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PD Regional Reports - Southwest: Butter manufacturers build inventories with extra cream

Published on 19 January 2010

Milk production per cow, according to the NASS Milk Production report released on December 18, for November was 1,679 pounds, up 25 pounds or 1.5 percent from a year earlier.

The output per cow percentage change from last year for selected Western states is as follows: Arizona no change, California down 1.1 percent and New Mexico up 4.5 percent. California is the only Western state with a negative production per cow.

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No issues were reported in handling milk in California during the holiday period. Plants have capacity and no breakdowns have been reported. Milk production is coming back seasonally, but it continues to lag year-earlier numbers.

Feed and hay prices have certainly moderated and milk prices have rebounded, but financial stress remains the rule at most dairies. Many continue to buy feed on a just-in-time basis because that is all that they are able to do financially.

Cream markets remain seasonally weak. Butter churns have access to all the cream that they can handle. Prices or multiples remain weak. Some contacts report that some fluid milk demand is starting to build and that is also adding to the heavy supplies of cream. Firms are more willing to make and store butter at these end prices when taken into account with the cheaper cream. Cream multiples range from 95-122 freight on board and vary depending on class usage and basing points.

Surplus cream was available during the holiday break and butter manufacturers were busy building inventory at steady to reduced cream prices. Most churning facilities were operating at near capacity. Equipment problems were reported in some isolated situations.

According to the CME, weekly butter stocks increased by 3 million pounds to stand at 37.8 million pounds. Butter inventories which have been reducing since mid-September are being replenished in the post- holiday period. For information purposes based on a different number of butter houses, the total for last year was 36.9 million pounds and the total was 72.5 million pounds in 2007. Prices for bulk butter range from flat to 5 cents under the market, based on the CME with various time frames and averages used. PD

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