CCBA
It's always somewhat a "roll of the dice" when giving the cheese report at our annual convention in the spring, and then following up with all of you each quarter to see just how close, or far (as the case may be) our predictions may be - "To see just how we fair against what the Cheese Market is really doing". My forecast at the time of the convention was for relatively low and stable pricing right through to fall, and quite possibly remaining low to year end.
Well, so far, we find we are staying true to
these predictions, and despite some unforeseen conditions that normally could impact pricing upward, the overall conditions have exerted enough influence to keep our current predictions of a low block and barrel alive.
Lets for a moment review some conditions since my last update. This summer, we experienced very high temperatures well above traditional weather patterns. This in itself drops the yields per cow for milk produced. Adding to this, the heat further produced heavy death tolls for cows. This will most likely raise the overall cow culling numbers further then the increase they are currently showing over the same period of last year. Despite these factors, the overall number of cows, and the total yields from the growing herd size is offsetting the negative factors discussed above, that would otherwise drive upward pricing. Consequently, overall milk production will be revised upward some 700 million pounds for the year, and have helped keep prices unusually low.
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The
Newsletter of the California Cheese & Butter Association 
OCTOBER 2006 Lisa Waters, Editor On a separate but related issue, please take note that more and more customers and end users of cheese, (our consumers), are interested in organic approaches to their foods. Cheese is no exception with many producers requesting the elimination of Monsanto's Posalac (rBST) from the milk they use. This you may recall is a bovine "milk boosting" hormone increasing yields per cow. Considerable calculating with regard to the ramifications on yield must be considered in the elimination of this hormone, but that is already taking place, and the wave is gathering strength, - and I am quite sure it will continue. What's ahead? Well, higher pizza cheese sales for one, with cooler weather, and with schools going back in full session. Surprisingly, pizza sales ran fairly strong this summer also, as did processed cheese along with corresponding higher sales amongst the leading burger chains. The holidays are soon coming, with more cheese earmarked for added consumer retail sales. Predictions anyone? Well, if we must, let's start with today's Block Market of $1.2875 a full .3075 cents below the year ago Block Market of $1.5950. The Barrel Price today is matching the Block at $1.2875, against a year ago market of $1.5350, a full .2475 cents below one year ago! These are considerable differences. Look for stronger cheese sales in the last quarter. Look also for the average Block Market this year through today - to increase slightly, in the last quarter, but still hold well below a year ago. There could be some daily ups and downs, but it should not be much. Unusually low Market prices should prevail through year end. All the best! |
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Cow Moos Mother Nature has an incredible way of changing dairy economics. I recall about 25 years ago seeing a dairy industry newspaper article headline entitled "Mother Nature changed in three weeks what Congress took five years to do". Mother Nature has a way of changing the supply, which then can have an effect on demand if prices change significantly. For example, over the years when beef prices have been high, cheese sales have flourished if cheese was a cheaper source of protein.
This summer's blistering heat spell has made quite a difference on the California Dairy Industry. Since California is the number one dairy state, the heat wave has affected the rest of the nation. The heat waves in the upper Midwest and the Northeast have also created a tightening of the dairy industry.
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Early statistics indicate that at least 16,000 cows have died from the heat according to the Department of Food and Agriculture Secretary A.G. Kawamura (Mercury News, San Jose, California, August 9, 2006). "With 12 days of blistering temperatures over 105 degrees in the Central Valley, dairy cattle - the state's largest agriculture sector - may have been rocked the hardest of any agriculture product. Exact figures are being tabulated, but dairy farmers have suffered an estimated loss of more than $1 billion, says Michael Marsh, Chief Executive Officer of the Modesto based trade organization Western United Dairyman."
Governor Schwarzenegger has requested federal disaster assistance for the state's $5.2 billion milk industry.
The heat has had a greater affect on the California dairy industry than any time in recent history. The reason why is the heat wave affected the entire state of California, while previously it's only been in certain parts of the state. While many dairy farmers have misters to spray cool water on the cows, the scorching temperatures never dropped off enough in the evenings to give the animals any relief. Michael Marsh has said that it may take at least 9 months - until the cows give birth and start their next lactation cycle - before milk production gets back to normal. Another adverse affect of this is that the butter fat and the solids within the milk have each dropped thus affecting the other milk products that were being processed.
Whether consumers see higher prices for milk and other dairy products is unclear in August when this article is being written. The reason for that is that it's too soon to see how wide spread this heat will affect the total U.S. Dairy Industry.
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The effect of this heat wave has another long term effect. Dairy cows and heifers will not breed on time if they are too stressed from the heat. The death of this many cows will also have a long term effect. The reasons why prices haven't jumped higher as of mid-August is because of the amount of butter inventory that is currently available. Butter inventories are significantly higher than in previous years. Another reason is the number of heifers ready to join the milking cow ranks is at an 11 year high.
Butter consumption (the remaining number from production and inventories as published by the USDA) reflects an 8% high for year-to-date. This compares to an increase in butter sales at regular retail stores in of +2.8%. The average price of butter in California for year-to-date is $3.47, which compares to $3.42 for prior year.
It has been hoped by those in the butter industry that the lower prices of the CME in 2006 would transfer into lower prices at regular retail stores, which would enable 2006 to be one of the strongest years in butter sales to regular retail stores.
With the USDA reporting butter commercial disappearance at 8% of 2006, it would appear that Foodservice and Food Processing industries are consuming large quantities of butter. We caution to add that the commercial disappearance number frequently changes as inventory and production numbers are verified for previous months.
Butter continues to be the gold standard in the industry. Margarine and spreads do not have the 120 natural flavor compounds that exist in butter. All of us in this industry are proud to be associated with such a pure and natural product as butter. "Nothing brings out the taste like real butter."
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