DairyBusiness Update: June 4, 2014

H A P P Y     J U N E     D A I R Y     M O N T H!!

FO Benchmark Milk Price Drops $1.74
   The Agriculture Department announced May Federal order milk prices this afternoon. The benchmark Class III price is $22.57 per hundredweight (cwt.), down $1.74 from April, $4.05 above May 2013, $3.23 above California’s comparable 4b price, and equates to about $1.94 per gallon.
   Looking ahead, Class III futures settled today as follows: June, $21.21; July, $20.33; August, $20.21; September, $20.23; October, $19.85; November, $19.42; and December, $18.95.
   The five-month Class III average now stands at $22.94, up from $17.69 at this time a year ago and $15.96 in 2012.
   The May Class IV price is $22.65/cwt., down 69 cents from April but $3.76 above a year ago. The Class IV average for the year thus far now stands at $23.08, up from $18.02 a year ago and $15.24 in 2012.
   The four-week, NDPSR cheese price average used in calculating this month’s prices was $2.1703/lb., down 18.4 cents from April. Butter averaged $2.0477, up 12.5 cents. Nonfat dry milk averaged $1.8768, down 14.2 cents, and dry whey averaged 67.45 cents per pound, down fractionally.

April Dairy Products Report: Where Did the Milk Go?
April 2014 U.S. milk production, at 16.3 billion pounds, according to preliminary data, was up 1.2% compared to a year ago, and USDA’s latest Dairy Products report issued this afternoon shows where it all went. April 2014 dairy product output, compared to April 2013 and year-to-date (Y-T-D) estimates included:
Total cheese: 950.4 million lbs., up 2.2%; Y-T-D 3.72 billion lbs., up 1.5%. 
Total Italian cheese: 413.9 million lbs., up 5.2%; Y-T-D 1.63 billion lbs., up 4.3%.
Mozzarella: 327.8 million lbs., up 8.3%; Y-T-D 1.29 billion lbs., up 6.5%.
• American: 376.7 million lbs., Unchanged; Y-T-D 1.48 billion lbs., down 0.6%
Cheddar: 281.8 million lbs., up 1.0%; Y-T-D 1.09 billion lbs., down 1.0%.
• Butter: 158.4 million lbs., down 4.9%; Y-T-D 670.2 million lbs., down 5.5%.
Dry milk powders – Nonfat dry milk, human, 158.2 million lbs., down 1.2%, Y-T-D  600.3 million lbs., down 2.2%; and skim milk powders, 48.8 million lbs., down 22.8%, Y-T-D 185.6 million lbs., up 4.0%. 
Dry whey (total): 74.5 million lbs., down 12.8%; Y-T-D 278.1 million lbs., down 19.2%.
Yogurt: 397.7 million lbs., up 2.5%; Y-T-D 1.63 billion lbs., up 3.9%.

Don’t Get too Bearish on the GDT
   That’s the read from HighGround Dairy’s Eric Meyer. He writes that, while skim milk powder and cheddar cheese managed to find support at this week’s auction, Fonterra-sourced product across nearly every other commodity line continued to take on water with additional losses. A price decline on weaker volume as seen in the whole milk powder market can certainly be construed as a bearish signal. However, we caution our readers not to get too bearish from these levels as markets tend to not move in a single direction forever.
   With the GDT Price Index registering a 26% decline across all commodities over the past four months, it would not surprise us to see the global market bounce in the next 30-60 days as buyers step in to lock down contracts ahead of the southern hemisphere’s production season. The recent price decline will bring more buyers to the table as pipelines need to be refilled which should lend support to the market in Q3. A seasonal production decline in the northern hemisphere may provide a slight boost to NFDM/SMP, cheese and butterfat markets in the near term.
   Demand from emerging markets will need to outpace supply to continue driving long term support to the international dairy markets. And HighGround remains a long term bull for all food proteins as emerging populations generate more wealth. Dairy is well-positioned for demand growth and remains one of the more inexpensive protein sources in the world.
   Read the rest of Meyer’s analysis by writing him at dairy@highgroundtrading.com.

Lagging NDPSR Prices: Cheese & Whey Down/Butter & Powder Up
   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 $2.0516/lb., down 6.1¢ from the week before, while the barrels averaged $2.0563, down 4¢. Butter inched up 1¢, to $2.1293/lb. Nonfat dry milk averaged $1.8901/lb., up 7.6¢, and dry whey averaged 67.24¢/lb., down 0.8¢. These prices are used in determining Federal order Class milk prices.

California Powder Price up 13.3 Cents, Sales Fall 
   The California Department of Food and Agriculture announced its latest surveyed nonfat dry milk prices yesterday at $1.9057/lb. for the week ending May 30, on sales of 8.38 million lbs. The price was up from $1.7723/lb. the week before, on sales of 23.75 million lbs.

Mielke Market Daily 
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   It’s BACK! $2 block cheese made another appearance at the CME this morning as 1 lonely unfilled bid took the price to $2.03/lb., up 5.5¢ on the day. The Cheddar barrels were up 1¢ on one trade, following 14 loads yesterday, and are now at $1.9450/lb. Two bids at that price however went unfilled. Yesterday’s 8% increase in the Global Dairy Trade’s Cheddar average may have played a part in today’s trading.
   Cash butter plunged 5¢, to $2.21/lb. on 4 trades, but the next 3 were at $2.23/lb. and it dug itself out of the hole to the final sale at $2.26/lb., unchanged from yesterday, with 1 offer at that price left on the board.
   A trade took the Grade A nonfat dry milk up another 0.25¢, following yesterday’s 1.25¢ rise, and is now at $1.86/lb.

Today’s Market Closing Prices
Butter: Unchanged, at $2.26/lb.
Cheddar blocks:  Up 5.5¢, to $2.03/lb.
Cheddar barrels: Up 1¢, to $1.9450/lb.
Grade A nonfat dry milk: Up 0.25¢, to $1.86/lb.
Class III milk: June $21.21, +27¢; July $20.33, -7¢; Aug. $20.21, -8¢; & Sept. $20.23, -8¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.26, -7¢ from Tuesday. The Fourth Quarter average is now at $19.41, -2¢ from Tuesday. The First Quarter 2015 average is now at $18.31, +1¢ from Tuesday.

Looking ahead:
    That’s it for USDA reports this week that we regularly monitor. Looking to next week, the Agriculture Department releases its weekly Crop report on Monday. Tuesday the California Department of Food and Agriculture announces its July Class I milk prices. The monthly World Agricultural Supply & Demand Estimates report is out Wednesday from USDA, which will include the Department’s latest milk production and milk price projections, and the National Dairy Products Sales Report (NDPSR) is out Wednesday afternoon.
Thursday on DairyLine:
   NMPF’s Chris Galen checks in with his weekly report
   Our June Dairy Month Spotlight: Ashley Rosales from the Dairy Council of California tells us why it’s important to have
        three servings of dairy a day.


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