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DairyBusiness Update: June 6, 2014

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Cheese will be “Choppy”
   Look for “choppiness for the next several weeks” in the cheese market, according to Jerry Dryer, Editor of the Dairy and Food Market Analyst. Speaking in Friday’s DairyLine, Dryer said the market is “trying to figure itself out.” He adds that the outlook is that supplies are going to be relatively tight however we’re working through the spring flush right now and, while milk has peaked in the Upper Midwest, you still have cheese coming out of the vat and cheese coming out of the cooler as it has to sit in the cooler 10-15 days before it’s eligible to come to the CME or the market. “So you have a little extra product hanging around the edges,” Dryer said, but he believes prices will hover about 2 cents below or above $2 per pound.
   First Quarter 2014 commercial disappearance of milk and dairy products was up 3.3% from a year ago, according to USDA’s latest estimates. The data closely matches Dryer’s numbers however Dryer used data from this week’s Dairy Products report to project disappearance through April. Doing so, Dryer reports that disappearance has likely eased some from that 3.3 percent but is still “very strong.”
   For the three months ending in April, Dryer reports American cheese disappearance was up 2.4 percent and other cheese was up 3.5 percent. The total cheese category was up about 3 percent and he noted that, interestingly, U.S. cheese sales were down 2.5 percent in that period. All of the increase was attributed to exports, he said, and he reported that he had just got off the phone with a cheese exporter who told him that he was “optimistic about the future and is writing orders as we speak.”
   First Quarter butter disappearance was down, according to Dryer, but has since popped sharply higher, up 6.2 percent, in the most recent three months.
   “Demand and usage of dairy products has remained relatively strong,” Dryer concluded, but he warned that “Higher prices are going to keep taking a toll on those consumption numbers as we move through the next three or four months.”

Australian Dairy Farmers Told to Make More Milk
   Australian milk production remains steady with recent weeks under mild temperatures and adequate rainfall, according to USDA’s Dairy Market News. Dairy Australia's situation and outlook report had July-April production at 0.8% below the previous year. Producers are being prompted to make as much milk as possible under the current farm gate price, given prices for next season are projected to be lower than they are now. 
   Current milk production volumes are being channeled to the nearest available processor, as numerous plants are undergoing yearend planned maintenance projects.    
   The timely autumn rains have prompted some good grass growth and hay supplies are at more than adequate levels in the southern, dairy export-focused, regions.  However, high protein hay is less available than in previous years. Dairy cattle exports from Australia are running above last year, with China the main destination point.  According to an industry survey, Australian farmer confidence is at a three year high with 40% of farmers expecting the agricultural economy to improve, up from 29% for the previous survey.                       
   Dairy farmers were the most upbeat about their prospects for the coming year.  According to Dairy Australia, Australian production of various dairy commodities for March 2014 showed the following percentage changes compared to 2013; butter, +12.9%; butteroil, -33.4%; skim milk powder, -6.3%; whole milk powder, +0.2%; buttermilk powder, +7.7%; cheese, -7.3%; and whey powder, -11.6%. 

New Zealand Milk Production Down Seasonally
   New Zealand milk production has entered the typical low production period for the year, reports Dairy Market News. Some producer cooperatives indicate that over half of the cows have been dried off and moved to winter pastures. Some manufacturers are conducting maintenance projects and are shut down.
   Five infant formula manufacturers have gained approval to export into China with other companies making modifications to gain approval. Eucolait pegged total whole milk powder imports into China for April, 2014 at 88,700 metric tons, down from March, but significantly above year ago levels. New Zealand was the main benefactor of China's April whole milk powder imports.

European Milk Production Update
   EU milk production is lower with weekly declines being noted in Germany and France, according to Dairy Market News. Prices for spot loads of milk and skim condensed have stabilized, compared to recent weeks. Producer margins are good, and with the outlook for lower milk prices in the future, are incentivized to produce as much milk as possible in order to reap the current good returns. 
   Weather conditions are favorable for milk production. Skim milk powder drying facilities are operating at near capacity. According to Eurostat, EU 28 dairy product production levels, for Q1 2014, showed the following percentage changes compared to 2013; butter, +1.9%; skim milk powder, +14.5%; whole milk powder, +8.3%; and cheese, +2.4%. 
    Eastern Europe milk production remains at/or near seasonal peak levels. Cheese producers and drying facilities are operating at near capacity levels. Some Western European loads of skim concentrate are being processed in Eastern Europe. Export interest has improved for Polish sweet dry whey.

Jersey Producers Profit the Most from High Exports
   That’s how the National All-Jersey Incorporated sees it, reasoning that “What gets exported are milk solids in the form of cheese, milk powders, whey products and butterfat, and Jerseys excel at the efficient production of milk solids.”
   National All-Jersey Inc. has compiled an economic analysis of nonfat dry milk (NDM), SMP and WMP production, comparing Jersey milk to average milk. The analysis incorporates different component levels in producer milk, along with 2013 average prices for the products of cream, butter, anhydrous milk fat (AMF), NDM, SMP, WMP and the input costs of Class IV non-fat solids and butterfat, along with lactose and permeate.
The analysis summary is available on the USJersey web site:
http://www.usjersey.com/NationalAllJerseyInc/Protein-Standardized-Powders.pdf

Young Dairy Farmers go to Capitol Hill
   About 60 young dairy farmers from across the country met in Washington D.C. last week to lobby on several issues they say won’t go away without being resolved. The group is part of the National Young Cooperator (YC) Program organized by the National Milk Producers Federation.
   Even though the Farm Bill is now in our rear view mirror, NMPF says there are plenty of issues Congress should focus on including two trade agreements and immigration reform.
   “We also have the issue of GMO labeling and why we don’t want to see mandatory federal laws that require GMO labeling,” NMPF’s Chris Galen said in Thursday’s DairyLine. Instead, NMPF supports a measure that would make the labeling of food containing genetically modified organisms voluntary.
   Another important issue is trade policy and getting good deals both with the Trans Pacific Partnership (TPP) and the Trans Atlantic Partnership (TTIP).
   “Those deals are still pending right now and we want to convince our lawmakers that dairy farmers need to have a good outcome in both the Atlantic and Pacific deals,” Galen said.
   The issue of immigration reform won’t be resolved anytime soon as there’s a very narrow window between June and the first Tuesday in November.
   “Our expectations are fairly low,” Galen said. “It does not look like immigration reform will get done, unfortunately.”
   Even if Congress doesn’t take up the issue until after November, Galen says it’s important to have dairy farmers visit Capitol Hill to remind lawmakers that this issue is not going to go away.
   “It’s not going to get resolved unless there is federal legislation,” he said. “The same applies to the GMO issue and with the trade policy issues as well.”
   NMPF organized the YC Program in 1950 to educate and build leadership ability in young dairy farmers, designed for dairy producers 40 years of age and younger. A YC fly-in was held last week in conjunction with NMPF’s June Board of Directors meeting.
   See more at: http://www.nmpf.org/about-nmpf/young-cooperators#sthash.naT2b5w7.dpuf.

Are You Innovative?
   Nominations are now being accepted for the Innovative Dairy Farmer of the Year, an annual award co-sponsored by the International Dairy Foods Association (IDFA). The winner will be honored at the 2015 Dairy Forum, January 25-28 at the Boca Raton Resort & Club in Boca Raton, Fla. The deadline for nominations is August 15, 2014, and there is no entry fee.
   The call asks for nominations of active U.S. dairy farms that are improving on-farm efficiency through progressive management practices, production technologies and/or marketing approaches. Nominees will be judged on current methods as well as their positioning to meet future economic and business challenges.
   The award recipient will receive an all-expenses-paid trip to the 2015 Dairy Forum to attend a special presentation ceremony held during the program. The person nominating the winner will receive complimentary registration to Dairy Forum.
   Dairy Forum is widely recognized as the most important processor and producer conference of the year for the U.S. dairy industry. The 2014 event drew another record crowd of more than 1,000 industry participants.
   This call for nominations begins the 17th annual competition for the award. The 2014 winner was Milk Source, LLC, in Kaukauna, Wis. Previous winners were McCarty Family Farms, Rexford, Kan.; Sweetwater Valley Farm, Philadelphia, Tenn.; Brubaker Farms of Mount Joy, Pa.; Haubenschild Dairy Farm, Princeton, Minn.; High Plains Dairy of Friona, Texas; Mason Dixon Farms, Gettysburg, Pa.; Clauss Dairy Farms, Hilmar, Calif.; Baldwin Dairy/Emerald Dairy, Emerald, Wis.; Si-Ellen Farms, Jerome, Idaho; Pagel's Ponderosa Dairy, Kewaunee, Wis.; C Bar M Dairy, Jerome, Idaho; North Florida Holsteins of Bell, Fla.; KF Dairy of El Centro, Calif; Joseph Gallo Farms of Atwater, Calif.; and KBC Farms, Purdy, Mo.
   Complete award criteria and a nomination form are available here.  

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)
   Things were quiet in this morning’s cash cheese trading in Chicago following the return to $2 block Cheddar. The 40lb. blocks saw daily gains this week but were unchanged this morning, holding at $2.05/lb., with no activity. The 500lb. barrels held at $1.9675/lb., following 3 days of gain, with an offer this morning at that price left on the board.  
   The blocks are up 9¢ on the week and 30.25¢ above this week a year ago. The barrels are up 3.5¢ on the week and 20.75¢ above a year ago. Six cars of block traded hands on the week and 18 of barrel. The lagging NDPSR-surveyed U.S. average block price fell 6.1¢, to $2.0516/lb. Barrel averaged $2.0563/lb., down 4¢.
   Cash butter lost 1.75¢, following a 2¢ decline yesterday, 2¢ on Tuesday and 2¢ on Monday, and finished the week at $2.2225/lb. Ten carloads traded hands this morning, 5 at $2.22/lb. and 5 at $2.2225/lb., and an offer at $2.24/lb. went uncovered.
   The spot price reversed two weeks of gain and is down 7.75¢ on the week, but is still 67.75¢ above a year ago. Twenty nine cars were sold on the week. NDPSR butter averaged $2.1293/lb., up 1¢.
   How low will butter go? No one knows for sure but FC Stone dairy broker, Dave Kurzawski, warned in this morning’s Insider Opening Bell: "We expect to see more weakness on spot butter."       
   An uncovered offer took the Grade A nonfat dry milk down 0.25¢ today, following several sessions of gain the past 2 weeks, and closed the day and the week at $1.8575/lb., up 1.25¢ on the week. Three cars were sold this week. NDPSR powder averaged $1.8901/lb., up 7.6¢, and dry whey averaged 67.24¢/lb., down 0.8¢.

Today’s Market Closing Prices
Butter: Down 1.75¢, to $2.2225/lb.
Cheddar blocks:  Unchanged, at $2.05/lb.
Cheddar barrels: Unchanged, at $1.9675/lb.
Grade A nonfat dry milk:  Down 0.25¢, to $1.8575/lb.
Class III milk: June $21.24, -13¢; July $20.38, -32¢; Aug. $20.33, -22¢; & Sept. $20.32, -3¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.34, -19¢ from Thursday. The Fourth Quarter average is now at $19.54, +30¢ from Thursday. The First Quarter 2015 average is now at $18.34, +2¢ from Thursday.
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Looking ahead:
   There’s not a lot for the markets to feed from next week. USDA issues its weekly Crop report Monday afternoon. The California Department of Food and Agriculture announces July Class I milk prices on Tuesday. USDA issues its monthly World Agricultural Supply & Demand Estimates report on Wednesday, which will include the latest milk production and milk price projections, and the National Dairy Products Sales Report (NDPSR) is released Wednesday afternoon.

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Monday on DairyLine:
   Rod Isham from Prince Agri Products discusses dairy cow stress management       
   California dairyman Ray Prock talks football in the offseason as part of Fuel Up to
         Play 60

http://dairyline.com/monday.mp3

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