Milk Producers Council

MPC FRIDAY MARKET UPDATE
CHICAGO MERCANTILE EXCHANGE CHICAGO AA BUTTER NON-FAT DRY MILK
Blocks +$.0100 $1.9325 Weekly Change -$.0025 $1.5500 Week Ending 7/04 & 7/05
Barrels +$.0450 $1.9200 Weekly Average -$.0179 $1.5340
Calif. Plants $1.3741 11,621,028
Weekly Average NASS Plants $1.3955 15,474,204
Blocks -$.0163 $1.9075 DRY WHEY
Barrels -$.0401 $1.8480 NASS w/e 7/05/08 $.2726 WEST MSTLY AVG w/e 7/10/08 $.2800
CHEESE MARKET COMMENTS: Prices on the CME this week moved downward through Wednesday ¨C
then reversed course today and finished the week higher than last Friday. These price "corrections" are a sign
of a healthy market, showing a give and take between sellers and buyers. The wider than normal spread
between blocks and barrels was corrected in a single day by a 10 cent increase for barrels. There's concern
about the large amount of surplus milk now being offered to cheese plants (other than those in California). It's
hard for a plant to pass up the $3 to $5 per cwt windfall discounts on milk that Dairy Market News reports
being offered to cheese plants in various parts of the country. Those offers could disrupt an otherwise strong
and stable market ¨C by either displacing part of a regular milk supply or by resulting in an unwanted increase in
cheese production.
BUTTER MARKET COMMENTS: Mid-year pause? Market correction? Maybe a little of both explains
why butter prices on the CME on Monday dropped by 2.25 cents per lb. DMN believes from what they hear
that buyer resistance may be the main reason. And then Monday's price drop was mostly recovered today. The
weekly pricing pattern so far this year continues to follow quite closely with last year's. The big differences
between this year and last year that could have an effect on butter prices so far is the direction of U.S. milk
production, the direction of export sales, the cost of producing milk, and the slowing economies in the U.S. and
some foreign countries. It's a mixed bag, at best.
POWDER MARKET COMMENTS: Prices are steady on the spot markets and higher on the weekly
averages reported by NASS and CDFA. DMN attributes the higher average sales prices partly to indexing a
portion of the current week's sales to prior week's prices. The California plant average price continues to
bounce around, and remains lower than the NASS average. Factors affecting the California average include the
percentage of sales under long-term contracts, skim milk powder sales, and export sales. The western "mostly"
average has been edging upward for the past 3 weeks, and also could be influencing the weekly average.
WHEY MARKET COMMENTS: DMN reports that whey supplies may be backing up, at least in the central
region, as some drying plants are said to be turning away loads of condensed whey, even from regular
suppliers. The market undertone is weak. Production is steady, sales are slowing, inventories are growing, and
NASS average prices continue to fall. It looks like just about everybody has given up on whey products ¨C
which means existing stocks in the hands of buyers (particularly international buyers) should be declining.
That should lead to future market improvement. What happens to the milk supply this Fall in New Zealand and
Australia, and to the questionable strength in the economies of several key foreign countries, should help
determine whether a rebound happens. Prices for whey protein concentrate continue to weaken, and stocks
continue to rise.

FRED DOUMA'S PRICE PROJECTIONS...
July 11 Est. Quota cwt. $18.76 Overbase cwt. $17.06 Cls. 4a cwt. $15.99 Cls. 4b cwt. $17.44
Last Week Quota cwt. $18.74 Overbase cwt. $17.04 Cls. 4a cwt. $15.97 Cls. 4b cwt. $17.43

WHAT IS BUTTER? (By J. Kaczor) In the wild and crazy world of reporting about dairy products, what is
included as "butter" depends on the particular weekly and monthly report you happen to be reading.
. Daily trading and prices for butter reported on the CME include only butter containing 80% butterfat;
. Weekly sales volumes and prices of butter reported to NASS include only butter containing 80%
butterfat;
. Monthly production volumes of butter reported to NASS include butter containing 80% and 82%
butterfat;
. Monthly storage volumes of butter reported to NASS include all butter plus all anhydrous milkfat and
butter oil;
. Monthly export volumes and prices of butter reported to the USDA's Foreign Agricultural Service
include separate lines for butter and the concentrated forms of butterfat represented by anhydrous
milkfat and butter oil.
That means that attempts to reconcile beginning inventories, production, and sales of butter are fruitless. But
why? A distinction between 80% and 82% butter for sales reporting is understandable because there is a clear
difference between the two in costs and prices. But what is keeping NASS from at least foot-noting pertinent
facts about what is being reported? It's certainly not those buyers and sellers who have been clamoring for
greater transparency, so it must be those others who cherish and benefit from private sources of information.
UPDATE ON CALIFORNIA MILK PRICES: (By J. Kaczor) The following table includes minimum prices
announced by CDFA as of today. The Class 1 prices are those for Southern California. Quota prices are $1.70
per cwt higher than the Overbase prices.
June's Overbase price should be reported next week; it could be about $1.65 per cwt lower than last June's.
Look again at today's projections made by Fred Douma included above. Prices through May continued to
generate higher overall prices for California producers, but a comparison of 2008's Class prices for June to the
same prices a year ago suggest that lower prices may be expected for the balance of the year.
Class 4a prices over the second half of last year reflected the record high prices that resulted from international
short term reactions to shortages of nonfat dry milk in major exporting countries. Those prices are unlikely to
2007 2008
Class 1 Class 4a Class 4b Overbase Class 1 Class 4a Class 4b Overbase
January $14.00 $11.92 $12.47 $12.00 $23.23 $16.40 $16.91 $17.44
February 15.37 12.34 13.20 12.75 21.98 14.28 17.54 16.72
March 16.01 13.24 14.13 13.58 19.17 14.36 16.94 16.01
April 16.71 14.53 15.20 14.63 20.19 14.31 16.79 15.86
May 17.71 16.00 18.05 16.59 19.05 15.19 18.66 16.77
June 20.28 17.03 21.18 19.00 20.50 15.61 19.12
July 23.26 19.84 20.54 19.90 22.77
August 23.76 21.21 19.41 20.04 19.79
September 23.10 21.62 19.34 19.99
October 23.81 21.32 17.65 19.46
November 23.43 20.66 19.75 20.23
December 23.26 19.14 18.58 19.09
be approached this year, and U.S.-produced skim milk powder is taking an increasing share of that market
from nonfat dry milk. The June 2007 4b price reflects a monthly average cheese price of $1.98 per lb, and
more than $2.00 per cwt from the dry whey component which no longer exists in the price formula in last year's
form. The June 2008 4b price reflects a cheese price of $2.09 and could be reflective of 4b prices for the rest of
the year. Putting these considerations together, along with the effect of the sizable shift of usage from the
higher priced 4b class to the lower priced 4a class, it appears that minimum milk prices from July through
December could be significantly lower than for the same period a year ago. That said, a change in the amount
of milk produced in the U.S., or a disappointing amount that is produced in certain other countries, or
something else, could improve price prospects later this year. Any ideas?
LAST WEEK TO APPLY FOR LIVESTOCK INDEMNITY PROGRAM: (By Rob VandenHeuvel) While
many of you have likely already filed the paperwork for FSA's Livestock Indemnity Program (LIP) ¨C which
compensates dairies for the animals that died during designated "disaster periods," this is just a reminder that
the deadline to submit applications to FSA is next Friday, July 18, 2008. If you have not prepared your LIP
forms yet, and would like assistance from MPC, please call the office at (909) 628-6018.

Our thoughts and prayers are extended to the family of MPC board member BJ Schoneveld, with the
passing of their father, grandfather and husband John Schoneveld this past Tuesday. Please remember
the Schoneveld family in your prayers.