Cheese prices skyrocket, then slip
Block Cheddar cheese has hit the highest price in five years and is the highest priced cheese in the world. It closed “Friday the 13th” at $2.2050 per pound, up an astounding 20 3/4-cents on the week and 60 cents above a year ago, as traders anticipated Wednesday’s August Milk Production report.
The barrels finished Friday at $1.92, up 17 3/4-cents on the week and 50 cents above a year ago. Only 9 cars of block were traded last week at the CME and 14 of barrel.
The blocks ticked up 3 1/4-cents Monday, hitting the highest level since Oct. 22, 2014, but fell back 6 3/4-cents Tuesday, to $2.17, with 8 cars changing hands.
The barrels were up 2 cents Monday on a single trade, highest since Nov. 11, 2014, then gave back a nickel Tuesday, dropping to $1.89, on 5 uncovered offers. The spread is at an unsustainable 28 cents.
FC Stone dairy broker Dave Kurzawski explained in the Sept. 16 "Dairy Radio Now" broadcast that tightened milk supplies resulting from crimped margins on U.S. dairy farms the past few years meant lower cheese output. That, plus Class IV milk prices, have topped Class III prices which pulled some milk from the cheese vat, resulting in lower Cheddar output, the cheese traded at the CME. He also credited “very strong domestic cheese demand.”
The cheese price was the topic of last week, according to Dairy Market News, but contacts are concerned what markets will do in the near future. Some expect a sharp fall-off while others question where the ceiling is. Midwest cheese sales remain healthy, even with the price upticks and inventories in balance.
Western cheese makers have plenty of milk and plants are running near full capacity. Contacts see demand as adequate to keep stocks from ballooning but export demand has been stifled by the higher prices compared to world prices. Some suggest that supplies of block cheese that meets CME requirements are limited, giving a push to prices but the big question is how well the market can regain a balance, says DMN.
Block and barrel prices may moderate somewhat but the concern is that stronger milk prices and cheap feed may incentivize more milk production and, subsequently, more cheese. A few contacts suspect that without the potential for new market opportunities the U.S. may again have a lot of cheese that is hard to sell.
Spot butter climbed to $2.2350 per pound last Wednesday but backed off to close at $2.2225, up a nickel on the week but 1 1/4-cents below a year ago. A hefty 55 cars traded hands last week.
Monday’s butter lost a penny and a half and then fell 5 3/4-cents Tuesday, to $2.15, lowest CME price since Feb. 20, 2018.
Some butter producers say orders are picking up while others say demand remains quiet. Cream is available, and plants are taking advantage of the accessibility and working on 2020 cream contracts.
Western retail orders for print butter are not as good as sellers would like, says DMN, but food service intakes remain “stout,” helping to keep inventories under control. “Global butter sales are steady but with the strong value of the dollar and higher U.S. butter prices compared to the EU, export demand is unlikely to improve in the near future,” warns DMN.
Grade A nonfat dry milk dipped to $1.0375 per pound last Tuesday but rallied to close Friday at $1.0550, up three-quarter-cents on the week and 18 cents above a year ago.
The powder was unchanged Monday but gained a penny and a half Tuesday, hitting $1.07, highest since May 8, 2019.
Dry whey gained a quarter-cent last week, closing at 39 3/4-cents per pound.
It remained at Friday’s close Monday and Tuesday.
GDT up 2%
Tuesday’s Global Dairy Trade auction saw its weighted average of products offered end three consecutive declines. The average jumped 2.0%, following a 0.4% slip on Sept. 3, 0.2% on Aug. 20 and 2.6% on Aug. 6.
The gains were led by lactose, up 5.6%, after a 0.9% slip on Sept. 3.
Skim milk powder was up 3.4%, after it inched up 0.7% last time.
Butter was up 2.7%, after holding steady last time.
Whole milk powder was up 1.9%, after slipping 0.8%. Anhydrous milkfat was up 0.6%, following a 1.5% drop, and GDT Cheddar was up 0.4%, following a 0.8% loss last time.
Rennet casein was the only product in negative territory, down 0.1%, after gaining 4.6%.
FC Stone equated the GDT 80% butterfat butter price to $1.8271 per pound U.S., up 4.4 cents from Sept. 3. CME butter closed Tuesday at $2.15.
GDT Cheddar cheese equated to $1.7446 per pound, up almost a penny from the last event, and compares to Tuesday’s CME block Cheddar at $2.17. GDT skim milk powder averaged $1.1791 per pound and compares to $1.1338 last time. Whole milk powder averaged $1.4210, up from $1.3952. CME Grade A nonfat dry milk closed Tuesday at $1.07 per pound.
The Agriculture Department raised its 2019 milk production estimate in the latest World Agricultural Supply and Demand Estimates report, based on stronger growth in milk per cow offsetting forecast lower cow numbers. The 2020 forecast was reduced from last month on slower expected growth in dairy cow numbers; however, this is partly offset by slightly higher forecast milk per cow.
2019 production and marketings were estimated at 218.0 billion and 217.0 billion pounds respectively, up 100 million pounds from last month’s estimate. If realized, 2019 production would be up 400 million pounds or 0.2% from 2018.
2020 production and marketings were estimated at 221.2 billion and 220.2 billion pounds, respectively, down 200 million and 100 million pounds, respectively, from last month’s estimates. If realized, 2020 production would be up 3.2 billion pounds or 1.5% from 2019.
The 2019 and 2020 the Class III milk price forecasts were raised from last month on higher expected cheese and whey prices. Look for the 2019 Class III price to average $16.45 per cwt., up 15 cents from last month’s projection, and compares to $14.61 in 2018 and $16.17 in 2017. The 2020 average is now projected at $17.05, up 50 cents from last month’s estimate.
The 2019 and 2020 Class IV price forecasts were lowered as lower forecast butter prices more than offset higher nonfat dry milk prices. The 2019 average is now pegged at $16.15 per cwt., down 15 cents from last month’s estimate, and compares to $14.23 in 2018 and $15.16 in 2017. Expect the 2020 Class IV average at $16.15, down 30 cents from last month’s projection.
Fluid sales rise
July U.S. fluid milk sales staged a small uptick, first time since April 2018. USDA’s latest data shows 3.6 billion pounds of packaged fluid sales in July, up 0.2% from July 2018.
Conventional product sales totaled 3.4 billion pounds, down 0.1% from a year ago. Organic products, at 217 million pounds, were up 4.6% and represented a tad under 6% of total sales for the month.
Whole milk sales totaled 1.3 billion pounds, up 3.6% from a year ago. Sales for the six month period were up 1.2%. Skim milk sales, at 265 million pounds, were down 8.1%.
Total packaged fluid milk sales, January through July, totaled 26.6 billion pounds, down 1.8% from a year ago.
Conventional products year-to-date totaled 25.1 billion pounds, down 1.7%. Organic products, at 1.5 billion pounds, were down 3.3% and represented about 5.5% of total fluid milk sales for the period.