MD_DA950
DY, DAIRY
MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
August 10, 2012 MADISON, WI (REPORT 32)
CME GROUP CASH MARKETS (08/10):
BUTTER: Grade AA closed at $1.7500. The weekly average for
Grade AA is $1.7270 (+.0655).
CHEESE: Barrels closed at $1.8200 and 40# blocks at $1.8550.
The weekly average for barrels is $1.7910 (+.1105) and blocks,
$1.8185 (+.1145).
BUTTER HIGHLIGHTS: The cash butter price has steadily
increased throughout the week. The current price of $1.7500
compares to $1.6900 a week ago, $1.5400 a month ago, and $2.0675
last year at this time. Churning schedules across the country
are often being challenged by tightening cream supplies. Class
II demand continues to absorb a significant portion of available
cream and this need is starting to show signs of easing. Many
butter producers feel that cream supplies will remain snug for
the next few weeks, as school bottling standardizing resumes and
Class II demand eases further, cream supplies should become more
available. Overall volumes of standardized cream may be lighter
this year as butterfat levels on incoming milk have been lower
for much of the summer. Limited churning cream supplies are
often causing butter producers to reach into inventories to
fulfill butter demand. Microfixing is starting to be reported
at more locations. Butter demand is holding steady from coast
to coast. Some butter producers are indicating that they are
concerned about upcoming tight milk supplies due to drought,
heat, and feed costs and supplies that will probably short milk
for butter production before the impact is felt by cheese
plants. Butter exports continue with the assistance of the CWT
program. The most recent assistance was for 271 MT (597,453
pounds). Thus far in 2012, the CWT program has assisted with 56
million pounds of butter exports. According to FAS, June butter
and milk fat exports totaled 8.5 million pounds, 34% lighter
than June 2011. Cumulative exports for the first 6 months of
2012 (January - June) totaled 65.5 million pounds, 26% less than
the comparable period last year.
CHEESE HIGHLIGHTS: CME cash trading on blocks and barrels
broke through $1.8000 for the first time since late November
last year and ended the week with blocks at $1.8550 and barrels
at $1.8200. Cheese inventories are currently in a normal range
which manufacturers are comfortable with. Milk supplies are
tightening seasonally in much of the country. Looking ahead,
there is some apprehension related to uncertainty over what
impact the prolonged drought will have on feed and hay supplies
and hence, milk production available for making cheese. This is
causing some discussion about potential volatility in spot cash
markets as the year winds on. Cheese retail advertising volume
reported in the National Dairy Retail Report is up, following
three periods of declining volume. Current cheese ad numbers
are 20.2% above volume two weeks ago. The weighted average
advertised price of 8 ounce shredded increased 9.3% to $2.36; 8
ounce blocks increased 4.5% to $2.30; 1 pound blocks increased
0.3% to $3.95; and 2 pound blocks increased 5.0% to $5.66. Only
1 pound shreds declined, -17.2%, to $3.41. Total cheese
production in the U.S. in June reached 896.8 million pounds, up
0.9% or 7.7 million pounds from last year. Cumulative total
cheese output for the U.S. through June is 5.4 billion pounds,
up 2.7% or 144.6 million pounds from 2011.
FLUID MILK: Hot weather is impacting and lowering milk
production over most of the nation. California, Arizona,
Florida and the Southeast region have especially felt the heat
this week. Milk production in the Northeast and the Pacific
Northwest are at seasonal levels. Many schools are beginning
their fall terms, increasing Class I demand and lowering
manufacturing milk supplies. Cream supplies are very tight in
the East and multiples have moved significantly higher. Cream
markets are firming in the West and mostly steady in the
Midwest. According to the latest NASS crop report, corn
production is forecast at 10.8 billion bushels, down 13% from
2011 and the lowest production since 2006. Based on conditions
as of August 1, yields are expected to average 123.4 bushels per
acre, down 23.8 bushels from 2011. If realized, this will be the
lowest average yield since 1995. Area harvested for grain is
forecast at 87.4 million acres, down 2% from the June forecast
but up 4% from 2011. Soybean production is forecast at 2.69
billion bushels, down 12% from last year. Based on August 1
conditions, yields are expected to average 36.1 bushels per
acre, down 5.4 bushels from last year. If realized, the average
yield will be the lowest since 2003. Area for harvest is
forecast at 74.6 million acres, down 1% from June but up 1% from
2011.
DRY PRODUCTS: Nonfat dry milk prices continued to trend
higher across the nation. The market tone remains firm.
Production declined in the East and West, but was steady to
higher in the Midwest. Some manufacturers in the Midwest and
East are limiting spot sale quantities to assure coverage of
contract customers desiring additional loads. Dry buttermilk
prices are trending higher and the market undertone remains
firm. Production is steady in the Midwest, declining in the
East and West. Dry whey prices moved higher in all regions with
sharp increases in the West. Demand is turning more aggressive
as buyers attempt to increase coverage of future needs. Spot
sales activity is light. Whey protein concentrate 34% prices
were unchanged as the price range narrowed. Some spot buyers
are opting for contracts in the near term to assure supply.
Lactose prices are unchanged on a steady market.
ORGANIC DAIRY MARKET NEWS (DMN): In the real world of
organic dairy, times are good and times are bad. Retailers are
committing dollars for retail advertising of organic milk at
near record volume levels. Some processors continue to be
inventive in marketing milk into densely populated urban areas,
increasing sales. A national dairy this week announced a spin-
off of its' organic division in an initial public stock offering
and investors responded favorably by driving the price of the
firm up. This is viewed as a favorable verdict by the "stock
market". The bad times are still not quantified, but relate to
this summer's weather. There is more hay moving longer
distances than would be normal, at higher prices, such as from
the west to some of the Midwest. Organic dairy farmers are
having margins squeezed as feed prices increase. There are
reports of organic grain being sold at prices near $1,000 a ton,
even in New England. Of concern now, is where organic grain
prices will settle once the year's crop harvest is completed.
Sometimes forgotten is that organic grain prices showed upward
movement before this summer's heat and drought. The big
question for this fall will be whether organic milk prices paid
to farmers will increase enough to deter some of the potential
exodus from organic dairy farming that ever higher feed prices
may generate. Right now, there are many "raw nerves" as many in
the organic dairy industry await possible events of coming
months. Organic dairy advertising volume remained strong
following last period's record setting levels of overall organic
dairy ads, organic milk ads and organic half gallon milk ads.
This period's organic retail ad numbers are the third highest of
any period since this data series began during fall 2009.
Organic milk and organic half gallon ads are the second highest
level since fall 2009. The national weighted average advertised
price of organic milk half gallons, $3.27, is 37 cents lower
than two weeks ago. The price range is $4.99 to $2.29,
unchanged at the top but 10 cents lower at the bottom. This
price spread is the greatest for organic half gallons by 10
cents since this data series began during fall 2009. Ads for 4-
6 ounce organic yogurt yielded a weighted average advertised
price of 63 cents, up 4 cents, from two weeks ago. The top of
the price range, 79 cents, is 19 cents higher than two weeks ago
and the range low price, 57 cents, is 7 cents higher. Nearly
five times as many ads are for national brands than store
brands. The current national organic half gallon milk weighted
average advertised price of $3.27, compares with $2.28 for non-
organic half gallons. This yields an organic-conventional half-
gallon milk advertised price spread of $0.99, down from $1.83
two weeks ago and $0.35 above the average for the year to date.
During 2012 the spread has ranged from $0.78 to $2.46.
JUNE FLUID MILK SALES (AMS): During June, 4.1 billion
pounds of packaged fluid milk products is estimated to have been
sold in the United States. This was 0.3% lower than June 2011.
After adjusting for calendar composition, sales in June 2012
were 0.8% lower than June 2011. Estimated sales of total
conventional fluid milk products decreased 0.5% from June 2011
and estimated sales of total organic fluid milk products
decreased 3.9% from a year earlier.
NATIONAL DAIRY RETAIL REPORT (DMN): Total conventional
dairy retail ads increased by 4.4% this week, following a 20.1%
decline the previous reporting period. Conventional cheese and
yogurt ad numbers increased while ads for milk declined by 32.3%
and cream cheese ads declined by 51.6%. The most advertised
cheese category, 8 ounce shreds, has a weighted average
advertised price of $2.35, a 8.8% increase from last cycle. The
average price for 8 ounce blocks, $2.32, is a 5.5% increase from
the last cycle. The weighted average advertised price of 4-6
ounce yogurt is $.49 and $.99 for 4-6 ounce Greek yogurt. The
weighted average advertised price of each type of yogurt is one
cent lower than during the last survey period. The weighted
average advertised price for 48-64 ounce ice cream containers is
$3.12, up 3.0%. Ice cream in 48-64 ounce containers is the
single most advertised item this survey period, having increased
by 25.7%, after declining by 24.0% during the last reporting
period. However, if all package sizes of cheese or yogurt are
totaled, cheese and yogurt each have more ads than 48-64 ounce
ice cream. Yogurt ad numbers increased by 36.5%, more than
reversing the 20.1% decline two weeks ago. Cheese ad numbers
increased by 34.4%, following a decline of 15.0% during the last
survey period. Conventional milk's national weighted average
advertised price for half gallons this period, $2.28, is 47
cents above two weeks ago. Organic milk's national weighted
average advertised price for half gallons, $3.27, is down 37
cents from last period. This results in an organic-conventional
half-gallon milk advertised price spread of $0.99, down from
$1.83 two weeks ago. Numbers of ads for conventional half
gallons milk store brands are a bit higher than ads for national
brands. In contrast, with organic milk, over fourteen times
as many ads for half gallons appeared for store brands than
national brands.
1200C rick.whipp@ams.usda.gov 608.278.4152
National Dairy Market At A Glance
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