Cheese market hemorrhaging stops
Hemorrhaging in the cash cheese market came to an end Friday. You’ll recall that block Cheddar peaked Sept. 16 at $2.2375 per pound, highest CME price since Oct. 22, 2014.
It then plunged to $1.9025 last Thursday but regained 5 1/4-cents Friday to close at $1.9550, still 9 1/2-cents lower the week, down 28 1/4-cents from the peak, but 26 1/2-cents above a year ago.
The blocks inched a quarter-cent higher Monday and, with eyes on the morning’s GDT, took the blocks up 3 1/4-cents anyway, hitting $1.99.
The barrels peaked at $1.94 per pound on Sept. 16, highest since Nov. 11, 2014, plunged to $1.6125 last Tuesday, but also rallied Friday, gaining 4 1/4-cents and closed at $1.6550, unchanged on the week but 27 1/4-cents above a year ago.
The spread hit a record 43 1/4-cents last Monday but fell to 30 cents on Friday.
The barrels jumped 3 1/2-cents Monday and added 4 1/4-cents Tuesday, hitting $1.7325, putting the spread at 25 3/4-cents.
Midwestern cheesemakers continued to express concern over the ongoing “market correction,” says Dairy Market News, and warned: “A large price gap between blocks and barrels has a tendency to increase buyers' hesitation.” Central cheesemakers say spot milk is generally tight and cheesemakers are increasing their condensed skim and nonfat dry milk usage for fortification. Production rates are steady but inventories are “somewhat balanced in the region.”
Western cheese output is active with plenty of milk available. Barrel inventories are heavy but blocks are tighter. Export demand has cooled.
FC Stone stated in its Sept. 25 Early Morning Update, “We’ve said that a block price somewhere around $2.00 per pound seems to make sense to us. We think stocks have been drawn down more significantly here in September than back in August, relegating that Cold Storage report to the ‘old news' pile rapidly.”
“Still, in the wake of last year’s slower fall holiday sales, it’s hard not to remind ourselves and our customers that cheese tends to peak this time of year. We think there are still a number of supply-demand fundamental factors that ought to be supportive of cheese prices moving forward but now we’re in correction mode”
Cash butter finished last week at $2.1475 per pound, up 3 1/4-cents on the week but 17 1/4-cents below a year ago.
Monday’s butter was down 2 cents and stayed there Tuesday at $2.1275.
Butter producers continue to relay widely available cream offerings, which were expected this time of year. Churning is steady but producers are keeping a close eye on fall butter stocks. Demand reports vary from flat to somewhat bullish.
Western interest in butter has weakened somewhat and buyers' confidence in finding the supplies they need whenever they feel the need is also stronger. Expensive prices in the domestic market compared to the global market and the strong dollar have led to more imports, according to DMN.
FC Stone warns: “The likelihood of seeing sub-$2.00 butter prices by the end of fourth quarter is growing. The strong production, and strong imports, have resulted in larger than expected butter stocks that look like they are going to drag CME prices lower.”
Grade A nonfat dry milk climbed to $1.11 per pound Friday, up 2 3/4-cents on the week and 23 1/2-cents above a year ago.
The powder was unchanged Monday but gained 2 cents Tuesday, hitting $1.13, highest since March 2, 2015.
Dry whey fell to 33 3/4-cents per pound last Wednesday but closed Friday at 34 3/4-cents, down a nickel on the week and 20 1/4-cents below a year ago.
The whey was up a quarter-cent Monday and then gave it back Tuesday, returning to Friday’s close.
FC Stone says, “Something is brewing in the dry whey market. 30 loads of spot dry whey have traded in the past two days alone (14 more Tuesday). The price is up 1 1/4-cents to 35 cents from its September low last Thursday. The market continues to find balance in the mid-30 cent range. That balance appears to be the result of lower exports juxtaposed against reduced dry whey production and tighter overall supplies of whey. Prices can continue to trade sideways here, but we’re of the opinion that the directional risk for dry whey in the coming 3-6 months is higher, not lower.”
GDT up 0.2%
The weighted average of products offered in Tuesday’s Global Dairy Trade auction (GDT) inched 0.2% higher, following the 2.0% jump on Sept. 17. Sellers brought 85.4 million pounds of product to the market, up from 82.3 million in the last event.
Buttermilk powder led the charge, up 6.7%. It was not traded in the last event. Skim milk powder followed, up 2.7%, after a 3.4% gain last time. Lactose was up 1.8%, after jumping 5.6%, and rennet casein was up 0.7%, after slipping 0.1%.
Unfortunately, cheese led the losses, down 3.4%, following a 0.4% gain last time. Whole milk powder was off 0.2%, after gaining 1.9% last time. Butter was also down 0.2%, following a 2.7% gain, and anhydrous milkfat was unchanged after inching 0.6% higher last time.
FC Stone equated the GDT 80% butterfat butter price to $1.8253 per pound U.S. CME butter closed Tuesday at $2.1275. GDT Cheddar cheese equated to $1.6860 per pound, down 5.9 cents and compares to Tuesday’s CME block Cheddar at $1.99.
GDT skim milk powder averaged $1.2130 per pound and compares to $1.1791 last time. Whole milk powder averaged $1.4248. CME Grade A nonfat dry milk closed Tuesday at $1.13 per pound.
Milk ratio higher
A higher All Milk price and lower feed prices nudged the August milk feed price ratio higher for the second month in a row. The USDA’s latest Ag Prices report put the ratio at 2.26, up from 2.16 in July and compares to 2.06 in August 2018.
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. In other words, one pound of milk today purchases 2.26 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $18.90 per hundredweight, up 20 cents from July and $2.80 above August 2018.
California’s All Milk price was $18.70, up a dime from July and $2.85 above a year ago. Wisconsin’s, at $19.10, was up 30 cents from July and $2.80 above a year ago.
The national average corn price averaged $3.93 per bushel, down 23 cents from July but 57 cents per bushel higher than August 2018. Soybeans averaged $8.22 per bushel, down 16 cents from July and 37 cents per bushel below a year ago.
Alfalfa hay averaged $179 per ton, down $4 from July but $2 per ton above a year ago.
Looking at the cow side of the ledger, the August cull price for beef and dairy combined averaged $68.30 per cwt., up $1.30 from July, $5.30 above August 2018, but $3.30 below the 2011 base average of $71.60 per cwt.