MD DA950 NATIONAL DAIRY MARKET AT A GLANCE
JULY 18, 2014 MADISON, WI (REPORT 29)
CME GROUP CASH MARKETS (7/18)
BUTTER: Grade AA closed at $2.4800. The weekly average for Grade AA
is $2.4170 (+.0325).
CHEESE: Barrels closed at $2.0700 and 40# blocks at $2.0275. The
weekly average for barrels is $2.0415 (+.0770) and blocks, $2.0100
BUTTER HIGHLIGHTS: The butter market is tight in most regions,
with some frozen butter being reworked to meet current interest.
Butter demand is steady into food service accounts as summer travel
spurs vacation related fast food and eat-in dining. Sales into
industrial accounts are steady. Butter production is mostly lower as
cream volumes clear into ice cream/frozen novelties production. Some
butter/powder plant operators report the current returns on spot cream
sales are too good to pass up. However, those operators also note
they will have to retain cream volumes in the coming weeks to start
rebuilding salted and unsalted bulk and retail inventories before
holiday demand arrives. Bulk butter prices range from 3 cents under
to 6 cents over market, with various time frames and averages used.
CHEESE HIGHLIGHTS: Cheese production is trending lower this
week. Hot weather in the West is reducing manufacturing milk volumes.
Milk production in the Central and Eastern regions is past peak and
reducing seasonally. Because cheese plants are hoping to run at
capacity, many are looking for spot surplus milk to keep full
production schedules. Some plants are looking to available condensed
skim supplies to increase vat yields. Domestic demand from retail and
processor/packager facilities is mostly steady as they try to acquire
inventory. Export demand is softer with many of the deliveries from
previously negotiated sales. Mozzarella sales have slowed. Stocks of
cheese are tightening in the Midwest with barrels tighter than blocks.
Western stocks are more readily available as exporting has slowed.
Wholesale cheese prices are lower this week, but spot sales at the CME
Group this week rallied higher. Barrels closed on Friday at $2.0700,
up 8.25 cents from last Friday. Blocks closed at $2.0275, up 5.75
cents from last week's close.
FLUID MILK: Milk production has slowed across much of the
country. The combination of hot weather and typical seasonal declines
is slowing availability of manufacturing milk. In the Midwest, cooler
weather is expected to keep milk volumes closer to steady. Spot loads
of milk are available, but are becoming harder to source. Class I
demand is sluggish, but negotiations for the new school year are
beginning in various parts of the country. Cream demand remains good
with ice cream, frozen novelties and cream cheese plants working
steady to slower schedules. Some butter/powder plants continue to
sell cream at favorable prices. Sales of condensed skim are being
made to various Class III manufacturers and are helping to alleviate
pressure on drying plants.
DRY PRODUCTS: The low/medium heat nonfat dry milk market is
lower following trends in various basing models. NDM production
continues at a heavy pace despite much of the country experiencing
lower milk volumes. Demand is steady for contracted volumes with some
buyers looking for lower pricing for additional purchases. Stocks
continue to build in many parts of the country. High heat production
is mostly geared to contract fulfillment. Dry buttermilk markets are
steady to weak following trends in the NDM market. Stocks are
adequate for current demand with light spot sales. Dry whey prices
are mixed. Contract deliveries are steady, but buyers on the spot
market are looking for lower prices to purchase volumes. Export
prices are weak as international prices are lower than our domestic
price. Stocks of whey are increasing due to the slower export sales.
Whey protein concentrate 34% sales are mixed with a weak undertone.
WPC 34% inventories are variable as buyers look for price breaks. The
lactose market is unchanged to lower. New contracts for Q3 and end of
year prices are emerging with some new pricing models. Stocks of
lactose are building as export sales have slowed. Dry whole milk
prices are unchanged to lower on a weak market.
INTERNATIONAL DAIRY MARKET NEWS (DMN): WESTERN AND EASTERN
EUROPE: WESTERN OVERVIEW: Western European milk production continues
to be good with producers incentivized by good margins and favorable
weather. Export market activity for most dairy commodities is light.
Export prices are under pressure from other global markets. Domestic
demand has also weakened, due to the onset of the European holiday
season. Western European milk delivery estimates for May, reported by
ZMB, have EU-28 production 3.8% above 2013 levels. Monthly delivery
increases over last year levels are declining as milk production
declines along the seasonal trend with Germany +3.1%; France, +3.8%;
UK, +8.0%; Netherlands, +1.2% and Ireland, +7.0%. January-May
deliveries compared to one year ago for selected countries are:
Germany, +4.4%; France, +6.0%; Ireland, +8.5%; Netherlands, +4.3%; and
the UK, +11.9%. EASTERN OVERVIEW: Milk production in Eastern Europe
remains strong with continued significant increases over year ago
levels in Poland and the Baltic States. Increased levels of cheese,
skim milk powder and butter are being produced, compared to last year.
Dairy exports to Russia have increased recently as additional plants
have gone through the Russian registration and approval process.
Eastern European milk deliveries for May, reported by ZMB, showed
robust increases for some countries compared to last year with Poland
up 7.8%, Romania up 17.4% and the Baltic States up 12.3%. OCEANIA
OVERVIEW: AUSTRALIAN milk production was flat over the last fortnight
with levels at or near the seasonal low point. The mild weather has
given way to more normal winter conditions with cold and rains
covering much of the dairy producing areas. Most dairy farmers have
signed on for the new season with their milk processor of choice.
Beginning season milk prices are above levels of years past and
producers are readying for a good start to the new season. Cows will
begin calving over the next 4 weeks. Export spot sales activity has
been fairly light for most dairy commodities. Manufacturing plants
continue to cycle through their typical shut downs for planned
maintenance projects. Stocks are being worked lower with supplies
moving through contracts. Trading is light with reports that China
has mostly adequate supplies for the near term and Ramadan has lowered
export interest from the Middle East. According to Dairy Australia,
Australian production of various dairy commodities for May 2014 showed
the following percentage changes compared to 2013: butter, +13.7%;
butteroil, -13.2%; skim milk powder, +8.1%; whole milk powder, -11.9%;
buttermilk powder, +15.7%; cheese, +1.9%; and whey powder, -7.4%.
Dairy Australia also reports dairy product exports for the July-May
period totaling 667.4 thousand tons, down 8.1% from the year ago
period. The largest export category is skim milk powders (SMP). The
total value of exports is 18.1% higher over the prior year period. The
highest value items are SMP and WMP. NEW ZEALAND's milk producers are
waiting for the start of the new season. Current milk production is
limited, as a majority of cows are dried off and on winter pastures.
Weather remains mild on the South Island, but the North Island has
seen heavy rains and colder temperatures. Some flooding did occur in
areas north of Auckland, but the impact to dairy operations is said to
be minimal. Calving has started in some areas on the North Island.
Stocks of dairy commodities are being worked lower, with uncommitted
supplies of whole milk powder readily available for the spot market.
Going into the new season, some manufacturers are adjusting their
production schedules away from whole milk powder to butter and skim
milk powder production. New Zealand's 2013-14 export revenue
increased by 30% according to a report released by the Ministry of
Primary Industries. At the July 15 GDT event #120, average prices
ranged from 10.9% lower to 1.1% lower from the prior event across
categories. The all contracts price averages (US$ per MT) and percent
changes from the previous average are: anhydrous milk fat, $3,250 -
10.0%; butter, $3,144 -1.1%; buttermilk powder, $4,426 -4.6%; cheddar
cheese, $4,164 -1.6%; lactose, n.a.; milk protein concentrate, n.a.;
rennet casein, $9,761 -8.9%; skim milk powder, $3,516 -7.1%; and whole
milk powder, $3,088 -10.9%.
JULY MILK SUPPLY AND DEMAND ESTIMATES (WAOB): The milk
production forecast for 2014 is lowered from last month as slower
growth in output per cow more than offsets a more rapid expansion in
cow numbers. The forecast for 2015 is raised as higher milk prices and
lower feed costs are expected to support more rapid growth in cow
numbers and output per cow. Export forecasts for 2014 are lowered on a
fat basis but raised on a skim-solids basis. High domestic butter
prices are expected to limit export opportunities, but nonfat dry
milk/skim milk powder (NDM/SMP) exports are expected to remain strong.
For 2015, no change is forecast to fat-basis exports, but strength in
NDM/SMP sales will help support higher skim-solids exports. Product
prices are forecast higher for 2014 with strength in butter prices
expected to carry into 2015. Despite increased production, robust
domestic demand and stronger NDM/SMP exports will support prices.
Class III and Class IV prices for 2014 are raised on stronger
component product prices and the Class IV price forecast for 2015 is
raised reflecting strength in butter prices. The all milk price is
forecast at $23.25 to $23.55 per cwt for 2014, and $19.75 to $20.75
per cwt for 2015.
REVISED APRIL MILK SALES (FMMO & CDFA): During April, 4.1
billion pounds of packaged fluid milk products is estimated to have
been sold in the United States. This was 4.5% lower than April 2013.
Estimated sales of total conventional fluid milk products decreased
5.1% from April 2013 and estimated sales of total organic fluid milk
products increased 7.6% from a year earlier.
APRIL MAILBOX MILK PRICES (AMS & CDFA): In April 2014, mailbox
milk prices for selected reporting areas in Federal milk orders
averaged $25.33, up $0.15 from the March 2014 average, and up $5.88
from the April 2013 average. The component tests of producer milk in
April 2014 were: butterfat, 3.72%; protein, 3.11%; and other solids,
5.73%. The April Mailbox prices increased an average of $0.07 across
all Federal milk order reporting areas when compared to the previous
month. The April 2014 mailbox prices increased in thirteen areas and
decreased in six areas. Minnesota experienced the greatest increase of
$0.63, while the Northwest States experienced the greatest decrease of
$0.39. Mailbox prices in April 2014 ranged from $27.13 in Florida to
$22.94 in New Mexico.
USDA/AMS/Dairy Market News, Madison, Wisconsin
Dairy Market News website: www.ams.usda.gov/dairymarketnews
Dairy Market News database portal: www.marketnews.usda.gov/portal/da