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The bleeding in the cash cheese market appears to have ended the week of February 10 but not until a little more was shed and lots of product sold. The blocks closed that Friday at $2.1050 per pound, down 12 3/4-cents on the week but still 43 cents above a year ago. The barrels closed at $2.0625, down 14 1/4-cents on the week and 43 1/4-cents above a year ago. Twenty four loads of block traded hands on the week and 16 of barrel.
The blocks have lost 25 1/2-cents since the turnaround and the barrels are down 25 3/4-cents. Generally, a penny movement in cheese equates to about a dime on the milk price. The lagging NDPSR-surveyed U.S. average block price hit $2.2781,up 5.1 cents. Barrel averaged $2.3016, up 6.7 cents on the week.
Recent record high cheese prices are meeting more price resistance according to USDA's Dairy Market News (DMN). The week of February 3 saw the first price declines in daily trading at the CME for the new year. With Super Bowl over there are fewer big cheese demand events ahead and buyers are reluctant to increase inventories at current prices. Many buyers would like to restock inventories, but are patient to step back and wait until they have confidence in the prices.
International demand, while good, is slowing as U.S. prices are more in line with world prices. Cheese plants are beginning to see increased milk volumes across much of the U.S., but are also wary of building stocks. Plants hoping to reduce production are finding willing milk buyers at butter/powder plants. Midwest milk supplies are called sufficient or good by most cheese manufacturers, even with the lingering, unusually cold weather.
FC Stone dairy broker Dave Kurzawski, reported in Friday's DairyLine there are two camps regarding prices; one that believes we're settling into a stabilized price at $2.1050 per pound on the blocks and $2.06-$2.07 on the barrels. The other camp believes that the market clearing price is somewhere below $2, perhaps $1.90 or $1.85 per pound and the split between the camps is 50/50. He thinks there is cheese that is coming to the CME but there'll be buyers stepping in although end users are still in a "wait and see mode."
Export prospects for 2014 are still good, according to Kurzawski, but will "ebb and flow like any other year." "We've spent the better part of 8 to 12 months looking at burgeoning export prospects," he explained. "And they will ebb and flow and if that's so we could be at a period now where things start to slow down as milk production comes on, pretty strong out there in Europe."
He adds that there's a "very competitive atmosphere" right now on butter and cheese out of Europe where "they're taking some of our business." As that happens, he warns that "our price has to adjust to be competitive."
Cheese will remain above $2 per pound, according to Jerry Dryer in his February 7 Dairy and Food Market Analyst, based on conversations he has had. Orders have slowed, he admits, now that the holidays and Super Bowl is behind us but customers are buying hand-to-mouth, according to everyone he has talked to the past several weeks. He adds that, "With orders piecemeal, many cheese makers are cutting back; unwilling to build much, if any, inventory when prices are in the stratosphere. This will simply keep supplies snuggle and supportive of prices."
Dryer says "There will be a tug-of-war. With prices moving lower this week, buyers will resist ordering as they hope for more downside. But at the end of the day, they need the cheese."

Butter production remains steady
Cash butter finished at $1.77,down a nickel on the week but 16 1/2-cents above a year ago. Nine cars were sold this week. NDPSR butter averaged $1.8353, up 4.4 cents.
Butter production is mostly steady as cream supplies are mixed, says DMN. Some churn operators in the Northeast and Central regions were able to secure extra cream, while supplies were tighter for others, especially in the West. Domestic demand is steady with some sales to retail slowing due to current high prices. U.S. butter makers maintain a price advantage over Oceania and European prices resulting in continued active export sales. Butter stocks are adequate to light.
Cash Grade A nonfat dry milk closed the week at $2.02, up a quarter-cent. Ten cars were sold this week. NDPSR powder averaged $2.0692, up 0.5 cent. Dry whey averaged 62 cents per pound, up 0.6 cent, the highest price since March 2013.

2014 forecast raises milk production
The California Department of Food and Agriculture announced its March Class I milk price at a record high $25.38 per hundredweight (cwt.) for the north and $25.65 for the south. Both are up $2.27 from February and are $6.05 above March 2013. The north First Quarter average now stands at $23.78, up from $19.80 at this time a year ago and compares to $18.67 in 2012 and $17.52 in 2011. The three-month south average now stands at $24.05, up from $20.07 a year ago and compares to $18.94 in 2012 and $17.79 in 2011. The Federal order Class I price mover is announced by USDA on February 20.
The Agriculture Department's World Agricultural Supply and Demand Estimates report raised its 2014 milk production forecast from last month on expected higher cow numbers in the second half of the year. USDA's Cattle report estimated dairy replacement heifers expected to calve during 2014 were up about 2 percent from a year ago, while the number of milk cows was fractionally below a year ago.
Look for 2014 milk production to hit 205.7 billion pounds, up 100 million pounds from last month's projection, and compares to 201.2 billion pounds in 2013 and 200.3 billion in 2012.
Strong returns resulting from higher milk prices and moderate feed costs are expected to boost expansion later in the year. Milk per cow was unchanged. Fat-basis exports for 2014 were raised on increased sales of butter and WASDE-526-5 cheese. Skim-solids exports were lowered mostly on reduced exports of lactose.
Product price forecasts for cheese, butter, and whey were higher, supported by strong demand and price strength. Nonfat dry milk (NDM) was lower for 2014 on expectations of competition from other exporters in second-half 2014.
The Class III milk price estimate was raised on higher cheese and whey prices. Look for the Class III to average $18.35-$19.05 per cwt., up from $17.80-$18.60 projected a month ago, and compares to $17.99 in 2013 and $17.44 in 2012.
The Class IV price estimate was down as lower NDM more than offset greater butter. It is projected to average $19.80-$20.60, down 10 cents on the high end from last month, and compares to $19.05 in 2013 and $16.01 in 2012.
Milk production in the U.S. is mostly increasing, according to USDA, with some areas, which were hit by severe cold weather, seeing growth not quite up to forecasted expectations. Weather caused transportation issues for many Eastern locations and in the Central region as storms passed through. Bottlers took on extra loads in parts of the country with a mostly steady overall demand. Class IV demand for milk supplies is increasing as various areas took on extra volumes this week as ice cream production season is starting to kickoff. Drought concerns in California are on the forefront of dairy producers' minds.

Fonterra, DairyAmerica will not renew export agreement
Checking the export front; in a joint announcement, Fonterra and DairyAmerica confirmed that they will not renew their export agreement upon the completion of its current term, effective 1 August 2014. The agreement saw Fonterra acting as DairyAmerica's Skim Milk Powder export agent. Both parties agree that the timing is right for DairyAmerica to chart a more independent course directly to customers in export markets.
Hoyt Huffman, DairyAmerica CEO, said, "We are increasing the availability of our product to the international market and see this as the right time to chart our own course and sell direct to customers. This would not have been possible without the support of Fonterra over the course of the relationship."
The U.S. Dairy Export Council's Tom Suber said the announcement is "another in a series of signs that the U.S. industry is maturing in its interest and capability to grow itself through proactive development of export markets."

China sees 6 percent decline in milk production
In other global news; the National Bureau of Statistics of China, states in a press release that China's dairy cow milk production in 2013 totaled just 35.31 million tons (77 billion lbs.), down 5.7 percent. Compare that to U.S. 2013 output at about 91 million metric tons or 201.2 billion lbs. The release by the Central Party Committee and State Council began by stating "In the year of 2013, faced with the increasingly complicated and severe external and internal conditions" and addressed overall national economic performance, which it said "Showed good momentum of stable and moderate growth."
China Daily USA reports that China's raw milk shortage in December "turned into a severe challenge for the country's dairy farms this year, as most struggle to get forage crops sufficient to boost productivity."
Gu Jicheng, vice-president of the Beijing-based Dairy Association of China, said China's poor forage crop production, along with rising prices of imported alfalfa and corn silage, affected the nation's raw milk output in 2013. Most Chinese dairy farms lack access to quality feed for their cows, he added.
USDEC's Alan Levitt affirmed; "The 6 percent decline in China milk production is responsible for a whole lot of additional imports. China's need to buy on the world market (at historically high prices) is supporting the world market these days."

CWT accepts 26 requests for export assistance
Cooperatives Working Together (CWT) accepted 26 requests for export assistance this week to sell 4.006 million pounds of Cheddar, Gouda and Monterey Jack cheese, 1.645 million pounds of 82% butter and 180,779 pounds of whole milk powder to customers in Asia, Europe, the Middle East and North Africa. The product will be delivered through June and raised CWT's 2014 export sales to 16.389 million pounds of cheese, 5.396 million pounds of butter and 698,865 pounds of whole milk powder to 18 countries on four continents.

Idaho state senate backs bill halting spying on dairy operations
Finally; leave your cameras at home. The Daily Journal reports that dairy producers convinced Idaho state senators to back a bill aiming to halt spying on their operations, a measure prompted by animal activists who captured cruelty at a southern Idaho dairy on film in July 2012.
The Agricultural Affairs Committee voted to back what proponents called an "agricultural security measure" and what foes branded a heavy-handed and punitive response to groups seeking to expose horrendous abuses. The industry-backed bill now goes to the full Senate for a vote. A Democrat, Sen. Janie Ward-Engelking of Boise, opposed the measure.
The legislation would put people who surreptitiously enter and record agricultural operations in jail for up to a year and slap them with a $5,000 fine. It would criminalize obtaining records from dairies or other agricultural operations by force or misrepresentation, as well as lying on a farm's employment application.
Bob Naerebout, the Idaho Dairymen's Association president, says this will add "teeth and strength" to existing prohibitions on trespassing.
Sen. Jim Patrick, R-Twin Falls and the bill's sponsor, said extremist animal activists were comparable to marauding invaders centuries ago who swarmed into foreign territory and destroyed crops to starve foes into submission.
"This is clear back in the sixth century B.C.," Patrick said. "This is the way you combat your enemies." The story is posted at: http://www.dailyjournal.net[[In-content Ad]]

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