MD_DA950 DY, DAIRY MD DA950 NATIONAL DAIRY MARKET AT A GLANCE July 2, 2009 MADISON, WI (REPORT 26) CME GROUP CASH MARKETS (7/02): BUTTER: Grade AA closed at $1.1925. The weekly average for Grade AA is $1.1956 (-.0094). CHEESE: Barrels closed at $1.1000 and 40# blocks at $1.1150. The weekly average for barrels is $1.0988 (+.0228) and blocks, $1.1150 (-.0035). BUTTER HIGHLIGHTS: The cash butter price at the CME Group declined early in the week to the lowest level since April and closed the week at $1.1925. Churning activity across the country has been quite active and will remain so during the upcoming weekend when additional cream volumes are expected to be available. Many butter producers are anticipating that this will be the last time significant surplus cream offerings will be available on a spot basis as typically these cream offerings disappear after the holiday for the balance of the summer. Butter demand is fair at best as most buyers hold off placing regular orders until they review their inventory situation following the holiday. During June, the DEIP program accepted bids of 54 MT of AMF (119,000 pounds) and 1,794 MT of butter (3.95 million pounds) for export with bonuses of $1050/MT on the AMF (47.6 cents) and $850/MT on the butter (38.5 cents). The DEIP program is now closed, as the DEIP fiscal year is from July 2008 - June 2009, even though the program was just recently announced. The trade is waiting to see if a new program will be announced. CHEESE HIGHLIGHTS: The CME Group cash cheese market continues to bounce around at prices near or below CCC purchase prices. Demand is generally fair at best. At current prices, many buyers have already built sizeable inventories, so new spot interest is light. Retail promotions continue to move extra volumes. Some order improvement was noted from food service accounts in resort areas, particularly where the weather turned more seasonal. Cheese offerings remain seasonally heavy. Milk supplies remain well above year ago levels at most cheese plants though warmer weather has helped reduce cheese yields at more plants. For June 2009 and the DEIP year ending June 30, USDA Foreign Agriculture Service accepted bids for 152 MT (335,099 pounds) of cheese for export. FLUID MILK: Milk production in the East is trending lower, but the decline is not as steep as in past years due to nearly ideal weather patterns in the Northeast and Mid Atlantic regions. Heat and humidity in the Southeast are reducing Florida's production to the point where exports will end and imports from northern areas will begin. Upper Midwest milk is moving south into areas affected by the heat and humidity. Heat in the Southwest, including California and Arizona, is reducing milk production. The Pacific Northwest is also heating up again, reducing farm milk production. Milk volumes are heavy for this time of year and are expected to continue through the Independence Day holiday, with active diversions to balancing plants. Some cream suppliers are noting the upcoming weekend may be the final chance to take advantage of surplus cream offerings. Cream supplies in the West remain heavier than anticipated with multiples steady to lower. Churning is expected to increase over the weekend. Class I interest is generally lighter with fewer retail promotions. Many producers are trying to balance low milk prices by reducing their feed ration costs. Lower prices of corn, due to the latest crop report, and lower hay prices are allowing some producers to continue to operate a while longer. Condensed skim markets and prices are generally steady. DRY PRODUCTS: The nonfat dry milk market remains mostly steady and prices are basically unchanged. Western buyers are still assessing the effects of the cheese swap powder program. Western production of powder is described as seasonally heavy. Plants are adjusting to lower milk volumes and some loads in the Central area are being diverted to fill Class I needs in the Southeast. The 4th of July holiday has handlers adjusting shipments to fill processing schedules. The DEIP program for the marketing year has ended with the export of 20,025 MT of NDM during June. There have been no announcements as to whether the program will be renewed after July 1. Dry buttermilk prices in the Central and East remain steady while prices moved higher in the West. Movement of buttermilk from the Central area has helped to fill demand in the East. The market in the West has offerings clearing easily and firming demand. Dry whole milk prices are unchanged and production is sufficient for needs. Dry whey prices are steady to firm. Production is lighter with farm milk intakes to plants decreasing seasonally. Lighter offerings from manufacturers have resulted in higher prices for WPC 34% and demand remained steady. Lactose range prices are unchanged to higher, with the mostly prices higher. Due to decreased farm milk intakes, production is steady to lower. Monthly contracts for July and into the third quarter are being settled at higher prices compared to the second quarter. Casein prices remain generally steady with supplies adequate for immediate and future needs. CCC PRICE SUPPORT PURCHASES (FSA): During the week of June 29 - July 3, CCC net purchases totaled 8,383,895 pounds of nonfortified NDM under the dairy price support program. This brings cumulative total purchases since October 1, 2008, to 272,422,262 pounds. CLASS AND COMPONENT PRICES (DAIRY PROGRAMS): The following are the June 2009 prices under the Federal Milk Order pricing system and the changes from the previous month: Class II $10.79 (+$0.08), Class III $9.97 (+$0.13), and Class IV $10.22 (+$0.08). Product price averages used in computing Class prices are: butter $1.2073, NDM $0.8461, cheese $1.1466, and dry whey $0.2693. The Class II butterfat price is $1.2614 and the Class III/IV butterfat price is $1.2544. Further information may be found at: www.ams.usda.gov/DairyMarketStatistics select Prices, select Price Formulas - 2008 CONSUMER PRICE INDEX (BLS): The CPI for all food is 217.8, up 2.7% from May 2008. The dairy products index is 196.1, down 5.6% from a year ago. The following are the May to May changes for selected products: fresh whole milk is -16.4%; cheese, -3.8%; and butter, -8.8%. COMMERCIAL DISAPPEARANCE (ERS, AMS): Commercial disappearance of dairy products during the first four months of 2009 totals 60.9 billion pounds, 0.9% below the same period in 2008. Comparing disappearance levels with year earlier levels: butter is -4.8%; NDM, -12.6%; American cheese, +4.0%; other cheese, +1.4%; and fluid milk products, +1.2%. JUNE AGRICULTURAL PRICES (NASS): The index of prices paid by farmers for commodities and services, interest, taxes, and wage rates in June 2009 advanced 1 point to 179. Compared with June 2008, the index was down 8 points (4.3%). The index of prices received by farmers for dairy products declined 2 points during the month of June 2009 to 87. Compared with June 2008, the index was down 61 points (41.2%). Prices received by farmers in June with changes from May were: for All Milk, $11.40, down $.20; Fluid Grade Milk, $11.70, down $.20; and for Manufacturing Grade Milk, $11.20, down $.20. JUNE DEIP ACTIVITY (FAS): On May 22nd, FAS announced July 2008 to June 2009 DEIP allocations at 68,201 MT (150,355,920 pounds) of nonfat dry milk, 3,030 MT (6,679,938 pounds) of cheese, and 21,097 MT (46,510,446 pounds) of butterfat. By June 30, the close of the DEIP year, accepted bids totaled 20,025 MT of nonfat dry milk, 152 MT of cheese and 1,862 MT of butterfat. For nonfat dry milk, bonuses per MT ranged from $110.18 - $264.69, the cheese bonus was $100.00, and butterfat bonuses ranged between $850.00 - $1050.00. The percentages of the total allocation accepted were 29.4% for nonfat dry milk, 5% cheese and 8.8% butterfat. The total value for the 22,039 MT accepted was over $5.6 million. No new program allocations have been announced at this time. 1400c Robert Hunter 608-250-3217