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USDA Dairy Market News – June 21, 2013

CME Butter Grade AA closed for the week at $1.5000. The weekly average for Grade AA is $1.5160 which was -.0240 from the previous week. Cheese barrels closed at $1.7175 and 40# blocks at $1.7250. The weekly average for barrels is $1.7445 (-.0255) and blocks, $1.7230 (-.0130).

BUTTER HIGHLIGHTS: Western butter prices are steady to weak as increased butter in cold storage weighs on the market. Buyers are looking for discounts as an incentive to purchase more than immediate needs. Domestic demand for print butter into Western retail and club stores continues to be strong. Central bulk butter production is active, but churn operators report they are willing to forego some churning to sell into the Class II market at higher multiples. Cream multiples for the week range from 1.26 to 1.35 for all Classes. Northeast cream demand continued to improve this week, and as a result, butter production has seen further declines. Some Northeast butter makers have been able to curtail bulk butter production, due to the decrease in the cream supply. Domestic demand for Northeast butter remains lackluster and below year ago levels and producers are building inventory. Prices for bulk butter vary, ranging from 3 cents under to 5 cents under the market in the West, from 1 cent under to 1 cent over in the Central Region, and from 4-6 cents over the market in the Northeast. According to the FAS, quota imports of butter for January – May 2013 total 4.0 million pounds, 50.3% more than the same period in 2012. January – May imports for 2013 account for 26.2% of the yearly total quota. Imports of High-Tier butter (above quota and with a penalty) are 252,749 pounds, more than double last year’s high tier import of 110,137 pounds for January – May.

CHEESE HIGHLIGHTS: Cheese prices are mixed for the week. Contract cheese prices tied to CME weekly averages were higher for both blocks and barrels. Spot cheese prices at the CME and elsewhere were mixed for blocks and lower on barrel offerings. Barrels had been trading at a premium to blocks recently and that spread returned to a more typical situation. Overall prices have moved in a small range for the last month. Cheese production continued at a steady pace with plants trying to maximize schedules. Domestic sales are steady with some increased interest from export markets. CWT assistance has helped to accelerate export sales this year. Year to date, the program has assisted with export sales of over 61 million pounds of cheese. Cheese stocks are heavier than usual, but are not felt to be problematic. Barrels closed the week at the CME Group on Friday at $1.7175 and blocks at $1.7250. Barrels are down $.0550 from last Friday and blocks are up $.0025 from last week’s close.

FLUID MILK: Availability of spot loads of milk in the Midwest is uneven. Some cheese manufacturers indicate their internal milk supplies are declining seasonally and access to additional milk supplies would be helpful to meet near term cheese orders. A few manufacturers with nonfat dry milk and cheese production capabilities are opting toward sending additional loads of farm milk intakes into NDM operations as that market appears to be gaining near term strength. Weather in California is not stressing the milking herd at all. The peak in milk production is past, but output is not dropping off very much or very fast.

According to the U.S. Drought Monitor, the entire state is classified as being in a moderate to severe drought with the outlook calling for the drought to persist or intensify in the coming months. Warm conditions continue to persist in Arizona. The milking herd is under some stress, but the heat abatement measures continue to work well. Tests on milk receipts do continue to decline seasonally. Milk receipts in New Mexico continue to hold up reasonably well. Days are warm in the dairy areas, but drop into the mid-60s at night. Milk is being handled efficiently by processing plants. Weather conditions in the Pacific Northwest are ideal for comfortable cows. This is helping to hold milk production levels near the seasonal peak. Coastal areas are well supplied with rains for pasture and some rains fell across the high desert areas of Eastern Washington this week. Milk supplies for processing showed some increases this week as Class I usage drops with schools letting out. Manufacturing plants have adequate capacity to handle current supplies with some milk being moved to balance production of specific products. Utah and Idaho milk supplies are mostly steady. High temperatures during the day are balanced with cooler nights and cows are not stressed to any extent currently. Manufacturing capacity is still above milk production in most parts of the region. Weather conditions favorable of cow comfort levels in the Northeast and Mid-Atlantic regions have supported a strong and prolonged seasonal milk flush. Manufacturing milk supplies continue to be heavy and above year ago levels. Class I demand is near its seasonal low point as nearly all schools have closed for summer break. Florida weather has turned hot and humid, causing considerable declines in milk production. Milk supplies in the Southeast continue to exceed demand, requiring the utilization of auxiliary manufacturing plants. Load rejections, due to temperature issues, continue to be a problem with transports out of the most southern areas of the region. 

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