DairyBusiness Update: Jan. 2, 2014

Federal benchmark highest in 13 months   HAPPY NEW YEAR!
The December Federal order benchmark milk price is $18.95 per hundredweight (cwt.), up 12¢ from November, 29¢ above December 2012, 92¢ above California’s comparable 4b price, and equates to about $1.63 per gallon. The 2013 Class III average is $17.99, up from $17.44 in 2012, $18.37 in 2011, and $14.41 in 2010.
   The December Class IV price is $21.54, up $1.02 from November and $3.71 above a year ago. Its 2013 average is $19.05, up from $16.01 a year ago, $19.04 in 2011, and $15.09 in 2010.
   The January 2014 Class III futures contract settled today at $19.66; February, $19.12; March, $18.54; April, $18.17; May, $18.00; and June at $17.83.
   The AMS-surveyed U.S. average cheese price used in calculating this month’s FO prices was $1.8761/lb., up 1.5¢ from November. Butter averaged $1.6308/lb., up 11¢, nonfat dry milk $1.9537/lb., up 6.5¢, and dry whey averaged 57.06¢/lb., down 1.3¢.

Central order: 3.5% of farms marketed 50% of milk
   A relatively small number of dairy farms make up a disproportionate share of Central federal milk marketing order total milk marketings, according to the milk marketing administrator's latest Marketing Services Bulletin. Milk marketing data for October 2013 shows 34 of the largest farms accounted for 25% of Central order marketings for the month. Each of these farms marketed more than 6.729 million lbs. during the month. 
   Half of the milk on the Central order in October 2013 was accounted for by including the next 73 farms – these farms had marketings between 2.782 million - 6.729 million lbs. Thus, 3.46% of the farms marketed 50% of the milk during October 2013. 
   There were 1,547 farms (down from 5,727 farms in October 2002) which marketed less than 100,000 lbs. on the order in October 2013. These producers accounted for approximately 50% of the farms – but less than 6% of the milk marketed.
   For more information, visit http://www.fmmacentral.com/PDFdata/msb201312.pdf.

2014 blows in like a lion
   Got Milk and Milk Mustache campaigns aside, one of the most productive ways to spur fluid milk sales is the weather and weather is and will likely be a big factor this week. A massive winter storm hit the Midwest and is about to dump on New York City and much of the Northeast. USA Today says the storm packs heavy snow, strong winds and frigid temperatures.
   USA Today adds that the National Weather Service has placed the entire New York City area under a winter storm watch for today and tomorrow. “A winter storm watch means there is potential for significant snow accumulations that may affect travel.” And, as dairy producers and processors know, not only do storms affect dairy sales but farm milk production, farm milk deliveries, processing, and finished product delivery to store shelves are also affected.

2014 will be a busy year
   So says the International Dairy Foods Association’s (IDFA) Peggy Armstrong in today’s DairyLine. Armstrong reported that IDFA CEO, Connie Tipton, sees the U.S. dairy industry positioned for incredible growth. “With U.S. dairy product exports now  accounting for more than 15% of our farm milk production,” Tipton says, “Strong demand for U.S. dairy exports will result in stronger prices throughout the U.S. supply chain.”   
   Armstrong said the decline in consumption of fluid milk in schools will continue to be a major issue this year, and “will require all of our best efforts to win back milk drinkers among school kids.”
   Labeling also will be very important this year, she said, as FDA is expected to release its proposed changes for the Nutrition Facts panel of food labels which “could change serving size and percent daily values as well as require a new declaration for added sugars.”  
   Efforts to require GMO labeling of foods could have an impact on the marketing of dairy products, according to Armstrong, “despite the fact that FDA labeling guidance only considers the food itself, and does not address agricultural inputs such as feed used in the production of the food.”  
   Lastly, she said the industry will likely “continue to deal with negative claims about our products in the digital media. We expect producers will continue to work closely with dairy companies and co-ops to promote our industry’s commitment to providing safe, nutrition foods.”   
Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   The cheese gets more binding, as my mom used to say. 2014 starts with another increase in the cash block price. One unfilled bid took the 40lb. Cheddar to $2.0150/lb., the highest since Nov. 6, 2012. The 500lb. barrels, after plunging a total of 12¢ Monday and Tuesday, were unchanged this morning, holding at $1.85/lb., also with a bid going unfilled, but the spread jumped to 16.5¢.
   FC Stone risk management consultant Chris Hildebrand wrote in this morning’s eDairy Insider Opening Bell that he doesn’t see blocks going anywhere. “They have been well supported," he wrote. The block-barrel spread of 15 cents is the widest since early May but he predicted that the barrel price “could creep higher today or tomorrow to narrow that spread.”
   Spot butter, on 5 unfilled bids, inched up another 0.75¢ this morning, following a 1¢ gain on Tuesday, and is now trading at $1.54/lb.        
   FC Stone’s Hildebrand says spot butter prices in the $1.50 area are likely to spur buying adding that; "Fundamentals are still a little bullish until stocks are rebuilt." FC Stone dairy economist, Bill Brooks, expects tomorrow's Dairy Products report will show butter production increased in November.
   Cash nonfat dry milk was quiet today. Grade A remained at 2.06/lb., following a 3¢ loss on Tuesday and 2¢ on Monday. Extra Grade remains at $2.09/lb., where it’s been since Dec. 17. There was no activity in either market today.

Today’s market closing prices:
Butter: Up 0.75¢, to $1.54/lb.
Cheddar blocks: Up 1.5¢, to $2.0150/lb.
Cheddar barrels: Unchanged, at $1.85/lb.
Grade A nonfat dry milk: Unchanged, at $2.06/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.
Class III milk: Jan.$19.66, +32¢, Feb.$19.12 +45¢, Mar. $18.54 -19¢, Apr. $18.17 +14¢, May $18.00 +13¢, & Jun. $17.83 +10¢. Based on today’s CME closing prices, the 2014 average stands at $18.04/cwt., +11¢ from Tuesday.
Looking ahead:
      The Agriculture Department issues its November Dairy Products report tomorrow. It’s a pretty light schedule next week. The California Department of Food and Agriculture issues its February Class I milk prices on Friday, January 10. USDA’s issues its monthly Crop Report on Friday as well as its World Agricultural Supply and Demand Estimates report.
Friday on DairyLine:
Daily Dairy Report market analyst, Sarina Sharp, reports on growing Chinese dairy demand.
Dr. Mike Hutjens gives us strategies to correct blood calcium levels