MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
MAY 25, 2012 MADISON, WI (REPORT 21)
CME GROUP CASH MARKETS (05/25):
BUTTER: Grade AA closed at $1.3875. The weekly average for Grade AA is
CHEESE: Barrels closed at $1.4700 and 40# blocks at $1.5700. The weekly
average for barrels is $1.4660 (+.0100) and blocks, $1.5145 (+.0145).
BUTTER HIGHLIGHTS: Butter pricing is firming this week for national
and regional pricing points. Demand has been fair for the current time of
year. Butter feature activity has been light to moderate, but expected to
increase as more co-featuring is occurring with sweet corn and the unofficial
start of barbeque season at the Memorial Day holiday weekend. Lower retail
butter prices are also helping sales. Cream demand has increased this week,
surprising many ahead of a holiday weekend. Multiples and overages are also
higher. Cream supplies are declining due to less standardized cream
available as school milk needs decline, lower milk output in some areas, and
declining milkfat levels in milk. Butter production remains moderate to
heavy at seasonal levels. According to the NASS Cold Storage report, stocks
of butter as of April 30, 2012, total 253.9 million pounds, +79% or 112.1
million pounds more than April 2011. Stocks were 22% higher or 45.6 million
pounds more than March 2012. Cooperatives Working Together (CWT) has
accepted requests for export assistance to sell a total of 1.642 million
pounds (745 metric tons) of butter. The product will be delivered May through
November 2012. During 2012, CWT has assisted member cooperatives in making
export sales of butter and anhydrous milk fat totaling 44.4 million pounds.
CHEESE HIGHLIGHTS: Cheese production nationally remains heavy.
Increased milk supplies have been moving to manufacturing facilities with
cheese plants taking much of the increase. This has increased stocks in cold
storage, but manufacturers are reported to be comfortable with current
inventories. Export sales are being assisted by the Cooperatives Working
Together (CWT) program. American cheese stocks are above year ago and last
month's levels. "Other" natural cheese stocks are below year ago levels, but
increasing from last month. A recent earthquake in Italy is reported to have
damaged over 300,000 wheels of aged cheese worth hundreds of millions of
dollars. Cheese prices are trading in a fairly narrow range for the month of
May. After a lackluster trading week, the block market was bid $.0675 higher
on Friday with no sellers. Blocks closed the week at $1.5700 while barrels
closed at $1.4700 at the CME Group.
FLUID MILK: Northeast milk production is widely believed to have
reached a plateau a "couple" of weeks ago. Nevertheless, production remains
heavy and drying at some plants remains at full capacity. That is now
projected to be scaled back next week. Milk production in the Southeast is
declining overall except in the mid-Atlantic region. This has kept
manufacturing capacity in the Southeast at about 60%-70% of capacity but that
is expected to increase over the weekend. Midwest farm milk intakes and
component contents are gradually receding from seasonal highs in the Central
region. Various marketing representatives and dairy cooperative managers
indicate the competition for farm milk is increasing steadily in some areas
of the Central region where cheese and butter/powder plants are numerous.
California milk output is mostly steady and remains at or near the seasonal
peak. Weather conditions have been warm during the daytime, but are cooler
at night. Arizona milk production is trending lower on a week-to-week basis.
Hotter temperatures are a main cause, along with time in milk and feeding
changes made because of high feed costs. Milk production in the Pacific
Northwest has slowed from the heavy levels a few weeks ago, but remains heavy
across the region. Milk handlers are expecting some additional loads to move
to manufacturing plants during the holiday weekend as some Class I and II
plants are closed for the long weekend. Butter/powder and cheese plants in
Utah and Idaho will be busy over the holiday weekend with local supplies and
some outside milk from the Northwest. Favorable weather for milk production
is helping to keep milk supplies above year ago levels.
DRY PRODUCTS: Nonfat dry milk contract sales prices in the Central
region moved lower, based on variable indices that declined, but prices from
some operations that set prices weekly report their prices firmed compared to
last week. The market tone is mixed. All Eastern nonfat dry milk low heat
prices moved lower, as did the upper end of the high heat price range.
Prices for Western low/medium nonfat dry milk are mixed this week. Prices
continue to move lower off the top ends of the range and mostly series.
Countering that, the bottom ends of the range and mostly series moved higher
as those low priced trades were not reported. Dry buttermilk prices are
unchanged in the Central and eastern regions. Western dry buttermilk prices
continue to trend lower. The market undertone remains weak. Prices for dry
whole milk are unchanged to lower for the week in a lightly tested market.
In the Central region, dry whey prices are lower and higher on a mixed
market. Northeast dry whey prices moved lower at both ends of the price
range. Western dry whey prices are lower and export competition moved some
manufacturers to lower prices to maintain export sales. Lactose prices are
both lower and higher on the range, and unchanged on the mostly, with a mixed
market tone. Whey protein concentrate 34% prices on both ends of the range
and the top of the mostly price series shifted lower on a market in search of
support. Casein markets are unsettled with prices generally holding steady.
INTERNATIONAL DAIRY MARKET OVERVIEW (DMN): Milk production across
Western European countries is at, near, or slightly off the seasonal peak
levels. Indications are that France is past the peak and Germany may have
peaked this week. Total milk output continues to trend higher than year ago
levels across many countries. Summertime conditions are prevalent across the
region and processing plants are running at or near capacity levels. In many
locales, there is increasing demand for fresh milk and cream based products,
which is alleviating the stress on plants making cheese, butter, and powders.
Milk supplies are being handled well and processors are able to make the
product mix needed for current and future sales. The results of the recently
completed export tender are not entirely clear, but industry indications are
that there are heavy volumes of SMP and WMP being sourced from Europe. The
sales are welcomed to move or rebalance stocks that have been built during
the production season. Current pricing for SMP and WMP is unchanged, but
there are indications pricing levels are trying to firm. The weaker Euro has
made sourcing European dairy products more attractive. However, the
international markets have been trending lower for finished dairy products
and buyers have shown reluctance to be market participants when they perceive
lower, future values. Butter movements into PSA remain active. From March 1
through May 13, 68,630 MT (151.3 million pounds) of European butter have been
offered into PSA. Eastern Europe milk production continues to build towards
the peak output levels. Conditions have been generally favorable for milk
cows and milk output has been higher in certain countries than has been the
case in others. Cow numbers are often higher and feed more available,
leading to milk production gains. Milk is being processed in a timely
fashion and manufacturers are building stocks for future sales.
Oceania milk producers and handlers are reporting that milk volumes are
noticeably declining. The 2011 - 2012 milk production season has been very
positive in both New Zealand and Australia, especially with a strong finish
in both countries. Milk producers are stating that the milking herd needs to
prepare itself for the upcoming season, thus the end of the current season
needs to occur. Milk producers are very pleased with the condition of the
milking herd going into the winter months. The herd has not had a stressful
end to the current season and hopefully the winter months will not be overly
stressful. Temperatures are starting to decline, thus fall is in the air.
Milk production projections for the current year remain positive. New
Zealanders continue to project a 9 - 10% increase over the previous season
while Australians are looking at about a 4% increase. Milk production in
Tasmania, which is included with Australian figures, is running about 10%
stronger than last year, which is helping boost Australian figures. Milk
producers and handlers in all countries of the Oceania region are optimistic
about the upcoming season, but are very aware that opening farm gate prices
will potentially be lower than the current year. Farmers have had a positive
year and are still unsure how lower prices will impact their upcoming season.
As the milk volume declines, manufacturing facilities that have maintained
more active processing schedules than anticipated are now being shuttered or
running on much reduced schedules. Typically, manufacturing facilities use
the down time for maintenance, but many will need to compress this down time
maintenance period into a narrower range this year. Up to this point, the
extra milk volume has been able to generate some additional stocks that were
previously not anticipated. Much of this additional stock was welcomed and
provided a supply cushion for late season commitments and also provided for
enhanced volumes of some products that cleared through the g/DT event.
Traders and handlers are stating that these end of season volumes are
declining and stock balance is generally in very good shape for the upcoming
winter season. At the May 15 g/DT session #68, rennet casein average prices
increased 0.7% ($6,244 per MT) when compared to the previous all contract
average, while all others traded product averages were lower by 0.2% - 11.9%.
Skim milk powder, sourced from the U.S., again traded in the closest
contracting period (June) and averaged $2,395 per MT ($1.0864 per pound).
All other products and supply sources, with the exception of buttermilk
powder and lactose, saw activity in contract #2 (July). Anhydrous milk fat
continues to decline and realized an 11.9% decline ($2,499 per MT) from the
previous all contract average. Skim milk ($2,573 per MT) and whole milk
($2,546 per MT) powder averages were 5.4% and 8.9% lower respectively.
Lactose did not see activity at this event.
APRIL COLD STORAGE (NASS): On April 30, 2012, U.S. cold storage
holdings of butter totaled 253.8 million pounds, 22% more than a month ago,
and 79% more than last year. Natural American cheese holdings total 628.4
million pounds, 1% more than a month ago, and 1% more than a year ago. Total
cheese stocks were 1.0 billion pounds, 2% more than last month but 1% less
APRIL MILK PRODUCTION (NASS): Milk production in the 23 major States
during April totaled 16.0 billion pounds, up 3.3% from April 2011. March
revised production at 16.4 billion pounds, was up 4.3% from March 2011. The
March revision represented a decrease of 5 million pounds or 0.1% from last
month's preliminary production estimate. Production per cow in the 23 major
States averaged 1,875 pounds for April, 40 pounds above April 2011. The
number of milk cows on farms in the 23 major States was 8.53 million head,
94,000 head more than April 2011, and 4,000 head more than March 2012.
FEDERAL MILK ORDER ADVANCE PRICEHIGHLIGHTS (DAIRY PROGRAMS): Under the
Federal milk order pricing system, the base Class I price for June 2012 is
$15.24 per cwt. This price is derived from the advanced Class III skim milk
pricing factor of $10.61 and the advanced butterfat pricing factor of
$1.4279. A Class I differential for each order's principal pricing point
(county) is added to the base price to determine the Class I price. Compared
to May 2012, the base Class I price decreased $0.61 per cwt. For selected
consumer products, the price changes are: whole milk (3.25% milk fat), -
$0.58 per cwt., -$0.050 per gallon; reduced fat milk (2%), -$0.42 per cwt., -
$0.036 per gallon; fat-free (skim milk), -$0.22 per cwt., -$0.019 per gallon.
The advanced Class IV skim milk pricing factor is $8.72. Thus, the Class II
skim milk price for June is $9.42 per cwt., and the Class II nonfat solids
price is $1.0467. The two-week product price averages for June are: butter
$1.3506, nonfat dry milk $1.1460, cheese $1.5243, and dry whey $0.5355.
*****SPECIALS THIS ISSUE*****
INTERNATIONAL DAIRY MARKET NEWS (PAGES 8-8B)
DAIRY FUTURES (PAGE 9)
APRIL COLD STORAGE (PAGES 10-11)
APRIL MILK PRODUCTION (PAGE 12)
FEDERAL MILK ORDER JUNE ADVANCE PRICES (PAGE 13)
DAIRY GRAPHS (G1-G2)
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National Dairy Market At A Glance
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