Happy June Dairy Month! Though easily taken for granted, consumers need to be reminded of the valuable contributions dairy products make to their life. I believe the dairy checkoff is responsible to do that and, with that in mind, Dairy Management Incorporated’s Joe Bavido, began a series in Monday’s “DMI Update,” reviewing the goals and objectives of the checkoff.

He began by reminding us that, since the checkoff was established in 1984, the goal has been to “increase sales and maintain and build a positive perception of dairy and dairy products among consumers,” and producers helped do this through general image building campaigns and short-term sales building efforts such as the “Got Milk” and “Ah, the Power of Cheese” campaigns in the past.

These efforts helped, he said, but national and local dairy promotion leaders began a new direction in 2005 through a strategic business plan that directs funds to agreed-upon strategies to grow sales over the short and long term.

The approach works, Bavido said, by identifying partners, goals, and beliefs that are aligned with those of producers. One example is the partnership with HP Hood and its Lactaid brand to bring consumers back to fluid milk. Many have stopped drinking milk, he said, because of real or perceived lactose intolerance.

HP Hood developed two new lactose-free products currently in test markets, according to Bavido, and “by sharing key nutrition and consumer insights with the brand, dairy producers and Lactaid are partnering to educate health professionals about the role of lactose free products as part of a healthy diet.”

Milk price improves 46 cents from April
Meanwhile, the May Federal order Class III benchmark milk price was announced by USDA at $13.38 per cwt., up 46 cents from April, $3.54 above May 2009, and 98 cents above California’s 4b cheese milk price.

That pulled the 2010 Class III average to $13.57, up from $10.23 a year ago, but compares to $17.86 in 2008. Thursday’s Class III futures portend a $13.52 Class III price in June, $13.28 in July, $13.87 in August, $14.52 in September, and a peak of $14.70 in November before retreating. The May Class IV price is $15.29, up $1.56 from April and $5.15 above a year ago.

The four week-NASS-surveyed cheese price averaged $1.4257, up 4.3 cents from April. Butter averaged $1.5801, up 10.3 cents. Nonfat dry milk averaged $1.2520, up 13.1 cents, and dry whey averaged 36.45 cents, virtually unchanged from April.

California’s May 4b cheese milk price is $12.40 per cwt., up a dime from April, and $2.86 above May 2009. The 4a butter-powder price is $13.95, up 46 cents from April and $3.92 above a year ago.
CME cash cheese prices continued to weaken in the Memorial Day holiday-shortened week. The blocks closed Friday at $1.3975, 6.75 cents below the previous week, but 25 cents above a year ago.
Barrel closed at $1.3575, down 7.25 cents on the week, and 25.75 cents above a year ago. Nineteen cars of block traded hands and 14 of barrel. The lagging NASS-surveyed U.S. average block price gained 3.4 cents, hitting $1.4325. Barrel averaged $1.4544, up 3.9 cents.

Butter strengthened, closing Friday at $1.5750, up 1.75 cents on the week and 32.25 cents above a year ago. Nothing was sold. NASS butter averaged $1.5858, up 0.2 cent.

Cash Grade A nonfat dry milk closed Friday at $1.25, down a nickel on the week. Extra Grade closed at $1.26, down 3 cents. NASS powder averaged $1.2878, up 1.6 cents, and dry whey averaged 37.01 cents, up 0.6 cent.

American cheese stocks highest since 1986
University of Wisconsin Emeritus Professor Dr. Robert Cropp said in Tuesday’s DairyLine that the cheese market is responding to USDA’s April Milk Production report, which showed output above a year ago for the second month in a row. He added that there’s still a fair amount of cheese in storage, with American stocks the highest since April 1986.

Cheese recovered the second week in May, he said, but now it has dropped and he sees it hovering in the $1.40-$1.45 per pound range until we work some of this inventory off or see some sign that milk production is going to slow and cow numbers not keep climbing.

He said it’s hard to say if the CWT’s herd removal announcement last week will have an impact. It depends on how many cows are removed, he said, but he pointed to the maximum bid of $3.75 as being down a fair amount from the last removal program.

Cropp is not convinced the removal program will get a big response but “If they can move out 30, 40, or 50,000 cows it may help a little bit.” He stressed that we need to get cow numbers going down but warned that “there’s a lot of replacement heifers out there.”
Butter sales are fair, according to Cropp, as there’s interest in the export market, butter stocks are down about 13 percent from a year ago, and the cream supply is tighter, “so $1.55-$1.60 butter seems to be reasonable,” he concluded.

Readers with questions or comments for Lee Mielke may write to him in care of this publication.