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Cheese prices continue to weaken in early May

Cash cheese prices continued to weaken the first full week in May with blocks closing Friday at $1.1375 per pound, down 1 1/2 cents on the week, 86 cents below a year ago, and just three quarters of a cent above the government support price. Barrel closed at $1.0550, down 3 1/4 cents on the week, 92 1/2 below a year ago and 4 1/2 cents below support.

Ten cars of block traded hands on the week and 21 of barrel. The NASS-surveyed U.S. average block price fell 3.6 cents, to $1.2119. Barrel averaged $1.1291, down 4.9 cents.

Butter closed at $1.24, up a penny on the week but 23 cents below a year ago. Twelve cars were sold. NASS butter averaged $1.1920, up 2.8 cents.

Cash Grade A nonfat dry milk closed at 88 cents per pound, up a penny on the week on seven sales.

Extra Grade closed at 86 cents, up a half-cent on bids. The NASS-surveyed nonfat dry milk price averaged 82.33 cents, up 0.1 cent. Dry whey averaged 21.3 cents, up 0.6 cent.

Price support purchases for the week amounted to 3.4 million pounds of nonfat dry milk, raising the year’s cumulative total so far to 234.3 million, compared to none a year ago.

Mary Ledman, Principal of Keough, Ledman, and Associates in Libertyville, Ill., said, “End users are looking for a reason to be bullish on this market, and it’s very difficult to find one at this time.”

Dairy cow culling has slowed tremendously the last four weeks, according to Ledman, since the announcement of the CWT herd removal program, and dairy producers likely are “waiting for someone else to go out and not themselves.” She said it will be interesting to see what kind of signup CWT has this time.

The USDA reported that the spring flush is, or is close to occurring around the country. Ledman added that, while producers are holding on to cows, per cow output is falling, “something we rarely see, but producers are holding to cows to see if their neighbor is going to go out under the CWT, and believe that will result in the market strengthening in the second half of the year.”

The latest Milk Production report showed output was down 0.3 percent but demand is not growing enough for supply and demand to come together. Ledman said 0.3 percent is not a big slippage.
“We really need to see a 1-2 percent slippage to make up for the loss of exports,” she explained.

California’s April 4b cheese milk price is $10.41 per cwt., down 4 cents from March, $6.38 below a year ago, and 37 cents below the comparable Federal order Class III price.

The 4a butter-powder price is $9.79, up 12 cents from March, but $4.52 below a year ago and 3 cents below the Federal order Class IV.

USDA’s March Dairy Products report put butter production at 145.3 million pounds, down 0.3 percent from February and 6.6 million pounds or 4.4 percent below March 2008. Nonfat dry milk hit 135.6 million pounds, up 12.8 million or 10.4 percent from February, and 0.4 million or 0.2 percent above a year ago.

Mozzarella cheese output totaled 281.3 million pounds, up 33.9 million pounds or 13.7 percent from February, but 4.4 million or 1.5 percent below a year ago. Total Italian type cheese, at 362.9 million pounds, was up 43 million pounds or 13.5 percent from February, and 4.6 million or 1.3 percent above a year ago.

Cheddar production totaled 273.5 million pounds, up 32 million pounds or 13.3 percent from February, and 8.2 million pounds or 3.1 percent above a year ago.

American type cheese amounted to 359 million pounds, up 38.2 million pounds or 11.9 percent from February, and up 20 million or 5.9 percent from a year ago.

Total cheese output came to a record 870.7 million pounds, up 100.9 million pounds or 13.1 percent from February, and 36 million or 4.3 percent above a year ago.

Producer-handlers

USDA began hearings this week regarding producer-handlers, farms who bottle their own milk and therefore compete with other bottlers.
National Milk’s Chris Galen said, “The issue is whether the very largest producer-handlers should continue to be exempt from a decades-old regulation that has created a loophole, allowing these very large operations to not pay into the Class I pool and has to do with how all farmers are paid in Federal milk marketing orders.”

The highest value milk is Class I, he explained, and that revenue is shared by bottlers with all dairy farmers in a given region, with the exception that some of these large bottlers, if they’re owned by a dairy producer, do not have to pay into the Class I pool, thus reducing the revenue available to all other farmers.

The proposal to close this loophole was sought by National Milk and the International Dairy Foods Assoc., according to Galen, but also seeks to maintain and even expand the loophole for smaller producer-handlers who “don’t really have the opportunity to disrupt milk marketing because they’re not of a sufficient size, but we do think that once you reach a certain size threshold and can fly with the big boys, you ought to be regulated in the same way.”

Some frame this effort as large corporations trying to control smaller competitors, but Galen argued that many of these bottlers have grown so big that they’re bigger than plants that are paying into the pool.

“This is about producer revenue,” Galen said. “All that money that the producer-handlers don’t have to pay into the Class I pool means a lower blend price for all other farmers who don’t happen to be their own bottler.

“It’s about making certain that, when you get to a certain threshold a certain size that you are regulated the same as any other large bottler,” he concluded. “It’s not about regulating farms it’s about regulating the bottling aspects of these very large operations.”

Hiring illegal workers

Many dairy producers hire workers from Mexico and Central America. Dairy Profit Weekly Editor Dave Natzke reported that it’s more important than ever for farmers to determine whether those workers are here legally.

The Department of Homeland Security has released a fact sheet outlining updated worksite enforcement guidance for Immigration and Customs Enforcement officials.

The fact sheet reflects a renewed focus on the criminal prosecution of employers who knowingly hire illegal workers, in order to target a root cause of illegal immigration.

The memo notes that of the more than 6,000 arrests related to worksite enforcement in 2008, only 135 were employers.

5/14/2009