FC Stone dairy economist Bill Brooks said in Tuesday’s DairyLine that October butter output was the highest since records were kept and he’s a bit surprised that the price hasn’t fallen much considering the huge volume that was traded the week of Nov. 28. He warned however that, if the price breaks below $1.60, “it could be the straw that breaks the camel’s back.”

He sees cheese prices dipping to $1.60 or so as well and reminds us that we started 2011 in the $1.30s, but saw the $2 level maintained for some time. He pointed to the growing milk supply across the Southern Hemisphere and said “That’s not real positive given our economic situation we have out there across the world that we’re going to be able to use up all that at these current price levels and it could very well be that we’ll have to push those prices down a little bit further to move the product.”

The global dairy auction was held on Dec. 6 and prices were up, according to the CME’s Daily Dairy Report. The trade weighted index was up 2.6 percent from the Nov. 15 auction. The weighted average price for skim milk powder was $1.55 per pound, up 2.6 percent; whole milk powder was $1.65 per pound, up 2 percent; anhydrous milkfat was $1.82 per pound, up 12 percent and the highest since early September. The Cheddar cheese price was up 2.1 percent, to $1.62 per pound.

“International prices are still much weaker than domestic prices,” according to FC Stone dairy broker Derek Nelson and “World prices are still playing catch-up with U.S. prices.” Broker Boris Maslovsky adds that “International dairy markets appear to have stabilized but U.S. prices are still at a premium to world prices.

Typically international prices are higher,” he said, and warned “We could see the traditional spread between world and U.S. dairy prices slowly reestablish itself.”

Bill Van Dam, of California’s Alliance of Western Milk Producers, said he has followed this auction since its inception, particularly skim milk powder, and for the past two months the sale of it by DairyAmerica.

He wrote in his weekly newsletter that “It is becoming clear that the whole range of products sold at those auctions have become a critical piece of information in establishing the value of the various products in the world market.”  

He also reported that Murray Goulburn, a cooperative that handles about 32 percent of the Australian milk supply, will be the first to offer lactose products at the auction. Lactose has become a valuable product in which there is a great deal of interest, Van Dam said. “The U.S. exports over 50 percent of the lactose made in this country and interestingly New Zealand is our most important customer.” Murray Goulburn will offer products for the first time in April 2012 and that is the only products they will offer, according to Van Dam.

National Milk’s Third Quarter Import Watch shows dairy product imports continue a downward trend. NMPF’s Jim Tillison said in Thursday’s DairyLine that the imports they monitor have dropped 49 percent since 2005 and he pointed out that it’s the high value products that are dropping off the most.

 

Acording to Tilison, but “reflects the strong demand for cheese outside the U.S.” “The world middle class is growing,” he said, “And as a result, there’s a growing demand for dairy products offshore so the U.S. is no longer the place to dump dairy products. 

Butter imports are mixed, but Tillison said there was a big drop in butter substitutes, such as anhydrous milkfat, most of which was coming from Canada. Almost none was imported in the Third Quarter, he said. “We’re seeing a continuing shift away from imports toward products that are produced domestically and toward the world export market.” 

On the other hand imports of casine are up from a year ago and appear to jump when the milk price rises. When the nonfat dry milk price goes up imports of casine go up as well and Tillison believes that’s tied to the fact that casine can be a substitute in certain uses for nonfat dry milk powder. 

Milk protein concentrate imports are down and isn’t the “bug-a-boo” that some think it is, according to Tillison. MPC imports are running about average to what they’ve been running, he concluded. 

The farmer-funded CWT program accepted 13 requests for export assistance this week from Dairy Farmers of America and Darigold to sell a total of 3.2 million pounds of Cheddar and Gouda cheese to customers in Asia, Central America, the Middle East, and North Africa. The product will be delivered through May and raised CWT’s 2011 cheese exports to 91.5 million pounds. The International Dairy Foods Assoc. (IDFA) has issued its annual Dairy Facts book. Vivian Godfrey talked about it in Wednesday’s DairyLine and pointed out that the Milk Processor Education Program (MilkPEP) relies a great deal on research about dairy trends and Americans eating and drinking habits. 

She reported that U.S. milk production reached a record 192.8 billion pounds in 2010, but U.S. dairy exports increased 38.9 percent in volume with a 65 percent increase in value over 2009. She added that per person consumption of natural cheese achieved a record 33.29 pounds, surpassing t he previous 2007 record.

On a less positive note the long-term trend of declining sales of packaged fluid milk products continued but MilkPEP still sees good opportunities ahead and is using research to fight aggressively to increase fluid milk consumption.

MilkPEP’s independent research shows that from breakfast to dinner, milk consumption at home represents close to 70 percent of all domestic milk consumption, with 2.7 billion gallons of milk being consumed at breakfast alone. Our data also shows that milk added to foods and beverages makes up about 40 percent of total fluid milk volume.

Another revelation from the study is that many Americans stop drinking milk in their teenage years. “We have discovered through research a great opportunity to bring lapsed adults back to drinking milk by suggesting that they drink chocolate milk as a refuel beverage after exercise,” Godfrey concluded. “There is strong scientific evidence from research with athletes that chocolate milk is the ideal recovery beverage if consumed within two hours of vigorous exercise.”

The USDA’s latest milk production estimate for 2011 and 2012 was unchanged from last month’s World Agricultural Supply and Demand Estimates report. Commercial exports were forecast higher for 2011. Look for 2011 milk output to hit 195.9 billion pounds, up from 192.8 billion in 2010 and 189.3 billion in 2009. The 2012 projection is 198.4 billion pounds.

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World. Readers with questions or comments for Lee Mielke may write to him in care of this publication.