The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
U.S. dairy exports remain near two-year lows, but shipments rebounded a bit in February compared with the prior month, according to the latest data from the U.S. Dairy Export Council. Exporters shipped 137,576 tons of milk powders, cheese, butterfat, whey and lactose in February, down 14 percent from a year ago, but up 21 percent from January on a daily-average basis. Total overseas sales were valued at $434 million, down 26 percent from last year, but up 20 percent from January (daily average).
Exports of cheese and nonfat dry milk/skim milk powder (NDM/SMP) were up sharply from January's levels, and only slightly below February 2014. Shipments of NDM/SMP were 35,610 tons, up 13 percent from January (daily average) and down just 2 percent from last year. Sales to Mexico were up 34 percent from a year ago, and new sales of 2,770 tons went to Pakistan.
Cheese exports were 29,578 tons, up 38 percent from January (daily average) and down just 5 percent from a year ago. Mexico (up 23 percent versus last year) and South Korea (up 24 percent) posted increases.
Whey exports also were higher than January. Overall volume reached 32,831 tons, up 17 percent from January (daily average), though still 17 percent below a year ago. Gains were led by whey protein isolate, with exports up 72 percent from last year. In February, overall whey shipments to Southeast Asia were up 12 percent versus the prior year, while exports to China, our largest whey market, were down 34 percent.
U.S. exports (on a total milk solids basis) were equivalent to 13.1 percent of U.S. milk solids production in February, down from the 15.4 percent proportion exported in 2013-14. Imports were equivalent to 3.2 percent of production in February, according to the USDEC.
Cheese Prices Hold Steady
Cash cheese prices saw little change the first full week of April. The block Cheddar closed last Friday at $1.5775 per pound, down a quarter-cent on the week and 59¼ cents below a year ago when they tumbled 18 cents, to $2.17. The Cheddar barrels closed at $1.61, up 1½ cents on the week and the highest they have been since Dec. 1, 2014 but are 47 cents below a year ago, when they rolled 14½ cents lower to $2.08. They are also 3¼ cents above the blocks, a spread that typically runs 3-5 cents below the blocks. The ever lagging NDPSR-surveyed U.S. average block price slipped a half-cent, to $1.5756 per pound, while the barrels averaged $1.5729, down .9 cent.
Orders received by most Midwest cheese manufacturers continue to be consistently strong, leading to maintaining high levels of production, according to Dairy Market News. Extra milk is often available and is being purchased to achieve desired production levels. Many plants have found that they can be opportunistic and hold out for milk discounts of $2 or more under class, and generally find sellers. There is some surprise expressed at how long milk has been available at a discount in the Midwest.
The storage capacity available to plants varies. Some manufacturers continue to make as much cheese as available milk allows, with no concern to storing what can't be immediately sold. However, some plants are now facing fuller storage facilities, which may begin to affect manufacturing schedules in the near future. Storage capacity is not so much a factor for cheese manufacturers with specialty products or those in niche markets.
Western cheese manufacturers continue to find strong customer demand for cheese. The term "robust" was used in some discussions. Retail customers are perceived to like current pricing, which is driving orders from retailers. Demand is also strong from food service customers as well as brokers and resellers. While some cheese is going into storage, there is a growing perception that fresh usage demand is accounting for significant volumes of cheese production. With steady to increasing milk supplies, maintaining desired cheese production is not presenting challenges to manufacturers.
Cash butter closed April 10 at $1.7525 per pound, up 1¼ cents on the week and 21¾ cents below a year ago. Only one car traded hands on the week. NDPSR butter averaged $1.6973, up 2.5 cents.
DMN says churning has slowed for print butter in the Central region with the lapse of the holidays. Butter manufacturers are making and storing more bulk butter as demand has slowed. Inventories are mixed but most manufacturers want to increase stocks on hand for future contract needs. Cream supplies are available. Churns in the West are producing butter for print and bulk demand. Manufacturers have noted bulk butter holdings being tighter than had been expected. Some manufacturers, though, are making print butter to fill contracts and selling unneeded cream rather than add butter to inventories.
Cash Grade A nonfat dry milk finished the week at 93 cents per pound, down 4¾ cents on the week, 97 cents below a year ago, and the lowest spot price since Aug. 3, 2009. Fifteen cars were sold at the CME. NDPSR powder averaged 99.55 cents per pound, up .4 cent, and dry whey averaged 46.78 cents per pound, down 2.5 cents.
The nonfat dry milk market continues to weaken across the country, according to DMN. Increased output and limited demand is impacting prices. Reseller and end-users transactions are picking up. Dry buttermilk prices are mixed. Active production is building onto light inventories in the Central/East and mixed inventories in the West. Dry whole milk prices moved sharply lower in a weaker market. Some manufacturers are pushing to clear 2014 dated inventory.
USDA Milk Forecast
The Agriculture Department lowered its 2015 milk production forecast for the fourth time in a row in its latest World Agricultural Supply and Demand Estimates report issued last Thursday, again blaming growth in output per cow being constrained by dry conditions in the West. It also raised the Class III milk price average and lowered the Class IV.
2014 production and marketings were reported at 206 billion pounds and 205.1 billion, respectively, both unchanged from last month's report. If realized, 2014 production would be up 2.4 percent from 2013.
2015 production and marketings were projected at 210 billion and 209 billion pounds, respectively. The production estimate is down 1.1 billion pounds and the marketing estimate is down 1 billion from a month ago. If realized, 2015 production and marketings would be up about 1.9 percent from 2014.
Fat basis imports were raised on demand for butterfat, but skim-solids imports were unchanged. Exports are hampered by relatively weak international prices and the strong dollar; thus forecasts for both fat and skim-solids are reduced from last month.
Product price forecasts for butter and cheese were raised on domestic demand strength. However, relatively weak exports of nonfat dry milk (NDM) are expected to pressure prices lower. The whey price forecast was unchanged.
The Class III milk price was raised on the strength of cheese prices. Look for the 2015 average to range $16.20 to $16.70 per hundredweight, up from the $15.95 to $16.55 expected a month ago, and compares to $22.34 in 2014 and $17.99 in 2013.
The Class IV price was reduced as a lower NDM price more than offsets a higher butter price. Look for the Class IV to averaged $14.45 to $15.05, down from the $15.30 to $16 expected last month, and compares to $22.09 in 2014 and $19.05 in 2013.