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Dairy Market: Benchmark price drops $2.32

The Agriculture Department announced the first Federal order Class III benchmark milk price of 2020 at $17.05 per hundredweight, down $2.32 from December but $3.09 above January 2019 and the highest January Class III price since 2014.


Monday’s Class III futures settlements portended a February price of $17.04; March, $17.29; April, $17.42; and May at $17.39. The peak was $17.93 in September.


The January Class IV price is $16.65, down a nickel from December but $1.17 above a year ago and the highest January Class IV price since 2014.


Projections unchanged

The Agriculture Department left unchanged its 2020 milk production forecast in Tuesday's World Agricultural Supply and Demand Estimates report.


2020 production and marketings remain estimated at 222.0 billion and 221.0 billion pounds respectively. If realized, 2020 production would be up 3.7 billion pounds, or 1.7% from 2019.

Annual product price forecasts for cheese and butter were lowered as demand remains relatively weak. The nonfat dry milk forecast was unchanged while the whey price forecast was raised.


The Class III milk price average was reduced on the lower cheese price forecast while the Class IV price was reduced, reflecting a lower butter price estimate.


Look for the 2020 Class III to average around $16.95 per hundredweight, according to the USDA, down 40 cents from what was projected in January, down a penny from the 2019 average, but compares to $14.61 in 2018.


Monday’s Class III settlements, added to the January announced price, would portend a 2020 average of $17.54.


The Class IV price projection was put at $16.70, down 20 cents from the January estimate and compares to the 2019 average of $16.30 and $14.23 in 2018.


Prices under pressure

Dairy prices at the Chicago Mercantile Exchange came under downward pressure the first week of February. The Cheddar blocks fell to $1.8950 per pound last Thursday but rallied to close Friday at $1.93, up a penny on the week, after falling 7.5 cents the previous week, and 40.25 cents above a year ago.


The barrels lost 4.5 cents last Monday, falling to the lowest level since March 13, 2019, and set a record spread of 46.5 cents. After losing 11 cents the previous week, they closed Friday at $1.4775, down 2.25 cents, 10.5 cents above a year ago; 12 cars of block traded hands last week and 40 of barrel.


The blocks were up a penny Monday and then plunged 6 cents Tuesday, to $1.88, the lowest in four weeks.


The barrels gained 0.75 cents Monday and jumped 7.5 cents Tuesday, rising to $1.56, shrinking the spread to 32 cents.


Cheese plant managers cite the drastic shift in markets since fall 2019 and how they are negatively affecting orders, according to Dairy Market News. Others suggest 2020 sales have been steady but one certainty is the availability of milk.


A growing number of contacts are pushing spot milk loads back onto the market to keep cheese production in balance with demand, says DMN. The record-breaking block over barrel CME price gap is also cited as “not being helpful to cheesemakers” and a growing number of contacts suggest it has become “the veritable ursine elephant in the room.”


Heavy milk supplies are also heading to western vats and cheese output is at or near full capacity. Inventories are relatively stable and able to cover most buyer needs but contacts suggest demand is steady. Market participants are eager to see what fundamentals can shrink the gap between block and barrel prices.


Cash butter saw its Friday closing at $1.8325, 6.75 cents lower on the week and 46.25 cents below a year ago. A hefty 84 loads exchanged hands last week.


Monday’s butter was down 2.75 cents but it regained a penny Tuesday, climbing back to $1.8150.


Central butter output has been higher this year compared to previous years, according to plant managers. With the bountiful abundance of cream from Western and Midwestern sources, churns are busy with cream trucks lined up outside. Butter stores are available and growing as producers prepare for the expected uptick in demand for springtime baking and holiday-related retail.


Western butter production is also active. Cream supplies are reportedly tighter than they have been but there is still plenty to keep the churns full. Butter inventories are growing and adequate to meet any near-term need, says DMN.


Grade A nonfat dry milk fell to $1.2150 last Tuesday but closed Friday at $1.25, up a penny on the week and 25.5 cents above a year ago, with 13 sales reported.


The powder lost a penny Monday and gave up 1.5 cents Tuesday, slipping to $1.2250, with 21 cars unloaded on the day.


CME dry whey finished Friday at 39 cents per pound, up 2.5 cents on the week, all on unfilled bids, and 2.5 cents above a year ago.


Monday saw the whey inch up a half-cent and stay there Tuesday at 39.50 cents per pound, highest since Sept. 20, 2019.


Record cheese & butter

You’ll recall that December U.S. milk output hit 18.3 billion pounds, up 0.7% from December 2018. The USDA’s December Dairy Products report shows where the milk ended up.


Total cheese output crept up to 1.114 billion pounds in December, up 1.3% from November but just 0.2% above December 2018. Total 2019 cheese output amounted to a record 13.12 billion pounds, up just 0.7% from 2018.


Wisconsin produced 280.2 million pounds of the December total, down 1.4% from November and just 0.2% above a year ago.


California output fell to 202.8 million pounds, down 6.9% from November and 8.3% below a year ago. The Golden State produced 25.5% less Cheddar in December than a year ago. Idaho contributed 88.7 million pounds of cheese, up 15.0% from November and 4.1% above a year ago.


Italian type totaled 470.7 million pounds, down 0.7% from November and 1.7% below a year ago. YTD output came to 5.7 billion pounds, up 1.9%.


American cheese totaled 456.7 million pounds, up 5.0% from November and 1.9% above a year ago. YTD American is at 5.2 billion pounds, down 0.6%.


Mozzarella output slipped to 370.9 million pounds, down 1.6%, with YTD hitting 4.5 billion pounds, up 3.2%.


Milk was moved from Mozzarella to Cheddar, the cheese traded at the CME. Cheddar output hit 331.6 million pounds, up 20.5 million pounds or 6.6% from November and 5.5 million or 1.7% above December 2018. But, the year’s Cheddar output was at 3.72 billion pounds, down 2.1%.


Butter production totaled 177.2 million pounds, up a hefty 21.7 million pounds or 14% from November and 6.8 million pounds or 4.0% above a year ago, seventh consecutive month butter output topped that of a year ago. Butter output for 2019 amounted to a record 1.9 billion pounds, up 0.8% from 2018.


Dry whey totaled 79.8 million pounds, up 6.3% from November and 7.1% above a year ago, with YTD at 974.2 million pounds, down 2.5%. Stocks totaled 72.3 million pounds, down 8.4% from November but 2.0% above those a year ago.


Nonfat dry milk production totaled 164.3 million pounds, up 22.6 million pounds or 15.9% from November and 21.8 million or 15.3% above a year ago. YTD powder is at 1.8 billion pounds, up 4.1% from 2018. Stocks climbed to 248.4 million pounds, up 25.7 million or 11.5% from November but were 28.1 million pounds or 10.2% below the 2018 level.


Skim milk powder output climbed to 52.8 million pounds, up 9.1 million pounds or 20.8% from November and 2.5 million pounds or 5.0% above a year ago. YTD skim hit 518.5 million pounds, down 8.5% from a year ago.





From: Capital Press

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