Cheese price lowest in 20 years
Cash cheese prices continued to weaken in the Good Friday holiday-shortened week. The Cheddar blocks closed Thursday at $1.0550 per pound, down 9.5 cents on the week, following losses of 44 cents the previous week and 24.75 cents the week before that, and were 59 cents below a year ago.
The barrels finished at close to a 20-year low of $1.00 per pound, down 13.75 cents on the week, 61.75 cents below a year ago, and the lowest they’ve been since Nov. 9, 2000. Two loads of block traded hands last week at the CME and 20 of barrel.
Monday’s trading took the blocks down another 4.5 cents, matching the barrels at $1.01 per pound, and stayed there Tuesday, lowest CME price since Feb. 28, 2003, a 17-year low.
The barrels gained a penny Monday and held there Tuesday at $1.01.
U.S. cheese and butter are at bargain basement prices and hopefully will spur some exports. Class III milk futures have plummeted as well, with the April contract settling Monday at $13.63, then falling to an unbelievable $10.98 in May.
HighGround Dairy stated in its Monday Morning Huddle: “There is plenty of speculation in the marketplace for USDA-government intervention for U.S. farmers but there has not been confirmation on the actions USDA will take.”
The result, says HGD, is “the market is lacking directional fervor until confirmation is received on what the government will provide. There is little upside to this market as long as most restaurants across the country remain closed to dine-in service, with social distancing measures likely to persist for another few weeks. While details on government intervention remain unclear, cooperatives in regions across the country are taking steps to implement base programs that reduce the milk price on additional milk volumes produced throughout the flush; cooperatives are trying to encourage farmers to reduce production to limit milk dumping as processing capacity remains stressed.”
HGD also reports that the National Restaurant Association says its industry has lost 3 million jobs and $25 billion in sales since March 1. Spokeswoman Vanessa Sink said 3% of restaurants have closed permanently and another 11% are expected to do so by the end of the month.
Midwest cheese plants continue to run in the midst of the pandemic, according to Dairy Market News. Some have a handful of employees who have stepped aside for health concerns, but most are fully staffed and running. Milk availability is plentiful to excessive but plant managers say they are processing as much milk as possible. Food service demand lulls have more cheese heading into cold storage. Plant managers are trying to manage production schedules and inventories with the mounting amount of milk and affected cheese demand due to food service account slowdowns.
Western cheese inventories are growing but better balanced for cheese makers dealing with retail accounts as retail demand is above normal levels, while foodservice demand is minimal. Export buyers are showing some interest, but the strength of the dollar is making it difficult to complete some sales. Cheese production is steady, with many manufacturers continually running near capacity.
Butter saw a little strength last Tuesday and Wednesday, climbing back to $1.30 per pound, but it was short-lived and finished Thursday at $1.2475, down 3.25 cents on the week and $1.01 below a year ago.
The butter plunged 9.75 cents Monday and stayed there Tuesday at $1.15, a price not seen at the CME since Aug. 20, 2009.
Cream is full for operating Midwest butter plants, which are running hard, thanks to some plant closures in other regions. Contacts say whether directly or indirectly, foodservice slowdowns are creating a glut in the milkfat market but bulk butter offers are not increasing drastically. Butter, however, is moving to storage as inventories grow.
Western churning is active and butter makers are doing everything possible to avoid discarding cream but it is becoming more challenging as cream supplies are increasing above processing capacities. Many local storage facilities are full so manufacturers are looking outside their localities. After a heavy blast of sales, retail demand for butter has backed down and orders from foodservice are almost nonexistent, which has led to more bulk butter in storage.
Grade A nonfat dry milk climbed to 90.5 cents per pound by last Wednesday but it closed Thursday at 89.75 cents, up 3.5 cents on the week and 9 cents below a year ago.
Monday’s powder lost 2 cents, then gave up 2.75 cents Tuesday, falling back to 85 cents per pound, lowest CME price since Aug. 16, 2018.
Dry whey held at 33 cents per pound for 13 consecutive sessions, then gained a penny last Wednesday and Thursday, to close 2 cents higher at 35 cents per pound, 0.75 cents below a year ago.
CME whey was unchanged Monday but it inched a half-cent higher Tuesday, to 35.50 cents per pound.
The Agriculture Department lowered its 2020 milk production estimate in the latest World Agricultural Supply and Demand Estimates report. The estimate was lowered from last month’s report, due to slower growth in milk per cow. The average dairy cow inventory was little changed, however, as a higher-than-expected early year inventory is expected to decline later in the year, says USDA.
2020 milk production and marketings were estimated at 222.2 billion and 221.2 billion pounds, respectively, down 100 million pounds on production. The marketings estimate was unchanged. If realized, 2020 production would be up 3.8 billion pounds or 1.7% from 2019.
Product prices forecasts were lowered on weak demand, large supplies, and larger stocks, thus the forecasts for Class III and Class IV milk prices were also lowered. Look for a 2020 Class III average at a heartbreaking $12.75 per hundredweight, down $3.90 from last month’s estimate, and compares to $16.96 in 2019 and $14.61 in 2018.
The Class IV price average was estimated at $12.15, down $3.60 from last month’s projection, and compares to $16.30 in 2019 and $14.23 in 2018.
The USDA’s second Crop Progress report of the season shows that, as of the week ending April 12, 3% of the U.S. corn crop has been planted in the top 18 states. Those states accounted for 91% of the 2019 corn acreage and is dead even with a year ago but 1% behind the five-year average.
Some 9% of U.S. cotton is in the ground, up from 7% the previous week, 2% ahead of a year ago, and 3% ahead of the five-year average.