Editor’s note: The following are available market reports and futures data as of February 15, 2008.

Butter
Butter production is strong across all regions. The impact of heavy supplies of milk and cream is creating situations where churns need to run on extended schedules to churn the cream offerings.

Cream is moving from areas of surplus to Midwestern and Eastern churns to balance supplies. Transportation costs are high, and additional fuel surcharges make any shipment an expensive proposition.

Printing is active ahead of the Easter/Passover season and preorders are slowly developing. Current wholesale prices will make butter a better buy this season. There are some discussions about specials, but most upcoming sales are being held close to the vest for now.

Export butter interest is fair and moving anticipated volumes. New sales are slow to fair. The weekly Chicago Mercantile Exchange (CME) warehouse stock figure stands at 116.0 million pounds, compared to 102.6 million pounds last year.

According to the Foreign Agriculture Service, butter exports for 2007 total 72.6 million pounds; quadruple the total from last year. The top countries were Netherlands (13 million), Morocco (9.4 million), Mexico (7.9 million), Saudi Arabia (7.0 million) and Russian Federation (6.6 million).

Cheese
The cheese market is unsettled though prices are again rebounding at the CME. Many buyers are reducing orders as prices increase. Current offerings are generally at least steady. Production is steady, though generally well above year-ago levels.

Milk supplies are available for additional cheese production, if desired. The Kansas City Commodity Office announced they are seeking an additional 5.4 to 22.1 million pounds of unfrozen mozzarella for July to December 2008 delivery. Offers are due February 27 with award notification scheduled for March 3.

For 2007, U.S. exports of cheese and curd totaled 219.2 million pounds (99,430.9 metric tons), up 62.7 million pounds (40 percent) from 2006. Cheddar exports were the largest increase, totaling 34.5 million pounds, up 210 percent from the 2006 total.

Fluid milk
Severe winter weather (heavy snow with high wind) affected milk movement and consumption patterns in the hardest-hit areas in the upper Midwest and Northeast. Trucking was slowed, and schools were closed, impacting Class I use.

Current milk intakes continue to climb seasonally through most areas of the country. Arizona is only about a month away from the annual peak, with other states to follow into spring.

Cream supplies remain heavy and churning is active. California continues to export milk and components to locate manufacturing capacity. Manufacturing plant schedules are heavier than a year ago.

Dry products
Most recent powder patterns continue. The nonfat dry milk (NDM) market is generally weak, and prices continue to decline.

Production remains seasonally active with interest light to fair. Some export activity from the central regions has been stymied by the tight supply of export containers. Stocks remain heavy.

U.S. 2007 exports of NDM (skim milk) totaled 568.3 million pounds, down 63.5 million pounds (10 percent) from 2006. Buttermilk prices also continue under pressure as they follow NDM values lower. Churning remains active with producers trying to sell more as condensed rather than dry additional volumes just to build inventory.

Whey prices are steady to lower. Demand has improved in recent weeks. Some sellers have been able to clear some inventory, often through exports. Other buyers are sensing the bottom may be near and are starting to return to the market.

Drying remains active as cheese production is generally above year-ago levels. Some improvement was also noted in 34-percent whey protein concentrate (WPC) interest, with prices steady. Supply and demand are getting in better balance.

The lactose market is unsettled. Some producers are in better balance while others feel demand is slower. Interest from Mexico is improving.

International overview
Recent dry weather (drought) and elevated summer temperatures in New Zealand have caused a premature decline in milk intakes. Milk producers are already feeding stored feed as pasture quality is poor in affected areas. Manufacturers and exporters are concerned that the milk flow will possibly be inadequate to meet late-season commitments without any additional business. Forecasts for the season are being revised lower in New Zealand.

In Australia, frequent rains have improved crop conditions though not necessarily pastures in the major dairy areas.

Milk intakes in Europe are increasing seasonally with volumes higher in many European countries. Supplies of many products are still available in Europe, if supplemental volumes are needed. The final decision concerning whether or not to increase European Union milk production quotas for the upcoming season will be made in March.

International buyers are likely to shift their focus for additional product to the U.S. or Europe due to the projected production declines in Oceania.

November 2007 mailbox milk prices (AMS & CDFA)
In November 2007, mailbox milk prices for selected reporting areas in federal milk orders averaged $21.81, up $.42 from the previous month. The component tests of producer milk in November 2007 were: butterfat, 3.79 percent; protein, 3.17 percent; and other solids, 5.71 percent.

On an individual reporting area basis, mailbox prices increased in all federal milk order reporting areas except one, and ranged from $26.04 in Florida to $20.24 in New Mexico. In November 2006, the federal milk order all-area average mailbox price was $14.00, $7.81 lower.   PD