DairyBusiness Update: Jan. 7, 2014

More Texas cheese to come
Hilmar Cheese Company, Inc. is nearing completion of its most recent processing expansion at its facility in Dalhart, Texas. The expansion includes additional capabilities on an existing 40 lb. natural American-style cheese production line, and improvements to a variety of processes to, as a press release states, “Better serve domestic and international customers.”
   “We continue to invest in cheese to meet the need of our growing customers domestically and abroad,” explained David Ahlem, vice president, cheese.
   Hilmar Cheese Company built the Texas facility from a green-field site in 2005. The company began processing cheese in September 2007 and has grown to about 400 employees and processes almost 1 million gallons of milk daily into cheese and whey products. The expansion is scheduled for completion in 2014.

Butter Institute takes on new logo
The American Butter Institute (ABI) has unveiled a new logo for the association, one of the many changes that have taken place recently at the 106 year-old organization.
   “As a result of the changes made through our strategic planning process, it was determined that ABI needed to revitalize and revamp its logo to bring it more into the 21st century. The ABI board voted on the new logo at its October meeting, and we are launching it today,” said Anuja Miner, the Executive Director of ABI.
   Miner was named Executive Director last autumn, taking over as the chief staff person at ABI from Jerry Kozak, who has retired from the dairy industry after running ABI for the previous 22 years.
   ABI also reported that U.S. butter consumption has reached its highest level in 40 years. Miner attributed the increase in part to a shift in consumer preferences away from highly processed foods, artificial ingredients and trans fats derived from partially hydrogenated vegetable oils. Recently, the U.S. Food and Drug Administration began the process of banning trans fats from the American food supply. Details are post at www.butterinstitute.org

Chill out or thaw out
   Most of the nation will be chilling today and few will be thawing as record setting lows have made this a winter to remember for a long long time. The average U.S. temperature is a balmy 14.4 degrees, according to details on the Drudge Report and one account pointed out that temperatures at Chicago’s O’Hare airport were below those at the South Pole in Antarctica. I remember days like that as a kid when it’d be so cold we’d stand in front of an open refrigerator to warm our hands. 
   The frigid weather will likely will have minimal impact on milk production, according to FC Stone dairy economist Bill Brooks. Brooks was quoted in this morning’s eDairy Insider Opening Bell, stating; “Individual processing plants likely experience some declines in milk receipts, either from lower production or from difficulties in moving trucks. Cold weather likely will have some impact during late December and early January that will show up in Milk Production reports. Typically, cold periods don't last long enough to have much impact," said Brooks. "Cows can handle cold better than heat."

Farm Bill agreement this week?
   A framework agreement for the Farm Bill could be announced this week, setting up a formal meeting of the full conference committee to finalize legislation to send to the floor of both chambers of Congress, according to the National Association of State Departments of Agriculture (NASDA). After Congress deals with the omnibus appropriations measure that must be enacted by Jan. 15, the Farm Bill is widely expected to be the next major legislation tackled on the Hill.
   Despite signs of progress prior to the holidays, the framework has yet to be officially announced, and a number of unknowns still cloud the bill’s future. Agriculture Secretary Tom Vilsack indicated that if there are no signs of progress on the Farm Bill within the next couple weeks, USDA will have to begin the process of implementing permanent law.

Midwest milk-feed price ratios improve

December 2013 average milk prices were slightly higher than a year earlier, and lower feed prices helped push Midwest dairy producer milk-feed price ratios higher. In many cases, December 2013 regional milk-price ratios are the highest since November 2011, but about average with the rest of the country.

The index – representing pounds of 16% commercially mixed dairy feed equal in value to 1 lb. of whole milk – is based on current prices for a ration of 51% corn/8% soybeans/41% alfalfa hay.

The December 2013 index averaged 2.32 across Iowa, Michigan, Minnesota, Ohio and Wisconsin, compared to the national average of 2.30. The Midwest index was 2.29 in November 2013, and just 1.67 in December 2012.


Pennsylvania December IOFC steady

Penn State University’s measure of income over feed costs (IOFC) rose just 0.4% in December, according to the latest Dairy Outlook report from economist Jim Dunn. At $10.29/cow/day, the December IOFC is up 4¢/day from November and the highest value since 2007. 

IOFC reflects daily gross milk income less feed costs for an average cow producing 65 lbs. of milk per day, and the improvement in December came from a slightly higher milk price, up 0.9% from November. The December Pennsylvania all-milk price was up 20¢/cwt. from the revised November estimate, to $23.20/cwt.

That milk price increase was offset by a 1.9% increase in overall feed prices. The average cost to feed a cow producing 65 lbs. of milk per day rose 9¢, to $4.79/day. 

Measured another way, feed costs per hundredweight of milk produced averaged $7.38/cwt. in December, up 14¢ from November. With the higher milk price, the milk margin over feed costs was $15.82/cwt., up 6¢/cwt. from November 2013 and $3.15/cwt. from a year ago.

Dunn’s forecast of the average 2013 Pennsylvania all-milk price is $21.47/cwt., $1.43/cwt. (7.2%) more than the 2012 average price. His all-milk price forecast for all of 2014 is $22.17/cwt., which would be up 70¢ (3.3%) from 2013’s estimated price.

To read Dunn’s latest 2013 Dairy Outlook report, click here.


GDT weighted average down 0.8%
Today’s Global Dairy Trade auction saw the weighted average for all products slip 0.8%, led by a 3.4% decline in skim milk powder, a 1.8% slip in anhydrous milkfat, and 0.6% decline in whole milk powder. Butter was up 5.1%, Cheddar cheese up 1.9%, and milk protein concentrate was up 5.2%.

   The average butter price equated to about $1.9155/lb., up from $1.8375/lb. in the last event ($1.8688/lb. on 80%, up from $1.7927/lb.). The Cheddar average was $2.1119/lb., up from $2.0725/lb.; skim milk powder, $2.1264/lb., down from $2.2081/lb.; and the whole milk powder average was $2.2380/lb., down from $2.2489/lb. in the last event.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Temperatures in Chicago are plummeting but things are heating up at the Chicago Mercantile Exchange, sending Class III futures sharply higher again today.
   Cash block cheese jumped 6¢ this morning on 2 unfilled bids as sellers sat on their hands. The block price now stands at $2.11/lb., following a 0.75¢ gain yesterday, 2.75¢ Friday, and 1.5¢ on Thursday. Just in case you’re wondering, the record high is $2.2850/lb. on May 23, 2008. The Cheddar barrels pole vaulted 11¢, following a 3¢ jump yesterday and 7¢ on Friday. Two cars were sold this morning, 1 at $2.02/lb. and the 2nd at $2.06/lb., with 1 bid at $2.05/lb. going unfilled. The spread has been reduced to 5¢.
   Jerry Dryer wrote in his January 3 Dairy and Food Market Analyst that he’s “getting mixed signals on price trends,” but reports that “retail cheese restocking is high on the priority list in preparation for play-off game and Super Bowl  parties.” Exporters tell him that they are pretty much booked thru first quarter, so “It looks like markets will be supported at these elevated levels for at least several more weeks,” and maybe longer.
   Cash butter was unchanged today, following a 5¢ jump yesterday, 3¢ on  Friday, and 0.75¢ Thursday, and remains at $1.62/lb. One bid at that price was left on the board.
   FC Stone market analyst Ryan Cox wrote in this morning’s eDairy Insider Opening Bell that "Butter exports have been good. Exports during October were up 90% from a year ago.”
   Grade A nonfat dry milk finally saw some trades this morning but no movement in price. Five carloads found new homes, all at $2.08/lb., while 2 bids at that price went unfilled. Extra Grade seems cemented at $2.09/lb., with no activity again today.

Today’s market closing prices:
Butter: Unchanged, at $1.62/lb.
Cheddar blocks: Up 6¢, to $2.11/lb.
Cheddar barrels: Up 11¢, to $2.06/lb.
Grade A nonfat dry milk: Unchanged, at $2.08/lb.
Extra Grade nonfat dry milk: Unchanged, at $2.09/lb.
Class III milk: Jan.$20.28, +22, Feb.$20.15 +32¢, Mar. $19.36 +18¢, Apr. $18.73 +14¢, May $18.39 +14¢, & Jun. $18.15 +12¢. Based on today’s CME closing prices, the 2014 average now stands at $18.43, +12¢ from Monday.
Looking ahead:
   California’s February Class I milk prices will be announced on Friday. USDA issues its monthly Crop Report Friday afternoon as well as its World Agricultural Supply and Demand Estimates report.
Wednesday on DairyLine:
   Pennsylvania dairy producer Mike Ebey tells about 'White Gold' a higher standards milk.
   Commodities analyst Carl Babler is featured in PDPW's 'Your Bottom Line"