Cash dairy prices continue to slump
Cash dairy prices headed lower the first week of December. The Cheddar blocks closed at $1.35 per pound, down a penny and 12 1/2-cents below a year ago. The barrels finished at $1.2225, down 9 1/4-cents on the week and 44 3/4-cents below a year ago.
The blocks lost 2 cents Monday and stayed there Tuesday at $1.33 per pound, lowest block price since May, 2016. The barrels were down a penny and a half Monday, mirroring the price on Oct. 24, 2018, but jumped 4 1/2-cents Tuesday, to $1.2525, lowering the spread to 7 3/4-cents.
Midwest contacts tell Dairy Market News that cheese volumes are “plentiful on the whole but some buyers are holding off, awaiting the potentiality of further market bears.” Some report average, or just below average, sales for this time of the year, while others suggest orders are fairly robust. “Cheese markets remain stagnant, with many contacts pointing to export declines and cheese inventories as market agitators.”
Western contacts report that export demand “ebbs and flows with the rise and fall of prices. With U.S. cheese prices lower than a few months ago, there has been renewed interest from international buyers but some foreign cheese prices have also declined, creating stiff competition in a few markets.” Domestic demand has been steady but there is pressure from the heavy stocks at all levels.
Cash butter closed Friday at $2.2075 per pound, down 3 1/2-cents on the week and 1 1/4-cents below a year ago.
Monday’s trading lowered the butter three-quarters and it lost a quarter-cent Tuesday, slipping to $2.1975, lowest CME price since early November.
Midwest butter producers say the amount of cream offered has escalated and prices were slightly lower than the previous week but “still above their comfort zone and they will hold out until further drops, which are expected.” Inventories are reportedly lower.
Western orders are seasonally higher, especially for retail. International butter demand is slow due to expensive U.S. prices compared to the rest of the world and a costly dollar exchange rate.
Spot Grade A nonfat dry milk finished Friday at 88 1/2-cents per pound, down 2 cents on the week but 20 1/4-cents above a year ago.
Monday’s powder lost a penny and a quarter only to climb back to 92 1/2-cents Tuesday, up 2 3/4-cents on the day and the highest CME price since June 5, 2017.
Cash dry whey closed Friday at 43 3/4-cents per pound, up a quarter-cent on the week. The whey was unchanged Monday but inched a half-cent lower Tuesday.
U.S. farm milk prices continue to fall. The Agriculture Department announced the November Federal order Class III benchmark at $14.44 per hundredweight, down $1.09 from October, $2.44 below November 2017, the lowest Class III since July 2018, and the lowest November Class III price since the disastrous year of 2009.
California producers are seeing their first Federal order Class III and IV prices. The Golden State’s comparable Class 4b cheese milk price in November 2017 was at $15.52 and its 4a butter-powder price was at $13.62.
The 11-month Class III price average stands at $14.69, down from $16.24 in 2017 and compares to $14.64 in 2016.
Monday’s Class III futures portended a December price at $13.65. That would result in a 2018 average of $14.60, down from $16.17 in 2017 and compares to $14.87 in 2016.
The January 2019 contract was at $13.81; February, $14.22; and March at $14.74, with a peak of $16.50 in September.
November’s Class III price equates to $1.24 per gallon, down from $1.34 In October and $1.45 a year ago.
The November Class IV price is $15.06, up a nickel from October and $1.07 above a year ago, and the highest Class IV since September 2017.
The Class IV average stands at $14.15, down from $15.31 in 2017 and compares to $13.66 in 2016.
The handwriting is on the milk house wall and the walls of USDA. The Agriculture Department again lowered its 2018 and 2019 milk production estimates in the latest World Agricultural Supply and Demand Estimates report, due to “slower growth in milk per cow and lower cow numbers. Relatively weak returns are expected to result in a smaller 2019 cow herd.”
2018 production and marketings were projected at 217.8 and 216.8 billion pounds, respectively, down 100 million pounds from last month’s estimates. If realized, 2018 production would still be up 2.3 billion pounds or 1.1 percent from 2017.
2019 production and marketings were estimated at 220.6 and 219.6 billion pounds, respectively, down 300 million pounds on both. If realized, 2019 production would be up 2.8 billion pounds or 1.3 percent from 2018.
The 2018 and 2019 Class III milk price forecasts were lowered from last month on lower cheese prices. The 2018 and 2019 Class IV prices were unchanged at the midpoint of the range.
Look for the 2018 Class III to average around $14.55 per cwt., down from $16.17 in 2017 and $14.87 in 2016. The 2019 average was put at a range of $14.65-$15.45, down from $15.15-$16.05 projected a month ago.
The 2018 Class IV price is expected at around $14.20, down from $15.16 in 2017 and compares to $13.77 in 2016. The 2019 average is now put at a range of $14.40-$15.30.
USDA’s latest Dairy Products report shows October cheese output totaled 1.12 billion pounds, up 6.1 percent from September and 3.0 percent above October 2017. Year-to-date output hit 10.7 billion pounds, up 2.5 percent from a year ago. October was the 67th consecutive month that cheese output exceeded that of a year ago.
Wisconsin vats contributed 290.2 million pounds, up 4.1 percent from September and just 1.1 percent above a year ago. California produced 214.7 million pounds, up 4.5 percent from September and 1.2 percent above a year ago. Idaho provided 91.8 million pounds, up 8.2 percent from September and 7.9 percent above a year ago.
Italian cheese totaled 470.6 million pounds, up 4.4 percent from September and 3.5 percent above a year ago. Year to date (YTD) Italian is at 4.6 billion pounds, up 2.9 percent from a year ago. Mozzarella, at 369.9 million pounds, was up 6.3 percent from a year ago, with YTD at 3.6 billion pounds, up 4.1 percent.
American type cheese totaled 433.5 million pounds, up 3.9 percent from September and 0.7 percent above a year ago, with YTD at 4.3 billion pounds, up 2.2 percent.
Cheddar, the cheese traded daily at the CME, totaled 303.4 million pounds, up 12.6 million pounds or 4.3 percent from September but 4.4 million or 1.5 percent below a year ago, with YTD output at 3.1 billion pounds, up 0.4 percent.
U.S. churns produced 144.4 million pounds of butter, up 7.0 percent from September but 0.3 percent below a year ago. YTD is at 1.6 billion pounds, down 4.0 percent.
Dry whey totaled 87.2 million pounds, up 8.0 percent, with YTD at 859.0 million pounds, down 1.2 percent. Dry whey for human consumption totaled 85.5 million pounds, up 22.2 percent from September and 7.9 percent above a year ago. Stocks totaled 72.5 million pounds, up 6.3 percent from September but an impressive 21.5 percent below those a year ago.
Nonfat dry milk production totaled 125.3 million pounds, up 15.1 percent from September but 13.6 percent below a year ago. YTD output stands at 1.5 billion pounds, down 4.0 percent. Stocks fell to 252.9 million pounds, down 9.4 million pounds or 3.6 percent from September and 63.9 million pounds or 20.2 percent below 2017 levels.
Skim milk powder totaled 37.5 million pounds, down 19.4 percent from September but 44.5 percent above a year ago. YTD skim is at 463.4 million pounds, up 5.8 percent from a year ago.