Dairy prices saw more weakness the first full week of February. The cash block cheese price closed that Friday at $1.4750 per pound, down a penny on the week and 44 cents below a year ago when they jumped 10.5 cents. The barrels saw some gains, but still lost a penny on the week, closing at $1.4850, 41.5 cents below a year ago when they gained 12.5 cents, but they’re a penny above the blocks despite a fair amount of product being sold. Nine cars of block traded hands and 29 of barrel. The NASS-surveyed U.S. average block price fell to $1.5587, down 2.5 cents.

The barrels averaged $1.5409, down 3.7 cents. Cash butter saw its fourth consecutive week of loss, losing another 6 cents and closing at $1.4325, 65.75 cents below a year ago. Four cars traded hands on the week. NASS butter averaged $1.5470, down 4.3 cents.  

Cash Grade A nonfat dry milk closed Friday at $1.3350, down 2.25 cents on the week, while Extra Grade held all week at $1.2975. NASS powder averaged $1.3853, down 0.8 cent, and dry whey averaged 66.48 cents, down a penny.

Commercial disappearance and the production of dairy products finished 2011 strong and rounded out a big year of output and usage, according to USDA data reported by Jerry Dryer in his Feb. 3 Dairy and Food Market Analyst.

Cheese production was up 1.7 percent (173 million pounds) to a record high 10.609 billion pounds and commercial disappearance grew by 3 percent (317 million pounds). American cheese disappearance grew 1.2 percent (49 million pounds) and other cheese, by 4.2 percent (268 million pounds). Dry whey output fell about 1 percent (10 million pounds to 950.6 million) and commercial disappearance was down 0.9 percent (8 million lbs to 952 million lbs).

Butter production increased 15.4 percent (241 million pounds) and commercial disappearance was up 10 percent (163 million lbs). Milk powder (NFDM and SMP) output neared the two-billion-pound threshold at 1.964 billion; up 8 percent (147 million lbs). Commercial disappearance was up even more, wrote Dryer, plus 8.8 percent (159 million pounds).

He also touched on the growing milk supply and, based on plant operators he has talked to, warned that “the traditional spring peak in daily milk production is one to four months early across most of the U.S.” He speculated whether there would be even more to come “as warmer weather and longer days push their way north to the milk-sheds across the upper tier of states” and posed the question; “Will there be enough plant capacity for all of the milk by March, April, and May.” Several people he spoke with are concerned, he reported.

Zeroing in on nonfat dry milk (NFDM), the CME’s Daily Dairy Report said U.S. NFDM prices have dropped steadily the last seven months, falling 25-30 cents from the July 2011 peak. Buyers are often waiting for prices to stabilize before ordering too far out, according to the DDR, and inventories are building.

Meanwhile, Oceania skim milk powder prices have held mostly steady since October. “Traders and handlers indicate that powder stocks are sufficient to fulfill commitments with minimal volumes remaining as uncommitted,” DMN said.

Mild winter weather across much of the country is helping to increase milk production and thus more milk is finding its way to cheese vats, according to Dairy Market News. Inventories are building as sales are reported as slow after the New Year. In most regions, the winter season has been much less stressful on the herd and increasing milk receipts at processing plants are being reported. Except for Florida, milk volumes coast to coast are building to the point that milk is not moving from one region to another to supplement shortages.

Milk volumes are increasing, but processing capacity is generally sufficient within close proximity of production at this time, according to USDA. Cream markets are weak and pricing multiples are easing. Cream volumes are heavy and often clearing from one region to another to find processing. Producers of higher-class cream product items are seeing declines in orders after a recent boost from football related interest, thus more cream is available to churns coast to coast. The Oceania milk production season continues to trend lower. New Zealand weather patterns are favorable for production at this time of the annual cycle and handlers continue to project a 3-4 percent annual increase over last season, with some handlers adjusting their estimates to a strong 4 percent plus increase.

Fluctuating weather in Australia is not having an overall negative impact on milk output. Producers and handlers indicate volumes are lower but maintaining levels that are often higher than projected.

Producers project a 2-3 percent annual increase when the current fiscal year ends in June.

Readers with questions or comments for Lee Mielke may write to him in care of this publication.