Cheese price direction in question
Mid-September cheese prices were down again. CME Cheddar blocks closed Friday at $1.6050 per pound, down 5 3/4-cents on the week and a half-cent below a year ago. The barrels finished at $1.42, down 8 cents on the week and 3 cents below a year ago.
Monday’s cheese was unchanged, as traders anticipated Tuesday morning’s GDT and Wednesday’s August Milk Production report. The blocks were up a penny Tuesday, to $1.6150, but the barrels rolled 1 1/4-cents lower, to $1.4075, lowest since July 30, 2018, and a whopping 20 3/4-cents below the blocks.
FC Stone said in its Sept. 12 Early Morning Update that “favorable milk production weather in the West and forecasts for that to continue may be creeping into the market’s mind as we wait for additional fundamental data.”
Friday’s edition added: “U.S. milk production in July was only up 0.4 percent, which initially looked friendly to prices, but behind the scenes fat and protein components in the milk have been growing significantly over the past few years. Higher components mean we have higher cheese yields, which combined with more processing capacity has kept the cheese markets in check.”
Cheese demand in the Central region is generally positive, according to Dairy Market News. “Fresher cheese stocks, namely Colby and Cheddar, are moving well. Italian style cheesemakers are also pointing to a continued steadiness, with some expected hiccups from the impending hurricane in the East affecting orders from that region.”
Food service demand is seeing an uptick as schools have reopened in the Midwest but cheese producers are not expecting orders to remain as steady following market drops as buyers may hold off and wait for further declines. Milk availability was mixed last week with most spot prices at a premium.
Western cheesemakers report that retail orders are strong and with most educational institutions back in session, some food service accounts are pulling a little more cheese. Discounted milk is not as readily available, but there’s no trouble getting the milk needed. Cheese inventories, while heavy, are not burdensome.
Spot butter fell to $2.1975 per pound last Wednesday, rallied Thursday, and closed Friday at $2.2350, up a half-cent on the week but 21 1/4-cents below a year ago.
The butter tacked on 2 1/2-cents Monday and 1 1/2-cents Tuesday, hitting $2.2750.
Cream was a little tighter last week, according to butter makers. There was not a scarcity, but offers were lighter.
Butter interest is reportedly strong, although markets are uncertain. Some contacts suggest larger volumes of imported butter may put downward pressure on domestic markets in the near term.
The Western butter market is defined as firm. Production remains active now that cream stock offerings are more available.
Grade A nonfat dry milk closed Friday at 87 1/2-cents per pound, down 3 1/2-cents on the week but 5 1/4-cents above a year ago.
Monday’s powder inched backward a half-cent and lost a quarter-cent Tuesday, sliding to 86 3/4-cents per pound.
The dry whey market kept getting bid to new record highs until a car was finally sold on Wednesday and one on Thursday. It closed Friday at 52 1/4-cents per pound, up three-quarter cents on the week.
Monday’s whey held at Friday’s close but crept a quarter-cent higher Tuesday, to 52 1/2-cents per pound.
The dairy world was looking for some positive developments in this week’s Global Dairy Trade auction (GDT). They didn’t get much. The weighted average of products offered fell 1.3 percent, after slipping 0.7 percent Sept. 4 and 3.6 percent on Aug. 21.
Cheddar cheese led the declines, dropping 3.5 percent, after it led the gains last time, jumping 4.2 percent. Whole milk powder followed, slipping 1.8 percent, after a 2.2 percent drop last time, and skim milk powder was down 1.1 percent, following a 2.2 percent uptick. Anhydrous milkfat was off 0.6 percent, after inching up 0.2 percent, and butter slipped 0.1 percent, after leading the losses last time with a 2.8 percent plunge. Rennet casein showed the only positive move, up 1.7 percent.
FC Stone equates the GDT 80 percent butterfat butter price to $1.8898 per pound U.S. CME butter closed Tuesday at $2.2750. GDT Cheddar cheese equated to $1.5889 per pound and compares to Tuesday’s CME block Cheddar at $1.6150. GDT skim milk powder averaged 89.79 cents per pound and whole milk powder averaged $1.2555. CME Grade A nonfat dry milk closed Tuesday at 86 3/4-cents per pound.
The Agriculture Department lowered its 2018 milk production estimate in the latest World Agricultural Supply and Demand Estimates report, due to slightly lower milk cow numbers and a slower rate of growth in milk per cow in the third quarter, but raised its 2019 estimate on slightly higher cow inventories.
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 221.0 and 220.0 billion pounds respectively, up 100 million pounds on both. If realized, 2019 production would be up 3.2 billion pounds, or 1.5 percent, from 2018.
Cheese, NDM, and whey prices were forecast higher for 2018 while butter prices were lowered from the previous month. The 2018 Class III milk price forecast was raised on higher forecast cheese and whey prices.
Look for the Class to average $14.85-$15.05 per hundredweight, up 35 cents from last month’s projection and compares to a 2017 average of $16.17 and $14.87 in 2016. The 2019 average is now expected to range $15.20-$16.20, up 25 cents from what was projected a month ago.
The Class IV price was raised as higher forecast NDM prices more than offset lower butter prices. It is predicted to average $14-$14.30 per cwt. in 2018, up a nickel from last month’s estimate and compares to $15.16 in 2017 and $13.77 in 2016.
NDM and whey prices for 2019 were raised while the butter price forecast was reduced from last month. The 2019 cheese price forecast was unchanged.
The 2019 Class IV price is projected to average $14.30-$15.40, up 55 cents from what was expected a month ago.