CWT assists with 2 million lbs. of cheese export sales
Cooperatives Working Together (CWT) accepted six requests for export assistance to sell 1.964 million lbs. of cheddar and Gouda cheese to customers in Asia, Europe and the Middle East.
Bids were accepted from CWT-member co-ops Dairy Farmers of America and Northwest Dairy Association (Darigold) The product will be delivered August 2014 through January 2015.
Year-to-date, CWT has assisted member cooperatives in selling 82.543 million lbs. of cheese, 48.051 million lbs. of butter and 19.877 million lbs. of whole milk powder to 43 countries on six continents. These sales are the equivalent of 2.054 billion lbs. of milk on a milkfat basis.
Dairy Margin Watch: August trends mixed
Dairy margins were mixed over the first half of August, improving in the third quarter of 2014, but deteriorating slightly in deferred periods, according to the latest CIH Margin Watch report from Commodity & Ingredient Hedging, LLC.
Most of the margin improvement in the spot period was due to strength in nearby milk futures, with both August and September showing strength since the end of July relative to deferred contracts.
Another contributing factor to margin weakness over the past two weeks was a slight rise in feed costs. USDA released the August World Ag Supply & Demand Estimates (WASDE) report, which was considered somewhat bullish for corn. The yield and production estimates were pegged at 167.4 bushels per acre and 14.032 billion bushels, respectively, each coming in below pre-report trade estimates. As a result, projected new-crop ending stocks were only estimated up 7 million bushels from July when the market was anticipating an increase closer to 200 million bushels.
By contrast, the soy production and yield figures were much closer to industry expectations, and thus considered neutral.
While nearby milk prices remain firm, deferred contracts appear to be coming under some pressure. According to the verbatim text of the August WASDE report, milk production forecasts for 2014 and 2015 were raised slightly as lower feed costs are expected to support higher output per cow. Fat basis export forecasts for 2014 and 2015 are lowered as Russia's ban on imports from a number of dairy exporting countries will likely increase competition in export markets. While the U.S. has not had significant dairy export sales to Russia in years, the EU has, and they most likely will move to compete more aggressively against the U.S. into the Middle East and Asia.
Global milk production update
According to USDA’s European and Oceania Dairy Market Overview for the week ending Aug. 14, milk production reported in Western Europe is down and following a normal seasonal trend. However, production for June was 4.3% higher than last year. The Russian import ban of European Union (EU) dairy products had a significant impact on Western European markets. Russian imports in 2013 were estimated to represent 1.5% of EU’s total milk production.
Milk production in Oceania is increasing as its season begins. Manufacturing facilities in Australia finished their maintenance shutdown periods and are ready for increased milk volumes. New Zealand milk production is expected to make sizable increases in the upcoming weeks leading to the seasonal peak in October.
Top cow milk-producing countries
Country billion lbs. billion lbs.
European Union 308.9 317.5
United States 201.2 205.9
India 126.8 132.6
China 75.6 79.4
Brazil 71.4 73.6
Russia 67.6 67.2
New Zealand 44.5 47.3
Argentina 26.3 26.7
Mexico 24.8 25.2
Ukraine 24.6 24.7
Australia 20.7 21.8
Canada 18.8 18.6
Japan 16.7 16.7
* USDA production estimates
Source: Dairy Farmers of America
Dairy CPI: Mostly higher in July
With the exception of ice cream, retail dairy product prices rose in July, with butter taking the largest jump, according to unadjusted monthly Consumer Price Index (CPI) data released by the Bureau of Labor Statistics.
Overall July 2014 retail dairy product prices were +0.3% compared to June 2014, and +4.3% compared to July 2013. That compares to retail prices for all food eaten at home, which was +0.3% compared to June and +2.7% compared to the year before.
Checking out individual products (July 2014 vs. June 2014 and July 2013, respectively): fluid milk: +0.1%; +5.4% [whole milk: +0.2%; +6.3%; other milk: unchanged; +5.1%]; cheese: +0.3%; +7.1%; butter: +3.9%; +16.5%; ice cream: -1.4%; -1.4%; and “other” dairy products: +1.5%; +2.0%.