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WEEKLY MILK PRODUCTION UPDATE – Dairy Market News  

Aug. 26, 2010

Manufacturing milk supplies continue to tighten in the East due to increased Class I demand as more schools are opening or preparing to open soon. Seasonal declines in milk production are continuing in the Northeast with steeper declines noted in the Mid Atlantic and Southeast regions which have been affected by significant spells of heat and humidity.

Schools have been back in session in the Southeast for over a week and trucking issues have lessened. Temperature issues however, remain and are causing some loads to be rejected. Class I pulls have increased in Florida as most schools are opening this week.

Cream supplies remain very tight as milk production declines and components remain low. Demand for cream is very strong with cream cheese, ice cream and butter makers vying for available supplies. Some manufacturers are attempting to match production with contracted cream supplies, but are more often having to look to the spot market to secure adequate supplies. Multiples range mostly from 160 to 170 with a few sales beyond the upper limit of the range.

A majority of condensed skim is moving through contracts. Some plants are limiting spot sales of condensed skim and increasing drying schedules, due to concerns of having adequate inventories later this year. Other plants are on limited drying schedules, allowing them to conduct planned maintenance projects.

According to NASS, national milk production for July 2010 in the 23 reported states totaled 15.3 billion pounds, up 3.0% from July,

2009. Milk production increased in 3 of the 5 listed states of the Eastern region and as a region, increased production 1.7% over the same period last year at 2,537 million pounds.

The 5 states showed the following percentage changes in milk production from July 2009 to July 2010 and total milk production this July: Florida, +3.6%, 173 million pounds; New York, +2.1%, 1,100 million pounds; Pennsylvania, +1.7%, 909 million pounds; Vermont, -0.5%,211 million pounds; and Virginia, -0.7%, 144 million pounds.

Milk cow numbers for July 2010 declined in 3 of the 5 listed states of the Eastern region and the region declined by 13,000 head or 0.9% compared to the same period last year. Individual state cow numbers from July 2009 and cows remaining as of this July are: Florida, unchanged, 115,000 remaining; New York, 10,000 decline, 611,000 remaining; Pennsylvania, 4,000 decline, 541,000 remaining;

Vermont, 2,000 increase, 137,000 remaining; and Virginia, 1,000 decline, 95,000 remaining.

Rick.whipp@ams.usda.gov

July 2010 POOL RECEIPTS of milk in CALIFORNIA total 3.12 billion pounds, 4.4% higher than last year. Cumulative January-July 2010 receipts are basically unchanged from the same months in 2009.

The July blend price, at a fat test of 3.49%, is $14.66, 70 cents higher than June and $4.69 more than July 2009. The percentage of receipts used in Class 1 products 14.6%. The July quota price is $15.94 and the over quota price is $14.24. These prices are 77 cents higher than June and $4.64 higher than a year earlier.

CALIFORNIA milk output is generally trending steady with recent weeks. Hotter weather conditions are common over much of the state this week and could impact milk intakes. A sampling of processors note that milk intakes are 3-6% above a year ago, however, the intakes are comparing to depressed levels a year ago.

Currently, plants are running along expected levels with some plants being offline from one to three days performing scheduled, seasonal maintenance. The fluid milk market has moved around to servicing school and retail accounts to accommodate the start of school and college terms.

ARIZONA milk production is holding mostly steady. Daytime temperatures have been around 100 degrees, but there has not been much impact on milk cows. Some plants are taking down time for maintenance issues.

Overall, milk is being handled as expected. Milk continues to be shipped out on contracts to help with shortages/needs in other areas.

Class I demand is improved as milk is pulled into school lunch needs.

The CREAM market remains hot, in spite of rising cream and butter prices. Cream demand remains good and clears offerings. Manufacturers are often faced with the dilemma of making products or selling the cream for attractive prices. While they want to have inventories to service contracts and future sales, producers don't want to have high inventoried product values if the market prices for those products should decline later.

At the CME Group, Grade AA butter price closed at $2.1600 on Wednesday, August 25, up 20.75 cents from a week ago. Cream multiples are mostly steady, but lower on the top of the 135-160 range and vary based on class usage and basing point.

Temperatures in the PACIFIC NORTHWEST are seasonally comfortable. Higher daytime temperatures are balanced with cool evenings and are not affecting milk production levels.

Schools are preparing to begin and Class I usage is increasing as bottlers fill the supply chain. Manufacturing plants are balancing remaining supplies to fill contracted needs.

Increased cow numbers have kept milk production above year ago levels and processors are utilizing the extra supplies. Plant capacities are easily handling intakes. Fluid supplies are up compared to last year, though processors report lower fat and protein levels.

Farmers are harvesting third crop hay with some areas looking for a possible fourth crop for the season. Prices have remained steady and dairies are putting together supplies for winter feeding.

UTAH and IDAHO are also experiencing weather conducive to good milk production. Increased cow numbers have kept production above year ago, although milk contents are reduced in many cases. Yields of manufactured products are lower than hoped for.

Forage production continued with third crop hay being harvested. Prices for dairy hay in Eastern Idaho and Utah have remained lower than Western production areas and farmers are able to put stores away at lower costs.

Cull cow prices are high and farmers are able to actively cull lower producers for heifers to increase production. Auction prices for heifers are steady to weak due to heavier offerings at sales.

Butch.Speth@ams.usda.gov 608-278-4152

Robert.Hunter@ams.usda.gov 608-278-4158