DairyBusiness Update: March 5, 2014

Class III Benchmark Milk Price Hits Record High/ Up $6.10 from 2013
   The Agriculture Department announced the February Federal order Class III milk price this afternoon at $23.35 per hundredweight, up $2.20 from January , $6.10 above February 2013, $2.21 above the California 4b cheese milk price, and equates to about $2.01 per gallon. It tops the previous high of $21.67 in August 2011.
   The two month 2014 average now stands at $22.25, up from $17.70 at this time a year ago and compares to $16.56 in 2012 and $15.24 in 2011.
   Looking ahead, the March Class III futures contract settled today at $22.20; April, $20.54; May, $19.91; and June, $19.70 per cwt.
   The Class IV price is a record high $23.46, up $1.17 from January and $5.71 above a year ago. The Class IV average is now at $22.88, up from $17.69 a year ago, $16.24 in 2012, and $17.41 in 2011.
   The four-week, NDPSR-surveyed cheese price averaged $2.2864 per pound, up 20.3 cents from January. Butter averaged $1.8320, up 18.5 cents. Nonfat dry milk averaged $2.0783, up 4.5 cents, and dry whey averaged 63.14 cents per pound, up 2.9 cents.

Most NDPSR Dairy Product Prices Down
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released today shows the U.S. average block Cheddar cheese price at $2.2303/lb., down 2.5¢, while the barrels averaged $2.2069/lb., down 4.4¢. Cheese prices, while down from the peak two weeks ago, are still at record levels. Butter was down 1.4¢, to $1.8092/lb. Nonfat dry milk averaged $2.0855/lb., up 0.4¢, and dry whey averaged 64.25¢/lb., up 0.8¢. The whey price is the highest it’s been since Feb. 2013. These prices are used in determining Federal order Class milk prices.

California Powder Slips
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $2.0268/lb. for the week ending February 28, on sales of 7.78 million lbs. The price was down from $2.0429/lb. the week before, on sales of 6.51 million lbs.

Butter Output Expanding
   Butter production rates are increasing in the Northeast, according to Dairy Market News (DMN. Unexpected volumes of cream supplies have churns very busy at some plants in the region. Some butter makers are focused on fulfilling good export orders, while others are reported running heavy over the next 3 weeks to increase print volumes, with Passover in mind. Inventories are being built for existing and future needs. The market tone remains steady.
   Midwest butter makers' production rates are mostly steady with cream supplies readily available, according to DMN. The market tone is mixed as a few buyers are showing price resistance, while some retail orders increased. Several butter manufacturers are focused on fulfilling very good export orders. Domestic demand is slow with hand to mouth purchasing, but sales are better than seasonal trends. Inventories are steady to improving.

“Got Milk” Got Turned to “Milk Life”
   Last week, America’s milk companies launched the “Milk Life” campaign, a new multi-million dollar campaign designed to reinforce how milk’s nutritional benefits can “help power the potential of every day.” MilkPEP’s Victor Zaborsky talked about it on Wednesday’s DairyLine, reporting that the campaign spotlights everyday moments of accomplishment, achievement and enjoyment, bringing to life how families and individuals who include milk’s protein at breakfast make the most of every day.
   The campaign stems from consumer research which indicates that while milk is found in most U.S. refrigerators, many Americans don’t realize its full nutritional contribution, especially the 8 grams of high quality protein in each 8 ounce glass as well as the eight other essential nutrients.
   One of the great things about “Milk Life,” according to Zaborsky, is that it has a double meaning. “It’s about wringing every last drop out of every single moment,” he said, “And it represents a way of living where milk helps power you to be your best.”
   The campaign includes print, TV, digital advertising, consumer and retail promotions, public relations and social media.
   Got Milk and the Milk Mustache aren’t being retired, Zaborsky said. The “Got Milk” taglines have tremendous equity, he said, and consumers will continue to see it on a number of dairy programs, including the California Milk Processors Board program. The Milk Mustache is “iconic,” he said and has “successfully help educate Americans on the benefits of milk for nearly two decades.” It will continue to be a part of the program in the future but will not be the core feature of the print campaign. Consumers can learn more at www.milklife.com
 
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   I’m not sure who is writing the script for the cash cheese market these days but today’s activity was a turn of events I don’t think anyone foresaw. An unfilled bid took the Cheddar blocks up 1¢, to $2.2375/lb., and by the way, there hasn’t been any block sold at the CME since Feb. 20. But, the shock came on the barrel side, up 11.5¢, to $2.2425/lb., inverting the barrels above the blocks by 0.5¢. One sale took the price to $2.2075/lb., but an unfilled bid took it higher to close at $2.2425/lb. It would appear that the move was to correct the spread, according to one market insider. Class III futures saw double digit gains, Mar.-June.
   Double A butter was unchanged this morning but 10 carloads exchanged hands, all at $1.88/lb., so it doesn’t appear anyone is giving up butter for Lent. An offer at $1.90/lb. got no takers.
   Grade A nonfat dry milk was also steady, holding at $2.0275/lb., but a bid at $2.0275/lb. went unfilled and an offer at $2.04/lb. was left uncovered.

Today’s Market Closing Prices:
Butter: Unchanged, at $1.88/lb.
Cheddar blocks: Up 1¢, to $2.2375/lb.
Cheddar barrels: Up 11.5¢, to $2.2425/lb.
Grade A nonfat dry milk: Unchanged, at $2.0275/lb.
Class III milk: Mar. $22.20, +10¢; Apr. $20.54, +28¢; May $19.91, +30¢, & Jun. $19.70, +13¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $20.05, +24¢ from Tuesday. The 2nd half average is now $18.98, +7¢ from Tuesday.
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Looking ahead:
   There are no more reports from the Agriculture Department that we regularly monitor the rest of the week. Looking to next week, the California Department of Food and Agriculture announces the Golden State’s April Class I milk prices on Monday. USDA issues its latest Crop Production report as well as its monthly World Agricultural Supply and Demand Estimates report on Monday. The monthly Livestock, Dairy, and Poultry Outlook is issued on Friday.
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Thursday on DairyLine:
  
Chris Galen discusses NMPF's involvement with FDA's new nutrition labels.
    And Dan Basse from AgResource is in our second half.

http://dairyline.com/thursday.mp3

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