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Consumers may pay higher price for milk if farm bill stalls
Happy New Year! I hope your Christmas was filled with the Spirit from which it truly originates and transcends to 2013. I once heard that “happiness” depends on what’s “happening.” Joy depends on what is within one’s heart and mind so while one may not be happy per se, one can still possess joy. It is a choice!

As I write this, my last column of 2012, I check the cupboards and there’s good news and bad in butter. The November Cold Storage report shows butter stocks at 127.1 million pounds, down a whopping 12 percent from October so demand was there, but stocks are up a whopping 36 percent from a year ago.

The Dec. 24 Daily Dairy Report (DDR) said: “This year’s smaller than normal decline belies soft demand for butter and indicates retailers were able to secure inventories earlier in the year and did little buying in November. It also explains the sizeable break in butter prices that began in November and suggests that despite these lower prices November butter exports could have slowed after robust sales in October.”

American cheese, at 581.3 million pounds, was unchanged from October, but 2 percent below a year ago. Total cheese stocks amounted to 941.8 million pounds, down 1 percent from October and 4 percent below those a year ago.

The cash block cheese market closed the shortened Christmas holiday week at $1.74 per pound, unchanged on the week, but 17.75 cents above a year ago. Barrel closed at $1.71, up 5.5 cents on the week, 13 cents above a year ago, and re-established the more typical spread. Seven cars of barrel was the only cash cheese sold on the week. The AMS-surveyed U.S. average block price fell to $1.7833, down 3.1 cents, while the barrels averaged $1.7151, down 3.9 cents.

Cheese production continues at accelerated levels, according to Dairy Market News (DMN). Milk supplies are steady to increasing in many parts of the country. Coupled with reduced demand from Class I and II due to the holidays, more milk is available for the vat and this is expected to be the case through early January.
Cash butter loses 4 cents

Cash butter remains in a melt down, losing another 4 cents Christmas week, and fell to $1.4975, 9.75 cents below a year ago. Two cars were sold on the week. AMS butter averaged $1.6017, up 0.7 cent. 

Cash Grade A and Extra Grade nonfat dry milk remained at $1.5575 and $1.56 respectively, where they have been since late November. AMS powder averaged $1.5596, up 1.4 cents, and dry whey averaged 66.78 cents, up 1.3 cents.

A combination of factors is influencing prices, according to DMN. Butter prices declining to levels last present during mid-July, cream offerings being heavy and expected to increase, and butterfat tests since July substantially above the last few years, all lead to surplus cream that exceeds demand. The surplus is expected to increase due to the holidays. The only real and viable outlet for the surplus cream will be the churn, warns USDA.

This leads to a complex situation where manufacturers are averse to building inventories concurrent with downward index prices and retail butter orders are dropping, DMN said. Some butter manufacturers in the Northeast are increasing production of unsalted 82 percent butter targeted for the export market, where export demand from the Middle East remains good. 

FC Stone’s Dec. 27 eDairy Insider Opening Bell suggested that the winter storm tracking across the eastern portion of the country “could be playing a role in this week’s quiet markets as travelers struggle to get to the office and return home from Christmas travel. The storm had already dumped more than a foot of snow on parts of Pennsylvania and New York.”

DMN reports that manufacturing milk supplies were increasing across the nation going into the holiday period due to seasonal declines in Class I and II demand. 

Manufacturing milk supplies were expected to keep dryers at or near capacity levels in the Eastern and Central regions and Western processors were expected to have adequate capacity to handle the increased volumes.

Milk production is increasing steadily in the Northeast, Mid-Atlantic and Central regions with rising protein and butterfat levels. Production in California and the Southwest is steady to building slightly but below a year ago. A new yogurt plant has opened in Idaho and will be ramping up the amount of milk it takes. 

NZ milk production increases
Looking across the pond; New Zealand milk production is steady to slightly lower as the milk season moves further away from the peak. October output was almost 4 percent higher than a year ago. Seasonal numbers through October were up 6 percent, reports DMN, while Australian output has been growing slightly in recent weeks. November totals are about 1 percent above a year ago. Estimates of seasonal totals growing by 2 percent are expected to be lowered. 

Back home, looking “back to the futures;” first half 2013 Class III contracts portended $18.26 per cwt., average on Dec. 7, down from $18.74 the week before, $18.47 on Dec. 14, $18.33 on Dec. 21, and was trading around $18.38 late morning Dec. 28, compared to $15.90 in 2012.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.