Cheese, butter production surge

Lee Mielke's weekly roundup of dairy news.

By Lee Mielke

For the Capital Press

Published on October 25, 2013 1:36PM

Lee Mielke

Lee Mielke

A lot of August milk flowed into the cheese vat but there’s plenty of butter being produced, according to the Agriculture Department’s August Dairy Products report, one of the first reinstated reports following the government shutdown.

August butter output hit 136 million pounds, up 1.5 percent from July and 4.7 percent above August 2012. Nonfat dry milk production hit 107 million pounds, down 8.5 percent from July but 0.6 percent above a year ago.

American type cheese, at 381 million pounds, was up a whopping 6 percent from July and 7.9 percent above a year ago. Italian type cheese totaled 386 million pounds, down 2.1 percent from July but 3.8 percent above a year ago. Total cheese output hit 926 million pounds, up 1.9 percent from July and 3.9 percent above a year ago.

Highground Dairy’s Eric Meyer wrote in his analysis that “Production of manufactured products across nearly all dairy commodities is much higher than expected and both dry whey and nonfat dry milk stocks are at very high levels for this time of year. However, the August mild weather did have an impact on ice cream and frozen product demand, leaving more milk and cream available for cheese and butter production. With the exception of whey protein concentrate and lactose, we view this report as bearish versus expectations.”

Meyer also points out that for the first time since USDA kept records in 1950, Cheddar cheese production was higher in August than July and that year over year production growth was at its strongest since 2008.

Reports reappear

USDA reports are reappearing following the government shutdown. Dairy Market News (DMN) resumed operations Oct. 17 but stated that “due to time and logistic constraints, DMN was not able to collect dairy market information, analyze data and provide market commentary, in a manner necessary to provide accurate and timely, first‐hand reports to the dairy industry.” The next issue will be released Nov. 1.

The cash dairy market seemed to take the Dairy Product news in stride. Block cheese closed Friday at $1.8750 per pound, up 1 3/4-cents on the week but 24 1/2-cents below a year ago when they jumped 12 cents, to $2.12 per pound. The barrels closed Friday at $1.82, up 5 3/4-cents on the week but 26 cents below a year ago, when they pole vaulted 161/4-cents, to $2.08. The spread is now at a more typical level. Five cars of block trade hands this week and 11 of barrel. The AMS-surveyed U.S. average block price hit $1.7890. Barrel averaged $1.7691.

Cash butter saw a third week of loss, closing Friday at $1.4750, down three quarter-cents on the week and 41 1/2-cents below a year ago. Only five cars traded hands this week. AMS butter averaged $1.5677.

Cash Grade A nonfat dry milk closed the week at $1.90 per pound, up 4 cents, and Extra Grade finished at $1.85, up 3 cents. AMS powder averaged $1.8431, and dry whey averaged 57.11 cents.

The November Federal order Class I price mover was announced by USDA at $20.20 per hundredweight (cwt.), up $1 from October, 50 cents below November 2012, and equates to about $1.74 per gallon. That pulled the 2013 Class I average to $18.70, up from $17.10 at this time a year ago, and compares to $19.19 in 2011, $15.21 in 2010, and an unbelievable $11.25 in 2009.

The surveyed product prices used to determine the Class I mover showed cheese at $1.7938 per pound, up 2 cents from October. Butter averaged $1.5551, up 16.8 cents. Nonfat dry milk $1.8358, up 3.5 cents, and dry whey averaged 57.57 cents per pound, down fractionally.

California’s November Class I milk price is $21.74 for the north and $22.01 for the south. Both are up 95 cents from October but are $1.43 below November 2012. That put the 2013 northern Class I average at $20.16, up from $18.69 at this time a year ago and compares to $20.68 in 2011 and $16.85 in 2010. The southern average now stands at $20.43, up from $18.96 a year ago, and compares to $20.95 in 2011 and $17.12 in 2010. The prices include state mandated price increases resulting from the Sept. 12 milk price hearing.

Jerry Dryer’s Oct. 18 Dairy and Food Market Analyst lends some insight into “the bottle” nationally. He reports that fluid sales at retail were down 3.6 percent during the four-week period ending Sept. 8 and down 2.8 percent year to date and “the 2.8 percent decline translates into about 625 million pounds of milk that ended up in manufacturing plants rather than milk bottles.”

During the most recent four weeks, organic milk sales were 3 percent higher and conventional milk sales 3.9 percent lower, according to Dryer, with year to date organic sales up 3.5 percent, capturing about 4.5 percent of total beverage milk sales. Conventional milk sales were 3.1 percent below one year ago through Sept. 8, Dryer said.

Western United Dairymen reports that the Dairy Institute of California, which represents cheese makers, has retained a Sacramento lobbying firm to “thwart provisions introduced by producer organizations that would have brought needed amendments to California’s Class 4b pricing formula.”

Provisions would specifically tie a dry whey value factor to reported dry whey values, similar to that found in federal milk marketing order pricing formulas. Dairy legislation will be revisited in January 2014, upon the Legislature return to session, according to WUD.

CDFA extends increases

CDFA released its findings and conclusions to the Sept. 12 milk price hearing in Sacramento. The department stated that it will simply extend the increases already in effect since July 1, 2013 through June 30, 2014.

Agriculture Secretary Karen Ross stated the increases result in an overall price increase of 12.5 cents per hundredweight each month and “I believe this will provide a consistent level of revenue to producers to ensure a stable milk supply.”

She added that “While there are positive signs in the marketplace, the fragility of the country’s economic recovery and the stability of the dairy sector compel me to make this extension. However, I am convinced that continued adjustments to the minimum price are inadequate to address the ongoing difficulties in the dairy industry. Our antiquated state pricing system demands structural reform.

“I understand there will be disappointment with this decision in light of the publicity surrounding the perceived agreement between producers and processors during the legislative session. However, the department was not jointly petitioned by producers and processors, only some producers, and when questioned by the hearing panel, processors responded that there was no agreement.”

The institute says it respects CDFA’s decision not to increase the milk price relief already in place and stated, “After thoroughly reviewing the facts, Agriculture Secretary Karen Ross has correctly concluded that further increases to the temporary price relief already in place for California dairy farmers were not warranted,” said Rachel Kaldor, Executive Director of the institute. “Secretary Ross was guided by the facts and we respect her decision.”

“The data show very clearly that economic conditions for dairy farmers have improved substantially since last year,” said Kaldor. “In addition to significantly lower feed costs, dairy farmers are also benefiting substantially from an increased demand for cheese and other products. As a result, they’ve already collected $508 million more from processors during the first nine months of this year compared to the same period last year.

California Dairy Campaign President Joe Augusto counters that the hearing decision “demonstrates that the California milk pricing system is not equitable to the state’s dairy producers.” CDC had joined California Dairies Inc., Milk Producers Council and Western United Dairymen in calling for a 46 cent per cwt. increase in the 4b price and an increase in the whey factor value from 75 cents to $1 per cwt.

“Today’s decision once again makes it clear that the only way to restore equity to milk pricing in California is by joining the federal milk marketing order system,” said Augusto. “On average dairy producer prices in California have been $1.05 lower than prices paid in the federal order causing the average sized dairy in our state to be paid nearly $600,000 less than the same sized dairy in the federal order system since January 2011.”

Union opposes deal

DairyBusinessUpdate reports that the 35,000 members of the International Brotherhood of Teamsters involved in the U.S. dairy industry are opposed to the proposed Trans-Pacific Partnership trade talks. Uniting with dairy workers from the National Union of Workers in Australia and the New Zealand Dairy Workers Union, Teamsters in Canada and the United States sent a joint letter to their nations’ trade negotiators saying they will work to defeat any trade deal that “erodes the rights or threatens the livelihoods of workers” from participating nations.

Cooperatives Working Together accepted 11 requests for export assistance this week to sell 2 million pounds of cheese and 771,618 pounds of butter to customers in Asia, Central America, Europe, the Middle East and North Africa. The product will be delivered through March 2014 and raised 2013 cheese exports to 111.3 million pounds plus 81 million pounds of butter, 44,092 pounds of anhydrous milk fat and 218,258 pounds of whole milk powder to 37 countries.

In another form of U.S. dairy exports, milking cows has come to mean a bright future for children in the Ukraine. We learned about it from New Hope Center’s John Wiens, who reported on a mission project in the Ukraine that has developed into a dairy farm and trade school for orphans.

The project’s website states: “In Ukraine, if you are an orphan, your life is almost destined to go down a destructive path. Whether it is prostitution, crime, substance abuse or other vices, Ukrainian orphans fall victim to many of these traps. Our goal is to change that trajectory, and turn them towards God, and to transform them into productive contributors in society.”

Wiens, a former farmer on the Canadian Prairies, along with his wife Ev, have been in the Ukraine for six years, and said they went with the goal of starting a church and a trade school for “aged out orphans,” orphans who have completed grade 9 in school.

“Typically they go to a government-sponsored trade school,” Wiens said, but he believes orphans’ lives only change “if they are in an environment with family.” The home is new, he said, and they place their orphans in group homes and then teach them dairy husbandry.

The Wiens were joined by Manitoba dairy farmer Gary and Teresa Verhoog, who sought to establish a 40-cow dairy farm there and that is where the students get their hands-on learning.

He said that the goal is to expand the dairy so it will help sustain the operational costs of the trade school and is currently milking 42 cows. Local cows are used, he said, “But they have clearly demonstrated to local farmers that the kind of feed given to the cows has a great influence on the amount of milk they produce,” adding that the school’s cows produce twice as much milk as a nearby 160-cow operation.

The milk is sold to two processors for sour cream, cottage cheese, and some as fluid into local markets in the cities, according to Wiens. A former collective barn was recently purchased with the goal to expand to 150-200 cows. To Learn more about the project, log on to, e-mail John at, or call 778-990-4008.


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