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|0409 PD: Milk production lowers as demand remains weak|
|Archives - Past Articles|
|Wednesday, 25 February 2009 03:18|
Editor’s note: The following are available market reports and futures data as of February 13, 2009.
The cash butter price at the CME Group has held steady and remains 5 1/4 cents above support. Western- produced bulk butter continues to clear to CCC with 454,997 pounds moving Feb. 9-13. Since the first of the year, nearly 4.1 million pounds of butter have been offered to the government.
Churning schedules across the country are seasonally quite active. Butter producers remain cautious with their additional cream purchases. In most instances, butter producers are managing their production schedules to be in line with needs. Although butter producers are taking advantage of favorably priced cream offerings and clearing this production to inventory, with the cash price slightly higher than the support price, most producers and handlers indicate that there are minimal downside factors that would jeopardize this decision. In general, sales to retail outlets are in better shape than to food service accounts. The economy is being called the reason for this to be happening.
The CME Group cash cheese market continues to firm. Current interest is at least fairly good for February though some segments, such as moderate to upscale food service accounts, remain sluggish. Bulk cheese supplies have tightened as buyers rebuild inventory and others prepare for planned feature activities. Other buyers are stockpiling supplies for later-year use and may not need as much cheese as usual later.
Financial limitations are still affecting supplies both held and entering aging programs. Cheese production is fairly steady. The Kansas City Commodity Office on Feb. 9 issued Solicitation BCD-035 seeking 1.4 million pounds of additional barrels for May/June delivery. Offers were due Feb. 24. 2008 U.S. cheese exports totaled 289.7 million pounds, up 70.3 million pounds (32 percent) from 2007. 2008 U.S. cheese imports total 375.5 million pounds, down 60.0 million pounds (-14 percent).
Heavy Class I demand based on lower first-of-the-month prices meant intakes at many balancing plants were lower. Shipments out of Florida fell to 120 loads Feb. 9-13 compared to 166 loads Feb. 2-6, largely based on an uptick in consumer demand. Additionally, with many school districts scheduling a holiday Feb. 16, fluid milk demand softened.
Eastern milk production is climbing as expected and balancing plants are keeping busy clearing intakes.
Milk production in California is steady to marginally lower as producers are making tough decisions by increasing culling and adjusting feed rations to less costly mixes.
Arizona and New Mexico milk output is gaining seasonally, as are fat/protein tests.
Throughout the Pacific Northwest, Utah and Idaho, most plants are concentrating on processing intakes from regular sources versus clearing additional intakes from neighboring regions. Western cream markets are generally weak, with some discounted loads still being offered. In the Central region, cream supplies have tightened and multiples are higher. Movement of cream into Class II uses is steady to higher there, benefiting from some of the recent good availability of cream linked to higher Class I use.
Spot cream loads in the Northeast and West are readily available.
Dry product manufacture has been heavy in late January and early February, tracking along with seasonally climbing milk production.
Nonfat dry milk markets are unchanged to marginally lower and many buyers are content to source off the spot market for near-term needs.
Dry whey inventories are in better shape in some regions, fostering a slight firming in Central and Western markets.
Dry buttermilk markets are mixed with the Central/East market increasing fractionally and the West market steady. Production is steady at most balancing plants, although some buttermilk in the West is bypassing the dryers due to plant capacity issues.
Lactose demand remains soft and buyer inquiries are focused on obtaining product at the low end of the market.
The whey protein concentrate 34 percent market saw the range narrow somewhat as buyer resistance emerged in response to fairly regular week-to- week price increases.
CCC purchases (FSA)
During the week of Feb. 9-13, CCC purchased 454,997 net pounds of Western butter and 7,717,533 net pounds of Western NDM under the dairy price support program. Cumulative CCC purchases since Oct. 1 total 4,120,822 pounds of butter and 169,998,399 pounds of NDM.
February milk supply and demand estimates (WAOB)
Milk production forecasts for 2009 are lowered from last month. The Jan. 30 Cattle report estimated that dairy cow inventories on Jan. 1 were almost 1 percent above a year earlier and only fractionally fewer heifers were being retained for addition to dairy herds. Assuming no significant herd reductions in the first part of the year, producer returns are expected to be heavily pressured resulting in a relatively sharp reduction in inventories during the latter part of the year. Output per cow is unchanged from last month.
Both domestic and export demand is forecast to remain weak due to economic uncertainty. Commercial export forecasts for 2009 are reduced from January as weak international demand and expected competition from recently announced subsidized EU-27 exports limit opportunities for commercial exports. Conversely, lower international prices are expected to result in slightly higher U.S. imports of dairy products, primarily cheese.
Fat basis ending stocks are forecast lower as supplies tighten later in the year on lower milk production, but skim-solids stocks are raised as exports of nonfat dry milk (NDM) are limited and supplies burden the market. Sales of butter and NDM to the CCC are forecast higher.
Milk and dairy product price estimates for 2009 are reduced as first-half product prices are expected to be pressured by the confluence of weak demand and burdensome supplies. As milk production is reduced, especially in the latter part of the year, tighter milk supplies are expected to help lift second-half prices from their midyear lows. However, weaker forecast exports and continued weakness in domestic demand keep prices later in the year lower than forecast last month. As a result, the annual average product and Class prices are forecast below last month. The all-milk price is also forecast lower, $10.95 to $11.65 per hundredweight in 2009.
Estimates for 2008 have been revised to reflect actual data. Milk production estimates are raised slightly based on December milk production. Based on trade data to date, exports are estimated lower than last month and imports, primarily on a fat basis, are forecast higher. Ending stocks are adjusted to reflect December data and revisions to NDM stocks.
December fluid milk sales (AMS & CDFA)
During December, about 4.8 billion pounds of packaged fluid milk products is estimated to have been sold in the U.S. This was 3.6 percent higher than December 2007.
After adjusting for calendar composition, sales in December 2008 were 1.3 percent higher than December 2007.
On an individual product basis, after adjusting for calendar composition, sales of organic whole milk, reduced fat milk (2 percent), low fat milk (1 percent), flavored fat-reduced milk, organic fat-reduced milk, and buttermilk increased from December 2007, while sales of whole milk, flavored whole milk, and fat-free (skim) milk decreased from a year earlier. PD