GDT price fall continues
Butterfat and powder values again pulled the Global Dairy Trade (GDT) auction lower Tuesday.
The weighted average of products offered fell 2.9%, following the 4.7% plunge on Feb. 4, as traders remain concerned over the growing ramifications of the coronavirus outbreak.
Anhydrous milkfat led the decline, down 5.5%, following a 4.5% drop on Feb. 4. Butter was down 3.9%, after inching up 0.2% last time. Skim milk powder and whole milk powder were both down 2.6%, following losses of 4.2% and 6.2%, respectively. Rennet casein was off 0.9%.
The only good news was GDT Cheddar cheese, up 5.3%, after it saw a 6.0% boost last time. HighGround Dairy equated the GDT butter price to $1.86 per pound U.S. CME butter closed Tuesday at $1.7950.
GDT Cheddar cheese equated to $2.05 per pound and compares to Tuesday’s CME block Cheddar at $1.81. GDT skim milk powder averaged $1.29 per pound and whole milk powder averaged $1.35. CME Grade A nonfat dry milk closed Tuesday at $1.20 per pound.
China announced this morning that it would accept applications for new tariff exemptions for 696 products imported from the U.S., including key agricultural and energy products such as pork, beef, soybeans, liquefied natural gas and crude oil.
HighGround Dairy says, “This will include dairy products that had tariffs imposed by China over the past two years,” and “opens up opportunities for U.S. products back into China and also conveys how desperate China has become to procure foreign goods.”
No nirvana yet
The stars came into a little better alignment in the cheese market Valentine’s Week but still have not achieved nirvana. The Cheddar blocks closed Friday at $1.82 per pound, down 11 cents on the week but 24 cents above a year ago.
The barrels finished at $1.5850, up 10.75 cents on the week, 15 cents above a year ago, and 23.5 cents below the blocks, better than what it was but still a far cry from the normal 3 to 5 cent differential. Six cars of block traded hands last week at the CME and 31 of barrel.
The markets were closed Monday for President’s Day. Tuesday saw the blocks lose a penny and slip to $1.81, lowest CME price since Dec. 26, 2019, as traders considered the morning’s GDT, China’s announcement, and anticipated the January U.S. Milk Production report on Thursday.
The barrels held at Friday’s close, 22.5 cents below the blocks.
Midwest cheesemakers reported varying demand on Valentines Week, with most suggesting sales are meeting expectations while others, particularly barrel producers, are concerned about market tones that are not helpful to their bottom line.
Spot milk was widely available for cheesemakers who are on the spot market, with reported prices in a tight, discounted range of $2 to $3 under Class III. Cheese inventories are available, but not overly concerning at this time. The block barrel price gap may have narrowed, says Dairy Market News, but “markets are definitely on shaky terrain.”
Western contacts suggest that cheese is readily available and heavy milk flows are resulting in as much milk moving through the vats as possible. Some of this milk is heavily discounted, just to make room in the processing facility. Retail demand has been solid, enough so that stocks of some block cheese brands are highly committed for the next few months. Prices are supported by this demand while prices are weaker for barrel cheese, according to DMN.
Butter fell to $1.80 per pound last Wednesday and stayed there, 3.25 cents below the previous week’s closing and 45 cents below a year ago. Some 48 cars found new homes on the week.
Tuesday’s butter was down a half-cent, to $1.7950, the lowest price since Oct. 24, 2016, with 16 cars trading hands.
Butter makers report that sales are level or meeting expectations and buying interest is beginning to show signs of springtime revival. Churning is active and cream is easily accessible from local and Western suppliers.
Producers are, at least in the near term, not overly concerned about the market dip, says DMN. “In recent years butter has been a dairy commodity stalwart regarding market tones.”
Churns are busy in the West with the increased availability of cream. Bulk butter demand is very strong and several customers are looking for coverage to third quarter. Print butter sales are low in some areas but high in others. With the approaching holiday, it is expected that butter requests will increase in three to four weeks. Supplies are currently readily available but some are wondering how stocks will look this summer if interests in bulk butter continue to increase.
Dry whey closed Friday at 37 cents per pound, down 2 cents on the week and 1.75 cents above a year ago, with 5 cars finding new homes on the week.
The whey was unchanged Tuesday.
Grade A nonfat dry milk plunged to a Friday close at $1.17 per pound, down 8 cents on the week and the lowest price since Nov. 1, 2019, but still 18.25 cents above a year ago. Some 36 cars were sold last week, the highest weekly total since Aug. 26, 2019.
The powder jumped 3 cents Tuesday, climbing back to $1.20 per pound.
HighGround Dairy points out that the powder has been trending lower since the market received confirmation that December production was the highest on record for the month. This morning’s announcement from China will likely change that trend due to “the improved sentiment from China that they are becoming desperate enough for food from the U.S.”
U.S. December commercial dairy product disappearance data shows total cheese was off 0.3% from December 2018, second consecutive month it was below the year ago level, and it was pulled down by lower exports that overcame slightly higher domestic demand, according to HighGround Dairy’s analysis.
Butter disappearance was down 22.7% from November but 11.4% above a year ago, steepest year over year increase since January, says HGD, and marked the strongest December demand since 2014.
Domestic nonfat dry milk disappearance dropped sharply versus prior year levels and marked the lowest December disappearance since 1999. The 59.4% year-over-year decline was the largest since February 2017.
Dry whey domestic disappearance was up 10.9% from November and 18.7% above a year ago, the eighth consecutive month it bested that of the year before.