Dairy Market: Cash prices continue to slip

Most cash dairy prices fell in the first full week of trading in two weeks. Cheddar block cheese dropped to $1.8250 per pound last Thursday, lowest since Dec. 26 but closed Friday at $1.87, 2 cents lower on the week and 46 cents above a year ago.

The barrels fell to $1.5175 Thursday, but inched back to $1.5225 Friday, down 12 cents on the week and 27.75 cents above a year ago. There were 24 cars of block traded last week at the CME and 26 of barrel.

Monday’s and Tuesday’s block price remained at $1.87. The barrels inched up a half-cent Monday but dropped 6 cents Tuesday, falling to $1.4675, lowest CME price since March 13, 2019, and widened the spread to an unsustainable 40.25 cents.

Midwest cheesemakers had positive reports on demand the week after New Year’s, according to Dairy Market News. Production is ongoing, picking up, and spot milk supplies were ample and solely at discounted rates. Cheese stocks are balanced and most loads are spoken for ahead of production.

“The block-barrel price gap is and has been hovering around 25 cents, which is not symbolic of what contacts believe to be stable markets,” says DMN. “They prefer a price gap under a dime.”

Cheese price volatility in the West is affecting buyer behavior, with some taking a break while monitoring market conditions, looking for the right time to buy. Several retailers are replenishing their stocks following the holidays and, with the Super Bowl just weeks away, the hope is that there will be a revival in cheese sales.

Cheese output is ongoing, stirred by strong milk supplies in the region but “there is also a good equilibrium between the quantity of cheese requested and stocks at hand,” says DMN.

Butter fell to $1.87 per pound last Wednesday, lowest CME price in three years, but closed Friday at $1.92, down 3 cents on the week and 33.75 cents below a year ago as the heavier-than-expected November output weighed on the market; 12 cars traded hands last week.

The butter lost a nickel Monday, then reversed gears Tuesday jumping 7 cents, to $1.94, with 7 cars exchanging hands.

Butter producers are churning ahead of the spring demand season but some say they can’t churn fast enough with the current availability of cream. “Analysts expect butter to hold in its range this year, but the goalposts have been adjusted from the $1.80s into the $2 area,” says DMN.

Heavy milk production, high components, and the pullback of Class II dairy production following the holidays have yielded plenty of cream for western churns, says DMN. Butter makers report active production and, to no one’s surprise, retail butter orders are slow except for the regular refill of store shelves.

Grade A nonfat dry milk finished Friday at $1.2725 per pound, up 4 cents on the week, highest since Oct. 23, 2014, and 24.25 cents above a year ago, with 19 cars exchanging hands on the week.

The powder held at Friday’s close both Monday and Tuesday.

Dry whey saw a Friday finish at 34.75 cents per pound, up 3.25 cents on the week but 14.75 cents below a year ago, with 54 sales reported for the week.

The whey was up a half-cent Monday and ticked up three-quarters Tuesday, to 36 cents per pound, highest since Dec. 10.

FC Stone says, “No doubt there’s been product available, but with budding bullishness in both the feed market as well as the powder market (courtesy of the GDT), buyers are lined up to own dry whey in the low-30s.”

Projections lowered

The Agriculture Department lowered its milk production forecasts for 2019 and 2020 in the latest World Agricultural Supply and Demand Estimates report, based on slower expected growth in milk per cow.

2019 milk production and marketings were projected at 218.3 billion and 217.3 billion pounds, respectively, both down 300 million pounds from last month’s report. If realized 2019 production would be up 700 million pounds or 0.3% from 2018.

2020 production and marketings were estimated at 222.0 billion and 221.0 billion pounds, respectively, both down 400 million pounds. If realized, 2020 production would still be up 3.7 billion pounds or 1.7% from 2019.

The 2020 cheese, butter and whey price forecasts were reduced on demand weakness and relatively high stocks. The NDM price forecast was raised from December on continued strength in demand from export markets.

The forecast Class III and Class IV milk price averages were lowered from the previous month. Look for the 2020 average at around $17.35 per hundredweight, down 30 cents from what was projected in December, but tops the 2019 average by 39 cents and compares to $14.61 in 2018.

The Class IV projection was lowered a nickel from last month’s estimate, now put at $16.90, and compares to the 2019 average of $16.30 and $14.23 in 2018.

Exports strong

November U.S. dairy exports saw strong performance across most commodities, especially cheese and nonfat dry milk, according to HighGround Dairy’s Lucas Fuess in the Jan. 6 “Dairy Radio Now” broadcast.

Nonfat dry milk and skim milk powder shipments were up 41% from November 2018 and reached an all-time high for the month. Volumes to Mexico fell. Demand from Southeast Asia, Colombia and China drove demand to these levels, according to HGD, with the biggest jump by volume to the Philippines, highest since August 2018.

U.S. exports to South America reached an all-time high in November, due to Colombia’s demand for nonfat dry milk, and exports to China were the strongest since June 2018, says HGD.

“Butter fundamentals remain bearish as higher productivity continues to be paired with slow exports and higher overall fat imports in 2019,” says HGD. Exports were down 18.6% from October and 11.3% below a year ago. September to November butter exports were each the lowest for their month since 2015 as fat to the Middle East, North Africa, Afghanistan and Pakistan as well as to our North American trade partners has weakened in recent months.

U.S. butter output has exceeded prior year levels for six consecutive months, says HGD, and 2019 is on track to be the strongest butter production year since 1941.

Butter imports, at 5.2 million pounds, were down 30.7% from a year ago but anhydrous milkfat imports were up 69.7%.

Cheese shipments moved higher seasonally, up 3.4% from October and 7.3% above a year ago, with gains to the top three destinations, Mexico, South Korea and Japan. Cheese exported to Canada reached a two-year high, while cheese imports, at 33.1 million pounds, were down 11.1% from a year ago.

Dry whey exports totaled 27.2 million pounds, up 29.8% from October but down 24.7% from a year ago.

From: Capital Press

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