The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Checking the cash dairy prices, the Cheddar blocks closed last Friday at $1.5750 per pound, down a quarter-cent on the week and 70½ cents below a year ago when they jumped 11 cents to $2.28 per pound. The Cheddar barrels were up for the fourth week in a row, hitting the highest level of 2015 so far, and the highest since December 1, 2014, at $1.6250, up 1½ cents on the week but 63¼ cents below a year ago. Two cars of block traded hands on the week and one of barrel. The NDPSR-surveyed U.S. average block price inched .1 cent higher, to $1.5767 per pound, while the barrels averaged $1.6131, up 4 cents.
Most cheese manufacturers in the Midwest are comfortable with current market conditions, according to USDA's Dairy Market News. "Very good markets" is a characterization offered last week, meaning production schedules are full but cheese is readily moving out the door. A few plants have slightly lower cheese sales volume, which is leading to increasing inventory levels.
Generally the increased inventories are accepted as a good cushion for ensuring steady sales deliveries later in the year. As has been the situation for a number of weeks, some plants are at or near full production. Surplus milk in Wisconsin is selling at prices as low as $5 below Class. Some plants are expanding cheese production schedules to take advantage of the extra milk, but some other plants are already at maximum production.
Credit is also given to robust restaurant and food service sales for adding to retail interest in maintaining current high demand for cheese. In fact, some cheese plant expansions are now underway to increase production capacity based in part on expectations for continuing strong demand for cheese. These plants are encouraging dairy producers selling milk to the plants to increase milk production to supply pending expansions of plant capacity.
Cash butter closed last Friday at $1.8075, up 5½ cents on the week but still 8¼ cents below a year ago when it fell 8 cents. This is the highest spot butter price so far in 2015 and the highest spot price since December 15, 2014. Ten cars traded hands on the week. NDPSR butter averaged $1.7425, up 4½ cents.
Butter promotions are aiding demand for butter, according to DMN. Sales are up slightly with the warmer weather setting in. Some manufacturers believe that unfavorable weather conditions in other regions have also helped with the increase in sales. Export demand is down, with some companies importing butter due to better pricing. Production is steady as some manufacturers are making and storing product for future demand. Cream supplies are available.
Print butter production remains strong in the West. Strong enough that some manufacturers are concerned that time available to build comfortable inventory levels to carry through summer is becoming "uncomfortably compressed."
Spot Grade A nonfat dry milk closed last Friday at 92½ cents per pound, down a half-cent on the week, after losing 4¾ cents last week, 94 cents below a year ago, and the lowest level it has been at since Aug. 3, 2009, a year all dairy producers would love to forget. Block cheese was trading at $1.2850 per pound that week and butter was at $1.2450. Six cars traded hands this week at the CME. NDPSR powder averaged 97.52 cents per pound, down 2 cents, and dry whey averaged 46.52 cents, down .3 cent.
In politics, the National Milk Producers Federation praised House lawmakers last Thursday for voting to repeal a tax it believes hurts dairy producers. An NMPF press release stated: "It's hard enough for new generations of dairy producers to establish their own farms without the prospect of the estate tax penalizing the transfer of farms between generations of family members.
"That's why we support the action today in the House of Representatives to repeal the estate tax. H.R. 1105, the Death Tax Repeal Act, banishes the specter of the estate tax from the same business people that we should be encouraging to invest in the future of America's food production.
"Dairy farming, like most forms of agriculture today, is a capital-intensive enterprise, and has become even more so in the past decade as land values have risen. When younger farmers inherit farms, they are often asset rich and cash poor. The estate tax can hit them with a bill to the IRS that is prohibitively costly. This legislation helps address that problem, and will facilitate the ability of established farmers to transfer their businesses to their offspring.
"The bill repeals the estate and generation-skipping transfer taxes and makes permanent the maximum 35 percent gift tax rate and lifetime gift tax exemption. It also provides for an inflation adjustment to such exemption amount. By repealing the death tax, it will provide more certainty to the agriculture sector, and protect farms' financial viability for future generations. We encourage the Senate to pass similar legislation to help our family farmers."
Meanwhile, National Milk and the U.S. Dairy Export Council urged the Senate and House to act quickly on new Trade Promotion Authority legislation, saying the measure is crucial to securing well-negotiated trade agreements that open foreign markets to more U.S. dairy products.