Dairy Market: Cheese blocks hover near $3 a pound

Forget gold. Invest in cheese. One could almost say that. The CME Cheddar blocks set another record high Friday, closing at $2.9150 per pound, up 24 cents on the week and $1.13 above that week a year ago.

But the market wasn’t satisfied and just had to see what $3 per pound looked like on Monday, jumping 8.5 cents, but then backed down a penny Tuesday to $2.99.

The Cheddar barrels, after limping to $2.40 per pound last Wednesday, closed Friday at $2.34, down 7.5 cents on the week and 60 cents above a year ago. 23 cars of block traded hands last week at the CME and only 2 of barrel.

The barrels got caught up in Monday’s updraft and regained 6.25 cents, but set a record of a different kind; a spread of 59.75 cents below the blocks. They were up 1.75 cents Tuesday, hitting $2.42 per pound, 7 cents shy of their $2.49 record on Sept. 22, 2014.

The continuing gains in cheese lit fires under Class III futures. Monday’s settlements portended a July price at $24.34, 26 cents shy of the all-time record high of $24.60 in September, 2014.

August was at $23.40; September, $20.71; October, $18.76; November, $17.73; and December was at $16.85.

If these prices are realized, the 2020 Class III average would be $18.19, highest average since the 2014 average of $23.34.

Those glowing milk prices have resulted in fewer dairy cows being slaughtered. StoneX reported that cull prices are staying high and dairy cows share of total beef slaughter dropped below 8% last week.

“Until milk prices lose strength, we will probably see dairy cow slaughter lag year ago numbers,” says StoneX.

Central cheesemakers continue to report mostly positive demand for most varieties, particularly blocks, according to Dairy Market News.

Barrel producers say demand is somewhat steady. Milk is available but below Class III mid-week. DMN adds that the cheese market tone “remains hearty” and “with government buying programs in place, along with steadfast retail demand during grilling season, buyers are still active and willing to pay prices very few contacts would have expected when markets were near $1 in April.”

The government buying programs have been a godsend. The Daily Dairy Report says the “Farmers to Families Food Box program had delivered 32 million boxes through July 7. The program is currently slated to run through August and purchase more than $2 billion in agricultural products, with the option to increase purchases to $3 billion. Many analysts speculate the entire $3 billion will be spent, which would likely result in $1 billion in dairy purchases,” DDR stated.

But the western cheese market is “fighting to maintain its strength,” says DMN. Sales are lively but increasing prices have put a little break on demand. The start of the second phase of the food box program is helping fuel the cheese industry, says DMN, but restaurant and hotel intakes are mixed and retailer demand was unchanged.”

The increase in the number of coronavirus cases at several western localities has some halting the reopening process, while others are closing back down. DMN warned this is likely to impact cheese demand from caterers, retailers and other consumers. Cheese inventories are still tight but production is ramping up.

Butter continued its meltdown, though it inched up a quarter-cent Friday. It closed at $1.69 per pound, down 4.75 cents on the week, the fifth consecutive week of decline, and was 72.25 cents below a year ago; 12 cars exchanged hands last week.

Thankfully, butter got caught in Monday’s upward momentum as well, jumping 3.75 cents, with 11 trades, and added 1.75 cents Tuesday, creeping up to $1.7450, on 5 more sales.

Butter makers were mixed on what the post 4th of July-holiday cream availability would look like, says DMN. They got their answer last week, as availability dried up and once again cream was pulled out of their reach, fiscally speaking. Butter demand is steady on the retail side, while foodservice orders are notably lower than this time in previous years.

Some contacts suggest cream supplies out of the West are limited due to the heat, as suppliers are leery of sending cream elsewhere when temperatures are reaching 90 and even 100-plus in many parts of the country.

Butter churning in the West has been low even though cream supplies were more available last week. Retail butter sales remain above expectations but have softened. With the new restrictions on reopening, foodservice sales have dropped back after increasing the past weeks. Other buyers are taking steady loads. Butter stocks are available and some retailers are looking to contract for the fall, although they believe supplies may not be tight at that time.

Grade A nonfat dry milk drew strength from the last week’s GDT and climbed to $1.0325 per pound Tuesday but finished Friday at $1.0150, up a half-cent on the week and 1.25 cents below a year ago, with 26 sales on the week, 24 on Tuesday alone.

The powder stayed at Friday’s close Monday and Tuesday.

Dry whey finished Friday at 28.75 cents per pound, down 4.25 cents on the week, lowest CME price since Nov. 12, 2019, and 3.5 cents below a year ago; 8 cars exchanged hands on the week.

The whey advanced 3 cents Monday and inched up 0.25 cents Tuesday, to 32 cents per pound.

Milk estimates mixed

The Agriculture Department lowered its milk production forecast for 2020 from last month, in the latest World Agriculture Supply and Demand Estimates report issued Friday, blaming slower growth in milk per cow.

The 2021 milk production forecast was raised on expectations of dairy herd rebuilding and a recovery in growth in milk per cow.

Price forecasts for cheese, butter, and nonfat dry milk were raised on recent price strength and anticipated demand strength however the whey price forecast was lowered.

2020 production and marketings were estimated at 221.5 billion and 220.5 billion pounds, respectively, down 1 billion pounds on both from their June estimate. If realized, 2020 production would still be up 3.1 billion pounds or 1.4% from 2019.

2021 production and marketings were estimated at 225.6 billions and 224.6 billion pounds respectively, up 300 million pounds on both. If realized, 2021 production would be up 4.1 billion pounds or 1.9% from 2019.

Class III and Class IV milk price forecasts were raised for 2020. Look for a Class III average of $18 per hundredweight, up $2.35 from last month’s forecast, and compares to the $16.96 average in 2019 and $14.61 in 2018.

The 2021 Class III average was projected at $16.20, up $1.10 from last month’s estimate, and would be $1.80 below the projected 2020 average.

The 2020 Class IV milk price average was projected at $13.95, up 40 cents from last month’s estimate and compares to $16.30 in 2019 and $14.23 in 2018.

The 2021 Class IV average was estimated at $13.80, up 45 cents from last month’s estimate, and would be down 15 cents from the 2020 projected average. It compares to a $16.30 Class IV average in 2019 and $14.23 in 2018.

From: Capital Press

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