Editor’s note: The following are available market reports and futures data as of July 11, 2008.

Butter
The butter price at the Chicago Mercantile Exchange (CMT) Group cash market trended lower. Churning schedules over the past Fourth of July holiday period were heavier, although surplus cream offerings were not as plentiful as anticipated. Butter producers indicated that pricing multiples did ease but were not as attractive as projected. In many instances, butter producers and handlers were pleased to take in additional cream offerings which generated additional fresh butter and slowed the drawdown of inventories.

Demand for cream became more competitive as Class II operations that were working under abbreviated holiday schedules resumed heavier schedules. Buying interest was slow as buyers assessed their supply situation following the holiday period. Some contacts note that some pushback on demand is occurring as prices moved above the $1.50 mark.

International sales continue to be reported, although domestic prices are getting to a point that some Cooperatives Working Together (CWT) export assistance is being sought for some destinations. The CWT program announced that two bids for export of butter, totaling 215 metric tons (MT) (474,545 pounds), were accepted for delivery to Singapore and Morocco. Including these bids, CWT’s total 2008 obligation for butter is 2,814 MT (6.2 million pounds) and 270 MT (594,000 pounds) of anhydrous milkfat.

Cheese
The cheese market is unsettled. Prices declined initially but rebounded later on the CME Group. Offerings and sale volumes increased sharply with 63 cars sold. The holiday reduced bulk cheese needs while cheesemaking remained active.

Orders are mixed after the long holiday weekend as a number of buyers wait for sales results before placing orders. Ample milk volumes are available for manufacturing with many plant cheese inventories growing. U.S. cheddar cheese production for January - May (adjusted for February 29) totals 1.308 billion pounds, down 7.645 million pounds (-0.6 percent) from the same period in 2007. The adjusted total cheese output for 2008 thus far is 4.044 billion pounds, down 2.386 million pounds from the comparable period last year.

Fluid milk
Manufacturing schedules were heavy over the long holiday weekend for those plants operating, in order to process the milk volumes available. Other operations were closed for an extended weekend, causing backups and extra fluid shuffling to occur. Milk receipts are holding relatively steady in the upper Midwest, where temperatures have generally been favorable for milk production.

In the Pacific Northwest, Idaho and Utah operating schedules are also lighter after the holiday weekend. In the South, Southwest, Northeast, and California, elevated summer temperatures have reduced cow comfort despite heat abatement efforts, leading to declines in milk receipts. This is allowing area plants to reduce schedules and allow additional time for maintenance.

Dry products
The NDM market is steady to firm though buyers are resisting making low heat purchases around $1.50. Sluggish condensed skim sales are causing producers to keep dryers busy. Domestic interest is light though international sales and shipments are moving product.

Buttermilk is mixed with firmness in the West and unsettled elsewhere. Supplies are tightest in the West with some shippers behind on deliveries. The Whey Protein Content market is weak and prices are lower. Producers are discounting prices to stimulate interest and reduce inventory. Whey is steady to weak as some producers try to reduce cheese and whey production to keep inventory from accumulating. Interest is light from domestic and international customers, particularly with continuing weakness in WPC. Lactose remains weak as producers struggle to clear inventory. Some buyers remain hesitant to make quarterly contracts as ample quantities of product are available on the spot market.

May 2008 dairy products highlights (NASS)
Butter production was 143.6 million pounds in May, 15.8 percent above May 2007 but 4.4 percent below April 2008. American type cheese production totaled 347.4 million pounds, 4.5 percent above May 2007 and 3.0 percent above April 2008. Total cheese output (excluding cottage cheese) was 828.4 million pounds, 0.5 percent above May 2007 and 2.3 percent above April 2008. Nonfat dry milk production, for human food, totaled 129.0 million pounds, 11.8 percent above May 2007 but 3.0 percent below April 2008. Dry whey production, for human food, was 91.3 million pounds, 2.2 percent below May 2007 and 0.1 percent below April 2008.

April over-order charges (dairy programs)
For April 2008, the all areas combined average over-order charge on producer milk used in Class I was $2.27, down $0.03 from the March 2008 average. Ninety percent of the producer milk used in Class I carried an over-order charge.On an individual order basis, Class I over-order charges ranged from $0.62 in the Pacific Northwest to $4.38 in Florida. For producer milk used in Class II, the all areas combined average over-order charge and proportion of milk carrying a charge was $1.24, down $0.04 from the March 2008 average. Eighty-four percent of the producer milk used in Class II carried an over-order charge.

Milk supply and demand estimates (WAOB)
Milk production forecasts for 2008 are increased due to slightly higher forecast cow numbers and slightly stronger growth in milk per cow. However, higher feed prices are expected to largely offset higher milk prices and the production forecast for 2009 is unchanged. Commercial exports of dairy products in both 2008 and 2009 are raised from last month as foreign demand remains strong.

In light of relatively slow growth in milk production and strong demand in 2008, domestic disappearance on both a fat and skim solids basis are raised and ending stocks reduced. The 2008 Class III price is reduced, but the Class IV price is raised. For 2009, slow growth in milk production and expectations of relatively strong demand are expected to support a higher cheese price forecast. The all-milk price is forecast higher this month, averaging $18.95 to $19.25 in 2008 and $18.60 to $19.60 in 2009.  PD