MD_DA950 Dairy Markets at a Glance Report 11 - Released on March 15, 2019 CME GROUP CASH MARKETS (3/15) BUTTER: Grade AA closed at $2.2800. The weekly average for Grade AA is $2.2785 (-.0050). CHEESE: Barrels closed at $1.4925 and 40# blocks at $1.5600. The weekly average for barrels is $1.4350 (+.0145) and blocks, $1.5380 (-.0235). NONFAT DRY MILK: Grade A closed at $.9675. The weekly average for Grade A is $.9665 (-.0110). DRY WHEY: Extra grade dry whey closed at $0.3200. The weekly average for dry whey is $0.3310 (-.0175). BUTTER HIGHLIGHTS: At the national level, butter production remains vigorous, in line with the previous weeks. Although the demand for cream along Class II processors is seasonally improving, butterfat intakes remain more than adequate for butter churning. Butter inventories continue building into cold storage for future use. Meanwhile, requests from retailers and restaurants are lagging a bit due to general cooler weather conditions. However, the spring break is near the corner and demand might shift up very soon. Bulk butter pricing varies among the regions: East, 5.0 cents to 8.0 cents over the market; Central, 5.0 cents to 7.0 cents above the market; West, 3.0 cents to 7.5 cents over the market, with various periods and averages used. CHEESE HIGHLIGHTS: Milk volumes are available as flush-like patterns have been reported in the West and South-Central regions. Spot milk prices ranged from $.50 to $2 under Class, but more are being reported near the latter. Production is continuing apace on the coastal regions, while Midwestern cheesemakers have begun increasing work schedules this week ahead of expected demand upticks in April. Demand reports in the East and West denote some positive sales numbers this week. Long cheese inventories remain a concern among the industry. Even still, market tones have picked up momentum throughout the week, particularly on the process side. FLUID MILK: Spring flush-like patterns are being reported from the West to the southerly Central region. An exception this week was in Arizona, where heavy rains created some unexpected production and hauling issues. The blizzard last week in the Pacific Northwest has remained a factor regarding herd health, but milk yields continue to inch up in the area, nonetheless. Elsewhere, weather conditions are starting to benefit cow comfort. Namely, the upper Midwest where temperatures are increasing. After a somewhat brutal late winter, spring-like conditions are beginning to emerge. Class I sales vary across the country. Midwestern contacts suggest continued slowness on bottler orders, as milk finds its way into processing plants. Cheese plant managers reported spot milk prices from $.50 to $2 under Class III. Cream prices shifted up in the Midwest and Western regions, while holding steady in the East. Price upticks denote an expected tightness due to the spring holidays. That said, cream is currently readily available. F.O.B. cream multiples are 1.07-1.20 in the East, 1.15-1.23 in the Midwest, and 1.05-1.18 in the West. DRY PRODUCTS: Low/medium nonfat dry milk NDM prices in the United States are steady to lower. The demand wavered a little, but producers suggest takers are, in some cases, willing to pay mid to high $.90s, while the $1 spot loads are increasing more difficult to move. Market conditions are steady to soft. High heat NDM prices steady to decreased. Market conditions are steady to quiet. Dry buttermilk prices are unchanged. The demand is stable to light. The market tone is steady to balanced. Dry whole milk prices are steady to increased. Some market participants report demand is improving ahead of the upcoming spring baking season festivities. Dry whey prices are steady to decreased. Domestic demand is steady to soft. Some buyers are still analyzing the market and holding off on purchases. Whey protein concentrate WPC34% prices are steady to a bit lower. The demand and market conditions are fairly steady. The demand is stable at this time. Rennet and acid casein prices are unchanged this week. Market activity is steady to lower currently. INTERNATIONAL DAIRY MARKET NEWS: EUROPE OVERVIEW: WESTERN: Early reporting of milk production in Germany and France, the two largest EU milk producers, has been higher than the previous year during the past two weeks. Conditions are favorable to continued strong milk production in coming weeks. EASTERN: Poland was among the top five cheese production countries in 2018, according to Eucolait. Cheese production, 865,230 MT, increased 1.9 percent from 2018. December 2018 production increased 0.5 percent from December 2017. Slovakia registered one of the largest cheese production increases during 2018, 5.9 percent, producing 37,660 MT. OCEANIA OVERVIEW: AUSTRALIA: Seasonal milk production in Australia, July 2018 through January 2019, is 5.8 percent lower than last year. January 2019 is 11.0 percent lower than January 2018. NEW ZEALAND: New Zealand weather since late February has been good. The year started dryer than desired for dairy producers. Impacts were varied. Farms without irrigation, or with limited irrigation, suffered more than irrigated farms. Rains through last weekend have begun to turn pastures tending toward brown, toward a green tinge. SOUTH AMERICA OVERVIEW: Continentally, farm milk production is steady to slightly up as temperatures remain high, very similar to the past two weeks. Sporadic rains maintained favorable general conditions for forage and the second harvest of maize and cotton in key agricultural areas. If the weather conditions remain favorable, feed costs could drop in the short term, helping several farmers to mitigate relatively low milk prices. In general, milk intakes are more than adequate for most processing needs. Fluid/UHT milk demands from educational institutions, retailers, and food service are improving. In the same fashion, interest for cream is strong ahead of the upcoming fall holiday season. The butterfat market is still in a bullish position as supplies remain below adequate to cover all buyers/end users¶ needs. Cheese production in very active across the continent NATIONAL RETAIL REPORT: Following the start of daylight savings time in most of the United States, conventional ice cream in 48-64 oz. containers is the most advertised product/category this week, with ad numbers increasing 15 percent. The national weighted average advertised price for conventional milk half gallons is $2.29, compared to $4.09 for organic milk half gallons, an organic price premium of $1.80. Conventional cheese ad numbers decreased 14 percent. Organic yogurt ads more than doubled but remain a small percentage of conventional yogurt ad numbers. JANUARY MILK PRODUCTION (NASS): Milk production in the 23 major States during January totaled 17.5 billion pounds, up 1.3 percent from January 2018. December revised production, at 17.1 billion pounds, was up 0.8 percent from December 2017. The December revision represented an increase of 2 million pounds or less than 0.1 percent from last month's preliminary production estimate. Production per cow in the 23 major States averaged 2,011 pounds for January, 38 pounds above January 2018. This is the highest production per cow for the month of January since the 23 State series began in 2003. The number of milk cows on farms in the 23 major States was 8.72 million head, 52,000 head less than January 2018, but 2,000 head more than December 2018. JANUARY 2019 DAIRY PRODUCTS HIGHLIGHTS (NASS): Butter production was 190 million pounds, 4.2 percent above January 2018, and 10.4 percent above December 2018. American type cheese production totaled 439 million pounds, 1.2 percent above January 2018, and 3.2 percent above December 2018. Total cheese output (excluding cottage cheese) was 1.10 billion pounds, 0.4 percent above January 2018, and 0.7 percent above December 2018. Nonfat dry milk production, for human food, totaled 173 million pounds, 7.7 percent above January 2018, and 21.0 percent above December 2018. Dry whey production, for human food, was 80.0 million pounds, 9.5 percent below January 2018, but 8.9 percent above December 2018. Ice cream, regular hard production totaled 53.0 million gallons, 3.2 percent below January 2018, but 21.3 percent above December 2018. MARCH SUPPLY AND DEMAND ESTIMATES (WAOB): For 2019, the milk production forecast is lowered on smaller expected dairy cow numbers. The fat basis export forecast is reduced on slower expected sales of butterfat due to increased global competition. Skim-solids basis exports are lowered on expected strong competition in international skim milk powder markets and slower expected demand for whey products. The fat basis import forecast is lowered slightly while the skim-solids basis import forecast is unchanged. Annual product price forecasts for cheese, butter, nonfat dry milk (NDM) are raised from the previous month, but the whey price forecast is reduced slightly. The Class III price is raised as the higher cheese price projection more than offsets the lower whey price. The Class IV price is increased on higher forecast butter and NDM prices. The all milk price forecast is raised to average $17.00 to $17.60 per cwt. FEBRUARY CONSUMER PRICE INDEX (BLS): The Consumer Price Index (CPI) for the all food category is 257.2, up 2.0 percent from 2018. The dairy products index is 216.6, up 0.1 percent from a year ago. The following are the February 2018 to February 2019 changes for selected products: fresh whole milk is 0.1 percent; cheese, -1.7 percent; and butter, 3.6 percent. JANUARY MILK SALES (USDA, FMMO, AND CDFS): 4.2 billion pounds of packaged fluid milk products were shipped by milk handlers in January 2019. This was 0.6 percent lower than a year earlier. Estimated sales of total conventional fluid milk products decreased 0.5 percent from January 2018 and estimated sales of total organic fluid milk products decreased 1.3 percent from a year earlier. NOTICE -USDA ANNOUNCES AMENDMENT TO CLASS I SKIM MILK PRICE FORMULA: The U.S. Department of Agriculture (USDA) announced March 8, 2019, an amendment to the Class I skim milk price formula under the Federal Milk Marketing Order (FMMO) program, in accordance with the Agriculture Improvement Act of 2018 (2018 Farm Bill). The change is effective May 1, 2019. Currently, the Class I skim milk price is calculated using the higher of the monthly advanced pricing factors for Class III or Class IV skim milk, which reflect dairy product survey prices for the two weeks prior to the price announcement, plus the applicable adjusted Class I differential. Because market prices for these surveyed products fluctuate, the ³higher of´ factor used to determine the Class I skim milk price can change, increasing risk and uncertainty associated with hedging. To address this issue, Congress determined that the formula for the FMMO Class I skim milk price should be the average of the monthly Class III and Class IV advanced pricing factors plus $0.74 per hundredweight plus the applicable adjusted Class I differential. In accordance with the 2018 Farm Bill, the amendment is effective indefinitely, until further modified, and may not be modified sooner than two years after the effective date of this rule. The Federal Register notice is available at https://www.federalregister.gov/documents/2019/03/11/2019-04347/federal-milk- marketing-orders-amending-the-class-i-skim-milk-price-formula Information for the period March 11 - 15, 2019, issued weekly Published by: Dairy Market News - Madison, WI JESSICA MUELLER, 608-422-8589 Email: Jessica.Mueller@ams.usda.gov Additional Dairy Market News Information: Dairy Market News (DMN) by Phone: (608)422-8602 DMN Website: https://www.ams.usda.gov/market-news/dairy DMN MARS (My Market News): https://mymarketnews.ams.usda.gov/