Cash dairy market in limbo
Mid-July dairy prices were mixed as traders absorbed last week’s Global Dairy Trade auction and anticipated Friday afternoon’s June Milk Production report and Monday’s June Cold Storage data, none of which fed the bulls.
The Cheddar blocks closed Friday at $1.52 per pound, down 4 cents on the week and 18 3/4-cents below a year ago. The barrels finished 15 1/4-cents lower at $1.27, 14 cents below a year ago and 25 cents below the blocks. A fluctuating price gap is apparently becoming the new norm in this market.
Monday’s block price was unchanged while the barrels recovered 2 cents. The blocks gained a penny Tuesday, hitting $1.53, while the barrels pole vaulted 11 cents, to $1.40, possibly a reaction to some reports of a shrinking milk supply.
FC Stone’s Dave Kurzawski wrote in his July 18 Early Morning Update, “There is still fear being baked into the market with the trade war uncertainty. If mozzarella exports continue to slow down we can expect more barrels being offered on the market which explains why we have such a large spread.” He adds that “freight continues to be a huge issue for moving dairy commodities around the country. Moving barrels from Idaho eastward to where the demand is has been much more costly and can be another explanation why we have such a large spread.”
Dairy Market News says spot milk prices were mostly up last week and that cheese production varied, but a growing number of Midwest cheesemakers are allotting days off “as milk becomes less available.”
Western cheesemakers say domestic demand has been lackluster and disappointing. And while export cheese demand has been stable, issues with our largest trading partners have battered U.S. cheese sales and other countries are entering into trade agreements with competitors while stockpiles grow here.
Spot butter closed Friday at $2.25 per pound, up 2 1/2-cents on the week but 33 1/2-cents below a year ago.
Monday’s butter was up 4 cents, then plunged 6 1/2-cents Tuesday, to $2.2250.
Cream in butter churns became a Central region rarity last week, according to DMN, and as cream prices continue their upward climb, butter churners are taking a step back from the market. Some are returning cream to the spot market in lieu of churning. GDT index results were bearish on the butter side, but domestic markets continue to stand their ground, says DMN.
Western butter stocks are heavy, and some butter makers are more than happy to sell excess cream. Butter inventories have grown seasonally. Some processors report sales to international markets have become more difficult as the gap between domestic and international butter prices has shrunk.
Grade A nonfat dry milk ended the week at 78 1/2-cents per pound, up 3 cents but 8 3/4-cents below a year ago.
Monday’s powder jumped 1 1/4-cents and stayed there Tuesday at 79 3/4-cents per pound, highest CME price since June 8, 2018.
Dry whey closed Friday at a new high of 42 cents per pound, up a quarter-cent on the week. It stayed there Monday but lost a penny Tuesday.
June milk up
U.S. milk output showed a bearish increase in June, the 54th consecutive month of gain versus the year before and the highest year-to-year gain in four months. Preliminary data shows output at 17.2 billion pounds in the top 23 states, up 1.3 percent from June 2017. The 50-state total, at 18.3 billion pounds, was up 1.2 percent. Revisions raised the May estimate 40 million pounds to 18.0 billion, up 1.1 percent from 2017.
May cow numbers totaled 8.75 million head in the 23 states, unchanged from May but 12,000 more than a year ago. The 50-state total, at 9.4 million head, was unchanged from May and a year ago. Output per cow averaged 1,964 pounds in the 23 states, up 23 pounds from a year ago.
California output was up 0.5 percent despite a drop of 14,000 cows from a year ago but output per cow was up 25 pounds. Wisconsin was up 1.2 percent on a 30-pound gain per cow but 4,000 fewer cows were milked.
-New York was up 1.4 percent, thanks to a 30-pound gain per cow outweighing the loss of 1,000 cows. Idaho was up 1.0 percent on 6,000 more cows, with output per cow unchanged. Pennsylvania was off 0.2 percent on 4,000 fewer cows but output per cow was up 10 pounds. Minnesota was down 0.6 percent, on 5,000 fewer cow offsetting a 10-pound gain per cow.
Michigan was up 1.3 percent, thanks to a nice 50-pound gain per cow but cow numbers were down 4,000 head. New Mexico was up 1.4 percent, on a 25-pound per cow gain and 1,000 more cows milked. Texas keeps their tanks full, up 6.6 percent, thanks to an 85-pound gain per cow and 11,000 more cows. Washington state was up 2.2 percent on a 15-pound gain per cow and 4,000 additional cows milked.
New high on cheese
June butter stocks were down from May but well above June 2017, according to the Agriculture Department’s latest Cold Storage data. The June 30 inventory was at a bearish 336.4 million pounds, down 2.1 million pounds or 0.6 percent from May but 26.2 million pounds or 8.5 percent above June 2017.
American type cheese, which includes Cheddar, slipped to 803.3 million pounds, down 1.3 million pounds, virtually unchanged from May, and 6.9 million or 0.9 percent below a year ago.
The other cheese category hit 557.9 million pounds, up 8.4 million pounds or 1.5 percent from May and 78.9 million or 16.0 percent above a year ago.
That put the total cheese inventory at another bearish record high 1.39 billion pounds, up 7 million pounds or 1 percent from May and 75.8 million or 5.8 percent above a year ago.
Class I drops
The August Federal order Class I base milk price was announced by the USDA at $14.15 per hundredweight, down $1.21 from July and $2.57 below August 2017. It is the lowest August Class I price since 2009 when it stood at $10.04. It equates to about $1.22 per gallon, down from $1.44 a year ago. The eight-month average is at $14.54, down from $16.37 at this time a year ago and compares to $14.10 in 2017.
Dairy cow culling dropped in June from May but remained slightly above a year ago. The latest Livestock Slaughter report shows an estimated 237,500 head were slaughtered under federal inspection, down 7,600 head from April but 800 above a year ago. A total 1.57 million head were culled in the first six months of the year, up 73,300 head or 4.9 percent from 2017.