Cheese price volatility continues
Block Cheddar cheese fell to $1.80 per pound the day after Christmas but closed Friday at $1.83, down 3 cents on the shortened week and 40 cents above a year ago.
The barrels, after jumping to $1.7225 last Monday, finished Friday at $1.60, down 6.5 cents on the week and 31 cents above a year ago. Nine cars of block and 25 of barrel traded hands last week at the CME.
As 2019 wound down, the blocks ticked up 4 cents Monday and did it again Tuesday, climbing to a Happy New Year’s $1.91 per pound.
The barrels were up 2.25 cents Monday and leaped 7.75 cents Tuesday to $1.70, with 11 cars trading hands. They start 2020 at 21 cents below the blocks.
FC Stone dairy broker Dave Kurzawski wrote in his Dec. 23 Early Morning Update, “Open interest doesn’t set the price of cheese; supply and demand do. With the holidays upon us, there is some level of concern that a lot of excess milk will be making its way to the cheese vat. This may in fact happen, but our opinion is that there are larger forces at play to dictate the level of supply/demand seen during the spot call in Chicago over the next few weeks. Don’t believe us, ask yourself this question: Can a few weeks of excess production make up for a short-fall of Cheddar production we’ve seen for most of 2019?
“If you wanted to see a spot cheese market collapse, you just got a front-row seat to that all month long. Selling is subsiding recently and buying is picking up. We expect more volatility from these markets and that can mean down days, but we also look for spot to revert to the price level that reflects broader supply-demand fundamentals. That price level is likely found around current levels and or higher, not lower.”
Meanwhile, Dairy Market News reports that milk was widely available Christmas week, with spot prices from $2 to $8 under Class. “Cheese plant closings due to the holiday and maintenance issues at other plants had milk handlers scrambling to find homes for milk, not an atypical circumstance in the final weeks of any year. Cheese buyers say both blocks and barrels are not hard to find.”
Western cheese output is active, helping participants keep up with increased milk availability. Plants are running at or close to full capacity. Discounted milk was available at some localities but cheese makers are cautious about taking additional loads, says DMN.
Cheese supplies are a bit tight, according to some, while others suggest there’s plenty in warehouses. Block and barrel cheese sales in the domestic market are good and international interest in blocks for 2020 is picking up due to the recent declines in prices, according to DMN.
Butter had a better week, closing Friday at $2.0350 per pound, 3 cents higher on the week but 18.25 cents below a year ago, with only 3 cars sold last week at the CME.
Two uncovered offers took the butter down 3.5 cents Monday and it lost a nickel Tuesday, slipping to $1.95.
Holiday work weeks vary from one Midwestern butter maker to the next, according to DMN. Some were giving up to three days off while others were just taking the day off. Cream availability is labeled as “sloppy, as multiples slide nearer to flat Class.” Butter production is picking back up due to the available cream supplies and some spring holiday stock buildups. Butter markets found some health, moving back to the comfort zone of $2 per pound, says DMN, but butter demand was quiet the week before Christmas and “expectations are not outside of seasonal realities for the next two weeks.”
Western butter makers reported that Christmas week print sales were flat and bulk butter was quiet. Manufacturers expect demand to regain strength the next few weeks as retailers restock store shelves. Bulk butter interest had been strong for early 2020 needs and processors believe that trend should continue into the New Year once end users get past the winter break. Inventories are lower due to the seasonal demand but are enough to cover any immediate need. Manufacturers say cream is plentiful and headed to the churn.
Grade A nonfat dry milk closed Christmas Week at $1.2325 per pound, down 1.75 cents on the week but 29.5 cents above a year ago, with only 2 cars sold.
CME powder lost 0.75 cents Monday but regained 0.50 cents Tuesday, inching back to $1.23 per pound.
The dry whey saw a Friday close at 31.5 cents per pound, unchanged on the week but 16.5 cents below a year ago, with 17 cars sold last week.
The whey was down a penny Monday but gained back three-quarters Tuesday, arriving at 31.25 cents per pound on the last day of 2019.
Milk-feed ratio jumps
A higher All Milk price and lower feed costs pushed the November milk feed-price ratio higher for the fifth consecutive month. The USDA’s latest Ag Prices report put the ratio at 2.61, up from 2.39 in October and compares to 2.21 in November 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 2.61 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $21.00 per hundredweight, up $1.10 from October and $3.80 above November 2018.
California’s All Milk price was $19.50, up 60 cents from October and $2.29 above a year ago.
Wisconsin’s, at $22.40, was up $1.90 from October and a whopping $5.40 above a year ago.
The national average corn price averaged $3.68 per bushel, down 16 cents from October but 27 cents per bushel above November 2018. Soybeans averaged $8.59 per bushel, down a penny from October but 23 cents per bushel above a year ago. Alfalfa hay averaged $173 per ton, down $6 from October and dead even with a year ago.
Looking at the cow side of the ledger, the November cull price for beef and dairy combined averaged $57.70 per cwt., down $3.20 from October, $5 above November 2018, but $13.90 below the 2011 base average of $71.60 per cwt.
U.S. milk quality
The U.S. dairy industry produces some of the best quality milk in the world, even though it has been hesitant to lower its maximum allowable somatic cell count standards to global levels.
Corey Geiger, managing editor of Hoards Dairyman magazine, pointed out in the Dec. 23 "Dairy Radio Now" broadcast that the EU’s maximum allowable somatic cell count is 400,000 cells per milliliter while the U.S. Pasteurized Milk Ordinance mandate is for 750,000.
But, when you examine the U.S. herds on the Dairy Herd Improvement roster, the 2018 average was only 191,000 cells per milliliter, according to Geiger, clearly below that of the EU and the PMO. Nearly a decade ago, that number was around 300,000, he said, so over 90% of the herds in the U.S. are under 400,000.
States with the best averages include Arizona, Idaho, Michigan, Utah and Vermont, all under 170,000 last year, he said.
The National Mastitis Council’s Quality Awards will be given in January and will go to two herds in Michigan, two in Wisconsin, one in Minnesota and one in Idaho, out of nearly 200 applications.