Blimling and Associates Blog

Machine at Fault for School Milk Poisonin in NW China

Expanding 2010 Milk Production Likely to Limit Price Increases, USDA Says

Cropp: Dairy Market Behavior Not Easy to Explain

Goat-napper on the Loose in Upcountry Maui

An article in the Wall Street Journal points to improving restaurant sales and consumer confidence, though there are indications that the consumer is still budget-minded.  Accordingly, restaurant companies are seeking to showcase value.

Sales at quick-serve and family-style restaurants open at least a year have been up four of the past six weeks, research firm NPD Group reported, something that hasn't happened in 11 months. Still, the firm expects the industry will remain weak for the next seven months.

Restaurants haven't been able to raise prices. Instead, they have developed new, lower-cost items or reduced costs by substituting lower-priced ingredients in their recipes.

At Yum Brands Inc., owner of KFC and Pizza Hut, lower prices have become a way of life. First-quarter sales at Pizza Hut were driven by a successful promotion, said CEO David Novak. "We were simply too expensive and now we're working on ways to sustain this value," he told analysts last week.

Chipotle finance chief John Hartung said the restaurant hasn't had any menu price rises "for over a year," and while he expects food and labor costs to creep up this year, "I think we'll be patient before we rush into any price increase," he added.

Consumer food prices were up only 0.2% last month even as producer prices rose 2.4%. That means restaurants aren't passing along their higher costs.

It isn’t clear to what extent increased restaurant traffic will improve demand of dairy products.  But marketers are surely heartened to see a little momentum back in the food service space.

Block cheddar cheese closed at $1.3675/lb, unchanged with 13 trades.

Barrel cheese closed at $1.3475/lb, unchanged with 8 trades.

Butter closed at $1.5700/lb, unchanged with no trades.

Grade A NDM closed at $1.2975/lb, up $0.0050/lb with 1 trade.

Extra Grade NDM closed at $1.2500/lb, unchanged with no trades.

Dairy Farmers Focused on Conservation

Chinese Milk Producer Suspends Operation After Food Poisonings

Debt-Struck China Milk Reveals Cash Hoard

US Milk Production Trends Up

Swiss Bankers Should Look to Cheese Exports for Answer to Model

Large Fire Destroys Former Cheese Factory

Police Find Pot-Laced Butter

Hershey Benefits from Major Advertising Push

CA: Cow Feed May Be Causing Valley Air Problem

New Zealand Dairy Farm Could Go for $200 Million

According to the USDA/NASS Cold Storage Report, published at 2:00pm CT today:

March 31 AMERICAN-TYPE CHEESE stocks @ 600.8 million pounds, up 9.5% year-over-year and up 0.4% versus February 2010 (that compares to an average February-to-March increase of 2.4% over the previous five years).

March 31  TOTAL CHEESE stocks @ 1,000.8 million pounds, up 9.4% year-over-year and up 1.5% versus February 2010 (that compares to an average February-to-March increase of 2.9% over the previous five years).

March 31  BUTTER stocks @ 196.6 million pounds, down 7.5% year-over-year and down 3.3% versus February 2010 (that compares to an average February-to-March increase of 9.9% over the previous five years).

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Dairy cow slaughter for the week ending April 10 was 53,644 head, up 8.6% from the same week last year.

Block cheddar cheese closed at $1.3675/lb, unchanged with 13 trades.

Barrel cheese closed at $1.3475/lb, down $0.0025/lb with 3 trades.

Butter closed at $1.5700/lb, unchanged with no trades.

Grade A NDM closed at $1.2925/lb, unchanged with no trades.

Extra Grade NDM closed at $1.2500/lb, unchanged with no trades.

Nestle Holds to 2% Input Cost Rise

ACCC Opposes Bid for Warrnambool Cheese

USDA Storage Data Showing Heavy Cheese Hangover, Analysts Say

Milk Boss Says 'Stiff Cheese' to Imports

Hershey's Profit Doubles as Sales, Margins Surge

Glanbia to Dispose Irish Dairy and Agribusinesses

Block cheddar cheese closed at $1.3675/lb, up $0.0025/lb with 11 trades.

Barrel cheese closed at $1.3500/lb, up $0.0050/lb with 5 trades.

Butter closed at $1.5700/lb, unchaged with no trades.

Grade A NDM closed at $1.2925/lb, unchanged with no trades.

Extra Grade NDM closed at $1.2500/lb, unchanged with no trades.

Stirred Up…

Less than a month ago we wrote that the dairy markets were entering an “especially crucial” period for price path determination.  In just a few weeks time, the marketplace has been vigorously stirred up, most notably by the April 6 Global Dairy Trade auction which showed 20+% month-to-month increases for SMP, WMP, and AMF.    Piecing things together, we are more bullish parts of the complex than was the case a month ago.  This doesn’t mean that we are set to revisit the market of 2007-2008, however.  Yes, demand in Asia is persistent and commands respect, but it would be a mistake to underestimate latent supply-side potential, particularly in the US.  What’s more, compelling arguments can be made suggesting that unexpected strength today will breed weakness that we have not heretofore expected for tomorrow.

With supplies tighter, demand a bit stronger, and the complex stirred up by the GDT results, we believe the world is going to go into front-load mode on powders and butterfat.  We expect that the US will participate from an export perspective, but as we have noted in the past, mainly as a function of supply gaps created elsewhere.  The complex is edgier and behaviors of both buyers and sellers will shift to avoid future shortages and take advantage of higher prices, respectively.

We continue to watch the developments with a wary eye.  A fundamental foundation for stronger prices exists, but can a significant, sustainable rally be built upon that?  There are a number of obstacles.

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