DairyBusiness Update: Jan. 10, 2014

Changes coming to DairyBusiness Update
DairyBusiness Update editor Dave Natzke announced his resignation today. Writing in today’s issue, Natzke said; It has been my pleasure serving as editor of DairyBusiness Update (and its predecessor, Dairy Profit Weekly) for more than 10 years. 
   Looking back, my first issue as editor was June 9, 2003. For those readers with long memories, the topics making the news that week concerned California Department of Food & Agriculture milk pricing policy changes, and the U.S. Food & Drug Administration regulation of new “dairy beverage” standards of identity and how they fit under the federal milk marketing order pricing system. (My how things haven’t changed.)
   Things do change, however, and DairyBusiness Update is no exception. I am making a career change, effective Jan. 13, so this will be my last issue as DairyBusiness Update editor.
   Adding it up, you have allowed me into your mailbox and/or email inbox about 525 times since June 2003. I have valued your continued readership and friendship over the past decade. If you want to stay in touch, I can be reached at dnatzke@charter.net.
   Those contributing news for DairyBusiness Update can contact associate editor Lee Mielke at lmielke@dairybusiness.com.

-- Dave Natzke

   A quick personal note, Dave Natzke is one of the most respected dairy journalists in the country and it has been my pleasure to have worked with him all these years. I wish him well.

                                                                                                                     --Lee Mielke

WASDE: More milk in 2014, but better prices, too
  According to USDA’s World Ag Supply & Demand Estimates (WASDE) report, released Jan. 10, the 2013 milk production estimate was reduced from last month, based on recent milk production data. The forecast for 2014 is raised as improving returns are expected to support a more rapid increase in output per cow.
    • 2013 production and marketings were projected at 201.3 billion lbs. (down 300 million lbs.) and 200.3 billion lbs. (down 400 million lbs.), respectively, from a month ago. If realized, 2013 production and marketings would be up less than 0.5% from 2012. 
   • 2014 production and marketings were projected at 205.6 billion lbs. and 204.7 billion lbs., up 300 million lbs. and 400 million lbs. from the previous month, respectively. If realized, 2014 production and marketings would be up about 2.1%-2.2% from 2013. 
   Fat basis imports are reduced for 2013 and 2014 on lower expected imports of butterfat. On a skim-solids basis, imports are reduced slightly for 2013, but are unchanged for 2014. Fat basis exports are raised for both 2013 and 2014 on relatively strong demand for cheese and other products. Skim-solids exports are reduced slightly for 2013 as NDM exports lagged in November. However, exports are expected to strengthen in 2014 and the skim solids export forecast is raised.
   Dairy product and milk prices for 2013 are adjusted to reflect December data. For 2014, cheese, butter, and nonfat dry milk (NDM) prices are raised as export and domestic demand are expected to strengthen, but the forecast for dry whey is unchanged. The Class III price is raised due to the higher cheese prices and the Class IV price forecast reflects higher butter and NDM prices. The all milk price is forecast at $20.60-$21.40cwt. for 2014.

Dairy price forecasts 
Estimated Forecast
Product 2012 2013 2014    
Class III ($/cwt) 17.44 17.90-18.00 17.80-18.60
Class IV ($/cwt) 16.01 18.95-19.15 19.80-20.70
All milk ($/cwt) 18.53 19.90-20.00 20.60-21.40
Cheese ($/lb.) 1.7076 1.7683 1.760-1.840
Butter ($/lb.) 1.5943 1.5451 1.515-1.625
NFDM ($/lb.) 1.3279 1.7066 1.805-1.865
Dry whey (¢/lb.) 59.35 59.02 0.550-0.580

Source:USDA WASDE report, Jan. 10, 2014

Calif. Feb Class I milk prices $3.28 above 2013   
   The California Department of Food and Agriculture announced the state’s February Class I milk prices this morning at $23.11 per hundredweight for the north and $23.38 for the south. Both are up 27¢ from January and are $3.28 above February 2013. The Federal order Class I base price is announced by USDA on Thursday, Jan. 23.

CWT plays big role in U.S. dairy exports
   Through October, CWT-assisted export shipments accounted for 82% of the American cheese shipments, 19% of total cheese shipments, and 87% of U.S. butter exports, according to Dairy Management Incorporated’s Dec. Dairy Market Report (DMR) issued today.
   All dairy imports tracked were down for the first 10 months of 2013 compared to the same period in 2012 except for American-type cheese. The American cheese percentage change is “misleading,” the DMR stated, “considering imports only totaled 47 metric tons in 2013 compared to 11 metric tons in 2012.”

November U.S. female dairy cattle exports jump
U.S. female replacement dairy cattle remain in strong demand, with monthly exports topping 7,500 head in November 2013 – the third time it's reached that level in 2013.
   November exports totaled 7,544 head, the third-highest monthly total of the year, according to USDA’s Foreign Ag Service. Through November, the 2013 year-to-date total – at 61,182 – had already surpassed the total for all of 2012. If trends continued into December, total 2013 exports will come in just below the record of 73,642, set in 2011.
   Russia was the top destination for U.S. replacements during November, at 4,759 head, pushing its year-to-date total to 23,413. Mexico was second, at 2,158 head in November, and a year-to-date total of 20,648.

November U.S. alfalfa exports steady
November 2013 U.S. alfalfa hay exports totaled 170,276 metric tons, slightly above the monthly average volume for 2013, according to USDA’s Foreign Ag Service. November’s exports bring the 2013 year-to-date total to 1.801 million metric tons, already surpassing the total for all of 2012.
   The United Arab Emirates (UAE) was the top market for U.S. alfalfa hay in November, at 46,985 metric tons. Japan followed, at 40,019 metric tons, with South Korea third, at 13,590 metric tons.
   Meanwhile, monthly U.S. exports of other hay totaled 175,749 metric tons in November. Japan and South Korea were the top two markets, taking about 74% of the monthly total. The year-to-date total is 1.731 million metric tons.

USDA Greek yogurt program expanding
USDA will expand a program to make Greek yogurt available in school lunch programs.
   USDA launched a pilot program last fall in four states – New York, Idaho, Arizona and Tennessee. Chobani submitted a successful bid to provide 200,000 lbs. of strawberry, vanilla, blueberry and plain yogurt between September and November 2013. The total contract was worth $279,720 ($1.40/lb.).
   USDA will expand the program to four more states in the next school year, although the agency didn’t identify the states, according to a spokeswoman for Sen. Kirsten Gillibrand (D-N.Y). To learn more about the program and Chobani's involvement, visit www.gogreekinschool.com.

“Mother Nature” spurring dairy sales
USDA’s Dairy Market News (DMN) reports that 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. Class I demand has had a strong bounce back in Florida as most schools and universities are back in session. Milk production has seen an increase with the cooler weather that has moved into the state. The increase in fluid demand has created the need for imports with 22 spot loads this week. The Southeast region has also seen a significant increase in Class I demand. Milk supplies are barely adequate to cover fluid demand.  Manufacturing supplies have been cut below contract minimums.  The forecast for a winter storm crossing the region is causing retail runs on dairy products, according to DMN.

What goes up must come down……well maybe not yet
   FC Stone dairy broker Dave Kurzawski cautioned in Friday’s DairyLine that “the four most dangerous words in using markets is ‘this time it’s different.’ He quickly added, “There are some differences out there and there are some issues of supply demand imbalances on dairy commodities both domestically and internationally.”
   While he has concern going into February and March, which is a typically slower U.S. demand time and a “pushback from U.S. consumers,” he still thinks the underpinnings of the market are “largely bullish” and looks for the market to trade in the $1.90-$2.20 area for the foreseeable future. He added that “issues in dairy farm economics are a little bit different than they have been in the past” and “even with good profit margins I just don’t think many of the dairy producers are going to respond as quickly as they have in the past.”
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
  Cash cheese prices were unchanged again this morning in Chicago as traders awaited this afternoon’s  World Agricultural Supply and Demand Estimates report. The 40lb. blocks remained at $2.20/lb. and the 500lb. barrels held at $2.16/lb. The blocks are up 15.75¢ on the week, up 20¢ cents since the 1st, and 48¢ cents above a year ago. The barrels re-established a normal spread and are up 24¢ on the week and 48.75¢ above a year ago. Two carloads of barrel was the only cheese sold this week in the spot market.
      Cash butter was unchanged this morning, holding at $1.6750/lb. Two cars traded hands, 1 at $1.68/lb. and 1 at $1.67/lb., but an unfilled bid kept the price at yesterday’s close. The butter price is up 10.5¢ on the week and 22¢ above a year ago. Seven cars were sold this week.  
   Sellers brought some powder to the market this morning and took the prices lower. Grade A lost 1.25¢ and slipped to $2.07/lb. One bid at $2.06/lb. and an offer at $2.0775/lb. got no response. Extra Grade, after sleeping for 16 consecutive sessions, was down 1¢ on a trade, to $2.08/lb. The Grade A is up 0.25¢ on the week, Extra Grade is down 1¢.

Today’s market closing prices:
Butter: Unchanged, at $1.6750/lb.
Cheddar blocks: Unchanged, at $2.20/lb.
Cheddar barrels: Unchanged, at $2.16/lb.
Grade A nonfat dry milk: Down 1.25¢, to $2.07/lb.
Extra Grade nonfat dry milk: Down 1¢, to $2.08/lb.
Class III milk: Jan.$20.50, +8, Feb.$20.21 +5¢, Mar. $19.22 +10¢, Apr. $18.70 +8¢, May $18.53 +12¢, & Jun. $18.40 +15¢. Based on today’s CME closing prices, the 2014 average now stands at $18.61 +9¢ from Thursday.
Looking ahead:
   Next week’s USDA schedule is light. The Agriculture Department will issue its monthly Livestock, Dairy, and Poultry Outlook on Thursday afternoon, Jan. 16, as well as Consumer Price Index data but that’s it for the week.  
Monday on DairyLine:
   Part 2 with Michigan dairy producer Jim Reid, on his recent trip to Dubai.
   Team facilitator Kristy Pagel helps dairy producers “Make the Connection”