Dairy Market: Benchmark price down 5 cents
The Agriculture Department announced the February Federal order Class III benchmark milk price at $17.00 per hundredweight, down a nickel from January, $3.11 above February 2019, and the highest February Class III since 2014.
Monday’s Class III futures settlements portend a March price at $16.30; April, $15.81; May, $15.96; and June at $16.23; with a peak at $16.93 in October.
The Class IV price is $16.20, down 45 cents from January, 34 cents above a year ago, and the highest February Class IV price since 2014.
January cheese output totaled 1.103 billion pounds, down 2.3% from December but 0.4% above January 2019, according to the USDA’s latest Dairy Products report. It was also a record high for January, according to the Daily Dairy Report.
Wisconsin produced just under 274 million pounds of the total, down 1.6% from December and 0.9% below a year ago. California output fell to 212.0 million pounds, down 2.4% from December and 0.9% below a year ago. Idaho cheese came in at 85.2 million pounds, down 4.1% from December and 1.7% below a year ago.
Italian type cheese totaled 482.2 million pounds, down 0.2% from December but 0.4% above a year ago.
American cheese totaled 436.3 million pounds, down 4.9% from December and 0.7% below a year ago. Mozzarella, at 380.2 million pounds, was up 0.1%.
Cheddar output, the cheese traded at the CME, fell to 317.4 million pounds, down 15.9 million pounds or 4.8% from December and was 5.8 million or 1.8% below January 2019, and helps explain the strong prices.
Butter sets record
Butter production hit 190.7 million pounds, up 13.9 million pounds or 7.9% from December and 1.1 million pounds or 0.6% above a year ago, the eighth consecutive month butter output topped that of a year ago and was also a record high for the month of January.
Dry whey totaled 84.8 million pounds, up 6.3% from December and 4.4% above a year ago. Stocks fell to 66.7 million pounds, down 7.7% from December and 16.0% below a year ago.
Nonfat dry milk production hit 173.2 million pounds, up 8.5 million pounds or 5.2% from December and 500,000 pounds or 0.3% above a year ago. Stocks climbed to 279.2 million pounds, up 31.7 million or 12.8% from December but were 7.2 million pounds or 2.5% below the 2019 level.
Skim milk powder output slipped to 51.5 million pounds, down 2 million pounds or 3.7% from December but was 11.7 million pounds or 29.4% above a year ago.
More milk, less price
The Agriculture Department raised its 2020 milk production forecast in this morning’s World Agricultural Supply and Demand Estimates report, based on a higher expected cow inventory.
2020 production and marketings were estimated at 222.3 billion and 221.2 billion pounds, respectively, up 300 million pounds on production and 200 million on marketings. If realized, 2020 production would be up 3.9 billion pounds or 1.8% from 2019.
The 2020 Class III milk price estimate was reduced on a lower cheese price forecast and is projected to average $16.65 per hundredweight, down 30 cents from last month’s estimate and compares to $16.96 in 2019 and $14.61 in 2018.
The Class IV price was reduced on lower butter and nonfat dry milk price forecasts and is expected to average $15.75, down 95 cents from last month’s projection and compares to $16.30 in 2019 and $14.23 in 2018.
Cheddar block cheese started March by ending three weeks of decline. It shot up to $1.7675 per pound last Monday but closed Friday at $1.75, up 2.75 cents on the week and 21.5 cents above a year ago.
The barrels dropped to $1.4775 by Friday, down 11.25 cents on the week and 11.25 cents above a year ago.
Monday’s block price gained a penny on a sale, as Wall Street saw its worst day of trading in over a decade. Stocks plunged due to falling oil prices and continued concern over the coronavirus. The blocks were unchanged Tuesday, holding at $1.76.
The barrels plunged 6.75 cents Monday and stayed there Tuesday, at $1.41, a widened 35 cents below the blocks.
Spot milk was offered for as much as $4.00 per hundredweight under Class last week, reports HighGround Dairy. Dairy Market News says milk is and has been available but maintenance issues at some cheese plants had milk handlers struggling to find destinations last week.
Cheese sales remain steady to slow, depending on the variety. Market tones are quiet to bearish, says DMN, and “contacts have begun to accept, but not embrace, the large block to barrel CME price gap.”
Western cheese output remains active as low-cost milk continues to flow to cheese vats. Domestic cheese sales are stable to increasing and current affordable prices are attracting international buyers. Cheese stocks are readily available but the coronavirus outbreak “continues to bring more uncertainty into the market,” says DMN. School closures and falling restaurant sales from the virus will pressure dairy prices.
Butter jumped 10.5 cents last Monday and climbed to $1.88 per pound by Thursday. It closed Friday at $1.8550, 13 cents higher on the week but 41.25 cents below a year ago.
The butter lost 3.75 cents Monday and stayed there Tuesday at $1.8175.
Butter producers continue to report plentiful cream supplies, which naturally leads to heavier churning, some at capacity. Inventories are growing ahead of spring demand upticks and plant managers hope Class II production will pick up and take more of the ever-present cream supplies.
Western butter manufacturers report that ice cream production is slowly increasing and using more cream but there is still plenty for the churns and many are running at or near capacity. Inventories continue to rise, albeit at a slower pace.
Grade A nonfat dry climbed to $1.14 per pound last Tuesday but finished Friday at $1.1150, up 5 cents on the week and 14 cents above a year ago on 38 sales.
Monday saw the powder fall 3.25 cents and lose 0.25 cents Tuesday, slipping to $1.08.
Spot dry whey saw its Friday closing at 34.75 cents per pound, 0.75 cents higher on the week and 0.75 cents above a year ago.
Monday’s whey was down 1.5 cents but it inched back up a half-cent Tuesday to 33.75 cents per pound.
Dairy exports clouded
January U.S. dairy export data included record volumes to Southeast Asia and a year over year climb in product moving to China, according to HighGround Dairy. However, “the global trade situation has changed dramatically in recent weeks. U.S. exports were likely challenged into February and March as the globe dealt with a continuously spreading COVID-19.
HighGround believes exports will struggle in the coming weeks until the world contains the virus and economic panic subsides.”
U.S. exports of nonfat dry milk and skim milk powder surged to a record January volume and remained on track with the strong shipments seen monthly since September, according to HGD. Product moving to Mexico was down 10% for the fourth consecutive month but continued shipments into Southeast Asia kept demand strong in the month.
“Total cheese exports eked out a gain versus prior year and were supported by shipments moving south to Mexico,” says HGD, up 21% from a year ago but South Korea and Japan imported less U.S. cheese.”
“January marked the 17th consecutive month of losses for U.S. dry whey exports and against steep prior year losses,” says HGD. Exports to China were down 13% year over year and “the weakest for January in four years.”
Meanwhile, customs data show that China’s overall exports shrank 17.2% in January and February combined, according to HGD, with blame placed on the coronavirus.