Cheese price trends spotty

Declines in CME cheese prices appeared to pause last week as traders awaited Friday afternoon’s October Cold Storage report.

The Cheddar blocks fell to $1.8375 per pound last Tuesday, lowest price since Aug. 2, but closed Friday at $1.8425, still 4.75 cents lower on the week and the third consecutive week of decline, but were 49.75 cents above a year ago, when they lost 10.75 cents.

The barrels dipped to $2.15 last Tuesday but closed Friday at $2.1850, down 1.25 cents on the week and 94.5 cents above a year ago, when they rolled 12 cents lower. They were still at an inverted 34.25 cents above the blocks. Only 9 cars of block traded hands last week at the CME and 3 of barrel.

Traders had the weekend to absorb Friday’s Cold Storage data and traded the blocks higher by 4 cents Monday. They added 4.75 cents Tuesday, climbing to $1.93, and await Wednesday’s trading to end the week due to the Thanksgiving holiday.

A sale pulled the barrels down to $2.11 per pound Monday but an unfilled bid brought them back to $2.1425, 4.25 cents lower on the day. They gained a nickel Tuesday, hitting $2.1925, putting the inverted spread at 26.25 cents.

Dairy Market News reports that “cheese markets are beginning to play a larger role in rank-and-file cheese production in the upper Midwest. A growing number of plant managers say they are hesitant to add to production schedules in light of the slide, or the correction, of current market prices. Contacts say the price gap is a continued concern, as block prices were sliding quicker than those of barrels.”

Cheese demand in most varieties was steady to slower last week, in line with seasonal trends. Barrel producers are breaking records with strong orders continuing later into the year than expected. Some holiday-related milk discounts are being reported at $2.50 under class, while others continue to report premiums at $1.00 over class.

Western manufacturers say cheese is moving well, pizza sales are steady, and retail accounts are making orders as expected, but additional demand “just is not there.” Spot sales have been slow to develop, even as CME prices decreased.

Barrel cheese is available and blocks are plentiful so buyers do not have an urgency to take additional loads of cheese and can wait for deals or buy as needed. Milk for processing is abundant and cheese production is active, according to DMN.

Butter barely remains above $2 per pound, closing Friday at $2.0250, down 4.25 cents on the week and 25.5 cents below a year ago, with 18 sales on the week.

Monday’s butter was down a penny and a half and stayed there Tuesday at $2.01, with 5 unfilled bids at $1.96. This is the lowest CME butter price since Nov. 15, 2016.

Butter makers say cream is readily available at similar multiples to the past month while others say it’s available but are having a hard time finding favorable rates. Some continue to source loads from the West. Expectations are that cream will be readily available Thanksgiving Week. Butter churning is generally steady and inventories are in a general balance.

Organic butter output is increasing regionally, with organic cream becoming more available of late.

Butter markets continue to maintain at just above the $2 mark. Undoubtedly, higher domestic stores and an increasing amount of imports are keeping butter markets toward the lower end of their range-bound status, says DMN.

Western grocery interests in butter are up and additional requests have been coming the past two weeks. A few bulk sellers received unexpected inquiries from unfamiliar buyers.

More cream is going to Class II products for the upcoming holiday but loads of cream are still enough for butter processing. Stored bulk butter is “plentiful and unlikely to run out any time soon.”

Grade A nonfat dry milk saw its fourth consecutive week of gain, closing at $1.22 per pound, up a quarter-cent on the week and 32.25 cents above a year ago.

The powder was unchanged Monday but ticked up a penny Tuesday, to $1.23, highest CME price since Nov. 4, 2014.

CME dry whey strengthened last week and less product moved to Chicago. It closed Friday at 34.75 cents per pound, up 2.75 cents on the week but 7.75 cents below a year ago, with only 12 sales on the week, down from 29 the previous week.

Monday’s whey inched a quarter-cent higher and did so again Tuesday, reaching 35.25 cents per pound, highest since Sept. 24, with 1 sale on Monday and 4 unfilled bids Tuesday.

Good demand

Friday afternoon’s October Cold Storage report served a little fodder to the bulls. Oct. 31 butter stocks totaled 237.7 million pounds, down an impressive 52.9 million pounds or 18.2% from September and just 6.5 million or 2.8% above stocks in October 2018.

Revisions lowered the original September count by 11.5 million pounds.

American cheese totaled 742.8 million pounds, down 32 million pounds or 4.1% from September and 68.8 million or 8.5% below a year ago.

Stocks in the “other” category inched up to 573.3 million pounds, up 6.3 million pounds or 0.1% from September and up 40.5 million or 7.6% from a year ago.

The total cheese inventory slipped to 1.342 billion pounds, down 31.6 million pounds or 2.3% from September and 32.9 million pounds or 2.4% below September 2018.

Class I up $1.19

The December Federal order Class I base milk price was announced by the USDA at $19.33 per hundredweight, up $1.19 from November and $4.28 above December 2018 and the highest Class I price since December 2014. It equates to about $1.66 per gallon, up from $1.29 a year ago.

The 2019 Class I average is $16.99, up from $14.84 in 2018 and $16.45 in 2017.

Culling below 2018

Dairy cow culling in October took a jump from September but was a bit below October 2018, according to the Agriculture Department’s latest Livestock Slaughter report.

An estimated 286,100 head were slaughtered under federal inspection, up 30,400 head from September but 2,100 or 0.7% above a year ago. The 10-month cull count stands at 2.7 million head, up 79,000 head or 3.0% from a year ago.

Prices portend more milk

Matt Gould, editor of the Dairy and Food Market Analyst, warned of rising milk output in the U.S. in the Nov. 25 "Dairy Radio Now" broadcast. He said the weather was cold in the U.S.

in October so output would likely have been higher, had it not been for the cold, and that the milk supply is growing in Europe.

“If you just look at the supply side of the equation, you might conclude things are pretty price negative,” he said. “However, there’s a number of very positive things on the demand side,” and he pointed to the five-year highs on nonfat dry milk and skim milk powder prices, driven by purchases from Southeast Asia and China.

He said he’s hearing rumblings that China is getting its hands around its African Swine Fever situation and is coming back to the U.S. for feed for those newborn piglets.

“There’s a lot to be optimistic on the international demand side” he said. Cheese prices hit the highest levels since 2014 and remain strong, despite the recent fall.

When asked if he agreed with USDA’s latest prediction of a 1.7% increase in milk output in 2020 over 2019, Gould answered, "yes, as we are adding cows again. If you hold cow numbers flat, we tend to increase milk production by a little over 1% so 1.7% growth rate means more cows." He concluded, however, that "USDA is also projecting the highest milk prices in 2020, highest since 2014.”

From: Capital Press