By LEE MIELKE
Mielke Market Weekly 

Like the proverbial little boy who cried wolf, weather forecasters were apologizing Tuesday as their predicted mega storm for the Northeast did not deliver the blow they anticipated. They had warned that the storm could bring up to two feet of snow and possibly the biggest in decades, if not the biggest ever. Well over 5,000 flights were canceled, New York shut down its subway system for the first time ever due to weather, and government officials ordered residents to stay home. TV news reports showed grocery stores being emptied as residents purchased food and essentials in preparation to hunker down and ride it out.

As is always the case, storm-induced buying strips store shelves, including fluid milk and dairy products, which in itself creates challenges to refill those shelves, let alone get milk trucks to farms to pick up the milk and transport it to processing plants. Resulting power outages certainly add to the challenge.

While some areas were indeed affected by snow and cold, perhaps prayers were answered that it was not as severe as expected. The National Weather Service stated that they would re-evaluate their computer models and re-examine how they called this one.

Dairy Market News reported that the snow and ice storm that did occur delayed a few milk deliveries in the Northeast, but blizzard conditions completely immobilized distribution in other areas of the region.

On a brighter note, dairy product prices strengthened the last week of January, particularly on butter and nonfat dry milk. Cash block Cheddar cheese closed Friday, Jan. 30, at $1.5325 per pound, up 5.25 cents on the week but still 82.75 cents below a year ago. The barrels finished at $1.5050, up 6 cents on the week and 81.5 cents below a year ago. Five cars of barrel traded hands on the week. The ever-lagging NDPSR-surveyed U.S. average block price slipped to $1.5701 per pound, down 1.1 cent, while the barrels averaged $1.5594, down 0.7 cent.

Strong cheese production in the Midwest continues to be driven by the volumes of milk being received, according to Dairy Market News (DMN).

"Cheese plants reach peak efficiencies when running full schedules, so to that extent good milk availability is a positive," DMN said. "The challenge is in selling higher cheese volumes to actualize the efficiencies. There are Midwest plants where cheese inventory is growing, but other plants are experiencing good order interest sufficient to keep inventories more in a desired balance. Even where inventory levels are higher, there is awareness of the situation but mostly a feeling that inventories are manageable," DMN says.

Spot loads of milk were available this week at $2.00 under to $1.50 over Class, but most plants were satisfied with regular milk supplies. Some cheese buyers are paying premiums to Midwest manufacturers of 5 to 7 cents above market, says DMN. Western cheese market activity is light to moderate, and the undertone is unsettled to steady depending on location, variety and demand.

Cash butter came back to life after holding steady the previous week and finished Jan. 30 at $1.75 per pound, up 20 cents on the week and the highest level since Dec. 15, 2014, but still 13 cents below a year ago. Seventeen car loads traded hands on the week. NDPSR butter averaged $1.5550, up 0.4 cent.

Print butter churning is down for some manufacturers as retail demand is lower than expected, according to DMN. Bulk butter churning remains active. Offers are light as inventory levels are clearing. Bulk butter buying is down as current prices do not support heavy buying. Sellers are waiting for the market to move up. The Western market was slightly firm at midweek last week, but the undertone remains on the unsettled side. The Foreign Ag Service reports January-December U.S. butter quota imports at 14.9 million pounds, up 37 percent from 2013.

Cash Grade A nonfat reversed gears last week and topped $1 per pound for the first time since Dec. 23, closing Friday, Jan. 30, at $1.07, up 8.75 cents on the week. Thirty four cars were sold in the spot. NDPSR powder averaged $1.0022, down 0.8 cent, and dry whey averaged 58.52 cents per pound, down 0.7 cent.

A surprise announcement was made Wednesday evening by Fonterra, New Zealand’s largest dairy cooperative, that it has reduced its milk volume forecast for the 2014-15 season to 1,532 million kgMS, reflecting the impact of dry weather on production in recent weeks. The new forecast is 3.3 percent lower than the 1,584 million kgMS collected last season. The previous milk volume forecast, made in December last year, was 1,584 million kgMS.

Group Director, Co-operative Affairs Miles Hurrell said daily milk production was now 6.1 percent lower than last season, as farmers appear to be using more traditional practices to manage their farms with the low payout forecast.

"In the first half of the season, excellent pasture conditions resulted in milk volumes being higher than the previous season," he said. "The situation has changed significantly over the course of this month. In some regions where pasture quality has declined markedly since mid-January, we are seeing some farmers drying off cows early, and there also appears to be a reduction in feed supplements, as the economics do not support widespread use this season."

When asked if that meant happy days were here again in Friday’s DairyLine, Matt Gould, market analyst for the Dairy and Food Market Analyst newsletter, said, "Not quite." He didn’t believe the uptick in cash cheese was in response to the Fonterra announcement, but said the strength in nonfat dry milk would be.

"Fonterra is saying that they see milk production for the first half of the production year to be down about 15 percent," Gould explained, after seeing significant gains earlier in the year, "so now they’re being offset." He cautioned; "That’s a big number, but for perspective, they’re two thirds of the way through the season." Some of Gould’s contacts question that figure, he said.

Class III contracts will see some "temporary strength here," according to Gould, as food service buyers and aged cheese come back to the market, but he emphasized that it will be temporary because we still are struggling with export sales in the first half of the year so inventories will build. "It’s a temporary blip in Class III."