DairyBusiness Update: July 7, 2014
May Powder Exports are Record High
U.S. exporters shipped 60,358 tons of nonfat dry milk/skim milk powder (NDM/SMP) in May, up 8% from last year and the most ever in a single month, according to the U.S. Dairy Export Council (USDEC). The big difference was nearly 25,000 tons of sales to Mexico, up 58% from a year ago and also a one-month high on sales to our largest single-country customer. In the first five months of the year, U.S. NDM/SMP exports were more than 240,000 tons, up 10% from last year’s pace.
U.S. exporters also continue to expand shipments of whole milk powder (+65% in May) and milk protein concentrate (+97%). Major customers for WMP were Vietnam and Algeria. Top buyers for MPC were New Zealand and Morocco.
Heavy sales of milk powder offset declining exports of cheese, butterfat and whey protein concentrate. Cheese exports in May were 31,779 tons, the lowest figure of the year (on a daily-average basis). For the second straight month, South Korea was our largest customer; in April and May, exports to South Korea were up 49% vs. a year ago, while exports to Mexico were down 20%.
Butterfat exports in May were just 5,401 tons, down 9% from last year, and the lowest since April 2013. Shipments to the Middle East/North Africa region were down 18%. May volumes were about half the pace established in the first quarter 2014, reflecting the growing disparity between higher U.S. prices and lower world prices.
Total whey exports were 44,297 tons in May, down 7% from a year ago. Whey protein concentrate exports were down 18% from last year’s lofty levels, while sweet whey was up 2% vs. last May and whey protein isolate was up 29%.
China remained the major customer for U.S. whey products, but May imports were down 3% from last year. Over the last year, WPI exports were 39% higher than the prior year. In total, U.S. suppliers shipped 187,375 tons of milk powders, cheese, butterfat, whey and lactose in May, up 3% from last year. Total value of all exports was $677.6 million, up 9%. U.S. exports (on a total milk solids basis) were equivalent to 16.8% of U.S. milk solids production in May. Imports were equivalent to just 2.6% of production, matching the lowest percentage since May 2011.
Read the entire report at www.usdec.org.
May Export Results are Mixed
USDA’s Foreign Ag Service published its May U.S. Dairy Export Volume Analysis on Friday. HighGround Dairy’s Eric Meyer reports that May Cheddar cheese exports were at the lowest monthly volume in 2014 and that “bearish indicators are adding up,” as “export deals have slowed considerably in recent weeks.” He adds that butter export volume also fell dramatically in May but nonfat dry milk and skim milk powder exports “did an about face and posted record volumes.”
Read Meyer’s complete analysis by writing him at email@example.com.
DMN: U.S. Cheese Imports Are Down 1%
Cheese production was mostly steady last week, according to USDA’s Dairy Market News report. Milk volumes were heavy across most of the northern regions and manufacturers continued working busy schedules to clear available milk. Hot weather has slowed milk production in much of the southern tier of states. Storms across the Midwest during the week caused some interruptions in processing due to high winds and power outages. Some milk was moved to unaffected manufacturers in the Midwest.
Cheese plants were also preparing for extra milk over the weekend as some other processors close for the 4th of July holiday. Demand for cheese is good with buyers looking to fill their pipelines as prices have moderated from recent highs. While cheese stocks are building, manufacturers report they are clearing inventory in an orderly manner.
The Foreign Ag Service reports quota imports of cheese for January-May 2014 totaled 60.5 million pounds, 1 percent less than a year ago.
How Low Will Cheese Go?
Cash cheese prices falling below $2 per pound and butter slipping is “the market trying to figure out what it wants to do,” according to Jerry Dryer, editor of the Dairy and Food Market Analyst. Speaking in Friday’s DairyLine, Dryer reported that there was “a wall of milk in June and through the Memorial Day holiday weekend and a lot of milk got sold to cheese makers at distressed prices, $3, $4, and $5 below Class, so obviously you can make less expensive cheese out of that and some of that cheese is being shopped around and there’s a little bubble of cheese working its way through the system.”
Commercial sales and exports, based on May data, remain very strong, he said, and “The market will work through this and digest this product.”
People are telling him that by the time the cheese price gets to $1.90 per pound, “buyers will more than likely be climbing all over the top of one another to get some cheese because inventories remain low and demand remains strong.”
I asked about reports that butter is still being exported from the U.S. but the high U.S. price is attracting butter imports, “two ships meeting in the night sorta speak.” He replied, “There is no butter to come in right now,” and referenced a spike in the Global Dairy Trade butter price from Dairy America. But, he warned that the rubber will meet the road in a couple of months on butter as imports will” crunch the butter price.”
When asked about the reported crash in GDT butter this week, Dryer said that some did fall but cautioned to not look at the index GDT publishes but “look at the real live prices.”
“Dairy America butter, for delivery in August, was actually higher than the previous trading session, two weeks ago,” he said, “When they were selling butter for delivery in July. The prices for September, October and product coming out of New Zealand, those prices were sharply lower.” “There’s going to be more butter later on, he concluded, but it’s not around yet, it’s not impacting the market yet.”
Corn Crop 54% in Good Condition
The Agriculture Department’s latest Crop Progress report, issued this afternoon, shows 21% of the nation’s corn, grown in the 18 states which comprised 91% of the 2013 crop, is rated in excellent condition, as of the week ending July6. That’s up from 20% the previous week and 17% a year ago. Fifty four percent is rated good, down from 55% the previous week, and compares to 51% a year ago. The states are listed below:
State Week Ending June 22, 2014
Very poor Poor Fair Good Excellent
Colorado 1% 5% 26% 47% 21%
Illinois 1% 3% 16% 53% 27%
Indiana 1% 5% 19% 53% 22%
Iowa 2% 5% 17% 53% 23%
Kansas 2% 6% 34% 47% 11%
Kentucky 1% 3% 14% 59% 23%
Michigan 1% 3% 14% 62% 20%
Minnesota 2% 7% 27% 50% 14%
Missouri - 2% 17% 52% 29%
Nebraska 2% 5% 21% 52% 20%
N Carolina 3% 11% 29% 45% 12%
N Dakota - 2% 18% 59% 21%
Ohio 1% 4% 20% 55% 20%
Penn. - 2% 17% 50% 31%
S Dakota 1% 2% 17% 67% 13%
Tennessee - 5% 16% 55% 24%
Texas - 4% 30% 47% 19%
Wisconsin 1% 5% 17% 52% 25%
The report shows 98% of the soybean crop is emerged, as of the week ending July 6, up from 94% the previous week, up from 94% a year ago, and 1% ahead of the five year average. The data shows 15% of the soybean crop rated as excellent, with 57% rated as good.
There is 53% of the cotton squaring, up from 36% the previous week, up from 49% a year ago, but 7% behind the five-year average. The report shows 13% of the cotton crop is rated in excellent condition and 42% as good.
Low Butter Inventory Keeps Prices Strong but Uncompetitive
Butter prices are strong, according to Dairy Market News. The market tone remains firm as many manufacturers are behind on seasonal inventory levels. Production rates are mostly steady to lower as cream supplies are tight. Bulk butter spot offerings are limited. Domestic demand is mixed, however interest is greater than last year at this time due to the tightness in supplies. International interest is slow as U.S. butter prices are uncompetitive with other global markets.
Butter IS Back
That’s according to the Wall Street Cheat Sheet, which points out that “For ages, health experts and doctors have advised against consuming too much butter as it allegedly increases the risk of heart problems and other health issues, including ovarian cancer in women. Healthy consumers opted for supplement products by using “I Can’t Believe It’s Not Butter” instead of the real deal for spreads and cooking with olive oil instead. The fear of butter became so rampant that the overall butter intake saw a decline for years.
But now the Wall Street Journal is reporting, based on U.S. government data, that butter intake is on a rise, as the average American consumes 23 sticks of butter a year. (While 23 sticks is a shocking amount of butter, TIME magazine notes that in the 1920s, Americans consumed a whopping 72 sticks a year.) In fact, the Journal reveals that the annual intake of butter by Americans is around 892,000 total tons and the last time such numbers were seen was World War II.
This year’s butter intake marks the third consecutive year that Americans purchased more butter than margarine, creating the $2 billion butter industry. As for why this change is being seen, experts believe it has something to do with butter-rich recipes on cooking shows and the new image of butter being a simple product.
And according to the most recent research, the image makeover for butter may be long overdue. Earlier this year, scientists published a study, in the journal Annals of Internal Medicine, stating that their study did not find a link between heart disease and saturated fat (the kind of fat found in butter) consumption. What’s more, the study did not find any health benefits (translation: reduced risk of heart conditions) from other kinds of fats, namely monounsaturated fats like olive oil. The researchers did; however, find an association between trans fat (which can be found in processed foods) and heart disease.
Read the entire article at: http://goo.gl/ijqE2J
Milk Flush Has Come and Gone
Farm milk production continues to step lower in the Southeast as temperatures and humidity rise, according to USDA’s weekly update. Mid-Atlantic and Northeast dairy producers also indicate hot weather has tagged milk production. The Mid-Central region is registering declines as summer temperatures settle across that area. Across the northern tier of Central and Western states, milk production is mostly holding steady. In those areas, cool nighttime temperatures are helping dairy cows recover from daytime temperatures.
The bottled milk market is mixed as convenience and grocery stores restocked early in the week last week, but those buyers tapered bottled milk orders as the week progressed. Cream sales are active throughout the country into ice cream/soft serve/frozen novelties accounts as well as cream cheese manufacturing. Particularly in the Southwest, some cream loads are traveling shorter distances than usual to maintain optimal delivery temperatures.
Penn State: Prices Promising on Feed Front
That according to Dr. Jim Dunn, Professor of Agricultural Economics at Penn State University. Writing in his monthly Dairy Outlook, Dunn says “Corn prices have fallen 8% since the last report, ending at $4.17/bu. for the July 2014 contract. It looks like growing conditions in the Midwest will produce a very large crop, despite some flooding in the western Corn Belt. China, Brazil, and Argentina are all expected to have good crops, with the Chinese crop predicted to be a record. Soybean prices are down 2.3% from last month, which seems like a muted response to the bean-crop forecasts, which are also for an excellent crop on more acreage than last year. The latest USDA soybean acreage forecast seems too low and the growing conditions look good. Soybean meal is down 0.9% from last month.
He spotlights June income over feed costs, ice cream demand, and more at:
NMPF to EPA: Withdraw Guidance that Could Hinder Farm Water Conservation
The National Milk Producers Federation today asked the Environmental Protection Agency (EPA) to withdraw recent guidance concerning when farmers must seek Clean Water Act permits for a long list of normal farming activities near wetlands.
NMPF, the voice of more than 32,000 dairy farmers in Washington, said the EPA’s proposal could have the perverse effect of discouraging water conservation, by changing the long-standing relationship between farmers and the Agriculture Department’s Natural Resources Conservation Service.
The EPA guidance, officially called an Interpretive Rule, was issued in March. It says producers are only exempt from needing Clean Water Act permits for more than 50 routine farming practices if they comply with detailed NRCS technical conservation standards. Until now, these standards have been voluntary, and the farming practices exempt from the permit process.
In comments filed Monday, NMPF said the guidance changes NRCS’s role from that of a conservation partner to an enforcer of the Clean Water Act on EPA’s behalf.
“Until now, NRCS has been the place producers could go for conservation advice, while EPA was charged with ensuring compliance with the Clean Water Act,” said Jamie Jonker, NMPF’s Vice President for Sustainability & Scientific Affairs. “The cooperative relationship with NRCS made it more likely farmers would adopt water conservation practices.
“Unfortunately,” Jonker said, “the interpretive rule moves NRCS into an enforcement role and, in the process, could set back conservation efforts.”
In its comments, NMPF used harvesting hay as an example. Under the Interpretive Rule, farmers harvesting hay may be exempt from needing a CWA permit only if they follow NRCS Conservation Practice Standard No. 511: four pages of criteria covering timing of the harvest, moisture content of the hay, length of the cut hay, stubble height and much more.
“Many dairy farmers harvest hay without any reference to NRCS standards,” said Jonker. “Will these farmers now be forced to comply with Standard No. 511? If so, many will simply choose not to work with the NRCS. As a result, there will be less water conservation on farms, not more.”
Jonker noted that NMPF has drawn up a detailed environmental handbook based on NRCS standards but tailored specifically to dairy farmers. “Under the IR, producers who follow the handbook apparently will not qualify for a permit exemption,” Jonker said. “Having invested time and money in producing the handbook, NMPF is now forced to ask if it was worth it to try to do the right thing.”
Additional points in the NMPF comments:
While EPA argues that meeting the NRCS standards is still voluntary, in practice it is mandatory, since failure to comply may expose farmers to legal liability.
More than 100 farming practices covered by NRCS standards but not listed the IR are left under a “cloud of suspicion” and further expose farmer to legal liability.
As a major policy change, the IR should have been issued as a proposed regulation, with public comments in advance of approval, rather than as guidance that is immediately applicable.
“NMPF and its members are committed to protecting U.S. waterways through voluntary efforts and regulatory compliance with the Clean Water Act,” NMPF said. “(But) the IR will have the perverse impact of harming the longstanding trust and cooperative relationship between producers and NRCS. Consequently, water quality improvements will be adversely impacted.”
Established initially the 1930s, the NRCS provides voluntary help to farmers who want to conserve the resources on their farms.
In May, NMPF urged the Environmental Protection Agency to allow more time to examine a controversial draft regulation expanding the waterways subject to regulation under the federal Clean Water Act. That request was granted on June 10th.
Dairy Cattle Entries Now Open for World Dairy Expo
World Dairy Expo’s 2014 dairy cattle entries are now open. Exhibitors can choose to enter through the Expo online entry system or by mail. Initial entry deadline is Sunday, Aug. 31, 2014. Premium Books were mailed to recent year’s exhibitors July 1. The Premium Book is also available online or new exhibitors can request a copy from World Dairy Expo at 608-224-6455. Visit worlddairyexpo.com for complete event details.
Dairy cattle exhibitors are encouraged to utilize the user-friendly Expo online entry system that contains the 2014 Premium Book and all entry forms. Exhibitors utilizing the online system can submit all animal entries, stalling requests, tent and/or booth space purchases and Futurity entries. Additionally, youth showmanship and fitting contest entries and judge nominations can also be submitted.
Entries must be submitted and payment transaction completed by Aug. 31, 2014. The online entry system will be available and credit card payment accepted for late entries until 11:59 p.m. on Sunday, Sept. 14, 2014. Late fees will be assessed for entries submitted between Aug. 31 and Sept. 14.
Exhibitors should to be prepared to enter animal’s name, registration number, 15-digit Animal Identification Number (AIN) or Canadian Cattle Identification Agency Number (CCIA) and pedigree information. Exhibitors will be able to refer back to their entries after payment. Exhibitors are encouraged to review the 2014 Premium Book, especially Page 71, which includes changes for this year’s show.
World Dairy Expo is recognized as the meeting place for the global dairy industry. More than 70,000 dairy producers and industry experts from 90 countries travel to Madison, Wis. annually. The world-class event includes 2,500 head of North American dairy cattle competing on the famed colored shavings, more than 850 exhibiting companies in the renowned trade show, Expo Seminars, Virtual Farm Tours and exciting youth competitions. World Dairy Expo’s theme is “Designer Dairy” and will be held Sept. 30 through Oct. 4, 2014. Visit worlddairyexpo.com, follow us on Facebook or Twitter @WDExpo or #WDE14 for more information.
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate Editor Lee Mielke)
Cheddar cheese blocks come back from the 4th of July holiday with a 1.25¢ loss this morning on 6 trades. The first was at $1.96/lb., the next 2 at $1.96/lb., and the final 3 at $1.9550/lb., an unsustainable 3¢ below the barrels and the lowest block price since December 17, 2013. Three bids at $1.95/lb. went unfilled and an offer at $1.9575/lb. was left on the board. The Cheddar barrels held at $1.9850/lb., with a bid at that price going unfilled.
FC Stone risk management consultant, Chris Hildebrand, wrote in this morning’s Insider Opening Bell: “With cheese having fallen back below two dollars last week, barrels ultimately rose in price over blocks and "today the tussle is likely to show the directional strength for the quarter. Our expectations are for weakness to show its bear claws in what still feels like a somewhat heavy fundamental situation. Buyers remain in the marketplace and a real counter-balance to cheese weakness as they continue to refill their pipelines with little sign of slowing down. They don't want to push price up, but they want to own product.”
Two trades took the butter down to $2.37/lb. but the buying continued and the price crept back up, with the final sale at $2.3950/lb., up 0.5¢ on the day and reversed 3 consecutive sessions of loss. An offer at $2.40/lb. brought no takers.
Hildebrand says Thursday’s Dairy Products report, “While neutral for cheese and NFDM was decisively bearish for butter with May production at 164.6 million lbs. up 0.5% from a year ago and the first growth in year-over-year production since October 2013. The report also showed a revision of 7 million lbs. in April. Hildebrand went on to write; "This explains the past, today we'll see the present and likely the future in what happens in the spot market, we expect sellers to remain vigilant".
Cash powder saw no activity this morning and was unchanged in price, after inching up 0.25¢ last Thursday. It remains at $1.7725/lb., the lowest level since July 18, 2013.
Today’s Market Closing Prices
Butter: Up 0.5¢, to $2.3950/lb.
Cheddar blocks: Down 1.25¢, to $1.9550/lb.
Cheddar barrels: Unchanged, at $1.9850/lb.
Grade A nonfat dry milk: Unchanged, at $1.7725/lb.
Class III milk (prelim.): July $21.37/cwt., -1¢; Aug. $20.66, +8¢; & Sept. $20.36, +4¢. Based on today’s CME settlements, the Third Quarter 2014 average now stands at $20.80, +4¢ from Thursday. The Fourth Quarter average is now at $19.84, -1¢ from Thursday. The First Quarter 2015 average is now at $18.39, -3¢ from Thursday.
It’s a lean week for USDA reports which we regularly monitor but this is how it shapes up: the Agriculture Department issues its National Dairy Products Sales Report prices on Wednesday. The California Department of Food and Agriculture announces its August Class I milk prices on Thursday. The monthly Crop Production report and the monthly World Agricultural Supply and Demand Estimates (WASDE) report are both issued Friday. The WASDE will include the Department’s latest projections for 2014 and 2015 milk production and milk prices.
Tuesday on DairyLine:
Alan Levitt, U.S. Dairy Export Council, with the latest dairy trade data.
Dr. James Dunn, Penn St. Dairy Economist, discusses his monthly Dairy Outlook.