CME prices push higher, then slip
Cash dairy prices were mostly higher last week. Block Cheddar closed “Friday the 13th” at $1.56 per pound, up 1 3/4-cents on the week but 11 1/2-cents below a year ago. The barrels finished at $1.4225, up 17 3/4-cents on the week and 5 1/4-cents below a year ago.
The blocks inched a half-cent higher Monday but lost 3 3/4-cents Tuesday, dipping to $1.5275. The barrels were unchanged Monday and gave up 4 3/4-cents Tuesday and fell to $1.3750, 15 1/4-cents below the blocks.
Matt Gould, analyst and editor of the Dairy and Food Market Analyst newsletter, warned in Monday’s Dairy Radio Now broadcast that tariffs will result in the loss of about $1.10 per hundredweight for dairy farmers in the second half of 2018 because about a quarter of U.S. dairy exports go China and Mexico. He said he knows of orders being canceled so “it’s very real. It’s hitting home.”
Dairy Market News says demand reports from Midwestern cheesemakers diverge from slow to very busy. Although Western cheesemakers are arguably the most impacted by recent tariffs, there are upper-Midwestern producers who ship globally. They are concerned but have yet to see what impact tariffs will have near term. Milk supplies are lessening, says DMN, and milk premiums were reported for the first time since March.
Western cheese export demand is somewhat slow. Contacts report that Mexican buyers have started to look for alternative providers in the European market as import tariffs on U.S. cheese have increased.
Cash butter saw a Friday close at $2.2250 per pound, up 5 1/2-cents on the week but 37 1/2-cents below a year ago, with 21 sales reported on the week.
Monday’s butter was up a penny. It gained 1 1/4-cents Tuesday, climbing to $2.2525.
Retail butter reports are generally positive, beating summer expectations in some cases, according to DMN, and cream headed for the churn is becoming less available.
Western butter makers say demand is “changing as rapidly as the weather, one day solid and another day weak.”
Spot Grade A nonfat dry milk closed 1 3/4-cents lower last week, at 75 1/2-cents per pound, 10 3/4-cents below a year ago.
The powder was unchanged Monday but closed Tuesday at 76 3/4-cents per pound, up a penny and a quarter on the day.
Cash dry whey closed Friday at 41 3/4-cents per pound, up 2 3/4-cents on the week, with 7 cars finding new homes on the week.
Monday’s whey lost a quarter-cent and stayed there Tuesday at 41 1/2-cents per pound.
The bleeding in the world dairy market slowed in Tuesday’s Global Dairy Trade auction (GDT), which saw its weighted average slip 1.7 percent, following the 5.0 percent drop July 3. This was the fourth consecutive session of decline.
Rennet casein led the declines, down 9.5 percent, after gaining 3.6 percent last time. Butter dropped 8.1 percent, after falling 4 percent last time, and anhydrous milkfat was down 5.2 percent, following a 1.7 percent decline. Cheddar was off 3.3 percent after dropping 4.3 percent.
Only two offerings were to the positive, the very ones leading the declines last time. Whole milk powder was up 1.5 percent, following a steep 7.3 percent drop last time, and skim milk powder was up 0.8 percent, after falling 4.6 percent.
FC Stone equates the GDT 80 percent butterfat butter price to $2.1920 per pound U.S. CME butter closed Tuesday at $2.2525. GDT Cheddar cheese equated to $1.6312 per pound U.S. and compares to Tuesday’s CME block Cheddar at $1.5275. GDT skim milk powder averaged 88.85 cents per pound and whole milk powder averaged $1.3485. CME Grade A nonfat dry milk closed Tuesday at 76 3/4-cents per pound.
Fluid sales drop
The April uptick in fluid milk sales may have ended 10 months of consecutive declines but it was short-lived. After inching up 0.4 percent in April, the USDA’s latest tracking put fluid sales at 3.93 billion pounds, down 3.2 percent from May 2017.
Conventional product sales totaled 3.7 billion pounds, down 3.2 percent from a year ago; organic products, at 219 million pounds, were down 3.2 percent and represented about 5.6 percent of total sales for the month.
Whole milk sales totaled 1.2 billion pounds, up 0.4 percent from a year ago and up 2.4 percent year to date. Skim milk sales, at 325 million pounds, were down 7.8 percent from May 2017 and down 9.2 percent year to date.
Total packaged fluid milk sales in a four-month period climbed to 19.8 billion pounds, down 1.7 percent from the same period a year ago.
Conventional products year to date totaled 18.7 billion pounds, down 1.8 percent; organic products, at 1.1 million pounds, were up 0.1 percent. Organic represented about 5.5 percent of total fluid milk sales January through May.
The Agriculture Department again lowered its 2018 milk production forecast as well as 2019 output in the latest World Agricultural Supply and Demand Estimates report, due to “slower-than-anticipated growth in milk per cow and lower cow numbers. Although tempered by lower expected feed costs, lower milk prices will likely weaken producer margins, resulting in lower cow numbers and slower growth in milk per cow. USDA’s Cattle report, to be released on July 20, will provide a mid-year estimate of dairy cow and dairy replacement heifer inventories,” the USDA wrote.
2018 production and marketings were projected at 217.9 billion and 216.9 billion pounds, respectively, down 100 million pounds from last month’s estimates on production and down 200 million pounds on marketings. If realized, 2018 production would be up 2.4 billion pounds or 1.1 percent from 2017.
2019 production and marketings were estimated at 220.6 and 219.6 billion pounds respectively, down 500 million pounds on both. If realized, 2019 production would be up 2.7 billion pounds or 1.2 percent from 2018.
The 2018 butter, cheese, nonfat dry milk (NDM), and whey price forecasts were reduced from the previous month. Forecasts were reduced for cheese, NDM, and whey prices for 2019 as cheese stocks will remain large and prices for NDM and whey will have to remain competitive with competing exporters. However, the 2019 butter price was raised as stocks are worked down.
The 2018 and 2019 Class III milk price and Class IV price forecasts were lowered from last month. The 2018 Class III average is now projected at around $14.45 per hundredweight, down from $15.25 expected a month ago and compares to $16.17 in 2017 and $14.87 in 2016. Look for a 2019 average of about $15.20, down from $15.80 expected last month.
The 2018 Class IV price will average around $13.85, down from $14.55 projected last month and compares to $15.16 in 2017 and $13.77 in 2016.