Blimling and Associates Blog

Block cheddar cheese closed at $1.4550/lb, up $0.0100/lb with 2 trades.

Barrel cheese closed at $1.4500/lb, unchanged with no trades.

Butter closed at $1.3200/lb, up $0.0100/lb with 8 trades.

Grade A NDM closed at $1.3250/lb, unchanged with no trades.

Extra Grade NDM closed at $1.2700/lb, up $0.0050/lb with no trades.

Farmers Threaten Milk Supplies

Cadbury to Milk Kraft

US Removes Import Levy on Israeli Milk Products

USDA Issues Recommended Decision on Proposed Amendments to All Federal Milk Orders

CCC Accepts Butter Bid

DFA Will Pay Members $8.8 Million

Sen. Gillibrand to Chair Committee Meeting on Dairy Pricing

Switzerland Gives Aid to Dairy Industry

Scalzo Promoted to Dean Foods COO

Fonterra to Vote on Capital Restructure

WI Dairy Industry at Risk

Dairy Industry Index Shows Strong Recovery

For the first time since June, front-month corn futures have popped over the $4.00/bu mark, with upward momentum driven by forecasts calling for an extended period of wet, harvest-delaying weather as well as continued weakness of the US Dollar. The cost of milk production is going up...

Block cheddar cheese closed at $1.4450/lb with no trades.

Barrel cheese closed at $1.4500/lb with no trades.

Butter closed at $1.3100/lb, up $0.0100/lb with 6 trades.

Grade A NDM closed at $1.3250/lb, up $0.0100/lb with no trades.

Extra Grade NDM closed at $1.2650/lb, up $0.0050/lb with no trades.

The EU has come through with aid for dairy producers. The reaction has been mixed. Various wire reports pick up interesting comments across the spectrum. First, Mariann Fischer-Boel, the EU's Agriculture Commissioner, had this to say after putting 280 million Euros (about 415 million US Dollars) on the table:

"I'll empty my pocket, and I have 280 million euros for the farmers. That's (what) I have. I don't have a special account in Switzerland or anywhere else... Nobody wants to return to the old-fashioned regime of the sixties and seventies..."

So, the Commission has come with all it has. Dairy producers, it is safe to say, are less than wowed. There are a variety of stories on the web, but we found this comment interesting:

Jackie Cahill, president of the Irish Creamery Milk Suppliers Organisation, said the deal would only serve to “throw diesel on the fire” and would not quell the spate of protests. “While we won’t refuse any money, it is so inadequate. It shows the European Commission is out of touch with the reality that’s out there at the moment.” He added, “The decision will increase farmers’ anger.”

Dairy policy -- hard to get everyone happy no matter the nation or language...

Organic Group Criticizes Target Soy Milk Ads

Owens Treading Into Dairy Industry

Cadbury Raises Forecast, Putting Pressure on Kraft

Dairy Giant Offers Milk Price Assurance

Cal Poly Holds Off Plan to Reduce Dairy Herd

Outside Observers Say Animal-Cruelty Videos Extreme at Best, Staged at Worst

A number of restaurant chains will be reporting quarterly results over the next two weeks. Today featured reports from Brinker (EAT) and Sonic (SONC). The story for the latest quarter remains largely unchanged: earnings topping estimates despite soft same-store sales.

Brinker earned $0.17/share, beating estimates for $0.15/share. Revenue, however, was down 21% as same-store sales across the company were down 6% (Chili's, Maggiano's, On-the-Border). On the earnings call, CFO Chuck Stonseby made the following observation in response to a question about sales performance month-to-month (courtesy of seekingalpha.com):

If we went down period by period in the first quarter, July was down 8.8% for Brinker; August was down 3.1%; and September was down 5.4%. So we did see some recovery from July into August. And then we got off the 3C [promotion] and went to a more full-price promotion and gave back a little bit of that same-store sales gain.

Customers, in short, are responding to price promotion...and when the promotions are less attractive, the customers don't come. 

Sonic Corp topped analyst expectations by $0.04/share; same store sales were down 4.5%.

Restaurant driven demand for dairy products and other commodity foodstuffs continues to lag...

Cow numbers continue to move lower, as depicted today in the latest USDA/NASS Milk Production report. The US herd contracted by 36,000 head from August to September according to USDA estimates. That makes it nine months in a row with a shrinking production base -- a journey that has whittled the total herd by 208,000 head and brought cow numbers back to December 2006 levels. Is it enough? Conventional wisdom was that we needed to reduce the herd by 300,000 head or more. By that metric, we are two-thirds of the way complete, but momentum will probably carry things closer to that target over the next two-to-three months no matter what happens to prices. With a lot of heifers in the pipeline, however, we suspect cow numbers could spring back comparatively quickly in response to higher prices -- as was the case in 2007.

According to the USDA/NASS Milk Production Report, released at 2:00pm CT today:

September 50-state MILK PRODUCTION @ 15.026 billion pounds, down 0.7% versus September 2008 levels. 

September 23-state MILK PRODUCTION @ 13.949 billion pounds, down 0.7% versus September 2008 levels. 

September 50-state COWS @ 9,126,000 head, down 197,000 head over September 2008 levels and down 34,000 head from the August 2009 estimate (the August estimate was revised up 2,000 head, making for a 36,000 head report-to-report change)

September 23-state COWS @ 8,342,000 head, down 168,000 head over September 2008 levels and down 30,000 head from the August 2009 estimate (the August estimate was revised up 2,000 head, making for a 32,000 head report-to-report change)

If you are not a subscriber and are interested in what this might mean for the dairy markets, request a free trial subscription. 

Block cheddar cheese closed at $1.4300/lb, up $0.0150/lb with 4 trades.

Barrel cheddar cheese closed at $1.4225/lb, up $0.0075/lb with no trades.

Butter closed at $1.3000/lb, up $0.0475/lb with 5 trades.

Grade A NDM closed at $1.3150/lb, unchanged with no trades.

Extra Grade NDM closed at $1.2600/lb, unchanged with no trades.