DairyBusiness Update: April 16, 2014

Post GDT Analysis
   High Ground Dairy’s Eric Meyer says the international dairy product price correction has entered its third month with the losses mounting. Since the short-term top was made at the 4 February auction, the WMP Price Index has fallen by 20.2%, SMP by 18.4% and AMF by 26.6% - a serious decline in a short amount of time.

   However, this week’s whole milk powder results were only modestly lower which suggests a near-term bounce may be due. Many buyers have been operating with limited inventories on hand for the past number of months due to extreme prices and may consider building stocks at a 20% discount from where the market stood less than three months ago.
   That said, Fonterra took their nearby forecasts up quite a bit last week for both WMP and SMP, and may keep buyers on the sidelines. If buyers do have some wiggle room with their current inventory situation, some may wait on longer-term purchases to determine the impact of the US and EU seasonal production peak that is occurring over the next few weeks.
  
HighGround maintains the view that the international dairy market is working through a bullish correction, not a dramatic change in trend. While it may have more room to move lower in the near term, we believe the bottom is close and the potential upside risk this summer is still a threat.
   For more details, write Eric at dairy@highgroundtrading.com.

Butter Exports Still Active
   Northeast butter production is steady, according to USDA’s Dairy Market News (DMN). Domestic sales have slowed with the settling of buyer interest, which was spawned by butter demand for the Easter/Passover holiday. Inventories are sufficient for contractual commitments.  Export interest is active, with some additional forward sales. This week, a cooperative export assistance program accepted requests for 2.260 million pounds of butter. The market tone is weakening.
   Central butter manufacturers, last week, reported that, with many international prices trending lower, export orders were slowing but some butter manufacturers were shifting production towards larger volumes of 82% after completion of last minute 80% holiday orders. The Central region made 40% of U.S. butter production in February. Cumulative 2014 Central butter production totaled 136.7 million pounds, an 8.2% decrease compared to the same time span a year ago.

Cheese: Inventories Tight/Export Interest Solid/High Prices Accepted
   Northeast Cheese production is steady, according to Dairy Market News. Supplies are adequate for fulfilling short-term commitments, as manufacturers deliberately manage cheese inventory levels, during market uncertainty. Tight inventories are limiting the number of spot market transactions. Domestic demand is good, while export interest remains solid with some additional forward sales. The market tone is mixed.
   Cheese production is steady to higher in many areas of the Midwest, with some variations depending on location. Throughout much of the lower reaches of the Midwest, milk production is coming up.  Cheese plants having access to those increasing milk volumes are increasing cheese output. In the upper parts of Wisconsin and Michigan, winter lingers and stored hay and feed quality is poor. In central to northern Wisconsin, snow fell last weekend and more may fall soon. These factors are believed to be holding back milk production increases and thus, cheese production. This may not change until the first hay is cut, in the estimation of some cheese manufacturers and traders.
   "Compared to what?" is the price trigger concept that has led to good overall cheese sales in recent weeks for many Midwest manufacturers. 
   Although cheese prices this year have been higher than the same date in recent years, which slowed early year cheese sales, the need to keep retail coolers stocked has largely supplanted previous retail store buyer tentativeness. Order patterns and order volume received by many cheese manufacturers now leads them to believe that higher prices have been accepted as reality for the time being, leaving buyers to respond to relative changes within the new higher level of prices rather than expect any significant price decline in the near term. 
   But, manufacturers report that declining weekly averages for the last two weeks have helped cheese sales. This week is still a work in progress but there has not been a noticeable impact on ordering as of Wednesday and it is too soon to know whether the weekly average of blocks, in particular, will be up or down. Thus, cheese manufacturers continue to manufacture cheese at levels possible with milk supplies available to them.

Lagging NDPSR Powder Drops 5.3¢
   The latest Agricultural Marketing Service’s National Dairy Products Sales Report (NDPSR), released this afternoon shows the U.S. average block Cheddar cheese price at $2.4149/lb., up 1.6¢, while the barrels averaged $2.3440, down 1.5¢. Butter was up 2.5¢, to $1.9839/lb. Nonfat dry milk averaged $1.9989/lb., down 5.3¢, and dry whey averaged 67.18¢/lb., up 0.1¢. These prices are used in determining Federal order Class milk prices.

California Powder slips below $2 
The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $1.9798/lb. for the week ending April 11, on sales of 16.64 million lbs. The price was down from $2.0007/lb. the week before, on sales of 16.24 million lbs.

Vermont Says Yes to GMO Labeling
  
The Burlington Free Press reports that Vermont’s Senate gave a decisive 26-2 vote Tuesday for a bill that would require labeling of foods that contain genetically modified ingredients, a strong indication that Vermont could become the first state in the nation to enact such a law.
   “We are saying people have a right to know what’s in their food,” said Senate President Pro Tempore John Campbell, D-Windsor.
   Campbell and other supporters argued that they believe they have written a bill that is legally defensible. They nonetheless created a fund in the legislation to help pay the state’s legal bills, as many assume that food manufacturers will sue.
   The bill would require food sold in Vermont stores that contain genetically modified ingredients to be labeled starting July 2016. The legislation is up for another vote in the Senate Wednesday before it goes back to the House, which passed a slightly different version last year. Gov. Peter Shumlin has indicated he’s likely to sign the bill.
   Two other states, Connecticut and Maine, have passed labeling laws, but both delayed implementation until neighboring states join them, a strategy designed to insulate them from being sued. Voters in Washington and California defeated labeling measures there.
   Read more at www.burlingtonfreepress.com.

Winners Announced at IDFA’s Annual Ice Cream Flavor Contest
   Oh to be a judge here! Banana pudding, lemon poppy pound cake and Greek yogurt with strawberries and granola were judged to be the most innovative ice cream flavors at the International Dairy Foods Association's Innovative Ice Cream Flavor Contest. The competition, which showcases the creativity of U.S. ice cream and frozen dessert makers, is part of IDFA’s annual Ice Cream Technology Conference.
   Honors for the most innovative ice cream flavor went to Southern Banana Pudding, which captured the nostalgic flavor of banana pudding in an ice cream product. It was entered by Publix Super Markets. Lemon Poppy Pound Cake, an ice cream with lemon poppy seed swirl and pound cake pieces, won most innovative prototype flavor. It was entered by SensoryEffects, a flavor company serving the ice cream and frozen dessert industry. Wells Enterprises, Inc., the maker of Blue Bunny ice cream and novelties, won the most innovative novelty with Greek Strawberry with Granola, a Greek frozen yogurt bar with a strawberry swirl and granola coating.
   "Flavors that captured the taste of popular snack foods such as peanut butters’ mores, caramel popcorn, mini doughnuts, vanilla malted pretzels and cotton candy were popular this year,” said Cary Frye, IDFA vice president for regulatory and scientific affairs. “We also sampled some new tastes that added heat to ice cream product, including Mexican ‘Hot’ Chocolate and Sweet Fire Ice Cream. This contest is a great way to spot new trends and highlight the industry's creativity."
   The contest, sponsored by Dairy Foods magazine, is a popular session at the annual conference. There were 31 total entries, making it a record field for the second year in a row. Conference participants served as the judges.
   A complete list of contestants is available here.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
  
That unfilled bid was back this morning and upped the ante another 2.5¢ on the 40lb. block cheese, to $2.2225/lb., despite yesterday’s continued decline of the Cheddar price at the GDT. An unfilled bid took the 500lb. barrels up 2¢, to $2.1875/lb., a typical 3.5¢ below the blocks.
   FC Stone dairy broker, Dave Kurzawski, wrote in this morning’s Insider Opening Bell “The cheese market looked bearish last week but the spot market and industry chatter indicate supplies are tighter after sales in the country in recent days. I wouldn't rule out a little bounce in second-half cheese and Class III going into the long holiday weekend."
   Cash butter gave up 1¢ this morning on 2 trades at that price, after dropping 3¢ yesterday and 4¢ on Monday. Double A is now at $1.89/lb. An offer at $1.90/lb. was again left on the board.
   Things slowed in the cash powder today after 11 loads exchanged hands yesterday. But, the price dipped 2¢ on a trade and fell to $1.89/lb. Three offers at $1.89/lb. got no response.

Today’s Market Closing Prices
Butter: Down 1¢, to $1.89/lb.
Cheddar blocks: Up 2.5¢, to $2.2225/lb.
Cheddar barrels: Up 2¢, to $2.1875/lb.
Grade A nonfat dry milk: Down 2¢, to $1.89/lb.
Class III milk: April $24.12, +1¢; May $22.00, +19¢; & Jun. $20.38, +10¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $19.26, -7¢ from Tuesday. The 2nd half average is now at $18.92, -5¢ from Tuesday.
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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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Thursday on DairyLine:
   Don’t let your taste buds fool you. NMPF’s Chris Galen updates us on the Real Seal
             program.
Dr. Tom Earleywine has some tips on feeding colostrum to the youngsters in his
             monthly “We Care for Calves” segment:

http://dairyline.com/thursday.mp3

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