The following is from Lee Mielke, author of a dairy market column known as «Mielke Market Weekly.»
Cash cheese prices sustained April 11’s small rally and closed higher the week of April 14, reversing three weeks of losses. The Cheddar blocks closed the Good Friday holiday-shortened week at $2.28 per pound, up 11 cents on the week, 40 cents above a year ago but 15¼ cents below their record March 24 peak. The Cheddar barrels finished at $2.2575, up 17¾ cents on the week, 48¾ cents above a year ago, a more typical 2¼ cents below the blocks but 12 cents shy of their record high. Four cars of block traded hands on the week and none of barrel. The still climbing NDPSR-surveyed block price hit $2.4149 per pound, up 1.6 cents, while the barrels averaged $2.3440, down 1.5 cents.
Cheese plants in many parts of the country are increasing production levels where milk supplies are building seasonally, according to USDA’s Dairy Market News. Some Midwestern plants continue to report slower growth. The higher production rates are helping to fill orders and build stocks.
Process cheese demand is building for summer needs and buyers are looking to increase purchases at the lower prices. Food service demand is also showing increased interest. As baseball parks open across the country, there are increased orders for cheese curd and various other cheese products for sports fans. Domestic retail demand is mostly steady. Export sales continue at above year ago levels. The Foreign Ag Service reported cheese exports for January to February were up 45 percent from the same period a year ago.
Cash butter resumed its decline this week, after holding all last week and closed Thursday at $1.89, down 8 cents on the week but still 10¼ cents above a year ago. Seven cars sold this week. NDPSR butter averaged $1.9839, up 2.5 cents.
Butter prices are mostly steady, says DMN. The market tone is uneven. Churn rates are mixed with varying cream supplies amongst the plants and regions. Domestic demand is moderate, but print sales have trailed off since the completion of holiday commitments. Export orders are trending slower. Inventories are tight; butter manufacturers look to rebuild stocks moving forward.
Cash Grade A nonfat dry milk closed last Thursday at $1.8650, down 4¼ cents on the week. Twelve cars were sold on the week. NDPSR powder averaged $1.9989, down 5.3 cents, and dry whey averaged 67.18 cents per pound, up .1 cent. Prices for nonfat dry milk are lower across the country. Buyers are hesitant to develop transactions beyond immediate needs.
Milk Production Increasing
Farm milk production levels in general are seeing increases across the country with better weather conditions, according to USDA’s weekly update. Producers are actively seeking replacement heifers to increase herd sizes.
Bottling sales are steady to slow across the country. Increases in milk supplies and sluggish sales are increasing volumes clearing to manufacturers. Milk exports from Florida increased to 140 loads compared to 120 loads a week ago.
Logistical issues related to distribution are following increases in milk production levels in the Midwest. Increased processing capacity is noted in the Southwest, as a new plant comes online. Milk is being imported from other states to meet Idaho’s manufacturing demand. Arizona’s farm milk production is experiencing some decline as hot days and warm evenings disrupt cow comfort. Producers in California attribute a modest increase in milk output to first seasonal green-chop.
As we reported from the latest World Agricultural Supply and Demand Estimates report, USDA moved its milk production estimate slightly higher. Milk production during 2014 is forecast to total 206.1 billion pounds, up 400 million pounds from their forecast a month ago and up 4.9 billion pounds (2.4 percent) versus 2013.
Jerry Dryer, editor of the Dairy and Food Market Analyst wrote in his April 11 issue that his milk production estimate is slightly lower, at 205.8 billion pounds. USDA says «strong returns are expected to encourage a more rapid expansion in cow numbers and increase milk per cow.» Dryer says he can’t argue with this assessment but «questions the magnitude of the response. Cow numbers will be held in check by debt-weary milk producers and bankers and output per cow will be slowed during the first half of the year by feed quality issues.»
As it always does, USDA’s monthly Livestock, Dairy, and Poultry Outlook, issued last week, 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.
Robust Dairy Prices
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 were unchanged from last month as U.S. exports face stronger foreign competition. Correspondingly, Class III, Class IV and all milk price forecasts were raised.
Corn price forecasts for 2013-14 were increased to $4.40 to $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 to $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 were raised slightly from March for the second half of 2014. On balance, cow numbers for 2014 were unchanged from February’s forecast at 9.26 million head.
Milk production was increased from March projections to 206.1 billion pounds. The increased production is based on higher output per cow, forecast at 22,280 pounds, with the improvement coming in the second and third quarters of 2014. The yield improvement was predicated on higher forage quality relative to 2013 and improved producer returns that will encourage feeding higher quality rations.
The Agriculture Department’s latest Crop Progress report shows only 3 percent of the nation’s corn has been planted, up 1 percent from this time a year ago but 3 percent behind the five-year average. Of the 18 states listed in the report, which comprised 91 percent of 2013 crop, only nine had seed in the ground as of the week ending April 13.
The report also shows 8 percent of the cotton crop has been planted, up 2 percent from the week before, dead even with a year ago, but 1 percent below the five-year average. Of the 15 states listed, which comprised 98 percent of the 2013 cotton crop, only 6 states show any planted.
Fluid Milk Sales
Fluid milk sales totaled 4 billion pounds in February, according to USDA estimates, down 2.1 percent from February 2013. Estimated sales of total conventional fluid milk products were down 3 percent while estimated total organic fluid sales were up 18.5 percent from a year earlier.
Last week’s Global Dairy Trade auction saw the weighted average for all products drop 2.6 percent, following the 8.9 percent plunge in the April 1 event, 5.2 percent drop in the March 18 event, and a 4 percent drop on March 4. The price index has seen declines since reaching its recent high Feb. 4.
The downfall was led by an 8.6 percent drop in buttermilk powder, (down 15 percent in the last event) a 7-percent decline in milk protein concentrate (down 4.3 percent in last event) and a 4.9 percent fall in butter (down 11 percent in last event). Skim milk powder was next, down 4.4 percent (down 9.6 percent in last event). Cheddar cheese was down 3.3 percent (down 3.5 percent last event). Whole milk powder was down 1.6 percent (down 8.4 percent in last event). The only positive movement was in anhydrous milkfat, up .6 percent (down 11.3 percent in the last event).
FC Stone reports the average butter price equated to about $1.7383 per pound U.S., down from $1.8325 in the April 1 event ($1.6959 per pound on 80 percent butterfat, down from $1.7878 per pound). The CME’s cash butter price closed last Thursday at $1.89 per pound. The Cheddar cheese average was $1.9384 per pound, down from $2.0130. The U.S. block price stood at $2.28 per pound. Skim milk powder, at $1.8715 per pound, is down from $2.0792, and the whole milk powder average was $1.8004 per pound, is down from $1.8293 in the last event. The CME Grade A nonfat dry milk price closed last Thursday at $1.8650 per pound.
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 Feb. 4 auction, the WMP Price Index has fallen by 20.2 percent, SMP by 18.4 percent and AMF by 26.6 percent, «a serious decline in a short amount of time.»
However, last week’s whole milk powder results were only modestly lower, which Meyer says 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, he said, and may consider building stocks at a 20-percent discount from where the market stood less than three months ago.
That said, Fonterra took its nearby forecasts up quite a bit two weeks ago for both WMP and SMP, according to Meyer, 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 U.S. 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.»
Source: The Farmers EexChange