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0209 PD: Class I use remains slow

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Wednesday, 14 January 2009 08:43

Class I use remains slow, though the threat of a winter storm did cause consumers to stock up on food staples like milk in some locations, causing at least one operation to run a little heavier than otherwise expected. Generally, interest is light at “closed schools” levels. Bottlers are expected to start to rebuild school milk inventory in early January. The lighter use of Class I and II is causing a large backup into manufacturing, both cheese and butter/powder. Supplies of milk, cream and condensed skim remain burdensome.

This year is generally considered to be the worst year-end holiday in a number of years to move surplus product. Plants are operating on extended schedules and most silos are full. Surplus milk produced and sold in December is especially discounted (often -$5.00 to -$6.00 under class delivered) though reports indicate less severe discounts on January sales as buyers anticipate Class III prices to fall sharply in January. Sellers are also discounting condensed skim though cream multiples are steady to occasionally higher.

Few, if any, ice cream producers are operating until January. The rumored sale of one Upper Midwest-based creamery to another is expected to reduce the competition for cream and, in the longer term, perhaps generate lower multiples. Milk production is steady to generally higher. Components have been holding near annual peak levels. Warmer temperatures melted some of the snow cover and lowered the snow pile height. In at least one location in Wisconsin, December became the snowiest month on record. Prospects for sharply lower producer milk prices in 2009 with only slight moderating in many input expenses will increase financial stress on producers.  PD

 

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