DairyBusiness Update: February 24, 2014

Cold Storage Report Shows No “Real” Bearish Trends
Such is the analysis of High Ground Dairy’s Eric Meyer. “US milk production picked up a percentage point in January but ending stocks for cheese and butter failed to make any substantial upward moves that would portend any real bearish trends,” says Meyer. In fact, all four are beginning the year behind last year. Based on upward price movement in both commodities last month, demand remained firm in January. High prices will eventually slow demand at some point but it seems like that cure is still down the road for the US market.
   Butter stocks grew nearly 23% between December and January, which seems like solid growth on the surface, according to Meyer. But looking back at historical data, 25.7 million pounds added to US storage warehouses is butter’s worst Dec to Jan monthly build since 1998 when only 13.5 million pounds were added. At $1.7850 per pound ($3,935MT – 21 Feb settlement), CME spot butter prices are the least expensive in the world. This will likely keep exports strong. And until milk production outpaces demand, stocks will likely grow at a slower than normal pace. However, inventories are not at critical levels at this time of year and will probably keep $2.00 off the board for the second straight year unless a major supply-disrupting event occurs. The California drought comes to mind as something to keep an eye on over the next few months.
   As to cheese, Meyer says “Cheese stocks did not show much by way of market direction and we believe is mostly neutral to the current market.”

Bearish but Not “Believable”
   FC Stone risk management consultant, Chris Hildebrand, wrote in this morning’s Insider Opening Bell that the Cold Storage report was “a little bearish versus expectations, but I don't think the market believes it."
   He adds that "U.S. supplies are overall tight compared with the rest of the world. Production is up in Europe on favorable weather and in New Zealand on strong pasture growth but Australia's production is lagging.”
   “We've had a little issue with weather in the Upper Midwest but California has made up for it in the short term." Hildebrand says that “technically, the Class III market likely will take a breather some time, but, there is room to the upside, depending on the continuation of the NFDM market and, of course, what spot cheese does."

No More “Got Milk”
Got Milk? Not anymore, according to the February 24 Advertising Age, which reports that the Milk Processor Education Program is sidelining the iconic ad slogan in favor of a new tagline, "Milk Life," which puts emphasis on milk's nutritional benefits, including its protein content.
   The change is part of a national campaign launching Monday that seeks to return the sluggish dairy milk category to growth. The national milk industry had been using the "Got Milk?" tagline since 1995 when the phrase was licensed from the California Milk Processor board. The state group began using the tagline in 1993 after it was created by Goodby, Silverstein & Partners.
   The California processors, which are still with Goodby, are keeping the tagline, which is one of the most recognizable and parodied phrases in advertising.
   But the national group, whose agency is Lowe Campbell Ewald, New York, is moving in another direction as it looks to boost milk sales, which are suffering as other beverages gain ground and cereal sales stall. Euromonitor International recently estimated that drinking-milk retail sales volume declined by about 1% last year.
   "Got Milk has very high awareness," said Sal Taibi, president at Lowe Cambell Ewald, New York. "But we have a new strategy. We have a new message and we just felt we needed a new approach."
   The national group, known as MilkPEP, plans to spend more than $50 million on the campaign, which will include TV, print, digital, retail promotions and PR. One TV ad visually depicts liquid milk powering consumers through activities like running, playing basketball or playing in a rock band.

Raw Milk Advocates Oppose Law Allowing Sales of Unprocessed Milk
The TimesFreePress reports that “Some metro Atlanta residents say they're concerned that legislation aimed at allowing grocery stores to sell unprocessed milk will force regulations on farmers and compromise the relationships they have with customers. The Marietta Daily Journal reports dozens of Cobb and Cherokee County residents were at a hearing Wednesday to discuss a bill filed by Rep. Scot Turner, a Holly Springs Republican. Currently, unprocessed milk may only be legally sold in Georgia for pet consumption.
   Despite that, some say they bypass grocery stores and buy milk directly from farmers because they like knowing where the milk they're drinking comes from and that the product is pure.
   Federal officials say unprocessed milk may carry contamination and that pasteurization, or heating the substance, kills potentially deadly bacteria. However, some consumers say they're not concerned with potential contamination and that pasteurization may also remove helpful nutrients.
   Raw milk consumers say allowing grocery stores to begin selling unpasteurized milk would likely give way to regulations that would change the quality of the products and interfere with the relationships between farmers and consumers.
   "Regulation is always tilted toward big agriculture, not small farms," said Cindy Morrow, of Woodstock. "I don't mind taking the 'risk' with food. I do have a problem with big government." Morrow said she usually pays between $7 and $8 per gallon for unprocessed milk when she meets with a local farmer.
   Turner said he considers the proposal as a way of putting power back in the hands of consumers. Read more at http://www.timesfreepress.com/news/2014/feb/23/georgia-bill-looks-allow-raw-milk-grocery-stores/.

Food Safety Summit Coming to Baltimore
   I'm not sure whether raw milk will be discussed but the food industry is headed to the Baltimore Convention Centre April 8-10. The event is a “solutions-based conference and expo designed to meet the educational and information needs of the food industry including growers,  processors, retailers, distributors, foodservice operators, regulators and academia,” according to its website; www.foodsafetysummit.com.
   The Summit attracts industry professionals to “learn from expert speakers and trainers, exchange ideas, find solutions to current job challenges and engage in the valuable opportunities the Summit has to offer.”

   The 3-day event offers interactive solutions and tools, specialized training and certification courses, industry solution providers demonstrating the latest tools and technologies on the Exhibit Hall floor, and opportunities to network and collaborate with food safety professionals representing the entire supply chain.

Mielke Market Daily
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
   Things were pretty quiet in the cash dairy markets in Chicago this morning but prices jumped in all products, mostly on bids and raised Class III futures in double digits again. The 40lb. Cheddar blocks jumped 2¢ on one unfilled bid, the 3rd consecutive session of gain, and are now trading at $2.1825/lb. The 500lb. barrels were up 1.75¢, on a bid, also the 3rd consecutive session of gain, and hit $2.1750/lb.  
   Some older cheese came out of storage to the exchange last week, reports FC Stone risk management consultant Chris Hildebrand, but "People still view it as a tight situation."  
   There were 4 sales of cash butter this morning, all at $1.80/lb., up 1.5¢ on the day, and 2 offers at $1.81/lb. went uncovered.
   Hildebrand says, while last week’s Cold Storage and Milk Production reports were bearish versus expectations, market participants are concerned about the impact of the drought on California's production in coming months.   
   Cash powder inched 0.25¢ higher on an unfilled bid, to $2.0475/lb., also up for the 3rd session in a row.

Today’s Market Closing Prices:
Butter: Up 1.5¢, to $1.80/lb.
Cheddar blocks: Up 2¢, to $2.1825/lb.
Cheddar barrels: Up 1.75¢, to $2.1750/lb.
Grade A nonfat dry milk: Up 0.25¢, to $2.0475/lb.
Class III milk: Feb. $23.20, +1¢; Mar. $22.18, +39¢; Apr. $21.29, +39¢; May $20.34, +33¢, & Jun. $20.05, +33¢. Based on today’s CME settlements, the Second Quarter 2014 average now stands at $20.56, +35¢ from Friday. The 2nd half average is $18.92, +20¢ from Friday.
Looking ahead:
   The Agriculture Department’s Economic Research Service issues its monthly Dairy Situation and Outlook report on Wednesday, which will detail the latest dairy product commercial disappearance data. The monthly Ag Prices report is out Friday afternoon and will include the latest milk feed price ratio.
Tuesday on DairyLine:
   Bob Naerebout of the Idaho Dairymen's Association joins us to discuss a new Senate
     Bill that will protect farmers from activist groups
   Denise Behnke discusses new technology on the farm with a SmartDairy Update: