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DairyBusiness Update: March 12, 2014

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IDFA Weighs in on the Food Fight
   International Dairy Foods Association (IDFA) President and CEO, Connie Tipton,  stated in a press release late yesterday that “IDFA commends the 55 U. S. senators who have taken a strong stance against the European Union’s efforts to hinder our use of common food names.  A letter coauthored by Senators Chuck Schumer (D-NY) and Pat Toomey (R-PA) urges Agriculture Secretary Tom Vilsack and U.S. Trade Representative Michael Froman to reject the EU’s attempt in the Transatlantic Trade and Investment Partnership negotiations to claim exclusive use of common cheese names both here and abroad.
   “These lawmakers understand the importance of lowering trade barriers and fighting the kinds of restrictions that have the capacity to stall job growth in the United States and limit our expanding dairy export market.
   “Protecting the ability of U.S. cheese makers to use common cheese names is a top priority for IDFA.  TTIP is an opportunity to lift trade barriers, not impose new ones.”

Outlook is “Dairy” Good
   The dairy outlook is very positive, according to Penn State’s James Dunn in Tuesday’s DairyLine Radio broadcast, with February values for the All Milk price and Class III and Class IV prices at record highs. The cost of feed is moderate which saw February’s income over feed costs up 6.5 percent from January, the highest value we have ever seen, Dunn said.
   “The outlook is very positive because we are selling so many dairy products to China, in particular,” Dunn said. “China is the biggest customer for dairy products in the world and continues to buy.”
   The futures market expects milk prices to tail off towards the end of the year. Its expected milk production will increase as we head into spring, which will lower prices. Dairy consumption typically goes down in the summer and that will have an effect as well, according to Dunn.
   “The whole year looks really quite positive,” he said. “The expectation I have is prices for the year as a whole are going to be two dollars above what they were last year.”
   Record high beef prices continue, meaning higher cull rates. That could be why we are seeing a delay in more cows across the U.S. The expansion of the herd has been expected but so far has not happened.
   The corn markets are edgy because of the situation in Ukraine, the third largest exporter of corn, according to Dunn. “People are wondering what is going to happen over there and whether that’s going to affect exports,” Dunn concluded. “It doesn’t seem to be so far, although people are sitting on their grain as they feel it has a better storage value than their money.”

California Powder Creeps Higher
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices today at $2.0594/lb. for the week ending March 7, on sales of 8.54 million lbs. The price was up from $2.0268/lb. the week before, on sales of 7.78 million lbs.

NDPSR Powder Highest Since Jun 2011/Highest Whey Since Jan 2013
  
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 $2.1878/lb., down 4.3¢, while the barrels averaged $2.2148, up 0.8¢. Butter was up 1.6¢, to $1.8242/lb. Nonfat dry milk averaged $2.1032/lb., up 1.8¢ (highest price level since the week of June 13, 2011), and dry whey averaged 64.81¢/lb., up 0.5¢ (highest whey price since the week of January 14, 2013). These prices are used in determining Federal order Class milk prices.

Butter Exports Still Strong
   Northeast butter production has settled somewhat from the previous week, as cream supplies become tighter due to increases in Class II production and forthcoming Easter holiday demand, according to Dairy Market News (DMN). Some manufacturers anticipate completing production schedules for holiday specialty butter by end of week.  Inventories are mixed in the region. Some butter makers favor adding to supplies, while others ship loads out as soon as possible. The demand for both print and bulk is strong.
   U.S. butter prices are running below most international prices, fostering active export sales, keeping several butter manufacturers busy making 82% unsalted butter. 
   Midwest operators are churning steadily as cream supplies are plentiful. Domestic retail demand is steady to improving.  Some manufacturers were able to rebuild butter stocks to comfortable levels while others have limited inventories as they keep up with contracts. 
   Butter production in the West is increasing due to improved farm milk volumes. Domestic retail sales are steady. Export demand is good.

Cheese Demand & Exports Strong Despite Higher Prices
   Northeast cheese production is steady, according to DMN, with some volumes continuing to be channeled into cheddar aging programs. As cheese makers look to fulfill near term export commitments, some plants are maintaining 7 day production schedules. Export activity remains strong. Domestic demand is good leading up to the Easter holiday.
   The Foreign Agricultural Service reports that January 2014 U.S. cheese and curd exports totaled 70.8 million pounds, a 46% increase from last year.
   Some Wisconsin cheese plants are running at capacity to meet demand and report being sold out. Producers opting to maintain steady production are generally drawing down inventory levels to meet demand. Orders have remained strong, even after markets saw prices strengthen. Orders received in the Midwest include those from regular customers, as well as orders not being met by some Western cheese producers who face reduced milk availability.
   Among regular buyers, there has been a noticeable increase in demand for hard Italian cheeses. Plants manufacturing mozzarella and provolone report stronger  interest in mozzarella. Reports of cheese plants buying surplus milk on spot markets are not widespread, but sales are reported to be occurring at up to $1.50 over class. Most cheese manufacturers expect milk supplies to continue to increase in coming weeks.
   January total cheese production in the Western region totaled 412.5 million pounds, up 4.5% (17.7million pounds) from January 2013. The West produced 43% of all U.S. cheese in January. Swiss output totaled 25.5 million pounds, down 0.4% from a year ago.

Called it Quits
   Sixty seven dairies closed their doors in California in 2013, according to data released by the California Department of Food and Agriculture (CDFA). That adds up to about 45,000 less cows.
   "Given that each cow generates more than $34,000 in economic activity each year, the closure of these dairies has caused the loss of more than $1.4 billion in economic activity and more than 11,000 jobs," explained Joe Augusto, president of the California Dairy Campaign (CDC).
   To prevent more dairies from going out of business, CDC is calling for California to join the federal milk marketing order (FMMO) system to bring prices paid to dairy farmers in California in line with prices paid in other states.
   "There are fewer than 1500 dairies remaining in California, and a significant reason for the drop in the number of dairies is due to the fact that prices paid to California dairy producers are significantly lower than prices paid in the federal order," stated Augusto.        
   "Passage of the 'California Milk Marketing Order Act" was our top priority and now that it has been signed into law in the 2014 farm bill, we have the authority necessary to move to join the federal order system and sustain dairies statewide."
   The 2014 farm bill included the "California Milk Marketing Order Act" introduced by Reps. David Valadao (R-21), and Jim Costa (D-16), which would enable California to retain its state quota program in the federal order system.
   CDC reports that more than 170 California dairies have gone out of business in the last two years.
   Read more: http://dairybusiness.com/seo/headline.php?title=67-california-dairies-quit-in-2013&date=2014-03-11&table=headlines#ixzz2vmLGXyUA

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Cash block Cheddar cheese, on an unfilled bid, inched higher again this morning, like it’s done in 13 of the previous 14 sessions, and hit $2.3250/lb., 3.5¢ shy of the all time record high. The barrels held at $2.2850/lb., following yesterday’s 1.5¢ rise and 2¢ on Monday. There was no activity today.
   FC Stone risk management consultant Joe Kobel wrote in this morning’s Insider Opening Bell: "There's a lot of uncertainty in the market. Will cheese prices blow past their all-time highs? Or will they fail the retest? People do not want to get caught on the wrong side of these markets."
   Butter was also unchanged, holding at $1.8850/lb. Two bids at $1.8750/lb. went unfilled, and an offer at $1.90/lb. was uncovered.
   Cash Grade A powder was unchanged, remaining at $2.04/lb. Two carloads traded hands at that price and an offer at $2.05/lb. was left on the board.
   Kobel says "The story in the powder markets is simply demand from China."

Today’s Market Closing Prices:
Butter: Unchanged, at $1.8850/lb.
Cheddar blocks: Up 0.5¢, to $2.3250/lb.
Cheddar barrels: Unchanged, at $2.2850/lb.
Grade A nonfat dry milk: Unchanged, at $2.04/lb.
Class III milk: Mar. $22.91, +1¢; Apr. $21.46, +7¢; May $20.03, -7¢; & Jun. $19.80,
 -12¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $20.43, -4¢ from Tuesday. The 2nd half average is now at $19.14, -6¢ from Tuesday.
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Looking ahead:
   The Agriculture Department will issue its monthly Livestock, Dairy, and Poultry Outlook Friday afternoon. Next week will be a busy one. The biweekly Global Dairy Trade Auction happens Tuesday, the preliminary February Milk Production report is issued by USDA on Wednesday afternoon, along with the April Federal order Class I base milk price. The Livestock Slaughter report is out on Thursday and the preliminary February Cold Storage report is out Friday afternoon, March 21.
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Thursday on DairyLine:
   NMPF's Chris Galen says there are more questions than answers when it comes to
    the new dairy program in the farm bill.
Jerry Miller, founder of FarmersOnly.com, explains why he started an online  dating
    website for farmers

http://dairyline.com/thursday.mp3

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