First and foremost, I hope DairyLine readers had a most happy and blessed Christmas and upcoming New Year’s holiday. There is perhaps no stronger time for family than at Christmas as we reflect on God’s greatest gift of all to us.
The cash dairy market was mixed the week of Dec. 13 as it awaited the November Milk Production report Friday afternoon. Block cheese lost ground, closing Friday at $1.3225 per pound, down 6.75 cents on the week, and 38 cents below a year ago. Wednesday saw 45 cars trade hands, the second highest single day total ever, according to Alan Levitt, editor of the CME’s Daily Dairy Report. Levitt says 52 cars were sold on June 4, 2004.

The barrels went the other direction, closing Friday at $1.3650, up 1.75 cents on the week, but still 7.5 cents below a year ago.

Seventy-three cars of block traded hands on the week and 10 of barrel. The NASS U.S. average block price fell to $1.4749, down 2.1 cents. The barrels averaged $1.4592, down 0.1 cent.

Butter also moved higher on the week, closing Friday at $1.6525, up 3.25 cents from the previous week, and 32.75 cents above a year ago when it plunged 121.2 cents, to $1.3250. NASS butter averaged $1.6135, down 7.6 cents.
Cash Grade A nonfat dry milk gained 3.5 cents on the week, closing Friday at $1.27, while the Extra Grade held all week at $1.2250.

NASS powder averaged $1.2133, up 0.7 cent, and dry whey averaged 37.86 cents, up 0.1 cent.

Alan Levitt reported in Tuesday’s DairyLine that cheese prices were at the lowest level since mid June, holiday pipelines appear close to being filled, First Quarter 2011 milk futures were hitting new lows, cheese production is still heavy, and inventories continue to weigh on the market.

That sounds dire, he said, but there is reason to be encouraged as prices of the other commodities seem to be well supported and the world market remains firm as international prices are mostly steady with the exception of a small softening on butterfat.

He added that Oceania milk production is past its peak and weather issues are keeping milk output from reaching the levels hoped for so buyers are a little nervous about getting what they need in 2011 and are buying a little more aggressively and that’s showing up in other commodities.

Powder production may be tight in 2011

Butterfat remains tight globally and the U.S. butter market keeps getting bid higher, Levitt said, and the global powder market seems pretty firm. Both nonfat dry milk and whey seem to be well supported, supplies are not excessive even though powder production is increasing seasonally, “there’s just this sort of sense that the bottom is at hand or close and that, in 2011, things may be a bit tighter.”

The CME’s Daily Dairy Report says U.S. cheese exports are topping imports this year for the first time in USDA records dating back to 1970 and Downes-O’Neill dairy broker Dave Kurzawski told DairyLine he’s bullish on cheese though he admitted in Wednesday’s broadcast that cheese is under a lot of pressure, but the Oceania Cheddar price is at $1.90 and that “gaping hole,” plus the weak dollar, is attracting U.S. cheese, and it may be cheaper to produce some of the cheese here that is normally imported in this country.

The market will work it out in 2011, according to Kurzawski, and ultimately the U.S. price of cheese will head back up, but the calendar will probably roll into the New Year before that happens.

Reports and concerns over drought in part of New Zealand is also a factor, but that’s probably not been priced in yet, according to Kurzawski, and the possible passage of a free agreement with South Korea is another factor.

Kurzawski said the cheese coming to the Exchange in Chicago right now is more “inventory management” as the end of 2010 approaches. He believes the cheese price is within pennies of the bottom and that buyers will respond at this level. They must have heard him because the next day 45 cars of block traded hands.

California’s January 2011 Class I milk price is $16.45 per cwt. for the north and $16.72 for the south. Both are down $1.83 from December and are $1.77 below January 2010. The Federal order Class I base price wis announced by the USDA on Thursday, Dec. 23.

Dairy exports continue to be the sunshine in what is otherwise a cloudy dairy picture. Dairy Profit Weekly Editor Dave Natzke reported the latest trade data as 2010 comes to a close and offered a look ahead to 2011 in Friday’s broadcast.

USDA’s latest trade report estimated October exports at $350 million, down 1 percent from September, but 54 percent more than a year ago, Natzke reported. That compares with dairy product imports, estimated at $222 million, which were up 10 percent from September, but just 4 percent more than a year ago.

Through the first 10 months of 2010, dairy exports totaled about $3.1 billion, up 69 percent from the same period in 2009. Meanwhile, imports stand at $2.1 billion, up just 2 percent. The result is a 2010 dairy trade surplus of more than $1 billion, a trade balance claim not many other U.S. industries can make, he said.

The U.S. Dairy Export Council and National Milk add that October exports were equivalent to nearly 15 percent of all milk solids production during the month, the highest monthly level in history. Imports as a percent of milk solids production totaled 3.7 percent in October. Year-to-date, nearly 13 percent of U.S. milk solids production has been exported, according to Natzke.

Looking ahead, USDA’s latest quarterly trade outlook estimates fiscal year 2011 dairy product exports will approach $3.2 billion, with imports estimated at about $2.5 billion, for another $700 million dairy trade surplus.

It’s not only U.S. dairy products that are in demand. Natzke reported that exports of female replacement dairy cattle totaled more than 4,100 in October, the highest monthly total on record. That brought the January-to-October female dairy cattle export total to 29,900, compared to about 16,200 for all of 2009.