Daily Cash Trading on Tuesday, April 22, 2014



















Cold storage inventories 

March 31 butter stocks totaled 178.35 million lbs., up 9% from Feb. 28, but 30% less than March 2013, according to USDA’s Cold Storage report, released April 22.

Total natural cheese stocks, at 1.01 billion lbs., were unchanged from February, but down 9% from March 2013. American cheese, at 631.0 million lbs., was unchanged from February, but 8% less than a year earlier.

HighGround Dairy’s Eric Meyer termed the report neutral vs. today's market expectations, but bullish for deferred months.

However, FCStone’s Dave Kurzawski said the report’s numbers came in higher than expected, resulting in a bearish outlook for butter and a slightly bearish outlook for cheese.

“We saw a larger than usual increase in (butter) stocks during the month and we would term this report bearish despite still being at our lowest total stock level since 2011,” he said. “The (cheese) marketplace looked to be very tight during the month of March, so it was a surprise to see stocks increase despite the strength in prices. It seems currently we are in the midst of flipping from a very tight supply availability back to a slight surplus of product and, should that continue to happen, it is likely to make the downside even more fierce given that we were actually building stocks last month.”


CWT assists with 5.3 million lbs. of cheese, butter and WMP export sales

Cooperatives Working Together (CWT) accepted 15 requests for export assistance to sell 198,416 lbs.  of cheddar cheese, 4.184 million lbs. of 82% butter and 936,965 lbs. of whole milk powder (WMP) to customers in Asia, Africa, the Middle East, and North Africa. The bids were accepted from Dairy Farmers of America, Maryland & Virginia Milk Producers Association, Michigan Milk Producers Association, Northwest Dairy Association (Darigold), O-AT-KA/Upstate-Niagara, and Tillamook County Creamery Association. The product will be delivered April through September 2014.

Year-to-date, CWT has assisted member cooperatives in selling 46.330 million lbs. of cheese, 38.348 million lbs. of butter and 5.141 million lbs. of WMP to 33 countries on six continents. These sales are the equivalent of 1.321 billion lbs. of milk on a milkfat basis, well ahead of the year-to-date increase in U.S. milk production through March of 565 million lbs.


Northwest FCS issues ‘snapshots’

Northwest Farm Credit Services recently released its quarterly Market Snapshots for dairy, cattle, hay, feed grains, soybeans and land values.

Northwest dairy producers’ spirits are high entering the second quarter of 2014. Class III milk futures prices between low and mid $23/cwt. for March and April 2014 fuel producers’ optimism and positive financial returns.

Although February milk cow numbers in Idaho, Oregon and Washington declined 0.62% year over year, Northwest milk production for the period increased 2.80%. Slightly lower cow numbers may be attributed to high slaughter cow prices. Replacement cow prices are also high, ranging between $1,800 and $2,300 per head.

Hay supplies in the Northwest remain tight. In Southern Idaho, average dairy quality hay prices are between $200-$230/ton FOB. Prices are similarly high in Central Washington, and range between $220-$235/ton FOB. Hay prices are expected to rise in 2014, pressured by demand from California where forage supplies are limited by drought and irrigation water constraints. Demand from California is most pronounced in Idaho, where brokers’ initial inquiries signal rising interest (and prices). Early offers for hay in Southern Idaho are approximately $250 per ton.

Expectations for higher hay prices are increasing dairy producers’ interest in corn silage and alternative forages. Although early, initial reports suggest new crop corn silage prices between $38-$40/ton in Southern Idaho and Washington. Irrigation water is adequate in all Northwest dairy producing regions, with the exception of the Owyhee irrigation district in Western Idaho and Eastern Oregon, where irrigation water is constrained.

Near-historic high milk prices are improving dairy producers’ balance sheets. Breakeven prices for dairies in Southern Idaho and Washington are estimated between $17-$18/cwt. Current strong markets follow a healthy 2013, where Northwest FCS relationship managers’ analyses reveal average dairy profits between $1.00-$1.25/cwt.

Priorities for dairies’ reinvestment include rebuilding balance sheets, completing deferred maintenance and purchasing farm ground to control feed supplies. However, relatively high agricultural real estate prices are creating pause in some Northwest dairies’ decisions, where careful analysis precedes farm ground purchases. Few dairies express immediate interest in expansion.

In Northwest dairy industry news, processors are becoming increasingly competitive to secure milk. Glanbia announced enhancements to its pay price in March, including one or two year supply agreements with better pricing and zero administrative fees on all risk management programs. A recent press release by Chobani noted the plant has the capacity to process 10 million lbs. per day. Current production is approximately 3 million lbs. per day. Rising demand for milk isn’t isolated to Southern Idaho. A fall 2014 plant expansion in Sunnyside, Wash. by Darigold will increase demand and provide producers an opportunity for increasing production allocations.

In Farm Bill news, early reports suggests a new Margin Protection Program administered by the Farm Service Agency provides large dairies new, better options than the discontinued MILC (milk income loss contract) program.


Tillamook expands lactose/WPC capabilities

Tillamook Cheese has completed a 65,000-square-foot expansion of its cheese-making facility at the Port of Morrow to process both lactose powder and a dried whey protein concentrate. The East Oregonian newspaper (http://is.gd/LrbYQI) reported the new plant is expected to help Tillamook double its revenue off whey and lactose-based products.


Dean in the news

Dean Foods Company will host a live webcast of its first quarter 2014 earnings investor conference call on May 8. Visit http://www.deanfoods.com/our-company/investor-relations/.

Also, Dean Foods was recently recognized as a "2014 Best of Sustainable Supply" award winner by McDonald's Corporation. As the leader in the North American supplier submissions in the category of Animal Health and Welfare, Dean Foods was only one of four suppliers selected in this category globally.

Dean Foods supplies McDonald's with single-serve white and chocolate milk, and other dairy products.

Dean Foods' corporate endeavors include a staff position dedicated to dairy stewardship, a specific charitable focus on national animal health and care initiatives, and the establishment of the Dean Foods Animal Welfare Advisory Council (AWAC).