MD_DA950 DY, DAIRY MD DA950 NATIONAL DAIRY MARKET AT A GLANCE May 24, 2013 MADISON, WI (REPORT 21) CME GROUP CASH MARKETS (5/24): BUTTER: Grade AA closed at $1.5500. The weekly average for Grade AA is $1.5710(-.0305). CHEESE: Barrels closed at $1.7225 and 40# blocks at $1.7525. The weekly average for barrels is $1.7335 (-.0045) and blocks, $1.7600 (-.0145). BUTTER HIGHLIGHTS: Butter production is very active in the Central Region, helped by Eastern cream shipments. Northeast Butter production is increasing due to cream supplies which are expanding ahead of the upcoming holiday. The increase in cream supplies is prompting increased production of bulk butter as numerous butter makers are forced to expand inventories. Western Region butter production schedules remain heavy with cream continuing to find its way to butter churns. Bulk butter prices are varied, with Western prices for bulk butter ranging from 3 cents under to 5 cents under the market, Northeastern bulk butter prices being 4-8 cents over the market while Central bulk butter interest is termed flat by many market participants. The recent NASS Cold Storage report shows butter in inventory at the end of April was 310.7 million pounds, 22% higher than both one month and one year ago. CHEESE HIGHLIGHTS: Cheese prices are mixed this week as buyers and sellers look to find a new equilibrium. Wholesale prices had barrels slightly higher and block prices lower. After a few weeks of divergent block and barrel pricing, they have moved back to a more typical spread. Prices for spot trading at the CME Group trended lower for the week with increased inventories weighing on prices. Cheese production continues at an accelerated pace with ample milk supplies available. Some concerns have been expressed as to whether the spring milk flush is late or nonexistent this year. Heavy production during April increased stocks of cheese in cold storage to 4% more than year ago levels. Lower cheese prices have increased some volumes going into aging programs. Cheese demand at the retail level is good with some increases into food service accounts as summer sales increase. The lower block prices have also increased interest for export sales. Trading at the CME Group closed the week with barrels at $1.7225 and blocks at $1.7525. Barrels are 3.75 cents lower for the week and blocks are 1.75 lower compared to last Friday's close. FLUID MILK: Farm milk production is in various stages of reaching/moving away from the seasonal peak. Hot, humid weather in the Southeast is affecting cow comfort and milk production. The Pacific Northwest is benefiting from moderate temperatures while Southwest dairy operators indicate heat is adding to cow stress. This week marks a seasonal change in fluid milk demand for many areas of the country. As educational institutions gear down, and reduce single serve orders, more milk is clearing into manufacturing. Milk handlers and processors in most areas report manufacturing facilities have the capacity to clear all the milk volumes coming their way. In some cases, plant operators looking for additional milk for the weekend haven't had any luck on the spot market. Reports indicate many large manufacturers plan just 1 down day, Monday, instead of an extended weekend. Feed availability and costs continue to affect dairy operations. Milk marketers in the Central region note many dairy operators opted for lower energy rations to bridge the gap between feed on hand and new crop forages. This has taken a toll on milk production that may not improve substantially when the cows do get fresh feed. California hay producers are on the third cutting, with the Southwest following at second cutting. The North Central has generally not started harvesting forages as producers wait for a matchup between acceptable plant maturity and haymaking weather. Hay prices, delivered, stretch from $230-$250/ton in California/Southwest to $350-$450/ton in the Central. DRY PRODUCTS: Price changes were minor for most domestic commodities. Nonfat demand is in the doldrums on the spot market. Most activity represented contract fulfillment as buyers have little incentive to take long positions during a market with weaker undertones. Dry buttermilk out of the West notched some gains as some buyers report delays in getting needed supplies from preferred sources. The Central/East range widened. Dry whey weakened on the Central and West mostly series and the East range. Stocks on hand are steady to higher as milk clears strongly to cheese making operations this week. Demand is based on contracts for the majority of sales through manufacturers, but buyers indicate offers from resellers are competitively priced and taking some of the demand away from F.O.B. spot offers. Whey protein concentrate 34% prices are steady. The lactose market is unchanged for the week. Supplies of unground lactose are available, while finer mesh lactose is tight. Casein prices firmed on the top of each range. INTERNATIONAL DAIRY MARKET NEWS (DMN): EUROPEAN OVERVIEW: WESTERN OVERVIEW: Cooler conditions are prevalent over much of Western Europe and the slow start of the spring season is delaying pasture and crop growth. Milk output remains muted and overall levels are tracking several percentage points behind a year ago. The milk season is moving towards peak levels, yet the concern is over the length of the shoulder period after the peak. Processors are ably managing the milk supplies. January - March milk production in the EU was running 1.1% lower when compared to the prior year. Current output remains lower than a year ago in France, the United Kingdom, and Ireland to name a few countries. There are indications that weekly output in Germany is also tracking slightly behind a year ago. Demand for fluid milk is stable. Milk pricing is steady to higher, where adjusted for higher finished product market trends. Dairy product prices moved slightly lower. The market tone is more unsettled as buyers are taking a more wait and see attitude. Their hope is for lower future pricing before contracting for later in the year needs. The lower currency rate is more favorable for export sales, yet the relative pricing values and subdued demand are countering that. Private Storage Assistance (PSA) butter intakes through May 12 total nearly 38,000 MT. The volumes are running about half the levels of a year ago. EASTERN OVERVIEW: Eastern European milk output trends are falling off from year ago levels, yet at a slightly less severe drop than of the Western countries. The cooler start to spring is impacting the milk flow. Processing plants are working well and handling the milk supplies. OCEANIA OVERVIEW: The NEW ZEALAND milk production season is moving towards the lower point of the year. Milk cows are being dried off or culled. The pasture conditions are poor to fair; only marginally helped by recent rains. The impacts of the cooler weather and slowing of the growing season are noted. More processing plants are reducing schedules or closing on or before schedule. Overall, processing has been scaled back to products of greatest needs as the milk flow has shorted ahead of most projections. The impact is muted because the reductions are against a smaller base point in the milk production season. Buyer interest is mixed for New Zealand products. Some buyers are still active in securing products and less worried about pricing points. Other buyers' needs were reduced as the pricing points built higher in recent months. In general, products for orders on the books are moving along planned schedules. March milk production numbers, Dairy Companies Association of New Zealand reports, are 16.8% lower than March 2012. Season to date output (June - March, unadjusted) is 2.7% higher than the comparable year ago mark. AUSTRALIAN milk output is trending lower along seasonal patterns. The growing season is waning and grass and pastures are less conducive to needs. There has been mostly adequate moisture, but temperatures are cooling. More cows are being dried off for the season. Manufacturing milk supplies are slowing and more plants are being shut down for maintenance and idling. Milk is moving to fresh products and consumer products. Demand there is fair to good. Several dairy companies are announcing higher, season opening milk prices for the upcoming season. Price increases are a result of commodity prices and favorable exchange rate expectations. Current demand is fair to good for commodity products. Offering volumes are at low levels. The impact of the price volatility has affected customers. Early on, coverage was sought as prices increased. With pricing now reversing from the recent highs, buyers are becoming more strategic in purchasing. Sales based on prior commitments are moving on schedule. According to Dairy Australia, milk production in Australia in April was 9.6% lower than April 2012, which recorded a 7.5% growth from April 2011. Seasonal milk output from July - April is 2.3% lower (unadjusted for leap day in 2012) than during the same period a year earlier. Season through April, unadjusted regional changes are: New South Wales, -0.9%; Victoria, -1.9%; Queensland -5.8%; South Australia -4.6%; Western Australia -1.2%; and Tasmania -3.6%. Dairy Australia is forecasting milk production to reach 9.35 billion liters in 2012/13, down 1.4% from 2011/12 output. gDT: At the May 15th gDT session #92, average prices were lower for most commodities, with rennet casein being slightly higher. The all contracts price averages (US$ per MT) and percent changes from the previous average are: anhydrous milk fat, $4,598 - 0.2%; butter, $3,846 -12.4%; buttermilk powder, $3,876 -5.1%; cheddar cheese, not traded; lactose, not traded; milk protein concentrate, not traded; rennet casein, $10,105 +3.7%; skim milk powder, $4,252 -2.8%; and whole milk powder, $4,722 -1.7%. CROP PROGRESS (NASS): According to the NASS Crop Progress report for May 19, 71% of the corn has been planted in the U.S. compared to the five year average of 79%. The rate increased 43 points in one week. Last year on this date, 95% had been planted. Looking at the Corn Belt states this year indicates that Illinois is 74% planted, an increase of 57 points from a week earlier; Indiana is at 64%, up 34 points; Iowa 71%, up 56 points; and Ohio 74%, up 28 points. APRIL COLD STORAGE (NASS): On April 30, U.S. cold storage holdings of butter totaled 310.7 million pounds, up 22% from March 2013 and April 2012. Natural American cheese holdings total 698.8 million pounds, 2% more than March, and 5% more than April 2012. Total cheese stocks were 1,120.2 million pounds, 1% more than last month, and 4% more than April 2012. JUNE FEDERAL MILK ORDER ADVANCE PRICES (FMMO): Under the Federal milk order pricing system, the base Class I price for June 2013 is $18.93 per cwt. This price is derived from the advanced Class IV skim milk pricing factor of $13.09 and the advanced butterfat pricing factor of $1.8000. 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 2013, the base Class I price increased $1.17. For selected consumer products, the price changes are: whole milk (3.25% milk fat), $1.17 per cwt., $0.101 per gallon; reduced fat milk (2%), $1.19 per cwt., $0.103 per gallon; fat- free (skim milk), $1.19 per cwt., $0.103 per gallon. The advanced Class IV skim milk pricing factor is $13.09. Thus, the Class II skim milk price for June is $13.79, and the Class II nonfat solids price is $1.5322. The two-week product price averages for June are: butter $1.6579, nonfat dry milk $1.6367, cheese $1.8388, and dry whey $0.5741. MARCH MILK SALES (FMMO & CDFA): During March, 4.4 billion pounds of packaged fluid milk products is estimated to have been sold in the United States. This was 4.2% lower than March 2012. Estimated sales of total conventional fluid milk products decreased 4.4% from March 2012 and estimated sales of total organic fluid milk products decreased 0.1% from a year earlier. APRIL FEDERAL MILK ORDER MARKETING AND UTILIZATION (DAIRY PROGRAMS): During April, more than 11.5 billion pounds of milk were received from producers. This volume of milk is 0.2% lower than the April 2012 volume. In April 2012 and April 2013, there were volumes of milk not pooled due to intraorder disadvantageous price relationships. More than 3.6 billion pounds of producer milk were used in Class I products, 2.9% higher than the previous year. The all-market average Class utilization percentages were: Class I = 32%, Class II =11%, Class III = 46% and Class IV = 11%. The weighted average statistical uniform price was $18.80 per cwt., $0.33 higher than last month and $2.18 higher than last year. 1200CT Janet.Linder@ams.usda.gov