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USDA-MD: National Dairy Market at a Glance

November 10, 2017 MADISON, WI (REPORT 45) -

DY, DAIRY 
MD DA950 NATIONAL DAIRY MARKET AT A GLANCE 

CME GROUP CASH MARKETS (11/10) 
BUTTER: Grade AA closed at $2.2550. The weekly average for Grade AA 
is $2.2185 (-.0245).
CHEESE: Barrels closed at $1.7525 and 40# blocks at $1.7100. The 
weekly average for barrels is $1.7235 (+.0010) and blocks, $1.6705 (-
.0745).
NONFAT DRY MILK: Grade A closed at $0.7225. The weekly average for 
Grade A is $.7210 (-.0090).
     BUTTER HIGHLIGHTS: Cream supplies are fairly evenly distributed 
throughout the United States for butter production. Production is 
mixed as many manufacturers are churning butter, however some 
balancing plants are putting off churning until after Christmas. In 
addition, other butter makers are selling cream back onto the spot 
market. Butter inventories are adequate and meet customers' needs and 
spot load requests. The demand is steady to strong due to increased 
holiday and end of year needs. Butter market prices have declined in 
some regions but are generally steady in others. Bulk butter prices 
range from flat market to 8 cents over the CME average. The market 
tone is weak to somewhat steady as some market participants report 
that stocks generally exceed demand. Friday's CME Group cash trading 
saw Grade AA butter close at $2.2550, up $0.0225 from last Friday. 
      CHEESE HIGHLIGHTS: Cheese production is steady to strong in the 
Northeast and West. In the Midwest, cheese producers report steady 
production as milk intakes are fairly balanced. Spot milk prices 
ranged from $1 under to $1 over Class. Cheesemakers are currently 
negotiating winter holiday milk prices and finding some noticeable 
discounts. Mozzarella producers in the Midwest are seeing steady to 
strong orders. Western contacts are hoping for a heavier holiday push 
in the upcoming weeks. In the East, retail advertisements are 
spurring a generally steady demand. The cheese market tone is 
unstable, as barrel prices remained healthy while blocks slipped 
throughout the first half of the week. Contacts are unsure whether 
barrels will come down to meet blocks, or the reverse will happen and 
blocks will rebound. CME Group trading Friday, barrels closed at 
$1.7525, up $0.0375 from last Friday. Blocks closed at $1.7100, down 
$0.0050 from last Friday.
     FLUID MILK: Fluid milk output is mixed in the nation. Production 
is steady to decreasing in the Northeast and Mid-Atlantic. Farm milk 
yield is increasing in Florida, New Mexico, and the Southeast, while 
across the Central region and the mountain states of Idaho, Colorado 
and Utah it is stable. For the holiday weeks, suppliers in the 
Midwest are offering loads of milk at fairly competitive prices. 
Class I sales are down in the Northeast, but up in Florida, and 
steady in Arizona, California, and the Midwest. Condensed skim 
availability is abundant in the West. However, the market is stable 
to decreasing in the East. Cream supplies are limited in the East, 
mixed in the Midwest, and plentiful in the West. Some Eastern 
processors are looking for additional loads of cream, but couldn't 
find any. Cream multiples for all Classes are 1.26-1.38 in the East, 
1.24-1.35 in the Midwest, and 1.07-1.29 in the West. 
      DRY PRODUCTS: Lower low/medium nonfat dry milk spot values are 
increasing NDM liquidity, which is reflected in a considerable uptick 
in sales during the current week in some regions of the country. The 
market undertone is unsteady. Overall, NDM inventories are readily 
available as supply surpasses demand. The high heat NDM market 
undertone is mostly bearish throughout the country while prices are 
mixed. Dry buttermilk production is active on a steady market, 
nationwide. Spot pricing is steady in the West, but steady to higher 
in the Central/East regions. Trading activity is light across the 
country. National dry whole milk prices are becoming more in line 
with international WMP values. The domestic market is steadily 
weakening while prices are trending lower. With a heavy seasonal 
cheese production, whey supply remains growing while prices continue 
falling on a weak market. WPC34% production is active while 
inventories are readily available as values continue waning. However, 
stocks are quite tight from manufacturers who make WPC34% meeting 
infant formula specifications. Spot prices for lactose are steady to 
lower as buyer demand weakens. Nevertheless, some industry contacts 
suggest the market is in shambles and fear price pressures will 
continue well into 2018.
      INTERNATIONAL DAIRY MARKET NEWS (DMN): WESTERN OVERVIEW: Signs 
are that when September milk production is reported in some of the 
top producing countries in the EU, production will be higher than 
September last year. Early observations point to Ireland continuing 
to produce more milk in September 2017 than September last year. Some 
estimates are of 10 percent higher. The United Kingdom too, is 
expected to report higher September milk production than one year 
earlier. Expectations are over 5 percent higher. German sources 
believe September milk production there may be up 3.7 percent. In 
France, a 6.4 percent increase for September is what some observers 
expect.
      Early this week, agriculture ministers of many EU nations met. 
Among the topics discussed was trade negotiations. An expected 
outcome is formalizing approval of trade discussions between the EU 
and Australia, also New Zealand. That could be approved as early as 
November 10.
      EASTERN OVERVIEW: Some Polish dairies have expanded sales of UHT 
milk to China. While most shipments currently go by ship, a 45 day 
trip, that may change as the upgrades to the rail line from Europe to 
China move toward completion. The rail line begins in Western Europe 
then travels through Poland, giving Poland the advantage of being 
closer to China than most of Europe. When operational, the rail 
option will reduce transit time to 15 days.
A recent report from a dairy promotion organization in Great Britain 
notes that an outcome of the 2014 Russian import ban, has been 
accelerated development of the dairy industry in Russia. Dairy 
producers have been incentivized by the Russian government, as well 
as benefitting from less competition from abroad. Dairy processing 
capacity in Russia has expanded, benefitting from targeted subsidies, 
investment credits and loans in order to support further growth. 
Foreign investors are also showing interest in accessing the 
undersupplied Russian market, with large investments from some Asian 
companies.
      AUSTRALIA: July-September milk production in Australia is up 1.0 
percent over July-September last year. Breakdown by state showing 
monthly production and percent change year to date is shown in the 
table below.

Australia Milk Production
August 2017
                      (Million     (% Change YTD 
                        Liters)    From 1 Year Ago) 
New South Wales          99.5       -0.1
Victoria                582.3        0.9      
Queensland               35.8       -4.1
South Australia          50.1       12.7
Western Australia        33.4       -1.9      
Tasmania                 78.0        0.7      
Australia (Total)       879.1        1.0  

Data From Dairy Australia    

      Expansion of dairy processing capacity in Australia was 
announced this week by a large dairy cooperative. Current plants of 
the coop have reached full capacity. The co-operative repeated its 
2017-18 season forecast farmgate milk price of $6.75 Australian 
dollars. 
      SOUTH AMERICA OVERVIEW: After reaching the peak of the seasonal 
flush, farm milk production is stabilizing in the main dairy 
countries of South America as summer approaches. Farm milk intakes in 
Argentina, Uruguay, and Chile, have plateaued, however, are 
sufficient to cover most manufacturing needs. As year-end 
celebrations are close, milk/cream inquiries from cheese 
manufacturers and butter churners are becoming robust. Bottled/UHT 
milk and yogurt processing are active while requests from retailers 
and food service are inching up. Condensed milk processing is very 
active in order to produce milk caramel, ice cream and other dairy 
dessert favorites. Back to the farm, pasture and forage conditions 
are improving in the area, especially in Argentina where widespread 
showers increased moisture for emerging summer grains, oilseeds, and 
cotton crops.
      According to the National Institute of Milk (INALE), September 
2017, Uruguay farm milk volumes sent to processors were 172.8 million 
liters, 0.1 percent above the previous month, but 0.6 percent below a 
year ago. From January to September, milk shipments totaled 1.325 
billion liters, up 7.1 percent from the same period in 2016.
      In Brazil, farm milk production continues its upward trend and 
is close to the seasonal peak that is usually during the early weeks 
of the summer season. Seasonal rainfalls are present in the southeast 
region of the country, where the main dairy states are located. One 
year ago, this zone was harmed by a severe drought, which has 
steadily improved throughout the last 12 months. Meanwhile, at this 
point, the fluid/UHT Brazilian market is stable while the cheese 
market continues showing signs of strengthening. Furthermore, the 
demand for milk powder imports is improving as supply is becoming 
lower. Yesterday, after 20 days of suspension, the Brazilian 
government released milk from Uruguay at the end of its technical 
audit to the Uruguayan dairy chain. It is important to note that the 
main objective of this audit was to gather enough information to 
determine if Uruguay triangulated the milk exported to Brazil in the 
past.
      NATIONAL RETAIL REPORT (DMN): Total conventional dairy ads grew 
9 percent. Ice cream in 48-64 ounce containers was the most 
advertised dairy item, followed closely by 8 ounce packages of shred 
cheese and 4-6 ounce containers of Greek yogurt. Total organic dairy 
ads decreased 6 percent and half gallon milk was the most advertised 
organic dairy item. Butter advertisements increased for both 
conventional and organic 1 pound packages, 68 and 70 percent, 
respectively. The U.S. weighted average advertised price for 
conventional butter in 1 pound packages was $3.17, while the average 
price for organic 1 pound butter packages was $4.71, resulting in an 
organic premium of $1.54. 
      Total conventional cheese advertisements increased 23 percent 
from last week. Organic cheese ads decreased by 65 percent. The U.S. 
advertised price for 8 ounce conventional cheese blocks averaged 
$2.48, while organic 8 ounce cheese blocks saw a $3.49 average, an 
organic premium of $1.01. Prices advertised for 8 ounce conventional 
cheese shreds averaged $2.39, while organic 8 ounce cheese shreds 
were priced $3.49 for the week, a $1.10 organic premium. 
      The average sale price for conventional 4-6 ounce Greek yogurt 
is $.97, while regular yogurt is $.50. The average price for organic 
4-6 ounce Greek yogurt is $1.31, while regular organic yogurt is 
$1.14. These prices result in organic premiums of $.34 for 4-6 ounce 
Greek yogurt and $.64 for 4-6 ounce regular yogurt. Total 
conventional yogurt ads increased 13 percent from last week, while 
total organic yogurt ads went up 30 percent.
      The weighted average price for conventional half gallon milk is 
$1.61. The weighted average price for organic half gallon milk is 
$3.30, resulting in an organic price premium of $1.69. Advertisements 
for organic milk decreased 34 percent and conventional milk ads 
decreased 25 percent from last week. 
      NOVEMBER SUPPLY AND DEMAND ESTIMATES (WASDE): The milk 
production forecast for 2017 and 2018 is lowered from the previous 
month on an expected slower pace of growth in milk per cow and 
slightly lower cow numbers. For 2017, the fat basis import forecast 
is lowered on recent trade data and the expectation of slower cheese 
imports in the fourth quarter; the forecast is raised for 2018 on 
higher expected shipments of whole milk powder and butter. The 2017 
skim-solids basis import forecast is reduced on lower-than-expected 
imports of milk protein concentrates and a number of other dairy 
products. This weakness is expected to carry over into 2018, 
supporting a lower import forecast. Fat basis exports are reduced for 
both 2017 and 2018 on lower butter and cheese exports. Skim-solids 
basis export forecasts are also reduced for both 2017 and 2018 on 
lower expected shipments of skim milk powder and whey products. For 
2017, butter, nonfat dry milk (NDM), and whey prices are lowered from 
the previous month, but the price forecast for cheese is raised. For 
2018, all dairy product prices are lowered on large supplies and 
global competition. The 2017 Class III price is unchanged from last 
month as the decline in whey is offset by the higher cheese price. 
The Class IV price forecast is reduced from the previous month on 
lower forecast butter and NDM prices. For 2018 both the Class III and 
Class IV prices are lowered due to lower forecast product prices. The 
2017 all milk price forecast is reduced to $17.65 to $17.75 per cwt 
and the 2018 price is lowered to $16.90 to $17.80 per cwt.
      SEPTEMBER MILK SALES (USDA, FMMO & CDFA): During September, 4.0 
billion pounds of packaged fluid milk products are estimated to have 
been sold in the United States. This was 2.8 percent lower than 
September 2016. Estimated sales of total conventional fluid milk 
products decreased 2.7 percent from September 2016 and estimated 
sales of total organic fluid milk products decreased 4.2 percent from 
a year earlier.
		

1300CT AJ Teran Angel.Teran@ams.usda.gov (608)422-8593
USDA/AMS/Dairy Market News, Madison, Wisconsin
Dairy Market News website: http://www.ams.usda.gov/market-news/dairy
Dairy Market News database portal: 
http://www.marketnews.usda.gov/mnp/da-home

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