The 2014 milk production forecast in USDA’s World Ag Supply and Demand Estimates report, released March 10, was unchanged from last month, but historical data was adjusted to reflect revised data for 2012 and 2013. Look for 2014 milk output to hit 205.7 billion pounds, up from 201.2 billion in 2013 and 200.5 billion in 2012.
Product price forecasts for cheese, butter, nonfat dry milk and whey were higher, supported by strong demand and price strength to date. Class III and Class IV price forecasts were raised on higher product prices.
The 2014 Class III milk price average was pegged at $19.25 per cwt., up from the $18.70 expected a month ago and compares to $17.99 in 2013, $17.44 in 2012, and $18.37 in 2011. The Class IV average was put at 20.70, up from last month’s $20.20 and compares to $19.05 in 2013, $16.01 in 2012, and $19.04 in 2011. The 2014 all milk price was forecast at $21.40-$22.00 per cwt.
Corn exports in the WASDE were projected 25 million bushels higher on stronger world imports and the rising pace of shipments in recent weeks. Continued strong export sales also support the higher figure. Projected corn ending stocks were lowered 25 million bushels. The season-average farm price for corn was narrowed 5 cents on both ends of the projected range to $4.25-$4.75 per bushel.
U.S. soybean supply and use projections for 2013/14 included higher imports and exports, reduced crush and reduced ending stocks compared with last month’s report. Soybean exports were raised 20 million bushels to a record 1.53 billion reflecting continued strong sales and shipments through February.
Soybean crush was reduced 10 million bushels to 1.69 billion reflecting weaker-than-expected domestic soybean meal use through the first quarter of the marketing year. Soybean stocks were projected at 145 million bushels, down 5 million from last month. Soybean and soybean product prices were all projected higher this month. The season-average price range forecast for soybeans was raised 25 cents on both ends of the range to $12.20 to $13.70 per bushel. Soybean meal prices were projected at $450 to $490 per short ton, up 25 dollars at the midpoint.
The California Department of Food and Agriculture announced the state’s April Class I milk prices this week at $24.88 per hundredweight for the north and $25.15 for the south. Both are down 50 cents from March record highs but are still $5.39 and $5.38 per cwt., respectively, above April 2013.
The north 2014 Class I average now stands at $24.05, up from $19.72 at this time a year ago and $18.30 in 2012. The southern average, at $24.32, is up from $20.00 a year ago and $18.57 in 2012. The Federal order Class I base price is announced by USDA on March 19.
Impact of higher prices
Speaking of high milk prices, the National Milk Producers Federation newsletter reports that a rash of news stories in February focused on the potential impact of rising farm-level milk prices, stoking fears of record-high consumer prices for dairy foods.
NMPF says it has provided important context to the issue, reminding the media that farm prices are just now climbing back to where they were in 2007-2008, before the Great Recession devastated dairy markets and points out that dairy farmers have no control over retail milk prices, which vary widely from store to store. And farmers still get only about 35 cents of every dollar the consumer spends on milk and dairy products, according to NMPF.
Farm prices are rising because increased global demand for dairy products, now being met in part with U.S. exports, which amounted to more than 15 percent of total U.S. production. As a result, the supply of milk in this country is not keeping up with demand.
Last year, milk production rose just .4 percent, as feed costs, weather and past low prices combined to keep a lid on farmers’ ability to expand output. Even with the recent price rise, however, dairy food inflation has lagged behind both the general inflation rate and the rise in all food costs for a decade, according to NMPF.
CWT OKs cheese export aid
Cooperatives Working Together accepted 12 requests for export assistance this week to sell 912,714 pounds of Cheddar and Gouda cheese, 1.355 million pounds of 82 percent butter and 606,271 pounds of whole milk powder to customers in Asia, Central America, Europe, the Middle East, North Africa and the South Pacific. The product will be delivered through August and raised CWT’s 2014 export sales to 26.985 million pounds of cheese, 11.774 million pounds of butter and 1.305 million pounds of whole milk powder to 19 countries.
U.S. exports picked up in 2014 where they left off in 2013, according to the U.S. Dairy Export Council. U.S. suppliers shipped 162,999 tons of milk powder, cheese, butterfat, whey and lactose in January, up 19 percent from last year. That’s about the same volume as the last four months of 2013, says USDEC, and total value of all exports was $583.7 million, up 35 percent from a year ago.
Cheese exports topped 32,000 tons for the first time, establishing a new record for the third month in a row. Sales to existing customers remained strong in January, while new sales were captured in Australia, Saudi Arabia, China and Egypt.
U.S. exporters also ramped up shipments of butterfat, up 150 percent over last January, whole milk powder, up 314 percent; and milk protein concentrate, up 110 percent. On the other hand, exports of dry whey and whey protein concentrate continue to lag prior-year levels. WPC exports in January were the lowest in nearly two years. Exports of nonfat dry milk/skim milk powder at 38,761 tons, were higher than the diminished levels of last January, but well below the levels registered in the last nine months of 2013 with an average of 49,849 tons per month.
In addition, NDM/SMP exports in January represented just 43 percent of U.S. powder production for the month, leading to a greater-than average build-up of inventory. The slowdown in NDM/SMP exports is attributed to greater competition, particularly from the EU, which saw a milk production increase of 4.3 percent in the fourth quarter of 2013.
What’s in a name?
In other trade news, a bipartisan majority of the U.S. Senate weighed in this week on the importance of rejecting European Union efforts to restrict the use of common food names, including a variety of popular, well-known cheeses, used by U.S. dairy producers and companies.
In a letter to U.S. Trade Representative Michael Froman and U.S. Agriculture Secretary Tom Vilsack, over 50 senators urged the U.S. government to fight back against EU efforts to restrict how U.S. companies market cheese and other foods. Under the guise of protecting European geographical indications, EU has been using free trade agreements to prevent cheese makers in the United States and around the world from using common food names such as parmesan, feta, havarti, Muenster and others.
The USDEC and NMPF applaud the Senate’s strong statement in support of the U.S. dairy industry, as it comes at a critical time in the development of a free trade agreement between the U.S. and the EU.
“Over the past five years, U.S. cheese exports have been growing by an average of 40 percent annually, leading to a record high of $1.4 billion in U.S. cheese sales abroad last year,” said Tom Suber, president of USDEC. “Last year, the United States became the largest single country cheese exporter in the world. So it’s vital to ensure that unfounded barriers to trade do not hinder this continued growth path for our industry.”
“For consumers both here and abroad, the consequences of limiting familiar food names to just a few regional suppliers would be higher costs, fewer choices and greater confusion,” said Jim Mulhern, president and CEO of NMPF. “No one country has any right to own common food names for their exclusive use. U.S. businesses should have the opportunity to offer their award-winning products, and let consumers decide what they want to buy.”
International Dairy Foods Association President and CEO, Connie Tipton, also applauded the Senate action, stating, “These lawmakers understand the importance of lowering trade barriers and fighting the kinds of restrictions that have the capacity to stall job growth in the United States and limit our expanding dairy export market. Protecting the ability of U.S. cheese makers to use common cheese names is a top priority for IDFA.”
Cheese prices up
Meanwhile, cash cheese prices saw a fourth week of climb, with the 40-pound block Cheddar closing Friday, March 14, at $2.3625 per pound, up 7 cents on the week, 75 1/4-cents above a year ago, and a new record high for blocks. The 500-pound barrels closed at $2.2625, up 1 1/4-cents on the week, 67 1/4-cents above a year ago however the barrels lost 2 1/4-cents Thursday and Friday and are now a dime below the blocks, compared to the normal 3-5 cent spread. Only two cars of barrel traded hands on the week at the CME. Blocks have not sold there since February 20. The lagging National Dairy Products Sales Report-surveyed U.S. average block price hit $2.1878, down 4.3 cents, and the barrels averaged $2.2148, up 0.8 cent.
Favorable demand continued to move prices higher, according to USDA’s Dairy Market News. Domestic demand for retail is steady with some increased interest for process cheese. Mozzarella sales are also said to be increasing. Export demand is steady, with some additional forward sales receiving price assistance. Cheese production is increasing as milk supplies build seasonally across the country. Some Midwestern plants are buying surplus milk to increase production and fill orders.
Cash butter closed the week at $1.88, unchanged on the week, but 22 1/2-cents above a year ago. Eight cars traded hands on the week. NDPSR butter averaged $1.8242, up 1.6 cents.
U.S. butter prices remain competitive with international prices fostering good export sales, according to DMN. The market tone is steady with supplies and retail orders gradually building.
Cash Grade A nonfat dry milk closed Friday at $2.04, unchanged on the week. Two cars were sold. NDPSR powder averaged $2.1032, up 1.8 cents, and dry whey averaged 64.81 cents, up a half cent.
Milk production is increasing across most of the country, according to USDA. There were no serious weather events affecting milk production or movement the week of March 3. More milk is moving through manufacturing plants as Class I sales are sluggish. Processors are ramping up production of Class II products as warmer weather moves into the U.S. Frozen dessert and ice cream accounts are increasing cream intakes, helping to keep cream supplies manageable.