MD_DA830 DA MD DA830 Cheese - Midwest MADISON, WI. June 03, 2015 (REPORT 22) MIDWEST CHEESE: All across the Central region, cheesemakers are facing volumes of milk which keep plant production at varied percentages above year ago levels. Some plants are operating at levels above what had been previously believed to be capacity, straining machinery and human endurance. A number of cheese manufacturers are turning discounted surplus milk offers away because capacity can't accommodate taking any more milk. Some plants have pressed milk storage capacity not used for some time into service to handle current volumes. This situation may result from cheese manufacturers who are attempting to help long time milk suppliers cope with needing to sell high milk volumes, in furtherance of relationship building that hopefully will be remembered by the milk suppliers during times of milk tightness when decisions are made about who gets milk. Not only is milk from the region a factor, but brokers are offering milk from the East to Midwest plants. Surplus milk is offered in Ohio to cheesemakers for $5.00 under Class, which is described as unusually low for the state. Iowa cheesemakers are being offered surplus milk at $3.00-$5.00 under Class, depending on timing, location and the source. There are some takers who usually wish they had plant capacity to accept more. In Wisconsin surplus milk is available for as low as $6.00 to $7.00 below Class. Some milk sellers are also suggesting various options seeking to induce sales to cheese plants, options that transcend simply setting a below Class price for the surplus milk. For example, some milk sellers have proposed agreements to sell milk to plants to make into cheese and then immediately buy it back at various price options, freeing cheese manufacturers from sales concerns, storage, or transport with a profit for the effort. Mostly that has not led to deals because few plants are able to increase cheese production. Specialty cheeses sometimes present a current problem to manufacturers because that manufacturing process can slow overall production volumes. An increasing challenge at some plants making a number of varieties of specialty cheese, is balancing between keeping good customers satisfied, weighed against the reality that to do so, there is a slowdown in the ability to absorb milk for making non-specialty cheese. Cheese sales are strong all over. Many plants are sold out and unable to accommodate new inquiries from buyers, at least buyers who lack an ongoing relationship with the plant. Even requests for additional volumes from existing contract customers are not always able to be honored. Part of the demand is current consumption but a number of manufacturers have come to believe that buying patterns are different this year from some recent years. These manufacturers believe that faced with prevailing cheese prices toward the end of 2014, a number of cheese buyers decided to defer re-stocking inventories and allowed sales to deplete stocks below traditional levels. This view believes that some of 2015 sales strength is attributable to replenishing inventories by such buyers, as well as efforts to further build inventories as cover should prices toward the end of the year follow similar trends as last year. The National Retail Report - Dairy (DMN) found that May 29 to June 4 Midwest ads for 8 ounce shredded cheese have a weighted average advertised price of $2.08, 26 cents lower than the national average, $2.34. Midwest prices range from $1.50 - $2.99. One year ago the national average price was $2.37. For 8 ounce blocks, the Midwest average price is $2.14, 9 cents lower than the national average price, $2.23. Midwest ads are priced from $1.50 to $2.99. One year ago the national average price was $2.44. Wisconsin wholesale prices for 1,000 to 5,000 pound mixed lots of process cheese increased $.0175, Swiss is unchanged, and the remaining varieties increased $.0325. The CME Group May 2015 monthly average price for barrels, $1.6250, is above $1.6135 in April, but below $1.9985 in May one year ago. Blocks' May average price, $1.6308, is up from $1.5890 in April, but down from $2.0155 one year ago. In CME Group trading Wednesday, Barrels closed at $1.7000, up $.0950 from last Wednesday and Blocks closed at $1.7400, up $.0800 from last Wednesday. WISCONSIN WHOLESALE SELLING PRICES: DELIVERED, DOLLARS PER POUND (1000 - 5000 POUNDS MIXED LOTS) Process American 5# Loaf : 1.7400-2.1000 Brick And/Or Muenster 5# : 2.0475-2.4725 Cheddar 40# Block : 1.7750-2.1700 Monterey Jack 10# : 2.0225-2.2275 Blue 5# : 2.3150-3.3025 Mozzarella 5 - 6# (Low Moisture, Part Skim): 1.8475-2.7875 Grade A Swiss Cuts 6 - 9# : 2.6900-2.8075 100C eric.graf@ams.usda.gov 608.557.7005 USDA/AMS/Dairy Market News, Madison, Wisconsin Dairy Market News website: www.ams.usda.gov/dairymarketnews Dairy Market News database portal: http://www.marketnews.usda.gov/mnp/da-home