DairyBusiness Update: March 28, 2014
March Milk-Feed Price Ratio Slips from February
Monthly average milk prices were up but so were feed prices, according to USDA’s latest Ag Prices report issued this afternoon. The preliminary March 2014 milk-feed price ratio slipped from February. At 2.58, the index is down from 2.60 in February and compares to 1.48 in March 2013.
The index is based on the current milk price in relationship to feed prices for a ration of 51% corn, 8% soybeans and 41% alfalfa hay.
The March 2014 U.S. average all-milk price was $25.40/cwt., with a 3.77% fat test, up from $24.90/cwt. in February, with a 3.81% test, and compares to $19.10/cwt. in March 2013, with a test of 3.79%.
March corn averaged $4.54/bushel, up 19¢ from February, but $2.59 less than March 2013.
March soybeans, at $13.60/bushel, were up 40¢ from February, but down $1.00 from March 2013.
Alfalfa hay averaged $191/ton, up $3 from February, but $28 less than March 2013.
Cull Cow Prices Approaching $100/CWT.
Estimated U.S. March 2014 cull cow prices (beef and dairy combined) averaged $99.90/cwt., according to USDA’s Ag Prices report. The average is up $4.50/cwt. from February’s revised estimate and $16.10/cwt. more than March 2013 and likely the highest monthly average ever. By the way, the 2011 average was $71.60/cwt.
Cheese/Powder Prices Softening but Dryer Still Bullish
Buyers are in hand-to-mouth mode, according to Jerry Dryer, editor of the Dairy and Food Market Analyst. Speaking in Friday’s DairyLine, Dryer said, there’s push back as they contemplate the spring flush and the additional milk that will becoming available. The Class III price is quite a bit higher than the Class IV price, so that has moved some milk from powder to cheese, from Mozzarella to Cheddar in the Upper Midwest. Cheese is coming to the market, he said, in response to the higher prices.
Dryer believes commercial disappearance may be higher than USDA’s latest data suggests, citing butter as an example. Dryer said USDA did not revise an inventory number in their calculation and, while Dryer prefers three-month rolling averages as opposed to monthly numbers, his data suggests January butter disappearance was up 16.7 percent, but more significantly, over the most recent three months, it was up 17.9 percent, he said.
American cheese wasn’t real strong in January, according to Dryer, and was only up about 0.8 percent in the last three months, but other-than-American cheese, like Mozzarella, Gouda, and some of the cheese being exported, was strong, up more than 3 percent for the most recent three months and for January.
“Cheese has continued to move well,” Dryer said, “And disappearance was probably very good in February and even in March as these prices haven’t pushed through to retail quite as fast as they frequently do.”
While USDA data suggests nonfat dry milk disappearance was down in January, Dryer reiterated that one month doesn’t make a trend. His data has it up almost 4 percent during January and up 10 percent for the most recent three months. Furthermore, USDA data doesn’t include skim milk powder, as Dryer’s does, and “that’s the big mover in exports,” he said.
Dryer sees “relatively high prices” for the next month or so. “We will come off those record highs on cheese and powder, although butter appears to be moving higher at this point,” he concluded, “But, continued good strength although not as high as we’ve seen in recent weeks.”
White House Strategy on Methane Emissions Reduction Applauded
America’s dairy farmers, cooperatives, processors, manufacturers, and other industry leaders applaud today’s announcement by the White House of a Biogas and Energy Roadmap to reduce methane emissions from agriculture.
In its announcement, the White House formally cited the work of the Innovation Center for U.S. Dairy’s Sustainability Council, whose efforts in part include a partnership with the U.S. Department of Agriculture to proactively reduce greenhouse gas emissions, including methane.
“This announcement validates the path the dairy industry is on, one focused on proactive incentives that can increase farm income, not punitive regulations that would add more costs,” said Jim Mulhern, president and chief executive officer of the National Milk Producers Federation, which develops and carries out policies that advance the well-being of dairy farmers and the cooperatives they own. “Because of our recent efforts and farmers’ long-standing environmental stewardship, the White House strategy for agriculture includes a commitment to cost-effective, voluntary actions to reduce methane emissions through partnerships and programs.”
A Biogas and Energy Roadmap will be developed in partnership with the dairy industry to accelerate the adoption of biogas systems and other cost-effective technologies. For example, the recovery of nitrogen and phosphorus, valuable soil nutrients, has the potential to make these systems revenue-enhancing for dairy farms of all sizes.
Through the Innovation Center, the dairy industry ramped up its efforts to build business value while reducing environmental impact across the value chain more than five years ago. These efforts provide a way for dairy farm families to turn environmental risks into new revenue streams, and demonstrate farmers’ ongoing commitment to being even better neighbors.
“This is great news for America’s dairy farm families of all sizes across the country,” said Tom Gallagher, chief executive officer of the Innovation Center for U.S. Dairy, which brings together leaders of dairy farmer organizations, cooperatives, processors, manufacturers, and brands to foster innovation. “For decades, dairy farmers have demonstrated a commitment to environmental stewardship, and adopting new practices and technologies along the path to continuous improvement. Our work continues.”
In 2009, the dairy industry established a voluntary goal to reduce its carbon footprint by 25 percent by 2020, and projects are underway across the value chain to accomplish the goal.
To learn more about the U.S. Dairy Sustainability Commitment, the reduction goal or the projects and tools currently available, visit www.USDairy.com/Sustainability.
Cheese Shortage was Good News for Kraft
The "Cheesepocalypse" shortage of Velveeta products before the Super Bowl in January was pure gold for the brand, which not only basked in copious free publicity but also used the opportunity to locate some of the people who loved it most in social media, said an executive for Kraft Foods in a presentation at the Advertising Research Foundation Re:Think conference in New York this week.
The shortage, first reported by Advertising Age and repeated in countless other news outlets (many of which noted the #cheesepocalypse social-media hashtag that emerged almost instantly) may actually have been a tad overblown. It affected only one-pound boxes of the processed cheese product, not the two-pound boxes that account for most brand volume, said Cannon Koo, director of analytics for Kraft, in an interview after his presentation. Nevertheless, he said, "It was great. It helped our sales."
Absence, or even a remote possibility of absence, can make hearts of true brand fans grow stronger, and that clearly was the case with Cheesepocalypse, in which they lamented the impending doom of a Super Bowl without their favorite processed cheese.
Kraft was already well into a project aided by Nielsen's Cambridge Group consulting unit to identify Velveeta's "super-consumers," the people who, by Cambridge's reckoning, account for 10% of buyers, 30% to 70% of sales and 50% or more of profits for just about any brand. These Velveeta "super- consumers" were also studied by the Harvard Business Review.
Kraft has found these biggest fans on cable TV using Nielsen Catalina Solutions, which weds Nielsen TV ratings, shopper-card data from Catalina and other data sources to analyze audiences according to such things as how much Velveeta they buy. Analyzing social media during the Cheespocalypse added another dimension for understanding the intensity of the brand's fans, said Cambridge Group Principal Eddie Yoon.
Read more at http://adage.com/article/media/cheesepocalypse-helped-velveeta-bond-biggest-fans/292297/.
Collegiate Dairy Leaders from U.S. & Canada Converge in Fort Wayne
The Dairy Challenge Academy and contest will bring 280 students from 38 college dairy programs to Fort Wayne, Ind., April 4-6. This North American event – hosted by Purdue University, Michigan State University and The Ohio State University – is the largest gathering of collegiates pursuing a dairy career.
Students will converge in Fort Wayne from all corners of the U.S. and two Canadian provinces. These students are training for careers in the dairy industry, as farmers, researchers, educators, financial analysts, nutritionists, farm service providers and veterinarians.
Collegiate participants will visit six dairy farms in Indiana, Michigan and Ohio, to learn how to help farmers evaluate and adapt their management to optimize success and care for animals. Also at Dairy Challenge, industry professionals will present cutting-edge research, new programs and career opportunities to students.
North American Intercollegiate Dairy Challenge® (NAIDC) is fully funded through generous support by 130 agribusinesses and dairy farms. Dairy Challenge started 13 years ago through cooperation between universities, dairy producers and agribusinesses. The event expanded in 2013 with the first-ever Academy, which allowed more students to participate, network and gain skills. This year, about 130 students will compete in the national contest, and 150 students will participate in the Academy.
Supporters can follow the student activity through posts and photos at www.facebook.com/DairyChallenge and @DairyChallenge on Twitter.
Heat Stress Road Show Winding Up in California
The final three stops for the Dairy Heat Stress Road Show will be April 1 in Stephenville, Texas, April 2 in Phoenix Arizona and April 4 in Tulare, California, according to DairyBusiness West Associate Editor Cecila Parsons.
The road show, featuring a number of dairy specialists and professionals will present a full day of heat stress management. The road show team will highlight new tools, and technologies, information about nutrition, facilities and cow cooling. The 10 a.m. 2:45 session is free and lunch will be provided.
For information about each road show presentation; Texas- firstname.lastname@example.org; Arizona- email@example.com and Californiafirstname.lastname@example.org.
Mielke Market Daily/Week’s End Review
(A daily wrap-up of dairy markets and the things affecting them, from DairyBusiness Update associate editor Lee Mielke)
Cash cheese prices saw another day of decline today at the Chicago Mercantile Exchange, the 3rd session in a row for the blocks and 4th for the barrels. The 40lb. blocks closed the day and the week at $2.3850/lb., down 2.25¢. Two cars were sold, 1 at $2.4075/lb. and 1 at $2.3850/lb. An uncovered offer at $2.3850/lb. got no response. The 500lb. Cheddar barrels were down 3¢ this morning on an offer, closing at $2.29/lb.
This week’s downfall ends five weeks of gains, but only after setting new record highs. The blocks peaked at a record $2.4325/lb. on Monday but closed today at $2.3850/lb., down 4.25¢ on the week but an astounding 69.25¢ above a year ago. The barrels topped out at $2.3775 on Monday but closed today at $2.29/lb., down 2¢ on the week, 69.25¢ above a year ago, and 9.5¢ below the blocks. Five cars of block traded hands on the week, first trade of blocks since February 20, along with 11 carloads of barrel.
Class III futures headed lower, reversing some of yesterday’s gains.
Butter hit $2/lb. this morning for the first time since September 2011, up 1.5¢ on the day, after jumping 1.5¢ yesterday, 2¢ on Wednesday, 0.5¢ on Tuesday, and 2.5¢ on Monday. One car was sold this morning at $2.00/lb., 2 bids at $1.9975/lb. were unfilled, and an offer at $2.05/lb. was left on the board.
The Double A price is up 8¢ on the week and 37¢ above a year ago. Five cars were sold this week at the CME.
FC Stone dairy broker Dave Kurzawski says "The expectation is that butter will become widely available after the holiday but could be tight into summer."
Cash Grade A nonfat dry milk moved 0.75¢ higher on a trade today and closed at $2.03/lb., down 2¢ on the week. Two cars traded hands this week.
Today’s Market Closing Prices:
Butter: Up 1.5¢, to $2.00/lb.
Cheddar blocks: Down 2.25¢, to $2.3850/lb.
Cheddar barrels: Down 3¢, to $2.29/lb.
Grade A nonfat dry milk: Up 0.75¢, to $2.03/lb.
Class III milk: Mar. $23.269, -3¢; Apr. $23.81, -22¢ (-28¢ on the wk.); May $21.64, -5¢ (-45¢ on wk.); & Jun. $20.49, -16¢ (-36¢ on wk.). Based on today’s CME settlements, the Second Quarter 2014 average now stands at $21.98, - 14¢ from Thursday. The 2nd half average is now at $19.49, +2¢ from Thursday.
Next week will offer dairy traders a few more tidbits to feed off of. The Agriculture Department releases its Prospective Plantings report Monday. The biweekly Global Dairy Trade auction is on Tuesday, and a lot of eyes will be on its results. The California Department of Food and Agriculture will also announce its March Class 4a and 4b milk prices Tuesday. Federal order prices are announced by USDA on Wednesday and the monthly Dairy Products report is out on Thursday afternoon.
Monday on DairyLine:
Ag economist Dillon Feuz reports on the impact of hay prices because of the
Plus, we "Make the Connection" with a dairy team meeting in our second half.
This Week in DairyBusiness Weekly:
- Dedicated to Dairy: Theme of 16th Annual DFA Meeting
- Farmers call for immigration reform
- DairyBusiness promotes Gilbertson, Ashton
- How important is a first impression?
- Success in any color: Four-Hills experiences unparalleled success in any ring
- Wisconsin Holstein Barn Meetings focus on feeding and caring for show animals
- Plus check out our calendar, industry briefs and more!
TIPS: DairyBusiness Weekly is best viewed in full screen mode. Double click to zoom. Also, don't forget to add this email address to your email address book. Failure to do so could cause the weekly issues to be routed to your junk or spam folders.