DairyBusiness Update: January 30, 2014

Better Butter Demand
USDA’s Dairy Market News (DMN) reports that some Central butter churn operators were able to secure additional cream supplies this week, which have been tighter than years past. The market tone continues to be firm with low print and bulk stocks. Many butter makers are trying to rebuild inventories but are not gaining much ground as good export sales and higher than expected domestic print orders have kept supplies tight.    
   DMN reports that contacts worry that the current high butter prices may have future implications on butter stocks, ice cream makers, and milk supplies. Current bulk butter prices went higher, ranging from 1 to 10 cents over the market, based on the CME, with various time frames and basing points used.

Record Cheese Prices Reducing Production
Record cheese price levels are resulting in some manufacturers reducing current cheese production, according to Dairy Market News (DMN). A number of them report decreasing sales to retail outlets and institutional/food service. “One manufacturer commented that a number of food service outlets are experimenting with reducing or removing cheese from some menu options, to reduce their need to purchase cheese.”   
   Grocery stores are resisting buying more than needed to keep shelves stocked, in the view of almost all manufacturers, says DMN, and current prices are blamed.
   “Some manufacturers are echoing the apprehension of buyers, not wanting to be left holding inventories with a high price basis when cheese prices decline,” says DMN. thus, some manufacturers with contracted milk supplies affirm that cheese production is being adjusted lower and milk which might have gone into cheese making is being diverted to other uses. Some cheese makers are now using more condensed skim as an alternative to nonfat dry milk in manufacturing due to current prices of NDM.”

Western Cheese Output Also Down
   Lower than expected milk production and strong demand from competing products are limiting milk available to cheese plants in the West, according to Dairy Market News. One prominent manufacturer announced layoffs this week due to tight milk supplies.  Production is sufficient for most contracted needs but is limiting spot offerings. Good export demand is also adding to the tight inventories, according to DMN.

IDFA Honors Three Outgoing Officers at Dairy Forum
   The International Dairy Foods Association presented 2014 Soaring Eagle Awards to three outgoing officers: Mike Nosewicz, vice president, Fresh Dairy, The Kroger Co.; Ed Mullins, executive vice president and CEO, Prairie Farms Dairy, Inc.; and Jon Davis, president and CEO, Davisco Foods International, Inc. The awards were presented this week at a special ceremony during IDFA’s Dairy Forum at the JW Marriott Desert Springs Resort and Spa in Palm Desert, California
   “The Soaring Eagle awards recognize the extraordinary service of leaders in the dairy industry and those who have provided exemplary leadership to IDFA, the International Ice Cream Association, the Milk Industry Foundation and the National Cheese Institute,” according to an IDFA press release. Videos honoring the three officers are available at IDFA's YouTube channel.

Wisconsin Dairy Named “Innovative Dairy Farmer of the Year”
   Milk Source, LLC, a dairy operation located in Kaukauna, Wis., was named the 2014 Innovative Dairy Farmer of the Year during an awards ceremony this week at the International Dairy Foods Association's Dairy Forum. The award recognizes U.S. dairy producers that “apply creativity, excellence and forward thinking to achieve greater on-farm productivity and improved milk marketing,” according to IDFA.
   Milk Source earned two nominations, one from Wisconsin Secretary of Agriculture Ben Brancel and another from David Crass and Anna Wildeman, attorneys with Michael Best & Friedrich LLP, in Madison, Wis. All three attended the ceremony where Jim Ostrom, president and CEO of Milk Source, accepted the award.
   The other owners are John Vosters, who manages the livestock, and Todd Willer, who handles facility and farming operations. Willer is also the lead on all building and site renovations. This partnership has allowed the farm to grow from 180 cows in 1994 to nearly 27,000 cows today. A video highlighting the company’s operations can be viewed at IDFA's YouTube channel.

National Cheese Institute Honors Schreiber Foods Executive
The National Cheese Institute has bestowed its highest honor, the NCI Laureate Award, on Robert G. Bush, chairman emeritus of Schreiber Foods, Inc., Green Bay, Wis. NCI Chairman Mike Reidy, who is senior vice president, corporate affairs, Leprino Foods Company, presented the award to Bush this week during a special ceremony at the International Dairy Foods Association's Dairy Forum.
   The NCI Laureate Award recognizes individuals who have made significant contributions to the development and growth of the cheese industry. A panel of industry professionals chooses a winner each year based on the person's long-term contributions to the industry.
   The son of Schreiber Food’s founder, Merlin G. Bush, Bob Bush dedicated his entire career to the cheese industry. He started with the company in 1946, and the list of his contributions is long and legendary. Bush holds 17 patents and revolutionized the industry with his engineering and technical expertise, which led to the invention of technology that gave the world individually wrapped processed cheese slices. A video highlighting Bush’s lifetime achievements can be viewed at IDFA's YouTube channel.

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 are rising faster than the temperature in Chicago and pulling Class III futures prices up with them. The Cheddar blocks were up 1.5¢ today on an unfilled bid, following yesterday’s 2¢ and 1¢ on Tuesday. One bid took the barrels up 2¢, duplicating yesterday’s 2¢, and 0.5¢ on Tuesday. The blocks and barrels are trading at a record high $2.3550/lb. and $2.32/lb. respectively.
   FC Stone risk management consultant Chris Hildebrand wrote in this morning’s eDairy Insider Opening Bell that "Buyers are pushing these prices to ultimate levels, but the cheese market feels very heavy."
   An uncovered offer took the cash butter 0.25¢ lower this morning, following yesterday’s 0.5¢, slip, and is now trading at $1.8925/lb. A bid at $1.88/lb. was unfilled.
   FC Stone’s Joe Kobel wrote in yesterday’s Insider Closing Bell that the industry is “working hard to replenish stocks, and worries that current prices could hurt butter demand later this year likely weighed on futures today."
   Cash Grade A nonfat dry milk regained  0.25¢, after dropping 2.25¢ yesterday, and gaining 2.5¢ on Tuesday. Six carloads were sold this morning. Three were at yesterday’s price of  $2.0525/lb., but the next 3 were at today’s close of $2.0550/lb. TEN bids at that price went unanswered and an offer at $2.06/lb. went nowhere.

Today’s market closing prices:
Butter: Down 0.25¢, to $1.8925/lb.
Cheddar blocks: Up 1.5¢, to $2.3550/lb.
Cheddar barrels: Up 2¢, to $2.32/lb.
Grade A nonfat dry milk: Up 0.25¢, to $2.0550/lb.
Class III milk: Jan.$21.11, +5¢; Feb. $23.29, +38¢; Mar. $21.53, +57¢; Apr. $20.06, +26¢, May $19.20, +5¢, & Jun. $18.87, -1¢. Based on today’s CME settlements, the first half 2014 average now stands at $20.68, +22¢ from Wednesday, and the 2nd half average is $18.25, +4¢ from Wednesday.
Looking ahead:
   The Agriculture Department will issue its monthly Ag Prices report tomorrow afternoon. The report will include the latest Milk Feed Price ratio. Looking to next week, the California Department of Food and Agriculture will announces the state’s January 2014 Class 4a and 4b milk prices on Monday, February 3. USDA issues its monthly Dairy Products report on Tuesday, and the January Federal order Class II, III, & IV milk prices are announced on Wednesday.
Friday on DairyLine:
University of Wisconsin’s Dr. Brian Gould analyzes the new Farm Bill’s Dairy Title
Mike Hutjens discusses the challenges cows face during cold temperatures