National Dairy Market at a Glance
USDA - Fri Mar 02, 1:30PM CST
MD_DA950

     Dairy Markets at a Glance

     Report 9 - Released on March 2, 2018

     CME GROUP CASH MARKETS (3/2)
     BUTTER: Grade AA closed at $2.2000. The weekly average for Grade AA is $2.1930(+.0274).
     CHEESE: Barrels closed at $1.4750 and 40# blocks at $1.5600. The weekly average for barrels
     is $1.4715 (-.0079) and blocks, $1.5350 (+.0062).
     NONFAT DRY MILK: Grade A closed at $.6625. The weekly average for Grade A is $.6720
     (-.0061).
          BUTTER HIGHLIGHTS: Butter churns are generally active. A few plant managers report that
     microfixing is on the rise. Coincidentally, some contacts communicate that they have
     slightly decreased their bulk butter production as they take on holiday preorders. While
     cream into churns is available, there are reports that cream loads into butter plants are
     becoming harder to come by as Class II and III producers reenter the cream market.
     Inventories are steady to higher. Interest in butter is mostly strong. However, in the
     Western region demand is flat to lower. Bulk butter prices range from 3 under to 8 cents
     over the market, based on the CME Group with various time periods and averages used. The
     butter market tone is mixed. Friday�s CME Group cash trading saw Grade AA butter close at
     $2.2000, up $.0275 from last Friday.
          CHEESE HIGHLIGHTS: Cheese production varies from region to region depending on milk
     intake. In the Northeast, plant managers report full work schedules for cheddar production
     and moderately below capacity for mozzarella. Midwest contacts expect mozzarella and
     provolone to add on orders prior to the March basketball tournaments. Demand is steady
     nationwide for retail and food service sales. Cheese demand is strong and a growing
     opportunity in the international market. The market tone is mixed regionally. Some
     Midwestern producers are generally bullish with the current stabilized market prices,
     whereas some Western contacts remain unsettled regarding heavy milk inventories, and,
     therefore, growing cheese stocks. Cheese inventories are balanced to heavy. Spot milk
     continues to be heavy and is offered at discounted prices. Spot milk prices ranged from $1
     over to $3.50 under Class. With the upcoming spring flush, contacts are concerned that the
     current milk situation will only get worse for the dairy market. Friday on the CME, barrels
     closed at $1.4750, up $.0150 from last Friday. Blocks closed at $1.5600, up $.0650 from
     last Friday.
          FLUID MILK: Milk production is mostly strong and on the rise across the nation.
     Midwestern contacts note that a majority of dairy cows from closing farms are finding homes
     on other dairy farms. Bottling sales are flat to lackluster in most regions. Some bottling
     contacts suggest preparations are underway for approaching spring breaks. In the Midwest,
     most Class III spot sales were discounted. Condensed skim supplies are ample. Cream is
     showing signs of firming around the country. As cream cheese sales and other seasonal
     favorites begin seeing increased production, cream supplies are being limited into other
     processes. Cream multiples for all Classes range 1.14-1.24 in the East, 1.18-1.24 in the
     Midwest, and 1.00-1.20 in the West.
          DRY PRODUCTS: Low/medium heat nonfat dry milk (NDM) prices are mixed.
     Production levels are increasing. Demand is moderate. High heat NDM prices slightly
     increased in the Central and Eastern regions, but declined in the West. Inventories are
     tight to available. The NDM market tone is uncertain. Dry buttermilk prices are steady to
     slightly higher. Inventories are sufficient to meet buyers� needs. The market is quieter
     than expected as baking season approaches. The dry buttermilk undertone is mixed. Dry whole
     milk prices held steady from last week. Production is trending lower, but is expected to
     increase ahead of the spring flush. The dry whole milk market tone is stable. In general,
     dry whey prices shifted higher. Spot sale activity remains active. The market tone is
     uncertain. Prices for whey protein concentrate 34% are unchanged on the range but slid on
     both the top and bottom of the mostly price series. Lactose prices are mixed. Inventories
     are reported to be more comfortable and interest, especially from international buyers, is
     improving. Acid casein prices held steady, but prices for rennet casein slightly slid.
     Market activity for rennet casein is light.
          INTERNATIONAL DAIRY MARKET NEWS: WESTERN OVERVIEW: Unusually cold weather has descended
     on much of Europe in recent days. Parts of Germany are well below freezing temperatures. In
     Italy, blizzards are predicted, which is very unusual. The colder weather in Germany has
     slowed the normal seasonal increase in milk production. Nevertheless, observers expect 2018
      milk production will be above 2017 production. There is great confidence in gains being

     registered for the coming spring months.
          Expectations are that early 2018 export data, when released, will reflect increased
     cheese exports from the EU. If this occurs, it will reverse several sluggish years.
     Expectations are for early 2018 cheese exports in the range of 3 percent higher than early
     2017.
          Cheese is a favored use for the increased EU milk production, less so for butter and
     skim milk powder. EU cheese manufacturers have strong confidence that existing export
     relationships can lead to absorbing higher exports. Aggressive efforts are underway in the
     EU to expand cheese export opportunities. The EU is the largest global cheese exporter and
     it plans to keep growing cheese exports.
           EASTERN OVERVIEW: Ukraine increased 2017 cheese imports 63 percent from 2016. All of
     the top ten suppliers of cheese to Ukraine are EU members. Leading sources and the 2017
     percent increase are: Poland, +46 percent; Germany, +39 percent; France, +49 percent;
     Netherlands, +39 percent; and Italy, +17 percent.
          OCEANIA OVERVIEW: AUSTRALIA: Increases in milk production this season are attributed to
     improved weather in most dairy regions as well as incrementally higher milk pay prices. Many
     dairy producers and processors comment favorably about dairy commodity price strength in the
     region.
          Aware that lower than projected New Zealand milk production, coupled with good product
     demand from other countries, has helped strengthen dairy commodity prices, some observers
     are cognizant of potential downside price risk should those factors reverse. Recent plans
     for investment in Australian dairy processing are encouraging to many producers. Processors
     are hoping production responds to keep the investment worthwhile.
          July 2017-January 2018 milk production in Australia is up 3.1 percent over one year
     earlier. Breakdown by state showing July-January production and percent change production
     year to date is shown in the chart below.

                                 Australia Milk Production
                                    July-January 2018
                                (Million) (% Change YTD
                                  Liters)   From 1 Year Ago)
     New South Wales                684.4         -1.9
     Victoria                     3,964.9          3.9
     Queensland                     246.7         -5.0
     South Australia                320.5          7.9
     Western Australia              231.0          0.0
     Tasmania                       560.4          6.4
     Australia (Total)            6,007.9          3.1

     Data From Dairy Australia
           NEW ZEALAND: January 2018 New Zealand milk production was 2.3 million MT, down from
     one year ago January 2017 milk production, 2.4 million MT, according to DCANZ. January in
     the third consecutive month of lower milk production following the seasonal peak in October,
     2017. January 2018 milk solids, 194.1 million kg, are down from January 2017, 209.7 million
     kg.
          Observers in New Zealand still expect seasonal production to be about 1.5 percent
     below last season. This factors in possible higher production for the remainder of this
     season if weather and pastures continue to be more favorable than recent times.
          At the February 20 GDT event #206, all contracts prices ranged from 3.0 percent lower
     to 1.1 percent higher than the prior event across categories. The all contracts price
     averages (US$ per MT) and percent changes from the previous  averages are: anhydrous milk
     fat, $6,458, -1.9 percent; butter, $5,334, +1.1  percent; buttermilk  powder, n.a.; cheddar
     cheese, $3,686, -1.3 percent; lactose, n.a.; rennet casein, $4,980, +0.7 percent; skim milk
     powder, $1,832, -3.0 percent; and whole milk powder, $3,246, +0.3 percent.
          SOUTH AMERICA OVERVIEW: During the past two weeks, scattered showers brought drought
     relief to corn, soybeans, and other summer crops in South America. However, higher
     temperatures and lack of water are anticipated during the rest of the summer and autumn
     season as a direct effect of the climatic phenomenon known as La Ni�a. In fact, according to
     The National Institute of Agricultural Technology of Argentina (INTA), as of February 19,
     2018, the percentage of usable water in soil mostly ranged from 0 to 10 percent throughout
     the country, which represents signs of severe dryness. Having said this, dairy producers
     (tamberos) are very concerned about their profitability due to a potential increase in the
     price of grains, which represents around 50% of the diet of their dairy herds. According to
     some industry contacts, farm gate prices will remain fairly steady at least thru the end of

     the summer season. In general, farm milk production is steadily declining throughout the
     continent while fat and protein levels in the milk remain low.
          With most educational institutions reopening in Argentina/Uruguay, milk requests from
     bottlers are increasing. Conversely, there is less than sufficient milk intakes to cover
     some manufacturing needs. Due to this, some processors are limiting the production of milk
     powder and prioritizing the production of other dairy products such as cheese and yogurt.
     Meanwhile, butter manufacturing is lower, driven by shorter cream supplies. According to
     some industry stakeholders, dairy farmers have not yet received government subsidies
     allocated to help with flood damage from previous years. Hence, rural road infrastructure
     continues to deteriorate in the major dairy basins.
          In Brazil, the shortage of milk is helping to sustain higher farm gate prices. After
     the traditional holiday celebration during the past few weeks, bottled milk/UHT requests
     from retailers and food service are down. Cheese and butter manufacturing is active, however
     milk/cream supplies are still tight in some regions of the country.
          NATIONAL RETAIL REPORT (DMN): Advertisement numbers are 2 percent higher for
     conventional dairy items and 53 percent higher for organic dairy items. Conventional 1
     pound butter ads decreased 7 percent, with a U.S. weighted average advertised price of
     $3.56, down 20 cents compared to the previous retail report.  Ads for organic 1 pound
     butter decreased 84 percent, with a U.S. weighted average advertised price of $4.99, up 11
     cents from the previous retail report.
          The national weighted average advertised price of conventional 8 ounce block cheese is
     $2.27, up 5 cents from last week. Organic 8 ounce blocks average $3.49, resulting in an
     organic premium of $1.22. The price of conventional 8 ounce shred cheese is $2.20, down 1
     cent from last week. The organic 8 ounce shred cheese price is $3.49, an organic premium of
     $1.29. Conventional cheese ad numbers are unchanged, but organic cheese ad numbers increased
     86 percent.
          Organic yogurt ads grew significantly, 198 percent, while conventional yogurt ads
     declined 11 percent. The weighted average price of conventional 4-6 ounce Greek yogurt is
     $0.98 and regular 4-6 ounce yogurt is $0.55. Organic Greek yogurt in 4-6 ounce containers
     is $1.20 and regular organic yogurt in 4-6 ounce containers is $0.99.
          The conventional-organic milk half gallon price spread is $2.27. The spread is the
     difference between the conventional milk half gallon average advertised price, $1.79, and
     the organic milk half-gallon price, $4.06. Conventional milk ads decreased 34 percent, but
     organic milk ads increased 32 percent.
          JANUARY AGRICULTURAL PRICES HIGHLIGHTS (NASS): The All Milk price received by farmers
     was $16.10 in January, down $2.80 from January 2017. Milk Cows price was $1,520 in January,
     down $100 from January 2017. Alfalfa hay price was $152.00 in January, up $26.00 from
     January 2017. Corn price was $3.29 in January, down $.11 from January 2017. Soybean price
     was $9.30 in January, down $.41 from January 2017. The milk-feed price ratio was 2.19 in
     January, down 0.52 from January 2017. The index of prices received by farmers for dairy
     products during the month of January 2018 was down 5.5 to 80.1. Compared to January 2017,
     the index was down 13.9 points (-14.8 percent). The index of prices paid by farmers for
     commodities and services, interest, taxes, and wage rates in January 2018 was up 0.6 to
     108.4. Compared with January 2017, the index was up 2.9 points (+2.7 percent).
          JANUARY DAIRY PRODUCT HIGHLIGHTS (NASS): Butter production was 185 million pounds, 4.3
      percent above January 2017, and 9.0 percent above December 2017. American type cheese
     production totaled 429 million pounds, 2.7 percent above January 2017, but 1.0 percent
     below December 2017. Total cheese output (excluding cottage cheese) was 1.08 billion
     pounds, 3.4 percent above January 2017, but 1.0 percent below December 2017. Nonfat dry
     milk production, for human food, totaled 162 million pounds, 5.4 percent above January
     2017, but 1.2 percent below December 2017. Dry whey production, for human food, was 87
     million pounds, 9.1 percent above January 2017, and 6.4 percent above December 2017. Ice
     cream, regular hard production totaled 56.6 million gallons, 0.9 percent below January
     2017, but 14.3 percent above December 2017.
          FEBRUARY FEDERAL MILK ORDER CLASS AND COMPONENT PRICES (FMMO): Class Prices: The
     following are the February 2018 class prices under the Federal milk order pricing system and
     changes from the previous month: Class II: $13.44 (-$0.67), Class III: $13.40 (-$0.60), and
     Class IV: $12.87 (-$0.26). Component Price Information: Under the Federal milk order pricing
     system, the butterfat price for February 2018 is $2.3490 per pound. Thus, the Class II
     butterfat price is $2.3560 per pound. The protein and other solids prices for February 2018
      are $1.6265 and $0.0550 per pound, respectively. These component prices set the Class III
     skim milk price at $5.37 per cwt. The February 2018 Class IV skim milk price is $4.82,
     which is derived from the nonfat solids price of $0.5352 per pound. Product Price Averages:
     The product price averages for February 2018 are: butter: $2.1112, nonfat dry milk:

     $0.7084, cheese: $1.4727 and dry whey: $0.2525.
     NOTICE TO THE INDUSTRY - The Dairy Market News portal is moving to a new platform - My
     Market News, https://mymarketnews.ams.usda.gov/. This is part of USDA's launch of MARS,
     Market Analysis and Reporting Services, a state-of-the-art electronic data platform. For a
     short time, Dairy Market News reports will continue to appear on the existing portal,
     https://www.marketnews.usda.gov/mnp/da-home, and existing bookmarks will work. Dairy Market
     News suggests readers also create new bookmarks for favorite reports on the My Market News
     website to maintain easy access to reports.

     Information for the period February 26 -  March 2, 2018, issued weekly

     Published by:
     Dairy Market News - Madison, WI
     JENNIFER HERNANDEZ, (608)422.8597
     Email: JenniferA.Hernandez@ams.usda.gov

     Additional Dairy Market News Information:
     Dairy Market News (DMN) by Phone: (608)422.8602
     DMN Website: http://www.ams.usda.gov/market-news/dairy
     DMN Database Portal: http://www.marketnews.usda.gov/mnp/da-home