By LEE MIELKE
For the Capital Press

The February Federal order Class III milk price was announced by the Agriculture Department March 5 at $14.28 per hundredweight, down 22 cents from January, but $4.97 above February 2009, and $1.33 above the comparable California 4b price. Class III futures portend a couple more months of loss. The March contract was trading late morning Friday at $12.92, April $12.87, May $13.12, June $13.95, and July at $14.60, with a 2010 peak of $15.20 in September and October. The February Class IV price is $12.90, down 95 cents from January but $3.45 above a year ago.

The four-week NASS-surveyed cheese price averaged $1.5110 per pound, down 2.6 cents from January. Butter averaged $1.3609, virtually unchanged. Nonfat dry milk averaged $1.0812, down 11.2 cents, and dry whey averaged 39.25 cents, up fractionally.

The four-week NASS-surveyed cheese price averaged $1.5110 per pound, down 2.6 cents from January. Butter averaged $1.3609, virtually unchanged. Nonfat dry milk averaged $1.0812, down 11.2 cents, and dry whey averaged 39.25 cents, up fractionally.

California's February 4b cheese milk price is $12.95 per hundredweight, up 23 cents from January, $2.84 above February 2009. The 4a butter-powder price is $12.84, down 91 cents from January but $3.44 above a year ago.

Cash cheese prices are not helping matters. Block fell 4 1/4-cents the first week of March, closing Friday at $1.2975 per pound, but that's still 9 3/4-cents above that week a year ago. Barrel closed at $1.25, down 4 cents on the week, but 3 cents above a year ago. Eight cars of block traded hands on the week and 34 of barrel. The NASS-surveyed U.S. average block price fell 1.4 cents, to $1.4921. Barrel averaged $1.4661, down 3.4 cents.

Thankfully, the butter market remains strong, closing Friday at $1.45, up 4 1/2-cents on the week and 28 1/4-cents above a year ago. Only one car was sold all week. NASS butter averaged $1.3592, up 1.9 cents.

Cash Grade A nonfat dry milk lost a penny on the week, closing Friday at $1.11. Extra Grade plunged 12 cents, dipping to $1.12. NASS powder averaged $1.0448, down 2.5 cents, and dry whey averaged 38.94 cents, down 0.5 cent.

Market analyst Mary Ledman, principal of Keough Ledman and Associates in Libertyville, Ill., warned that additional cheese capacity is coming on line from Southwest Cheese in March that could put continued downward pressure on prices. But she pointed out that the last week of February saw 31 loads of block trade hands and 15 of barrel, indicating that people are finding value in this market.

In contrast, butter is climbing. Ledman reported that Feb. 26 was the last trading day for old crop butter and that, as of March 1, only butter that had been produced after Dec. 1, 2009, could be traded at the CME.

It's not unusual for a bump up on March 1, she said, as there's only three months of production eligible to be traded and most people are cautious about trading butter early in March because they want to maintain inventories through the Easter and Passover holidays and then build inventory for the second half of the year.

Butter stocks, on the other hand, were down 4 percent or 7 million pounds from a year ago, she said, "so butter is being buoyed by the low stocks."

The Agriculture Department's latest Dairy Products report put January butter production at 162 million pounds, up 11.2 million pounds or 7.5 percent from December but 12.7 million pounds or 7.2 percent below January 2009.

Mozzarella cheese output totaled 285.3 million pounds, down 4.6 million pounds or 1.6 percent from December, but 17.2 million or 6.4 percent above a year ago.

Total Italian-type cheese, at 363 million pounds, was down 10.1 million pounds or 2.7 percent from December, but 15.1 million or 4.4 percent above a year ago. Cheddar production totaled 266.6 million pounds, up 6.6 million pounds or 2.5 percent from December, but down 7.5 million or 2.7 percent from a year ago.

American-type cheese amounted to 347.7 million pounds, down 1.6 million pounds or 0.5 percent from December, and down 5.5 million pounds or 1.6 percent from a year ago.

Total cheese output hit 842.3 million pounds, down 19.6 million pounds or 2.3 percent from December, but 18.3 million or 2.2 percent above a year ago.

The February Milk-Feed Price Ratio is 2.38, up from January's revised estimate of 2.31, according to USDA's "Ag Prices" report issued Friday afternoon, and compares to 1.51 in February of 2009.

The All Milk Price was estimated at $15.90 per hundredweight, down 20 cents from last month's estimate, but $4.30 above a year ago.

Corn averaged $3.45 per bushel, down 21 cents from January, and 42 cents below a year ago. The soybean price, at $9.40 per bushel, was down 39 cents from January, and 14 cents below a year ago. Alfalfa baled hay was $111 per ton, down $2 from January, and $30 below a year ago.

Corn averaged $3.45 per bushel, down 21 cents from January, and 42 cents below a year ago. The soybean price, at $9.40 per bushel, was down 39 cents from January, and 14 cents below a year ago. Alfalfa baled hay was $111 per ton, down $2 from January, and $30 below a year ago.

The final trade numbers are in, and as expected, U.S. dairy exports declined in 2009, ending six straight years of expansion. The U.S. Dairy Export Council's Margaret Speich said from 2002 to 2008, the value of U.S. dairy exports had increased almost four-fold, and overall volume had more than doubled.

But in 2009, dairy exports sales dropped 39 percent, to $2.32 billion. Most of the downturn reflected lower world prices, according to Speich. Commodity prices were 30 to 40 percent lower in 2009 than 2008. Overall export volume was off just 16 percent, at 2.18 billion pounds of milk solids. In fact, U.S. exports held up better than forecast in January, she said.

"One way of looking at these results is that resilience of our export performance indicates a further maturation of the U.S. industry," Speich said. "U.S. dairy export volume, overall and in all individual product categories, is significant and high in historic context. In fact, volumes are at levels where exporting is a prerequisite to maintaining a healthy and growing industry."

Export volume represented 9.3 percent of U.S. milk production in 2009, according to the data, down from 11 percent in 2008, and 9.8 percent in 2007.

"The biggest concern going forward is that the United States could continue to struggle to become a consistent exporter because we're still generally guided by a production-oriented mindset, rather than a global-customer-centric one," Speich said. "Unless the United States deals with the fundamental problems that make it the residual supplier to the world, we will remain the last-in/first-out player in base commodities, which accelerates volatility."

Those sentiments were echoed by Dairy Profit Weekly's Dave Natzke. Natzke reported on his recent USDEC information mission. The group was made up of USDEC members, USDA staff, Pennsylvania dairy farmer Paula Meabon, Arizona dairyman Paul Rovey, and North Dakota dairy farmer Kenton Holle, and traveled to Dubai, in the United Arab Emirates.

A centerpiece of the trip was to attend Gulfood, the largest Middle East food trade show, which brought food suppliers and buyers from all over the world. They also spent five days meeting with dairy product and ingredient buyers from throughout the Mideast.

"What I found," Natzke said, "was a region hungry for a consistent supply of U.S. dairy products and ingredients."

The United States lags well behind the European Union, New Zealand and Australia as a supplier of dairy to this emerging market, according to Natzke, While logistics and prices put many U.S. companies at an economic disadvantage, members of the mission were told that population growth and cultural changes in the Mideast "make the market potential too great to overlook."

Meeting that market demand will likely mean changes in how U.S. companies address competitive issues, Natzke said, as to what products we produce, and how we conduct business. For example, many U.S. cooperatives produce a lot of nonfat dry milk powder and salted butter, he said, because if there's a surplus, they have a guaranteed buyer in the U.S. government. In contrast, Middle East buyers prefer whole milk powder, he said, unsalted butter, and anhydrous milk fat as ingredients for other foods.

The region is a large buyer of whey protein concentrates to use as in ingredient in other foods, according to Natzke. However, because the U.S. produces a lot of yellow cheddar cheese, the whey concentrates discolor foods manufactured in the Middle East compared to the whey concentrates derived from the white cheddar in other parts of the world.

In addition, because the export market is largely seen as a market of last resort for U.S. surplus, U.S. companies often overlook the customer service and personal business relationships necessary to serve this market, he said.

The Agriculture Department issued its final decision as to what constitutes a "producer-handler." National Milk's Chris Galen said that "It's the end of a long sought effort to put a lid on the exemption that the largest producer-handlers have enjoyed."

USDA's rule, which will take effect this spring after being ratified by farmers in the 10 marketing orders, limits the producer-handler designation to farms that bottle 3 million pound of milk or less per month. Any operation producing above that will be subject to the same Class I requirements as any other commercial bottler, he said, "So this creates a level playing field."

It remains to be seen if any of the affected operations will reduce their size to maintain the producer-handler status, but NMPF estimates that there are only about five or six in the U.S. that will be affected and another 35 will remain producer-handlers and thus be exempt.

"It really only affects the very largest of the large producer-handler operations," he said.

Vivian Godfrey marked her one year anniversary as CEO of MilkPEP. She said that one of her most important accomplishments has been making sure that MilkPEP works closely with producer groups such as Dairy Management Incorporated, National Dairy Council, and National Milk to "align our activities and messages."

During the last week of February she spoke to DMI's board and members of the National Dairy Council's state and regional representatives. She started by reminding attendees that the single objective of MilkPEP is to encourage American consumers to drink more milk.

She said that they target two main groups where they believe they will have the biggest impact. The first group is mothers with children at home, and the second group is teenagers.

"In 2010 we are using the message of Building Strong Families to talk to mothers," Godfrey said. Two thirty-second TV commercials will air for much of the year, plus a single version in Spanish.

"The goal is to remind mothers of the many different ways that they can serve milk to their children and to their whole family," Godfrey said. "And why, with its incredible nutrient richness, it's a very healthy choice."

The second target group is teenagers. Many teens drink lots of milk, she said.

"We see them turning to other choices like sodas and energy drinks. So our goal is to remind them about how delicious milk is and how it helps them grow tall and have great skin, teeth and hair."

There won't be any TV commercials targeted to teens, she said, but instead will use the Milk Mustache celebrities on posters in schools, magazines and on the Internet.

"Teens especially love our Milk Mustache advertisements featuring sports celebrities," Godfrey said. "So we were very excited this year for the first time to team up with DMI and the NFL's Fuel Up To Play 60 initiative for the two Super bowl ads that aired, featuring players from the Saints and the Colts.

"We look forward to continuing to work closely with the Dairy Farmer organizations during 2010," Godfrey said.