Editor’s note: The following are available market reports and futures data as of March 6, 2009.

Butter

Churning is steady to lighter as increased seasonal demand for cream by cream cheese and ice cream has reduced supplies available for churning. Print orders are strong from retail accounts though softer from food service. Seasonal/holiday period retail features continue to move extra quantities of print butter. According to NASS, January 2009 butter production totals 174.7 million pounds, up 3.5 percent from last year.

Cheese

The cheese market remains unsettled though blocks and barrels closed at or above $1.20 on March 6 at the CME Group cash cheese exchange. New orders were slower to develop due to higher monthly average prices, with additional price weakness continuing.

Most buyers have rebuilt inventory and are able to use some of these stocks rather than having to reorder. Many packagers remain busy on some lines though others remain spotty. Process interest is improving seasonally for some firms and remains solid from most quick-service accounts. Good interest in mozzarella from frozen pizza and some pizzerias has kept spot offerings from building. Some extra mozzarella is also reported to be frozen for later-year use.

Cheese plants continue to operate on heavy seasonal schedules with overall milk supplies at least adequate. According to NASS, of the top five states in total cheese production in January, only California’s output was below January 2008.

Fluid milk

Farm-level economic conditions are huge factors in milk production across the U.S. Lower milk prices have worked through to farmers. The financial impact is immense and decisions are being made to maintain viability in the short run. Cow culling rates are higher as marginal animals are sent to market.

Feed rations continue to be adjusted, generally to find a least-cost ration rather than top-production ones. Financing is being watched closely by lenders with constraints often in place on the purchases.

There are pockets where bottled milk is being featured as retailers pass along the lower Class I/1 pricing.

Milk production in California is tracking level with recent weeks at a time when output is typically building. Wet weather in the Pacific Northwest and mountain states is having a leveling effect on output. Midwestern and Eastern production is steady to occasionally higher. Snows in the East and Southeast caused a few days of transportation issues and affected normal fluid milk distribution and consumption.

Dry products

The nonfat dry milk market has steadied around the 80-cent product price support price. There are continued weekly offerings to the CCC. Marketers are gauging their current pricing structures on overages and discounts to that price based on region, location, quality, age, bag type, and other factors. NDM production remains most active in the West to balance the milk supply. Supplies are tighter in the Midwest.

The dry buttermilk market and pricing are firming. Many producers are in better inventory positions and buyer interest has picked up in recent weeks.

Dry whey prices are trending higher with increased demand noted. There has been shifting of the whey stream away from making dry whey towards other products. The WPC 34 percent market price and tone are steady. Plants are in better inventory position, but there are stocks in resale channels.

Lactose prices are unchanged. The trade sentiment is that the bottom of the price cycle has been established. More export interest has returned to the market, looking to establish volumes for future needs.

CCC purchases (FSA)

During the week of March 2-6, CCC purchased 4,157,881 net pounds of Western NDM under the dairy product price support program. Cumulative CCC purchases since Oct. 1 total 188,379,273 pounds of NDM.

International overview (DMN)

The third round of export subsidy levels was announced in Europe on March 5. Traders and handlers continue to indicate that the refunds are not impacting export sales to any great extent. Butter offerings into intervention were 28,000 metric tons of a possible 30,000 metric tons as soon as the March 1 opening with indications that the total was filled by March 6. Skim milk powder offerings into intervention were over 40,000 metric tons of the 109,000 metric tons possible.

Oceania milk production is declining seasonally. New Zealand’s milk output is outpacing last year’s drought-influenced levels at around 4-5 percent, with a more typical seasonal end expected. Some localized areas are seeing higher output levels versus last year. Demand for dairy products has increased. Whole milk powder markets are firming. At the Global Dairy Trade, WMP prices moved higher for May contracts, with the regular WMP price at $2,100. Prices for SMP are steady to higher as more product is committed and the production season winds down.

Cheese prices are steady, but demand is impacted by the economic downturn and general lack of interest.

Farm-level pay prices for milk have been lowered from earlier season prices. The impacts of lower dairy product prices have necessitated processors to lower the prices paid to the dairies – some have seen a 25 percent decline in February.

February agricultural prices (NASS)

The index of prices paid by farmers for commodities and services, interest, taxes, and wage rates in February 2009 declined 2 points to 173. Compared with February 2008, the index was up 2 points (1.2 percent). The index of prices received by farmers for dairy products declined 14 points during the month of February 2009 to 88. Compared with February 2008, the index was down 58 points (39.7 percent). Prices received by farmers in February with changes from January were: for All Milk, $11.50, down $1.80; Fluid Grade Milk, $11.50, down $1.80; and for Manufacturing Grade Milk, $11.80, down $.60.

January 2009 dairy products

Butter production was 174.7 million pounds in January, 3.5 percent above January 2008 and 11.8 percent above December 2008.

American type cheese production totaled 353.4 million pounds, 5.8 percent above January 2008 but 1.7 percent below December 2008. Total cheese output (excluding cottage cheese) was 821.0 million pounds, 1.0 percent above January 2008 but 4.4 percent below December 2008.

Nonfat dry milk production, for human food, totaled 156.2 million pounds, 31.1 percent above January 2008 and 0.6 percent above December 2008. Dry whey production for human food was 83.0 million pounds, 2.4 percent below January 2008 and 3.9 percent below December 2008. Ice cream (hard) production totaled 58.2 million gallons, 7.9 percent below January 2008 but 6.8 percent above December 2008.  PD