Dairy Market: Benchmark price drops $1.08
The USDA announced the December Federal order Class III benchmark milk price at $19.37 per hundredweight, down $1.08 from November, $5.59 above December 2018, and the highest December price since 2007.
That put the 2019 Class III average at $16.96, up from $14.61 in 2018 and $16.17 in 2017.
Monday’s Class III futures settlements portended a January price of $16.97; February, $17.01; and March at $17.24. The January price was the low for 2020, with the peak at $17.60 in September.
The December Class IV price is $16.70 per cwt., up 10 cents from November, $1.61 above a year ago, and the highest Class IV price since August. Its 2019 average is $16.30, up from $14.23 in 2018 and $15.16 in 2017.
Cash dairy product prices at the Chicago Mercantile Exchange started 2020 mixed as traders awaited the November Dairy Products report on Monday and the first Global Dairy Trade auction of the New Year on Tuesday.
The Cheddar blocks climbed to $1.91 per pound New Year’s Eve but closed the first Friday of 2020 at $1.89, up 6 cents on the holiday shortened week and 47.25 cents above a year ago.
The barrels hit $1.70 New Year’s Eve but finished Friday at $1.6425, up 4.25 cents on the week, reversing four weeks of decline, and 34 cents above a year ago.
Six cars of block traded hands last week at the CME, 37 in the month of December, down from 49 in November. Sixteen cars of barrel sold on the week and 103 for the month, up from just 16 in November.
Monday’s block price lost a penny and it stayed there Tuesday at $1.88, as traders absorbed the Dairy Products report and the morning’s GDT auction.
The barrels were unchanged both Monday and Tuesday, resting temporarily at $1.6425, an unsustainable 23.75 cents below the blocks.
Central cheese makers told Dairy Market News that orders were slow to return in the second shortened week of the holidays. Blocks and barrels were both readily available and milk for processing is “abundant,” with spot loads offered at $6 to $8 under Class III.
Western cheese output is also active amid ample amounts of milk and contacts reported discounted milk was still available in parts of the region. Cheese orders slowed during the Christmas and New Year’s weeks but retail demand leading up to the festivities pulled at cheese stocks.
Cheese makers are hopeful that the pro football playoffs will spur the need for more cheese for pizza. Cheese inventories are “in good balance with customer needs,” says DMN.
Butter fell below the $2 per pound price tag again, closing last week at $1.95, 8.5 cents lower on the week and 30 cents below a year ago. Only 3 cars exchanged hands New Year’s Week, with 29 in December, down from 58 in November.
The butter fell 5.5 cents Monday and lost 1.5 cents Tuesday, dipping to $1.88, lowest CME price since Nov. 3, 2016, as November’s heavier-than-expected butter production weighed on the market.
Readily available cream was driving production at butter plants in the Central region, according to DMN, and a slowdown is not likely as manufacturers expect to see high butter output well into the week after New Year’s. Demand varies from flat to sluggish, as domestic buyer interest remained light early in the week. Retail orders improved slightly from Christmas Week. The market is “unsettled” as prices edge lower, says DMN.
Western butter manufacturing was also active due to increased cream offers in the New Year’s Week. Cream was moving to any processing plant that had room and was willing to take it.
Spot Grade A nonfat dry milk saw a Friday close at $1.2325 per pound, unchanged on the week but 25.75 cents above a year ago. Seven cars traded hands on the week, with 27 on the month, down from 69 in November.
Monday’s powder was unchanged but it jumped 2.25 cents Tuesday to $1.2550, highest since Dec. 16, 2019.
CME dry whey finished Friday at 31.50 cents per pound, also unchanged on the week but 17.5 cents below a year ago. There were 38 cars traded on the week, 88 for the month, 28 less than in November.
The whey was steady Monday but gained a penny Tuesday, creeping to 32.50 cents per pound, highest since Dec. 13.
Milk usage update
The mostly neutral November Dairy Products report shows that total cheese output slipped to 1.10 billion pounds, down 3.2% from October but 0.5% above November 2018. The year-to-date total stands at 12.0 billion, up 0.8% from 2018.
Wisconsin produced 284.4 million pounds of the November total, down 0.9% from October but 0.3% above a year ago. California’s share was 217.6 million pounds, up 0.8% from October and 0.6% above a year ago.
Interestingly, California’s November Cheddar output was up 11.1% from October but 19.0% below a year ago. Idaho contributed 77.1 million pounds, down 11.2% from October but 0.1% above a year ago.
Italian cheese totaled 473.8 million pounds, down 2.4% from October but 1.0% above a year ago, and brought year to date output to 5.2 billion pounds, up 2.3%.
American type cheese totaled 434.8 million pounds, down 2.5% from October and 0.2% above a year ago. YTD American is at 4.8 billion pounds, down 0.9%.
Cheddar, the cheese traded at the CME, totaled 310.3 million pounds, up 200,000 pounds or 0.6% from October but 3.9 million pounds or 1.2% below November 2018. YTD Cheddar was at 3.4 billion pounds, down 2.5%.
Butter output totaled 156 million pounds, down 0.6% from October but a bearish 6.6 million pounds or 4.4% above a year ago, the sixth consecutive month butter output topped a year ago. YTD butter is at 1.7 billion pounds, up 0.5% from 2018.
Dry whey totaled 75.1 million pounds, down 17.3% from October but 3.9% above a year ago, with YTD at 894.4 million pounds, down 3.3%. Stocks totaled 79.7 million pounds, up 0.3% from October and a hefty 16.8% above a year ago.
Nonfat dry milk production totaled 142.1 million pounds, up 6.9 million pounds or 5.1% from September and 7.7 million or 5.7% above a year ago. YTD powder is at 1.7 billion pounds, up 3.1% from 2018. Stocks climbed to 223.1 million pounds, up 5.1 million or 2.4% from October but were 66.1 million pounds or 22.8% below the 2018 level.
Skim milk powder output slipped to 43.7 million pounds, down 800,000 pounds or 1.6% from October but 1.2 million pounds or 2.8% above a year ago. YTD skim hit 465.7 million pounds, down 9.8% from a year ago.
The first Global Dairy Trade auction of 2020 posted a mostly bullish 2.8% rise in the weighted average of products offered, just as it did in the first event of 2019. The uptick followed a 5.1% plummet in the last GDT of 2019.
The turnaround was led by rennet casein, up 8.6% and buttermilk powder, up 7.4%. Skim milk powder was up 5.4%, following a 6.3% decline on December 17. GDT butter and cheese were both up 3.7%, after butter fell 2.4% and cheese rose 1.7% last time.
Anhydrous milkfat saw a 2.3% gain after inching 0.3% lower and lactose was up 2.1%, following a 0.6% gain. Whole milk powder was up 1.7% after plunging 6.7% last time.
FC Stone equated the GDT 80 percent butterfat butter price to $1.7831 per pound U.S., up 6.3 cents from the last event. CME butter closed Tuesday at $1.88.
GDT Cheddar cheese equated to $1.8211 per pound, up 6.6 cents, and compares to Tuesday’s CME block Cheddar at $1.88. GDT skim milk powder averaged $1.3724 per pound and compares to $1.3004 last time.
Whole milk powder averaged $1.4288, up from $1.4059. CME Grade A nonfat dry milk closed Tuesday at $1.2550 per pound.