Cheese prices firmed again this week despite the increased production. NFL football playoffs are expected to increase demand in the short term as fans gather for parties. In fluid milk, transportation issues were not uncommon as trucks were backed up and used for storage. Butter manufacturers cleared holiday cream supplies in most regions without too many problems. The first week of the New Year saw active production of dry products as processors managed higher inventories of milk.

The following are highlights from the USDA's Dairy Market News for the week of Dec. 31, 2012 to Jan. 4, 2013. Download the complete 25-page report.

BUTTER HIGHLIGHTS: Butter manufacturers cleared holiday cream supplies in most regions without too many problems. New churning facilities in the West helped manufacturers keep up with the holiday supply. Regularly operated and intermittently operated Central region churns contributed to clearing some East cream loads. Mechanical problems at one or two East region plants prompted some of those East/Central cream shipments. The last of the holiday cream is expected to run through churns by the end of this week. Retail interest is light as the holidays marked the end of active consumer interest for the near term. The recent active production of butter has increased bulk butter inventories, but manufacturers and some brokers indicate the current market price allows them to build inventories with confidence.

CHEESE HIGHLIGHTS: Cheese production was increased again this week as the holidays shortened the work week. Class I bottlers were quiet early in the week and some Class II plants took advantage of the holiday to shutter manufacturing plants. Increased volumes of milk were available for cheese plants with discounts being offered to clear supplies, especially in the Midwest. Milk handling returned to normal after the holiday. Cheese prices firmed again this week despite the increased production. NFL football playoffs are expected to increase demand in the short term as fans gather for parties.

FLUID MILK: The second week of holiday interrupted milk handling saw manufacturers scrambling, in some cases, to handle the increased volumes. Early in the week, many Class I facilities were running reduced schedules along with some Class II plants. As the holiday passed, cream was backed up in some Eastern and Southwestern plants. Dryers were busy with increased skim milk supplies and were running full schedules to handle the volumes. Transportation issues were not uncommon as trucks were backed up and used for storage.

DRY PRODUCTS: The first week of the New Year saw active production of dry products as processors managed higher inventories of milk. Much of the added supplies went to butter/powder and cheese plants. As the holiday passed, supplies eased with the opening of more Class II plants and increased Class I demand to refill the school milk pipeline. Sales activity for many dry products was quiet with renewed business not expected until next week. Contract sales moved normally, but spot activity was quiet. Buyers and manufacturers waited to find out about Farm Bill progress in Washington before undertaking new strategies. Dryers were busy as nonfat dry milk production was increased for the early week. Much of the production was focused on low heat in order to clear volumes of condensed skim. Inventories are building, but are not considered burdensome. Increased production of SMP has helped to balance NDM supplies. Dry buttermilk production is increased with the holidays as butter churns continue to process cream supplies. The market is expressing a weaker undertone with some spot sales reported at lower prices.