Northeast Milk Supply/Dean Settlement

To hear the DFA conditioned farmers tell it, there is so, so much milk in the Northeast that if they cannot get it into the Dean plants involved in the NE settlement, they will get less money.

Here are a couple stories:

http://www.uticaod.com/news/x1798429123/Chenango-Co-s-Chobani-yogurt-hopes-to-be-No-1-yogurt-soon



http://www.uticaod.com/news/x1274023574/Yogurt-plants-boost-state-s-dairy-industry

But Chobani has expanded so rapidly that dairy farmers haven’t been able to grow the size of their herds as fast as the company needs, Ulukaya said.

“The demand is so high that it comes from every corner of the state,” Ulukaya said, of the milk. “Yet, we need more.”

The need for milk is a major reason why Ulukaya doesn’t know whether he will expand in this state or another, he said. The Chenango County plant will stay in place either way, but he has been in discussion with state farmers about whether they can handle further expansion by Chobani, he said.

According to sources, DFA/DMS has a full supply agreement with Chobani. Obviously, they cannot supply the Chobani plant.

However, DFA's ploy really has nothing to do with supply, but rather, with trying to disrupt class certification in the class action lawsuit. Without class certification there is no suit.

Now the News

Trading at the CME has quite a few players, comparatively. Of course, there is still a difference between the CME and a real market. Still, you can't help but wonder if milk is tight.

Dairy Market News latest:

Northeast/Southeast -

"Manufacturing milk supplies continue to tighten in the East due to increased Class I demand as more schools are opening or preparing to open soon. Seasonal declines in milk production are continuing in the Northeast with steeper declines noted in the Mid Atlantic and Southeast regions which have been affected by significant spells of heat and humidity. Schools have been back in session in the Southeast for over a week and trucking issues have lessened. Temperature issues however, remain and are causing some loads to be rejected. Class I pulls have increased in Florida as most schools are opening this week. Cream supplies remain very tight as milk production declines and components remain low. Demand for cream is very strong with cream cheese, ice
cream and butter makers vying for available supplies."

Central -

"Milk supplies are very tight and even bottlers are occasionally getting deliveries when they are available and not on their preferred schedules. For bottlers, it is not just calling up to get extra
volumes just when desired with just a phone call or two, as manufacturers are reluctant to let go of their supply. Finding a truck/trucker available is also a problem with spot loads. Class I demand was stronger again this week between retail feature activity in selected markets and increased volumes needed to fill the school milk pipeline."

And

"The possibility of getting extra manufacturing milk supplies in the upper Midwest is extremely unlikely, so there are not enough prices received to generate a spot price report. The current demand far exceeds the few if any loads offered."

Supply Tightens

June milk production Numbers have not been out a week and there are abundant signs of short milk supplies. Dairy Market News overview states:

FLUID MILK: Weather conditions are having bigger impacts
on the milk flow across the United States as the summer season
progressed. Production declines are noted across many regions as
well as drops in milk components. Hot, humid conditions in the
Northeast and Middle Atlantic regions are causing significant
production declines and causing milk plants to run on reduced
schedules. Milk production in the Southeast has moderated and
being attributed to increases in heifers in the region offsetting
seasonal declines. Upper Midwest milk output is dropping with
weather conditions the main reason. There is good demand for
surplus milk and offerings are demanding premiums of up to $3
above class usage, unusual at a time when discounts are normally
needed to move milk. Production of milk is trending lower in
California, Arizona, and New Mexico. Declines in the fat and
protein levels of incoming milk are commonly noted. Conditions
are making heat abatement measures necessary, but less effective
as humidity levels increase. Milk supplies in the Northwest,
Idaho, and Utah are seasonally steady and plants are able to
handle the current flow. Bottled milk demand is trending along
summertime patterns. There are areas where retail features are
moving more milk along with some strategies of offering
reduced/skimmed milk pricing to allow bottlers to capture more
cream. Cream markets remain tight and characterized by good
demand and higher multiples.

Those multiples are based on current CME butter price. DMN states multiples as high as 170, which means 170% of the CME butter price per pound of actual fat.