3 cars of block traded, the 1st at $2.06/lb., the 2nd at $2.0575/lb., and the last at today’s close of $2.03/lb., down 2¢ on the day, after jumping 3¢ yesterday and losing 1¢ on Monday. The barrels, after jumping 2.75¢ yesterday and losing 0.75¢ on Monday, were up another 1.5¢ this morning. They just barely joined the blocks at topping $2/lb., at $2.0025/lb. One car was sold at that price, with a bid at $2.00/lb. going unfilled.  
   Class III futures were mixed today.
   Cash butter took a big jump, up 5.75¢ this morning, following a 1¢ rise yesterday, and is now trading at $2.2525/lb. Severn carloads found new homes today, following 18 cars selling yesterday. The first 6 loads were below yesterday’s close but someone wanted that last load awfully bad, jumping the price almost 6¢, and there were no bids or offers.
      Cash Grade A nonfat dry was unchanged for the 3rd session in a row, holding at $1.8250/lb., again with no activity today.

Today’s Market Closing Prices
Butter: Up 5.75¢, to $2.2525/lb.
Cheddar blocks: Down 2¢, to $2.03/lb.
Cheddar barrels: Up 1.5¢, to $2.0025/lb.
Grade A nonfat dry milk: Unchanged, at $1.8250/lb.
Class III milk: June $21.35/cwt., +2¢; July $21.71, -8¢; Aug. $21.34, -14¢; & Sept. $21.21, -6¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $21.42, -5¢ from Tuesday. The Fourth Quarter average is now at $20.16, +10¢ from Tuesday. The First Quarter 2015 average is now at $18.59, +1¢ from Tuesday.
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Looking ahead:
   The Agriculture Department issues its monthly Livestock Slaughter report tomorrow and that’s it for the week as far as USDA reports which we regularly monitor. Looking to next week, it’s a pretty lean week, especially compared to this week. USDA issues preliminary data in its monthly Cold Storage report for May on Monday and the Ag Prices report is out Friday afternoon, which will include the latest milk feed price ratio.

 --- 
Thursday on DairyLine:
   NMPF’s Chris Galen tells us why food companies should market food with integrity.
   Greg Larson, from GEA Farm Technologies, checks in with a Robotic Milking Minute.

http://dairyline.com/thursday.mp3

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