MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
February 22, 2013 MADISON, WI (REPORT 8)
CME GROUP CASH MARKETS (2/22):
BUTTER: Grade AA closed at $1.5900. The weekly average for
Grade AA is $1.6000 (+.0190).
CHEESE: Barrels closed at $1.6300 and 40# blocks at $1.6275.
The weekly average for barrels is $1.6300 (+.0220) and blocks,
BUTTER HIGHLIGHTS: Early trading on Grade AA butter was light
in the beginning of the week. The exchange was closed Monday, and
there were no sales on Tuesday or Wednesday. Buyers emerged on
Thursday, clearing 5 cars of butter, with the price decreasing $0.0050
at closing. Friday's activity shaved $.0100 off the closing price for
the week through an offer. Butter production is active throughout the
country. Those facilities with the ability to churn indicate cream
multiples are such that churning is more of a financial benefit than
selling cream loads destined for butter usage. Multiples currently
are below breakeven for spot cream going to butter. Butter makers are
building inventories of bulk butter with confidence. Bulk butter
prices range from 4 cents under to 7 cents over the market, and demand
CHEESE HIGHLIGHTS: Cheese prices are unsettled, with buyers
and sellers continuing to look for a clear market direction. As
trading for the week progressed at the CME Group, blocks traded weaker
with barrels holding steady. The recent large spread between barrels
and blocks has inverted itself this week with barrels closing at
$1.6300 and blocks a quarter of a cent below at $1.6275. Uncertainty
over future cheese supplies for the second and third quarter is adding
to the confusion. Cheese production across the US is up as available
milk supplies are headed to cheese plants in many parts of the
country. Retail sales are reported to be in line with expectations.
Increased national pizza promotions have added to mozzarella demand.
Export sales are said to be increasing. The CWT program is assisting
with sales. International prices are in line with domestic prices
adding to demand. Cheese stocks are reported to be manageable.
FLUID MILK: Farm milk production is uneven throughout the
country. Central farm milk supplies are steady to slightly
higher. In the East, manufacturing milk supplies are increasing
in the Mid-Atlantic and Northeast areas. California/Arizona
milk production is building seasonally, but overall still lags
compared to 2012. New Mexico eked out a small increase over
January 2012. Farm milk production in the Northwest is mostly
steady. Challenges facing dairy farmers include drought
affected forage quality/quantity and high purchased feed costs.
Anecdotal reports from some areas, such as California, indicate
financial resets may come through the path to foreclosure and
liquidation. Most areas report bottled milk demand is slow to
redevelop after the holidays, although some Southeast areas
indicate increasing outdoor dining is augmenting fluid milk
demand. Most regions are handling manufacturing of the milk
supplies within their respective region, with the exception of
cream. Cream loads from both the West and East are clearing
into the Central region to find processing room. Sales of cream
into ice cream and frozen dessert accounts are at seasonal
volumes, but that market segment is expected to increase rapidly
DRY PRODUCTS: Dry product markets trended lower this week
as buyers are often content to wait from week to week before
filling near term needs. Nonfat dry milk prices in the
East/Central and West registered decreases on the top of each
mostly series. Although some dairy indices are on the rise,
many manufacturers indicate spot sales are shouldering
substantial volumes. Dry butterfat prices stepped lower across
all price series as heavy clearing of buttermilk solids
continues. Condensed and dry buttermilk makers indicate
upcoming interest from ice cream producers may slow the downward
trend on dry buttermilk. Dry whey prices mirror the trends of
the full protein complex markets, showing light buyer interest
through decreases on all range and mostly series. Production of
dry whey is active in all regions. Whey protein concentrate 34%
prices followed the lead of NDM and dry whey, stepping lower in
both the range and mostly series. Although there is product
differentiation in the lactose market, and some Q1 contract
prices are holding, spot market pricing stepped lower this week.
For all the dry markets, market participants indicate most
commodities can be obtained through one or two phone calls.
ORGANIC DAIRY MARKET NEWS (DMN): The national weighted
average advertised price of organic milk half gallons, $3.49, is
26 cents lower than two weeks ago. The price range, $2.99 to
$3.99 decreased $1.00 at the top and increased 40 cents at the
bottom to the narrowest price spread since late February last
year, exactly one year ago. The weighted average advertised
price for national brands is $3.63 and for store brands, $3.30.
The region with the highest average price is the Southwest with
$3.68 and the South Central has the lowest, $2.99. The current
national organic half gallon milk weighted average advertised
price of $3.49 compared with the weighted average advertised
price for non-organic half gallons, $1.42, yields an organic-
conventional half-gallon milk advertised price spread of $2.07,
compared with $1.58 two weeks ago. Ads featuring organic milk
and organic yogurt this reporting period set 2013 records for
the number of ads, as well as comprising virtually all organic
dairy advertising. Total combined organic yogurt ads for all
package sizes are at a level higher than any period in nearly
one year, since the first week of March 2012.
RETAIL DAIRY MARKET NEWS (DMN): Butter retail advertising
volume more than doubled from two weeks ago, reaching the
highest level of 2013. The U.S. weighted average advertised
price for a 1 pound container of AA butter increased 8 cents to
$2.88, the second consecutive bi-weekly price increase. Greek
yogurt ads for 32 ounce containers reflected the largest
increase of any product and carton size, helping make yogurt the
largest single category of advertised products. The average
price for 32 ounce Greek yogurt was $4.48, down 51 cents.
Cheese retail advertising volume declined 23% from two weeks
ago, to the lowest level since the end of November last year.
The U.S. weighted average advertised price of the most
advertised cheese category, 8 ounce shredded, declined by 8
cents to $2.38 from two weeks ago, the lowest level of 2013.
The second most advertised cheese category, 8 ounce blocks at
$2.30, increased in price 2 cents from the lowest level of the
year. The national weighted average advertised conventional
milk price for half gallons this period, $1.42, decreased 75
cents from two weeks ago, following a 16 cent increase two
weeks before that. Organic half gallon prices averaged $3.49,
down 26 cents from two weeks ago, following a previous 18 cent
increase. The resulting organic-conventional half-gallon price
spread is $2.07, up 49 cents from two weeks ago to the highest
spread of 2013.
JANUARY MILK PRODUCTION (NASS): Milk production in the 23 major
States during January totaled 15.9 billion pounds, up 0.6% from
January 2012. Production per cow in the 23 major States averaged
1,871 pounds for January, 11 pounds above January 2012. The number of
milk cows on farms was 8.50 million head, 2,000 head less than January
2012, but 6,000 head more than December 2012.
MARCH FEDERAL MILK ORDER ADVANCE PRICES (FMMO): Under the
Federal milk order pricing system, the base Class I price for March
2013 is $17.80 per cwt. This price is derived from the advanced Class
IV skim milk pricing factor of $12.44 and the advanced butterfat
pricing factor of $1.6564. 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 February 2013, the base
Class I price decreased $0.41 per cwt. For selected consumer products,
the price changes are: whole milk(3.25% milk fat), -$0.41 per cwt., -
$0.035 per gallon; reduced fat milk (2%), -$0.44 per cwt., -$0.038 per
gallon; fat-free (skim milk), -$0.46 per cwt., -$0.040 per gallon.
The advanced Class IV skim milk pricing factor is $12.44. Thus, the
Class II skim milk price for March is $13.14 per cwt., and the Class
II nonfat solids price is $1.4600. The two-week product price
averages for March are: butter $1.5393, nonfat dry milk $1.5644,
cheese $1.6480, and dry whey $0.6399.
JANUARY FMMO MARKETING AND UTILIZATION SUMMARY(DAIRY PROGRAMS):
During January, more than 11.6 billion pounds of milk were received
from producers. This volume of milk is 2.3% higher than the January
2012 volume. In January 2012 and January 2013, there were volumes of
milk not pooled due to intraorder disadvantageous price relationships.
More than 3.8 billion pounds of producer milk were used in Class I
products, 0.3% lower than the previous year. The all-market average
Class utilization percentages were: Class I = 33%, Class II =13%,
Class III = 42% and Class IV = 12%. The weighted average statistical
uniform price was $19.19, $0.92 lower than last month and $0.58 higher
than last year.
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