DairyBusiness Update: Jan. 8, 2014

Supply management a sticking point in the Farm Bill
   Wisconsin-based Dairy Business Association (DBA) reports that Farm Bill dairy policy issues “reached a critical point on New Year's Eve, sources advise, with House Ag Chairman and farm bill conference leader Frank Lucas (R-Okla.) calling House Speaker John Boehner (R-Ohio) about the topic.”
   Contacts stated that Lucas in essence asked Boehner whether or not there was any "wiggle room" regarding helping Rep. Collin Peterson (D-Minn.), ranking member of the House Ag panel and the major lawmaker pushing supply management language to be included in the dairy program title.  
   “Boehner's response to Lucas made it very clear that the House Speaker had not changed at all his fierce opposition to dairy supply management,” according to a DBA press release, which added that Boehner had even threatened to not bring the Farm Bill conference report up for a House vote if it contained supply management.
   “If the eventual dairy policy language is not to Peterson's liking, the question then is whether or not he would vote for the overall conference report because of just one issue, and if so, how many other Democratic members would follow any such development. With most conservative Republicans expected to vote no on any coming farm bill conference report, the measure will need more than a few Democratic votes to win House approval,” The DBA stated, “But for now, farm bill negotiators are suddenly quiet, something they have not been for a long time. That usually means progress is being made and a deal is near. But as the multiyear farm bill negotiations have shown, any predictions on this topic can make the most seasoned observer look foolish.”

Cheese price strength good and bad
  
USDA’s Dairy Market News (DMN) reports that cheese price increases through this Wednesday “show extraordinarily robust strength,” and is “both good news and bad news, depending on who is opining.”  Good for manufacturers with strong recent sales and bad for manufacturers with recent sales less robust than anticipated.”
   “This week some manufacturers have not received the volume of cheese orders by midweek that they anticipated when scheduling weekly production. Opinions as to factors vary - some related to current high cheese prices and others to extremely cold weather. Yet other manufacturers report selling extra loads last week into this week, with inquiries for extra loads into next week as well.  One factor believed to be mitigating higher prices and weather, is this being the first full work week of the year for many buyers,” says DMN.

Weather’s impact just beginning
  
Midwest plants report milk production through last week had come up from the week before, according to DMN. One plant manager reported that farms supplying the plant were noticeably attributing stronger milk production in part to decent feed prices and hence, use of feed. This week's two decade record cold temperature is generally reported to have primarily slowed the increase in milk production, rather than decreasing production.  A number of plants report that milk production has been steadily increasing on a daily basis for about two weeks until this week's extremely cold weather. 
   Little concern has been expressed though, with production being expected to rebound quickly, according to DMN. The combination of heavy winter snow and arctic temperatures has caused milk production to decline in some areas of the Northeast. Manufacturing milk supplies are heavy coming off the holiday period in the Northeast and Mid-Atlantic regions. Milk transports have experienced some delays due to various winter storms. The forecast for a winter storm crossing the region is causing retail runs on dairy products.

California powder still well below CME spot price
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices at $1.9664/lb. for the week ending January 3, 2014, on sales of 7.25 million lbs., up from $1.9436/lb. the week before on sales of sales of 4.52 million lbs.
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Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Someone PLEASE SELL ME SOME CHEESE!!  Cash prices shot up again this morning pulling Class III futures with them but sellers were nowhere to be seen.
   The Cheddar blocks were up 9¢ on 1 unfilled bid, following yesterday’s 6¢ jump. Gains have come every day in the New Year and the blocks are now priced at $2.20/lb., highest price since June 3, 2008, but no one is selling…yet! Again, the record high was $2.2850/lb. on May 23, 2008. The barrels were up 10¢ this morning on a bid, following an 11¢ jump yesterday, 3¢ on Monday, and 7¢ on Friday. The spread is now at a more typical 4¢.
   Insiders credit (or blame) the weather. Anecdotal reports are that milk is being dumped in storm ravaged parts of the country plus, while yesterday’s Global Dairy Trade auction saw the weighted average for all dairy products fall 0.8%, an apparent cheese shortage on the world market maybe influencing price fundamentals here. FC Stone analyst Joe Kobel told us that “Cheese manufacturers went into December relatively light on inventory, betting that prices would tumble and inventories could be built at lower price levels but that was not the case.”
   Cash butter got with the program today as well, up 3¢ to $1.65/lb. One car was sold at $1.6425/lb. Two bids at $1.65/lb. took the price higher but got no takers. Butter was unchanged yesterday but gained 5¢ Monday. FC Stone dairy broker Dave Kurzawski wrote in this morning’s eDairy Insider Opening Bell that “Among dairy products, butter is relatively cheap and butter consumption is strong. The butter market is underpinned at $1.60 at this point and we'll probably see stable to higher prices."
   Grade A nonfat dry milk inched up 0.25¢ today, to $2.0825/lb. Two carloads sold at $2.08/lb. and 1 at $2.0825/lb., while a bid at that price went unfilled. Extra Grade held at $2.09/lb., with no activity.

Today’s market closing prices:
Butter: Up 3¢, to $1.65/lb.
Cheddar blocks: Up 9¢, to $2.20/lb.
Cheddar barrels: Up 10¢, to $2.16/lb.
Grade A nonfat dry milk: Up 0.25¢, to $2.0825/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.
Class III milk: Jan.$20.39, +11, Feb.$20.45 +30¢, Mar. $19.50 +14¢, Apr. $18.86 +13¢, May $18.60 +21¢, & Jun. $18.32 +17¢. Based on today’s CME closing prices, the 2014 average now stands at $18.63, +20¢ from Tuesday.
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Looking ahead:
   The California Department of Food and Agriculture announce the state’s February Class I milk prices on Friday. The Federal order Class I base price is announced by USDA on Jan. 23. USDA issues its monthly Crop Report Friday afternoon along with its latest milk price and milk production estimates in the monthly World Agricultural Supply and Demand Estimates report.
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Thursday on DairyLine:
   National Milk’s Chris Galen reports from Wash. D.C.
   Alltech’s Ann Kopecky tells us about in vitro fermentation

http://dairyline.com/thursday.mp3

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