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DairyBusiness Update: March 7, 2014


$2 Cheese Will Stick Around Awhile
Cheese prices hit record highs last month, then slumped, but are climbing back up again. Speaking in Friday’s DairyLine, Jerry Dryer, editor of the Dairy and Food Market Analyst, said “It’s called supply and demand and demand is very strong both here and around the world and supply is a little bit snug.”
   He cited this week’s Dairy Products report showing Cheddar production, which is primarily block cheese, below a year ago again and total American-type cheese was only up modestly. And demand is strong.
   He believes we could see $2 cheese through the end of March and said it’s looking more likely to be here well into the Second Quarter.
   International buyers who took a lot of cheese out of the U.S. last year, and in October and November, before the markets starting advancing, hedged their purchases through the first half of the year, Dryer said. He speculates that it sold in the $1.85 per pound range “so that’s what they’re paying for the cheese despite these higher prices at the Exchange.”
   Switching to commercial disappearance data, Dryer said he has pulled 2013 data together in both the domestic and export side of the business. Commercial cheese disappearance was around 11.5 billion pounds, according to Dryer, up 3 percent. U.S. sales were up 2 percent, he said, and up 22 percent on the export side, “a very significant force and price driver.”
   Commercial butter disappearance was up about 5 percent, Dryer reported, actually a bit lower in the U.S., he said, but up about 90 percent on exports.
   Ditto on nonfat dry milk, which is very important to this current market, he concluded, as “the higher nonfat dry milk price is helping support other milk prices.”

“Wheyward” Prices Up
The Central midpoint of the mostly whey price rose fractionally from last week's price to 61.5 cents, according to USDA’s Dairy Market News (DMN), while the midpoint of the Western price was announced at 63.13, up 0.5 cents from last week. "The firm market undertone is being reinforced by tighter inventories of whey in the West," says DMN.
   "Dry whey production in the West saw significant declines in January. Although cheese production in the West for January was up 4.5% compared to last year, dry whey production was down 35.3% from a year ago. Whey stream products were directed toward WPC production versus dry whey manufacturing. Demand for whey for both export and domestic use is reported to be good." FC Stone reported in yesterday’s Insider Closing Bell that April through September whey futures closed as much as 2.5 cents higher.

Good News for Beef and Dairy Producer Feed Costs says Rabobank
   Rabobank analysts report that world grain supplies are rebuilding and moderating prices, but there are some wild cards in the mix, including production in South America and Chinese demand. Details are spelled out in the March 6 Capital Press. But moderating prices are already boosting margins for dairy and beef production and could go even lower in 2014. Strong global demand will also underpin a stellar year for dairy and beef producers.   
   Moderating feed prices, combined with strong demand, has U.S. beef and dairy producers on target for an exceptional year, according to Rabobank analysts. In the big picture, grain markets are rebuilding and prices have moderated over the last six   months and could go lower, said Bill Cordingley, managing director and chief of Rabobank agribusiness research and advisory group.
   Rabobank officials are on a tour of the Northwest, speaking to clients about global commodity markets in terms of price and outlook. The tour made a stop in Twin Falls on March 4.
   It will be a strong year for U.S. dairy producers and exporters, and the tightening U.S. beef supply will continue favorable cattle prices and provide a big growth market for lean beef, Cordingley said. Read more at http://goo.gl/YcIbTg

Understanding Dairy’s New “Margin Protection” Program
  A University of Missouri Extension economist was quoted as saying that “when milk producers first hear about the dairy insurance program, they become confused about it.”    
   Bob Gray, editor of the Northeast Dairy Farmers Cooperative’s newsletter, writes in his March 7 issue that “We all know that this new dairy safety net is different and we have discussed it a number of times in previous newsletters. It is going to take much more planning on the part of dairy farmers in effectively utilizing this new program.”
   Plans are underway at our dairy cooperatives, university extension departments and state agencies like the Center for Dairy Excellence at the Pennsylvania Department of Agriculture to assist in educating dairy producers, according to Gray. “We will also closely track USDA’s development of the rules to implement the program. So we definitely plan on keeping you posted on all fronts.”
   Hopefully, this will be the case among all such agencies throughout the U.S. If not, contact your local cooperative or university cooperative extension office.

Dairy Processor Organization Looks at Upcoming Elections    
   Analysts estimate that there are fewer than 50 competitive seats out of the 435 members elected to the House. In the Senate, Republicans may have the opportunity to regain control, while Senate Democrats will be playing mostly defense.
   Ashley Burch, IDFA assistant director of political programs, explains why in her recent Policy & Politics blog posts. Log on to http://www.idfa.org/news--views/washington-insider/details/148/

California 2013 Dairy Data Posted
   While Wisconsin remains the nation’s biggest cheese producer and California the biggest milk producer, California cheese Vats were busy as well in 2013. The California Department of Food and Agriculture (CDFA) released its Statistics and Trends report yesterday showing total cheese output for the year at 2.31 billion pounds, up 66.4 million pounds from 2012 or a 2.95 percent increase. Mozzarella made up the biggest part of that total at 1.34 billion pounds, up 35.6 million pounds from 2012, followed by Cheddar at 350.9 million pounds, up 25.7 million pounds from 2012.
   Butter output totaled 634.4 million pounds, down 19.8 million pounds or 3 percent. Nonfat dry milk production, at 583.1 million pounds, was down 247.7 million pounds or 29.8 percent. For complete details log on to the CDFA website at http://www.cdfa.ca.gov/dairy/dairystats_annual.html.

Most Calif. Dairy Counties Saw Milk Declines in 2013
CDFA’s March California Dairy Review, also issued this week, shows that six of the state’s top 10 milk producing counties saw milk production declines in 2013, including the nation’s and California’s largest milk producing county, Tulare, down 0.09 percent.    
   Number two was Merced, followed by Stanislaus, Kings, Kern, Fresno, San Joaquin, Madera, San Bernardino, and Riverside. See complete details at http://cdfa.ca.gov/dairy/uploader/docs/MAR%2014.pdf.

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)
   Like a broken record, an unfilled bid took the cash block cheese price up for the 10th  session in a row this morning and still couldn’t entice any sellers. The blocks were up 1.25¢, following yesterday’s 4.25¢, and closed the day and the week at $2.2925/lb. The barrels were unchanged with no activity, following yesterday’s 0.75¢ advance and Wednesday’s 11.5¢ jump, which you’ll recall followed losses Monday and Tuesday totaling 7.25¢. The barrels rested today at $2.25/lb., putting the spread at 4.25¢.
   The blocks are up 7¢ on the week and 69.25¢ above a year ago. The barrels, after dipping to $2.1275/lb. on Tuesday, rebounded and closed 5¢ higher on the week and 67¢ above a year ago. Only three cars of barrel traded hands on the week in the cash market. There hasn’t been any block sold since Feb. 20th.
   Class III futures inched higher in the front months with gains in the last half averaging 12.5¢.
   Cash butter was unchanged again this morning, holding at the $1.88/lb., where it spent the week, up 25¢ from a year ago. There were 4 sales today, 2 at $1.88/lb., 1 at $1.8775/lb., and the final at $1.88/lb. An offer at $1.88/lb. was left on the board. Fifteen carloads were sold this week in the spot market.
   Grade A nonfat dry milk was also unchanged today, holding at $2.04/lb. You’ll recall it lost 1.25¢ Monday but regained that yesterday. There was no activity today. Six cars traded hands on the week.

Today’s Market Closing Prices:
Butter: Unchanged, at $1.88/lb.
Cheddar blocks: Up 1.25¢, to $2.2925/lb.
Cheddar barrels: Unchanged, at $2.25/lb.
Grade A nonfat dry milk: Unchanged, at $2.04/lb.
Class III milk: Mar. $22.65, +5¢ (+76¢ on the week); Apr. $21.25, +4¢ (+99¢ on wk.); May $20.25, unchanged (+58¢ on wk); & Jun. $20.01, +3¢ +34¢ on wk). Based on today’s CME settlements, the Second Quarter 2014 average now stands at $20.50, +2¢ from Thursday. The 2nd half average is now $19.19, +12¢ from Thursday.
Looking ahead:
   The California Department of Food and Agriculture announces the State’s April Class I milk prices on Monday. The Agriculture Department issues its latest Crop Production report and its monthly World Agricultural Supply and Demand Estimates report on Monday. The monthly Livestock, Dairy, and Poultry Outlook is issued on Friday.
Monday on DairyLine:
   Tom Suber, president of the U.S. Dairy Export Council, updates us on dairy exports
    We talk with Randy Schmidt, owner of S&S Jerseyland Dairy in Sturgeon Bay, WI.,
    who began his dairy last year


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