MD_DA950
DY, DAIRY
MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
March 15, 2013 MADISON, WI (REPORT 11)
CME GROUP CASH MARKETS (3/15):
BUTTER: Grade AA closed at $1.6550. The weekly average for Grade AA is
$1.6370(+.0295).
CHEESE: Barrels closed at $1.5900 and 40# blocks at $1.6100. The weekly
average for barrels is $1.5865 (+.0270) and blocks, $1.6030 (+.0310).
BUTTER HIGHLIGHTS: Western butter manufacturers are adding to
inventories as cream is available. Some producers are reporting tighter
supplies of cream this week. Central cream supplies receded slightly, with
fewer Eastern cream spot loads cleared into the region. Central butter
production, though, is still active. Several manufacturers are producing
butter to fill international commitments coming due within the second
quarter. Domestic demand in the East has increased ahead of the
Easter/Passover holidays, prompting some increases in butter production.
Current production is primarily focused on filling domestic market needs.
Orders for butter are very good and working most inventories lower. Current
bulk butter prices have declined on the upper end of the range and are 4-8
cents over the market. In the West, prices for bulk butter range from 3
cents under to 4 cents under the market. According to the Foreign
Agricultural Service, exports of butter and milkfat for January 2013 total
9.5 million pounds, up 44% from January of 2012. Saudi Arabia, at 5.2
million pounds for the month, is the largest importer with a 71% increase
above 2012. The butter and milkfat exports account for 5.1% of butter
production in the U.S. for the year.
CHEESE HIGHLIGHTS: Cheese prices across the country have moved lower
in recent weeks. The market trend reversed itself this week, as spot trading
at the CME Group increased in response to the lower prices. Prices firmed in
barrels and blocks for the week. Cheese production remains active with
manufacturers surprised at volumes of milk available to the vats. Cheddar
production in the Midwest and other parts of the country is reported to be
strong with good sales reported. Retail sales are good with both the
upcoming Easter/Passover period and promotions for "March Madness" being
sighted as additional demand factors. Current inventories of cheese are
reported to be comfortable. Some manufacturers are expressing concern about
future world milk supplies and are developing their strategies for second
quarter inventories. Export sales for January were reported to be 13% above
year ago levels. Compared to the previous week at the CME Group, the weekly
average price for barrels was $.0270 higher at $1.5865. The weekly average
for blocks was up $.0310 and averaged $1.6030.
FLUID MILK: Milk production in most areas of the nation is increasing
along the seasonal trend. Florida's milk production has shown only
incremental increases during this year's flush, compared to previous years,
with high grain prices and drought being cited as the primary limiting
factors. Various milk shipments continue to be rerouted in the East due to
the discontinuation of some milk distribution agreements. Numerous contacts
have expressed concern regarding NASS's announcement of discontinuing the
monthly Milk Production report for FY13. Cream supplies remain heavy, but
demand has increased seasonally. Cream cheese, butter and some ice cream
production increases are primarily responsible for the increase in cream
demand
DRY PRODUCTS: Dairy dry product inventories continue to expand in most
areas of the country keeping prices under pressure. Nonfat dry milk prices
moved lower. Buyer interest is increasing with some buyers indicating they
see limited risk in expanding NDM holdings at prices near the low end of the
market. Dry buttermilk prices moved lower across the nation with various
market participants indicating price incentives are needed to increase buyer
interest. Dry whey prices are mixed as formula bases pushed some variable
contract pricing higher, while price discounts on spot sales moved the low
end of the market lower. Export demand is increasing, and sellers are
offering prices at the low end of the price series for large quantity
purchases. Prices moved lower for whey protein concentrate 34% due to ample
offerings of spot loads. Prices for lactose are mixed as market participants
report conditions within the market are divided between mesh sizes.
INTERNATIONAL DAIRY MARKET NEWS (DMN): EUROPEAN OVERVIEW: Milk
production trends for Western European countries are following recent
patterns. Total output continues below year ago levels on weekly and monthly
basis for the region as a whole. In January 2013, EU milk deliveries were
2.1% lower than during January 2012. German production was stable, Ireland
was down 11.8%, the UK was down 5.3%, and France was down 4.2%. Weather
patterns have been generally neutral and any impact minimal. Supplies,
quality, and prices of feed, are all are playing an impact on milk output.
This week, Germany saw the return of snow and wintery weather. No impacts on
milk deliveries were noted. Dairy product prices are steady to higher across
reported categories, gaining momentum from events in other areas of the
world. Dry conditions in Oceania have curtailed milk output and have been a
contributing factor to higher dairy product prices. The EU is positioned to
be an available supplier into international export market needs. Higher
pricing points have also spilled over into the EU market. The PSA butter
program received around 4,800 MT of butter into the program since starting on
March 1st, the start of the new program year. The level is less than half
the volume of a year ago and attributed to better pricing and commercial
placement. Eastern European milk production levels are trailing year ago
numbers. In January 2013, milk deliveries were 1.1% less than the same month
a year early. Declines were noted in Poland, where concerns are noted about
exceeding the milk quota. Dairy product offerings are adequate to meet
current and contracted trade needs. OCEANIA OVERVIEW: The NEW ZEALAND milk
production trend is moving lower seasonally and further pulled downwards
because of dry conditions. A drought designation was declared for many
regions of the North Island. Pasture conditions have deteriorated and the
resulting lack of feed is causing a sharp decline in milk production.
Supplemental feeding is being done on some farms to keep cows in milk. Some
producers have moved to once per day milking or a longer than normal spacing
of the milking times to cope. Other farmers are drying off cows earlier than
planned. Additionally, cow slaughter rates are increasing for those who do
not have the feed or resources to keep fully stocked. Processors, trade
organizations, government agencies, and financial institutions, are offering
advice and assistance for farmers affected by the drought conditions.
Processing plants are running on reduced schedules with product needs
influencing where the milk is being placed. AUSTRALIAN milk production is
also being affected by hot and dry conditions in major output areas. Many
locations are seeing record March consecutive days with temperatures above 30
degrees Celsius (86 degrees F). Cows are not fond of the hot conditions and
pasture growth is being impacted. Current milk output is trailing year ago
numbers. Milk prices are being stepped up by several processors due to
improvements in dairy product prices and trading conditions. The high AUS
Dollar rate continues to impact export returns for some traders. Dairy
product prices for butter, SMP, WMP, and cheese are all sharply higher when
compared to recent weeks. The impact of the drought conditions and the
decline in milk receipts has created tighter supply conditions across product
categories. Demand interest is fair to good with some buyers seeking to
secure additional coverage. Many are not finding all the offerings that they
desire.
MARCH MILK SUPPLY AND DEMAND ESTIMATES (WAOB): The milk production
forecast for 2013 is raised from last month largely due to a slower pace of
herd reduction and higher first-quarter milk per cow. The 2013 fat-basis
export forecast is raised largely on stronger shipments of butter. Skim-solid
exports are raised based on greater nonfat dry milk (NDM). Imports are
unchanged on both a fat and skim-solids basis. Changes in 2012 estimates of
supply and use reflect revised annual data. Prices for cheese and whey are
lowered based on expectations of increased production and moderate demand.
The forecast butter price is unchanged from last month and the range is
tightened. The forecast price of NDM is raised as stronger export demand is
expected to support prices. The Class III price forecast is reduced from last
month, reflecting weaker cheese and whey prices while Class IV is increased
due to higher NDM prices. The all milk price for 2013 is raised to $19.00-
$19.60 per cwt.
MAILBOX MILK PRICES FOR SELECTED REPORTING AREAS IN FEDERAL MILK ORDERS
AND CALIFORNIA, DECEMBER 2012, WITH COMPARISONS (AMS & CDFA): In December
2012, mailbox milk prices for selected reporting areas in Federal milk orders
averaged $21.50, down $0.77 from the revised November 2012 average, and up
$1.45 from the December 2011 average. The component tests of producer milk
in December 2012 were: butterfat, 3.85%; protein, 3.18%; and other solids,
5.75%. On an individual reporting area basis, mailbox prices decreased in
all Federal milk order reporting areas when compared to the previous month.
Mailbox prices in December 2012 ranged from $24.04 in Florida to $18.95 in
New Mexico.
1200CT rick.whipp@ams.usda.gov
National Dairy Market At A Glance
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