Cheese prices tumble from peak
Most dairy product prices plummeted last week after the 40-pound Cheddar blocks shot up to $2.2375 per pound on Monday, the highest CME price since Oct. 22, 2014.
It plunged to $2.0450 on Thursday and closed Friday at $2.05, down 15 1/2-cents on the week, after pole vaulting 20 3/4-cents the previous week, but was still 41 1/2-cents above a year ago.
The 500-pound barrels hit $1.94 last Monday but fell to $1.6550 by Friday, down 26 1/2-cents on the week and 29 1/2-cents above a year ago.
The blocks were unchanged Monday, as traders awaited the afternoon’s August Cold Storage report, then dropped 5 3/4-cents Tuesday, to $1.9925.
The barrels lost 3 3/4-cents Monday and were at an all-time record 43 1/4-cents below the blocks. They rolled a half-cent lower Tuesday, to $1.6125, lowest CME price since June 17, 2019, and 38 cents below the blocks.
FC Stone’s Dave Kurzawski says, “The CME spot market is in the throes of finding a sense of equilibrium. ... Bull market corrections are jarring and violent. They represent a rapid swing in both prices and sentiment. They can be terribly confusing. But they rarely, if ever, change the underlying supply-demand fundamentals.”
He added that the spot market “appears to have gotten ahead of the real-world conditions last week, spiking too high and forcing buyers to find product elsewhere or cancel orders. And prices fall. But this correction doesn’t change the broader underlying supply-demand fundamentals at play. Weak milk and cheese production, good domestic cheese demand and light inventories remain supportive for cheese prices over the next month, at least.”
Cheesemakers reported a little more variety regarding demand, according to Dairy Market News, but sales are steady. Spot milk markets were quiet, though milk was on the tighter side in the region and ranged $1.00 over to $1.50 over Class.
Western block cheese availability was very tight and prices are higher than usual. Domestic buyers were reluctant to make purchases above immediate needs as they believed the prices were inflated.
Cheese production remains active with enough milk finding its way to the vats. The spread has been on the minds of traders, wondering how that will be corrected.
The strong value of the dollar is not helping export sales, and DMN warned that “low feed costs are likely to result in more milk production and subsequently more cheese output, which could impact the cheese market tone.”
Cash butter also had a rough week, falling to $2.1025 per pound Thursday, lowest price since Feb. 16, 2018, but regained a penny and a quarter Friday to close at $2.1150, 10 3/4-cents lower on the week and 12 cents below a year ago.
Monday’s butter jumped 4 cents but reversed Tuesday, losing a penny and a quarter, and slipped to $2.1425.
Cream is accessible, according to butter producers, but they are keeping churning somewhat light to manage end-of-fiscal-year stocks. Butter producers say demand has ebbed so trading is quiet throughout the region.
Western contacts suggest butter sales have slowed and buyers are not showing any signs of urgency to make purchases. Shoppers seem willing to wait to see if prices slip further.
While market observers think end users have some of their butter needs covered for the next few months, they also expect a surge in activity for fall and winter holiday needs, according to DMN.
Grade A nonfat dry milk marched to $1.0825 per pound Friday, up 2 3/4-cents on the week and 21 cents above a year ago.
Monday’s powder was up three-quarters and tacked on another 1 1/4-cents Tuesday, hitting $1.1025 per pound, highest since March 3, 2015.
Dry whey held all week at 39 3/4-cents per pound, 11 3/4-cents below a year ago.
The whey lost 3 cents Monday and gave up a penny and a quarter Tuesday, slipping to 35 1/2-cents per pound, lowest in six weeks.
Production up 0.2%
U.S. milk production remains above a year ago but not by much. The Agriculture Department’s latest Milk Production report showed preliminary output at 18.28 billion pounds, up 0.2% from August 2018.
Output in the top 24 states hit 17.4 billion pounds, up 0.4%. Revisions added 40 million pounds to the original July total, now put at 18.37 billion pounds, up 0.2% from July 2018.
August cow numbers in the 50 states totaled 9.32 million head, down 2,000 from July’s number, which was revised higher by 10,000 cows, but is 71,000 head below a year ago, and the lowest in 3 1/2 years. Output per cow averaged 1,962 pounds, down 9 pounds from July but 19 pounds above a year ago.
California output was up 1.5%, thanks to a 35-pound gain per cow offsetting the 6,000 fewer cows milked.
Wisconsin was down 0.5% on 7,000 fewer cows. Output per cow was unchanged from a year ago.
Virginia again showed the biggest decrease, down 11.4% on 9,000 fewer cows, followed by Illinois, down 7.9% on 7,000 fewer cows.
Pennsylvania was down 6.0% on 34,000 fewer cows. Arizona was down 6.1% on 13,000 fewer cows.
Idaho was up 2.9%, thanks to 15,000 more cows and a 10-pound gain per cow. New York was up 1.1%, on 5,000 more cows and a 5-pound gain per cow. Minnesota was up 0.5% on a 25-pound gain per cow offsetting a loss of 4,000 cows.
Michigan was up 1.6% on a 25-pound gain per cow and 2,000 more cows. New Mexico was down 1.6%, on 5,000 fewer cows. Output per cow was unchanged.
Oregon was up 2.8% on a 20-pound gain per cow and 2,000 more cows. Texas was up 4.6%, thanks to 25,000 more cows. Output per cow was unchanged.
Washington state was down 0.5% on 7,000 fewer cows. Output per cow was unchanged from a year ago.
Dairy farmers culled more cows in August than in July but numbers were below a year ago. The latest Livestock Slaughter report shows an estimated 266,600 head were slaughtered under federal inspection, up 9,800 from July but 13,100 or 4.7% below a year ago, as rising milk prices incentivize farmers to keep cows in the herd.
The eight-month cull count climbed to 2.16 million head, up 72,800 or 3.5% from a year ago.
Butter still plentiful
U.S. butter stocks slipped in August but remained above a year ago. The USDA’s latest Cold Storage report shows 305.1 million pounds in the cooler, down 24.5 million pounds or 7.4% from July but 14.3 million or 4.9% above August 2018.
American cheese stocks totaled 768.2 million pounds, down 6.6 million pounds or 0.8% from July, well below the 5-year average drawdown of 20 million pounds, and were 19.2 million or 2.4% below a year ago.
Stocks in the “other” category climbed to 567.9 million pounds, up 7.6 million pounds or 1.3% from July but were up 26.1 million or 4.8% from a year ago.
The total cheese inventory was up fractionally from July and from a year ago, coming in at 1.363 billion pounds, up 705,000 pounds or 0.1% from July and 2.6 million pounds or 0.2% above August 2018.
U.S. dairy product commercial disappearance in July had some good news and some of the other, according HighGround Dairy’s Lucas Fuess in the Sept. 23 “Dairy Radio Now” broadcast.
Total cheese disappearance continued above previous-year levels for the sixth consecutive month and put year-to-date disappearance up 2.1%, setting a record. And, for the first time on record, more than 1 billion pounds of cheese has been absorbed domestically in each month so far this year, says HGD. Fuess adds that even cheese exports looked “adequate” despite the trade struggles.
Butter disappearance, however, remains disappointing, down 7.8%, which followed June’s 7.3% decline. That represented a loss of 23.1 million pounds in the two months versus a year ago, according to HGD. Fuess believes butter will seasonally tick higher but plenteous supplies will keep the price in check.
Domestic disappearance has driven total nonfat dry milk and skim milk powder demand higher in both June and July, says HGD, “overcoming steadily lower exports seen in each month so far this year.”
Dry whey disappearance was up for just the second time this year, following May’s climb. HGD adds that, while exports dropped to their lowest monthly volume of the year to date, domestic demand moved higher versus the previous year for the third consecutive month and for the fourth time this year.
China’s African Swine Fever has greatly influenced whey demand, says Fuess. China, however, waived its retaliatory tariff on U.S. permeate for feed on Sept. 17.