Cheese prices continue to drop
Cash dairy prices plunged the week of June 18 as political and trade fallout hit and traders awaited the May Cold Storage report.
Spot block Cheddar closed the fourth Friday of Dairy Month at $1.49 per pound, down 10 1/2-cents on the week, 5 cents below a year ago and down 10 3/4-cents since June 1.
The barrels finished at $1.2850, down 16 1/2-cents on the week and the lowest price lowest since Jan. 16, 2018. It is 8 1/2-cents below a year ago, down 23 1/2-cents since June 1, and 20 1/2-cents below the blocks. Five cars of block traded hands on the week at the CME and 88 of barrel, the largest single week volume since the week of Dec. 15, 2017 when 97 barrels traded.
The blocks dropped 4 cents Monday, sinking to the lowest CME level since Jan. 11, 2018, but recovered a penny Tuesday, inching back to $1.46. The barrels plunged 8 cents Monday and stayed there Tuesday at $1.2050, the lowest price since July 30, 2009.
The cheese market tone is somewhat dim, says Dairy Market News. Midwest cheese demand is fairly steady but contacts are anxiously regarding the growing CME block to barrel price gap, tariff related trade pushback and tumbling market prices. Cheese plant managers are more apprehensive about taking any extra milk, hence spot discounts continue into week 25 at $3 to $4 under class.
Western markets are unsettled. Inventories, especially for barrels, are heavy. Domestic demand is mixed. While branded retail sales are stable, processors say food service and commodity cheese sales have slowed. Contacts also forecast weaker international sales due to trade issues and uncertainties of the market and are concerned that reduced demand from key markets may create cheese surpluses.
FC Stone’s Dave Kurzawski wrote in his June 26 Early Morning Update: “A majority of the talk surrounding the recent and drastic sell off on Cheese and Class III (futures) revolves around President Trump’s newly imposed tariffs on the likes of China and Mexico. However, putting the blame solely on the administration is a bit of a stretch.
“A larger issue at play here seems to be the current oversupply of barrels in the marketplace, which is not an abundantly exportable cheese.” He suggests this oversupply “has been brewing for some time due to a decrease in domestic demand.”
Cash butter was down 6 1/4-cents last week, falling to $2.29 per pound, lowest price since April 16, 2018, and 30 cents below a year ago.
Monday’s butter was down 3 1/2-cents and it lost a penny Tuesday, slipping to $2.2450, the lowest level since April 3, 2018.
DMN says Midwestern butter producers are still active on the spot cream market and Class IV cream supplies have grown alongside increasing cream demand. Butter churning remains active and Central contacts remain confident that $2.00 cash prices are an unlikely near-term reality. They suggest that with each penny lower, buyers are likelier to re-enter the picture.
Western ice cream producers are taking more cream but cream is still available to butter manufacturers. Overall butter output is steady and in line with current demand but spot sales reportedly have slowed a bit the past couple weeks.
Spot Grade A nonfat dry milk closed Friday at 76 1/4-cents per pound, down 2 1/2-cents on the week, 8 1/2-cents below a year ago, and down 6 1/4-cents since June 1.
The powder was down 2 1/2-cents Monday to the lowest it has been since April 16, 2018, but regained a penny Tuesday, climbing to 74 3/4-cents per pound.
Cash dry whey also succumbed, falling to 39 3/4-cents per pound last week, 1 1/4-cents lower on the week, with no sales reported.
Monday saw the whey inch up a quarter-cent and then give back a penny Tuesday, slipping to 39 cents per pound.
Plenty in storage
May butter stocks were up considerably from April and a year ago, according to the Agriculture Department’s latest Cold Storage data. The May 31 inventory stood at a bearish 338.8 million pounds, up 31.5 million pounds or 10.3 percent from April and the largest end-of-May volume since 1993, according to the Daily Dairy Report, and 25.2 million pounds or 8.0 percent above May 2017.
American type cheese, which includes Cheddar, climbed to 804.7 million pounds, up 24.5 million pounds or 3.1 percent from April, but 11.5 million or 1.4 percent below a year ago.
The other cheese category hit 549.7 million pounds, up 13.9 million pounds or 2.6 percent from April and 83.3 million or 17.9 percent above a year ago.
That put the total cheese inventory at a bearish record high 1.386 billion pounds, up 40.6 million pounds or 3 percent from April and 76.9 million or 5.9 percent above a year ago.
Dairy cow culling eased back a little in May from April but remained above a year ago. The latest Livestock Slaughter report shows an estimated 245,100 head were slaughtered under federal inspection, down 3,800 head from April but 7,900 above May 2017. A total 1.33 million head were culled in the five-month period, up 72,600 head or 5.8 percent from 2017.
Class I up
The Agriculture Department announced the July Federal order, and soon to be California, Class I base milk price at $15.36 per hundredweight, up 11 cents from June, $1.23 below July 2017, but the highest Class I price since January 2018. The seven-month average is at $14.60, down from $16.32 at this time a year ago and compares to $13.96 in 2016.