Cheese prices plummet
CME cheese prices continued their descent the second week of December. The barrels closed Friday the 13th at $1.6950 per pound, down a record single week decline of 53.25 cents, but still 38.5 cents above a year ago.
The hemorrhaging leaked onto the blocks, which finished at $1.7975, down 17.25 cents on the week and 39 cents above a year ago. Twenty cars of barrel sold last week at the CME and 4 of block.
The blocks lost 2.75 cents both Monday and Tuesday as traders absorbed the morning’s GDT auction and anticipated Wednesday afternoon’s November Milk Production report. Tuesday’s price was at $1.7425, the lowest block price since June 5.
The barrels plunged 8.5 cents Monday and lost 4 cents Tuesday, dipping to $1.57, lowest since June 12, and 17.25 cents below the blocks.
Dairy Market News reports that central cheese sales are steadying and warned that demand, in some cases, is falling behind stronger production and growing supplies. Milk is readily available and a number of cheesemakers are forgoing the spot milk market because they are at capacity.
Producers are hopeful the football playoff season will keep buyers busy. Milk production is higher in the region and cheese market tones are on “shaky ground,” says DMN.
Western cheese intakes are stable for retailers and food service. Export demands are at seasonal levels. Buyers have been getting only what they need the past few weeks, says DMN, but if the declines in prices are sustained, cheese sales are likely to become more active. Production continues to increase ahead of the holidays as milk supplies are plentiful in the West.
Cheese traders will have a new tool in 2020. The CME will begin listing block cheese futures and options beginning Jan. 12. Contact your broker for details.
Butter saw its first positive move since Nov. 18 last week, closing at $1.96 per pound, up 4.5 cents on the week but 23 cents below a year ago.
The butter gained 2 cents Monday and added 0.75 cents Tuesday, reaching $1.9875.
Butter producers report plentiful cream. Butter orders have already been placed to fulfill holiday needs but current demand is meeting expectations. Some contacts expect butter prices to level off and find some steadiness while the more bearish expect prices in the $1.80 area.
Western butter makers say that with ample amounts of affordable cream they are running their churns hard. Retail orders are strong as buyers try to get shelves restocked ahead of the holidays and bulk buyers continue to make inquiries for early 2020 needs.
Butter makers have seen inventory values fall with the declining prices and while stocks are adequate, they question the right amount to have on hand, says DMN.
CME nonfat dry milk saw some ups and downs but closed Friday at $1.2650 per pound, down a quarter-cent but 32.5 cents above a year ago.
The powder was unchanged Monday but the morning’s GDT didn’t help matters any. CME nonfat dry milk was down 1.25 cents Tuesday, slipping to $1.25 per pound.
Spot dry whey saw a Friday price at 33.75 cents per pound, down 3 cents and 11.25 cents below a year ago, with 19 cars finding new homes on the week.
The whey lost 2.5 cents Monday and inched a quarter-cent lower Tuesday, to 31 cents per pound, lowest CME price since November 14.
The last Global Dairy Trade auction of 2019 ended with a loud thud Tuesday, as the weighted average of products offered plummeted 5.1%, following the 0.5% loss on Dec. 3, ending five consecutive sessions of gain.
Powder pulled the average lower, led by whole milk powder, down 6.7%, following a 0.1% uptick on Dec. 3. Skim milk powder was down 6.3%, following a 1.9% gain last time. Butter contributed as well, down 2.4%, after losing 4.9%, and anhydrous milkfat was off 0.3%, following a 5.1% drop.
Rennet casein led the gains, up 2.6%. GDT Cheddar was up 1.7%, after jumping 2.7% last time, and lactose was up 0.6%.
FC Stone equated the GDT 80% butterfat butter price to $1.7199 per pound U.S., down 4.3 cents from the last event. CME butter closed Tuesday at $1.9875. GDT Cheddar cheese equated to $1.7550 per pound, up 3.3 cents, and compares to Tuesday’s CME block Cheddar at $1.7425.
GDT skim milk powder averaged $1.3004 per pound and compares to $1.3918 last time. Whole milk powder averaged $1.4059, down from $1.5108. CME Grade A nonfat dry milk closed Tuesday at $1.25 per pound.
The USDA’s latest dairy product commercial disappearance data helped explain recent prices, according to Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter.
Speaking in the Dec. 16 "Dairy Radio Now" broadcast, Gould reported that October butter prices topped the rest of the world but domestic butter consumption was up 4.1% in October, up 3.1% in August, and up 6.7% in September.
American type cheese consumption hovered between 1.5% and 1.6% in a three-month rolling average, he said, so domestic growth was solid.
However, “the problem is exports,” he said. American type cheese exports were down nearly 10% in the three months ending in October, and Gould blamed the on-going trade war.
Nonfat dry milk exports has been struggling, he said, but that was made up for by domestic use, which was up 18.3% and exports were up almost 17% in October.
HighGround Dairy adds that total October cheese disappearance marked the strongest monthly disappearance in history “and demand continued up versus prior year for the second consecutive month.”
Butter disappearance topped that of a year ago for the third consecutive month and moved toward seasonal highs, marking the strongest October on record, according to HGD, and the same was true for nonfat dry milk, with both export and domestic demand pushing total disappearance higher.
Milk sales down
Positive dairy product demand did not carry over to fluid milk. The USDA’s latest data shows 4.0 billion pounds of packaged fluid sales in October, down 2.1% from October 2018.
Conventional product sales totaled 3.8 billion pounds, down 2.2% from a year ago. Organic products, at 230 million pounds, were up 0.9% and represented 5.7% of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 0.4% from a year ago and made up 32% of total fluid sales in the month. Sales for the 10-month period totaled 12.5 billion pounds, up 0.9% from a year ago.
Skim milk sales, at 276 million pounds, were down 11.8% and made up 6.8% of total milk sales for the month.
Total packaged fluid milk sales, January through October, totaled 38.2 billion pounds, down 1.8% from a year ago. Conventional products year-to-date totaled 36.1 billion pounds, down 1.7%. Organic products, at 2.1 billion pounds, were down 2.2% and represented about 5.5% of total fluid milk sales for the period.
The figures represent consumption of fluid milk products in Federal milk order marketing areas and California, which account for approximately 92% of total fluid milk sales in the U.S.