Dairy Market: Cheese price sinks below $2
The bleeding has increased in the COVID-emotionally charged CME cheese market. The Cheddar blocks closed Friday and the month of July at $2.2525 per pound, down 28.75 cents on the week, after losing 12 cents the previous week, and 25.5 cents the week before that.
They dropped 17.5 cents Monday and lost 14.75 cents Tuesday, plunging to $1.93 per pound, as traders weighed the morning’s GDT and anticipated the afternoon’s June Dairy Products report. This is the lowest CME block price since May 20 and $1.07 below its record $3 peak on July 13, but is still 6.25 cents above a year ago.
The Cheddar barrels finished Friday at $2.2350 per pound, down 21.5 cents on the week, 54.25 cents above a year ago, and at a more typical 1.75 cents below the blocks after topping them a couple days.
The barrels dove 21 cents lower Monday and lost another 20.5 cents Tuesday, descending to $1.8150, lowest since May 19, 65 cents below its July 21 peak, and 11.5 cents below the blocks.
There were 15 cars of block traded last week at the CME, 70 on the month, up from 48 in June. The barrels saw 9 cars go to new homes last week, 51 on the month, up from 33 in June.
While May dairy product commercial disappearance was a big improvement from April, particularly for cheese, it was still down from a year ago. Uncle Sam’s food purchases and restaurant re-openings played a major role in the improvement but the rising cases of COVID in many states has either paused or reversed many of those restaurant re-openings and many are closing permanently so volatility remains a big part of the dairy markets.
HighGround Dairy says, “A key wildcard over the next several months is how the government plans to continue supporting the dairy industry. This injection of massive amounts of stimulus to purchase dairy products has contributed to intense volatility in recent weeks and a primary reason why block cheese prices hit a record high last month. USDA has indicated they will spend the remaining $500 million-$700 million in the Farmers to Families Food Box program in Round 3 after the current round expires on Aug. 31.”
Meanwhile, Dairy Market News reports that Midwest cheese production is “busy,” as milk supplies are plentiful. Some contacts expected block price drops at the CME to slow output but most say they’re remaining busy, with some even turning customers away. Block and barrel availability is reported as “tight to nonexistent” so cheese markets remain robust.
Western market conditions last week hadn't changed much from the previous week. U.S. prices may have seen declines but still weren’t very competitive in the international market, says DMN. Domestic retail cheese demand is stronger, whereas intakes from food service have declined a bit. Western cheese output remains active and inventories are sufficient, according to DMN.
Point of interest: the July Class III milk price is announced Wednesday. Its futures contract settled Monday at $24.53 per hundredweight, which would be a $3.49 increase from June and 7 cents shy of the record high set in September 2014.
Cash butter roller-coastered last week, plunging 15.5 cents on Wednesday, to $1.5550 per pound, but ended Friday at $1.6075, still down 12.25 cents on the week and 71.25 cents below a year ago; 31 cars traded hands on the week, 81 for the month, down from 98 in June.
Lots of product found its way to Chicago this week. The butter lost 2.75 cents Monday and dropped 15.5 cents Tuesday, to $1.4250, lowest since May 12; 25 carloads traded hands on both Monday and Tuesday.
Butter makers have given mixed reports on cream availability in recent weeks, says DMN, but more were in agreement last week that cream was available. Contacts say retail butter demand has steadied somewhat since last month and food service demand has inched its way back up since the early days of the COVID outbreak but remains short of previous years. Market tones remain somewhat soft, however, contacts believe the market is “close to its basement.”
The western butter market is “a bit unsettled,” says DMN, due to uncertainties about COVID’s affect. There was a surge in demand for print butter so churns were actively running as much as possible. Cream requests for ice cream production were strong, says DMN, but processors were still finding enough for butter. Food service demand has declined because of the new restrictions put in place to control the growing COVID cases.
An interesting historical note on butter. The National Milk Producers Federation says Aug. 2 was the anniversary of what was officially named the “Oleomargarine Act” signed by President Grover Cleveland in 1886. After heated congressional debate, the legislation created what to this day remains the only standard of identity for a food product set by Congress rather than regulators, says NMPF, and “was a precursor to the food-safety system that protects U.S. consumers to this day.”
Margarine was an impostor, according to NMPF, and “dairy fought its labeling chicanery, with outcomes that have benefited consumers ever since.”
NMPF warns that the battle has returned. “Today’s self-styled innovators still try to gain an unfair marketing edge by misleading labeling implying they’re something they’re not,” says NMPF.
“Think plant-based ‘butters’ that are really nothing more than margarines at best. Think artificially concocted liquid mixtures labeled as ‘milks’ that are nutritionally more like a high-school chemistry project than a natural, wholesome food.”
Read the complete story; “Dairy Defined: How the Fight Against Bogus Butter Changed the World,” at www.nmpf.org.
Grade A nonfat dry milk closed Friday at 97.75 cents per pound, down 1.25 cents on the week and 4.25 cents below a year ago, with 7 sales reported on the week, 65 for the month, down from 105 in June.
The powder lost 1.25 cents Monday and gave up another 2 cents Tuesday, sliding to 94.50 cents per pound, lowest since May 18.
Dry whey saw its Friday finish at 34.25 cents per pound, up a quarter-cent and a quarter-cent above a year ago; 5 cars were sold on the week and 16 for the month, down from 126 in June.
Monday’s whey was down 1.25 cents and stayed there Tuesday at 33 cents per pound.
GDT down 5.1%
Powder pulled Tuesday’s Global Dairy Trade auction lower. The weighted average fell 5.1%, largest drop since Dec. 17, 2019, and followed a 0.7% slip on July 21. Sellers brought 72.1 million pounds of product to market, highest since Jan. 21, 2020, and up from 52.9 million pounds on July 21.
The declines were led by whole milk powder, down 7.5%, after inching up 0.6% on July 21. Buttermilk powder was down 6.5% and skim milk powder was down 4.6%, following a 0.5% slippage. GDT Cheddar was down 5.3%, after inching 0.6% higher, and butter was down 2.8%, after falling 4.9% in the last event.
Anhydrous milkfat was up 3.0%, after dropping 2.8% last time, and lactose was up 5.7%, following a 2.5% dip.
StoneX Group equated the GDT 80% butterfat butter price to $1.5214 per pound U.S., down 4.2 cents from the last event. CME butter closed Tuesday at a bargain $1.4250.
GDT Cheddar cheese equated to $1.6185 per pound, down 10.6 cents, and compares to Tuesday’s CME block Cheddar at a still pricey $1.93. GDT skim milk powder averaged $1.1714 per pound, down from $1.2154, and whole milk powder averaged $1.3623, down from $1.4595. CME Grade A nonfat dry milk closed Tuesday at 94.50 cents per pound.
Milk ratio jumps
A sharply higher All Milk price pulled the June milk feed price ratio into positive territory for the first time in seven months and to the highest level so far this year. The USDA’s latest Ag Prices report put the ratio at 2.36, up from 1.77 in May, and compares to 2.08 in June 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. One pound of milk could purchase 2.36 pounds of dairy feed of that blend in June.
The US All-Milk price averaged $18.10 per hundredweight (cwt.), up $4.50 from May and was dead even with June 2019.
California’s All Milk price jumped to $18.70, up $5.50 from May and 60 cents above a year ago. Wisconsin’s, at $19.50, was up $5.90 from May and $1.60 above a year ago.
The national average corn price averaged $3.16 per bushel, down 4 cents per bushel from May and 82 cents below June 2019. Soybeans averaged $8.34 per bushel, up 6 cents from May and 3 cents per bushel above a year ago. Alfalfa hay averaged $179 per ton, unchanged from May, but $14 per ton below a year ago.
Looking at the cow side of the ledger, the June cull price for beef and dairy combined averaged $71.00 per cwt., up $2.70 from May, $5.10 above June 2019, but was 60 cents below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,310 per head in July, up $60.00 per head from April and $80 per head above July 2019. They averaged $1,350 per head in California, up $50 from April and $50 per head above a year ago. Wisconsin cows averaged $130 per head, up $100 from April and $50 per head above July 2019.