DairyBusiness Update: April 15, 2014

Global Dairy Trade Average Down 2.6%
   Today’s Global Dairy Trade (GDT) auction saw the weighted average for all products drop 2.6%, following the 8.9% plunge in the April 1 event, 5.2% drop in the March 18 event, and a 4% drop on March 4. The price index has seen declines since reaching its recent high February 4.
   Today’s downfall was led by an 8.6% drop in buttermilk powder, (down 15% in the last event) a 7% decline in milk protein concentrate (down 4.3% in last event), and a 4.9% fall in butter (down 11% in last event). Skim milk powder was next, down 4.4% (down 9.6% in last event). Cheddar cheese was down 3.3% (down 3.5% last event). Whole milk powder was down 1.6% (down 8.4% in last event). The only positive movement was in anhydrous milkfat, up 0.6% (down 11.3% in the last event.
   FC Stone reports the average butter price equated to about $1.7383/lb.U.S., down from $1.8325/lb. in the April 1 event ($1.6959/lb. on 80% butterfat, down from $1.7878/lb.). Today’s CME butter price is at $1.90/lb. The Cheddar cheese average was $1.9384/lb., down from $2.0130/lb. The U.S. block price stands at $2.1975/lb. Skim milk powder, at $1.8715/lb., is down from $2.0792/lb., and the whole milk powder average was $1.8004/lb., is down from $1.8293/lb. in the last event. The CME Grade A nonfat dry milk price stands at $1.91/lb.
                                                                                        Source: GDT & INTL FCStone     

USDA Dairy Outlook: Herd Expansion Expected
  
As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued this morning, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued April 9. The milk production forecast was raised in April. Given favorable milk-to-feed price ratios, cow numbers are expected to increase later in 2014; however the 2014 forecast number is unchanged from March.
  
Continued robust demand for dairy products, both foreign and domestic, tightens ending stocks on both a fats and skims-solids basis. The result is higher forecast dairy product prices, except for nonfat dry milk (NDM). NDM prices are unchanged from last month as U.S. exports face stronger foreign competition. Correspondingly, Class III, Class IV, and all milk prices were raised from last month.
  
Corn price forecasts for 2013/14 were increased to $4.40-$4.80 per bushel for April. A 125-million bushel increase in forecast exports tightens corn ending stocks, accounting for the price rise. Soybean meal price forecasts for April are raised to $460-$490 per ton. Feed price forecasts are changed only slightly from March and are still favorable for herd expansion.
   The March Milk Production report indicated a small year-over-year decline in February cow numbers, and first-quarter cow numbers are lowered from March’s forecast. The report also indicated continued year-over-year declines in output per cow in upper Midwestern States. This reduction was countered by year-over-year increases in Western States. In light of improved producer returns, however, a herd expansion is expected later this year, and cow numbers are raised slightly from March for the second half of 2014. On balance, cow numbers for 2014 are unchanged from February’s forecast at 9,255 thousand head.
   Milk production is increased from March projections to 206.1billion pounds. The increased production is based on higher output per cow, which is forecast at 22,280 pounds, with the improvement coming in the second and third quarters of 2014. The yield improvement is predicated on higher forage quality relative to 2013 and improved producer returns that will encourage feeding higher quality rations.

Quarterly and annual milk prices and projections

Year            All milk                Class III      Class IV

2009

12.83

11.36

10.89

2010

16.26

14.41

15.09

2011

20.14

18.37

19.04

2012

18.53

17.44

16.01

2013

 

 

 

  Q1

19.50

17.44

17.71

  Q2

           19.57

          18.04                      

         18.62

  Q3

           19.53

          17.81

         19.13

  Q4

           21.43 

          18.67

         20.74

Yr.

           20.01

          17.99

         19.05

2014

 

 

 

  Q1

           24.60

          22.61

         23.10

  Q2

24.40-24.80

22.80-23.20

22.45-22.95

Q3

21.15-21.85

18.80-19.50

20.35-21.15

Q4

20.00-21.00

17.45-18.45

18.25-19.35

Yr.

22.55-23.05

20.40-20.90

21.05-21.65

 

Corn Planting is Progressing
   The Agriculture Department’s latest Crop Progress report shows 3% of the nation’s corn has been planted, up 1% from this time a year ago but 3% behind the five-year average. Of the 18 states listed in the report, which comprised 91% of 2013 crop, only nine had seed in the ground as of the week ending April 13 and listed below:

State                               Week Ending

               April 13, 2013 / April 6, 2014 / April 13, 2014  Five Year Average

Illinois          1%                  NA                   1%                    10%
Kansas        3%                  4%                   11%                  9%
Kentucky     6%                  NA                    4%                   17%
Missouri       7%                  2%                   9%                   16%
N Carolina    25%                NA                    20%                 31%         
Ohio            1%                  NA                    -                       2%
Penn.          1%                  NA                     -                      2%
Tennessee  10%                 2%                    7%                   25%
Texas          56%                54%                  57%                 55%

   The report shows 8% of the cotton crop has been planted, up 2% from the week before, dead even with a year ago, but 1% below the five-year average. Of the 15 states listed, which comprised 98% of the 2013 cotton crop, only 6 show any planted.

CWT Accepts 28 Export Assistance Requests
   Cooperatives Working Together (CWT) accepted 28 requests for export assistance today from Dairy Farmers of America, Foremost Farms, Maryland & Virginia Milk Producers Association, Michigan Milk Producers Association, Northwest Dairy Association (Darigold), and Tillamook County Creamery Association to sell 5.34 million pounds of Cheddar, Gouda and Monterey Jack cheeses, 2.26 million pounds of 82% butter and 837,757 pounds of whole milk powder to customers in Asia, Central America, Europe, the Middle East, North Africa and the South Pacific.
   The product will be delivered through October 2014 and raised CWT’s 2014 cheese exports to 46.132 million pounds plus 34.163 million pounds of butter and 4.204 million pounds of whole milk powder to 29 countries on six continents. These sales are the equivalent of 1.195 billion pounds of milk on a milkfat basis.

Formulate for Millenials or Baby Boomers?
  
Karen Giles-Smith writes in Dairy Foods magazine that they view food differently but “In terms of influence in the market, baby boomers and millennials are running the show.”  To which generation should the dairy industry cater? Smith says the best answer may be both.
  
Boomers have more bucks per capita, but there are more millennials in the marketplace. By 2030, it’s estimated that millennials will number 78 million compared to 56 million boomers.
  
Many millennials are time-crunched multitaskers. To “get it done,” they demand convenience in eating: food when, where and how they want it. They’re super-snackers, often eating one meal daily plus several snacks — including ready-to-eat cereal, refrigerated lunches and yogurt. Millennials are a major driver of Greek (and overall) yogurt sales. They also love cheese and are willing to try different forms and flavors, as long as it is convenient to consume.
  
Boomers are busy, too, but strive for life balance. Eighty-one percent of their eating occasions take place at home. They view fresh and unpackaged foods with perishable ingredients as healthier and prefer scratch cooking, according to a 2014 report by The Hartman Group.
  
What these generations have in common is a desire for foods and beverages that foster health and wellness.
   As noted in the 2011 study “Millennial Grocery Shoppers: Meet Your New Consumer” by Barkley, Kansas City, Mo., millennials view healthy eating as a lifestyle choice that includes knowing the origin of foods and their ingredients and eating all-natural, local or raw foods. In contrast, boomers are all about prevention, hoping for a healthy, active retirement.
   “Boomers are trying to avoid the onset of illness such as the heart disease, diabetes and arthritis that their parents have,” said Shelley Balanko, senior vice president of business development, The Hartman Group, Bellevue, Wash.
   “Everyone wants fresh, real, and less processed. One distinction is that boomers are more attuned than millennials to the functional benefits of foods and beverages,” she added. “Boomers are actively managing or preventing illness via their food and beverage choices. Boomers want quality of food for quality of life.”
   Read the complete article at: http://www.dairyfoods.com/articles/90406-formulating-for-millenials-and-baby-boomers.

Mielke Market Daily

(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   The CME cash block cheese price, again on 1 unfilled bid, jumped another 1.25¢ this morning, following yesterday’s 1.5¢ gain, and is now trading at $2.1975/lb. The Cheddar barrels held at $2.1675/lb, after jumping 8.75¢ yesterday on an unfilled bid. A bid today at yesterday’s price was not filled. The price spread is now at a more typical 3¢.
  Class III futures retreated.
  
Cash butter, dropped 3¢ this morning, after losing 4¢ yesterday. Four carloads traded hands. Three sold at $1.9050/lb and 1 at $1.90/lb. A bid at $1.8950/lb. went unfilled and an offer at $1.90/lb. was left on the board.
  
The action today was in the cash Grade A nonfat dry milk. The price was unchanged, holding at $1.91/lb. after inching up 0.25¢ on 2 unfilled bids yesterday. Eleven cars were sold, today, all at $1.91/lb., 10 bids at $1.89/lb. went unfilled, and 1 offer at $1.91/lb. was uncovered.

Today’s Market Closing Prices
Butter: Down 3¢, to $1.90/lb.
Cheddar blocks: Up 1.25¢, to $2.1975/lb.
Cheddar barrels: Unchanged, at $2.1675/lb.
Grade A nonfat dry milk: Unchanged, at $1.91/lb.
Class III milk: April $24.10, +1¢; May $21.83, -20¢; & Jun. $20.27, -9¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $19.33, -9¢ from Monday. The 2nd half average is now at $18.97, -6¢ from Monday.
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Looking ahead:
   There are no further USDA reports the rest of this week which we regularly monitor and it’s a short week for dairy trading as the markets are closed for Good Friday and reopen on Monday. Next week will be busy. The preliminary March Milk Production report is issued Monday, April 21, along with NASS annual Livestock Slaughter report. The March Cold Storage report is out Tuesday, the May Federal order Class I base milk price is announced by USDA Wednesday afternoon, and the monthly Livestock Slaughter report is out Thursday.

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Wednesday on DairyLine:
   Matt Mattke, from Stewart Peterson, has our monthly "Strategy and Discipline"
           report.

   Dr. Amelia Woolums, from the University of Georgia, with tips on vaccinating your
        calves.

http://dairyline.com/wednesday.mp3