Dairy Market: Cheese prices still climbing
CME dairy prices saw little change in the St. Patrick’s Day week as traders anticipated the February Cold Storage report Friday afternoon.
Block Cheddar climbed to $1.5825 per pound Tuesday but slipped back to close the week at $1.57, up a penny on the week and 2 1/2-cents above a year ago.
The barrels finished at $1.5650, up 7 1/4-cents on the week, after gaining 12 3/4-cents the previous week, and were 5 1/2-cents above a year ago. Five cars of block traded hands last week at the CME and 37 of barrel.
Monday’s trading took the cheese to new highs for 2019, jumping the blocks 7 cents on two unfilled bids. They added a nickel Tuesday on bids, and hit $1.69, the highest CME price since Oct. 2.
The barrels inched a half-cent higher Monday, with 15 cars exchanging hands, then gained a penny and a quarter Tuesday on 10 trades and reached $1.5875, the highest since Sept. 4, but 10 1/4-cents below the blocks.
FC Stone dairy broker Dave Kurzawski admits that “barrels are coming to the exchange as the current supply of fresh barrels isn’t necessarily tight."
"But the volume here is key as there is something less enthusiastic when a market rises on zero trades. They’re harder to read and potentially more vulnerable to being pushed around both ways,” he says. "But when you have volume on the bid and offer, you have a market. And the temperament of that market has been rather firm for weeks now."
Spot milk availability to Central cheese production last week was similar to the past few weeks, according to Dairy Market News, and demand reports are “more positive with spring’s arrival.”
Western cheese demand is steady in domestic channels and some export markets. Heavy inventories do not seem to be a major concern for processors. Demand appears to be able to keep pace with production and cheesemakers are hopeful that spring basketball tournaments will put large amounts of mozzarella on pizza, and favorable spring weather launches the grilling season in earnest.
Butter closed last week at $2.2650 per pound, down 1 1/2-cents but 7 1/2-cents above a year ago.
It gained a penny and a half Monday but gave back a half-cent Tuesday, pausing at $2.2750.
South central butter churning is unchanged in some cases, says DMN. Some upper Midwest plants reported a slowdown in churning and cream purchases, as butter supplies are nearing sufficient levels for spring demand. Butter sales are improving, as expected, ahead of the holidays.
Western butter inventories remain manageable and haven't built up as much as usual. Bulk and retail print orders are strong. Weather is warmer; consequently, food service requests for butter have improved a bit due to people going to more restaurants. With the spring break near the corner at some Western localities, industry contacts expect food service and eateries to maintain active orders and ice cream production is likely to ramp up in the coming weeks.
Grade A nonfat dry milk closed Friday at 95 3/4-cents per pound, down a penny on the week but 26 1/2-cents above a year ago.
Monday’s powder slipped back a quarter-cent but gained three-quarters Tuesday, hitting 96 1/4-cents per pound.
Spot dry whey saw a Friday close at 33 cents per pound, up a penny on the week and 4 1/4-cents above a year ago, on 23 sales for the week.
The whey lost a quarter-cent Monday and shaved off a half-cent Tuesday, slipping to 32 1/4-cents per pound.
The Agriculture Department’s February Cold Storage report shows dairy product inventories are plentiful but not overly burdensome.
Feb. 28 butter stocks totaled 242.5 million pounds, up 31.3 million pounds or 14.8% from January but 23.3 million or 8.8% below February 2018.
American type cheese, which includes Cheddar, slipped to 785.6 million pounds, down 18 million pounds or 2.2% from January, largest January-to-February decline in 25 years, according to the Daily Dairy Report’s Sarina Sharp, but is 22.8 million pounds or 3% above a year ago.
The other cheese category hit 553.4 million pounds, up 16.8 million pounds or 3.1% from January and 26.3 million or 5.0% above a year ago.
The total cheese inventory stands at 1.37 billion pounds, virtually unchanged from January but 52.4 million pounds or 4% above a year ago and the 52nd consecutive month stocks topped a year ago.
FC Stone’s Dave Kurzawski warns that “Although American cheese holdings saw a nice drawdown in February, it’s the increase in Italian style (mostly mozzarella) holdings that have us concerned. Our estimated domestic mozzarella sales were very strong during the second half of 2018 and that was helping to keep milk out of Cheddar/American production. But it looks like those sales had slowed in January and it now looks like February was slow as well. If mozzarella sales remain weak, it could push more milk back toward Cheddar production in coming months which would be bearish for prices.”
The Agriculture Department’s latest Livestock Slaughter report shows dairy cow culling dropped in February but was above February 2018. An estimated 278,900 head were slaughtered under federal inspection, down 19,500 head from January but 18,300 or 7.0% above a year ago. The two-month total stands at 577,300 head, up 26,900 or 4.9% from a year ago.
Will we see U.S. milk output fall below year ago levels? HighGround Dairy’s Lucas Fuess is doubtful. Speaking in the March 25 Dairy Radio Now broadcast, he said, even though the cow herd remains below year ago levels, milk per cow continues to climb, and it looks like production will eke out gains through this spring even though it may not be at the strong levels that we’re used to.
Fuess says it’s been over three years since we have seen a deficit to the previous year in milk output, but output per cow continues to rise as farmers implement technology, genetic improvements, nutrition, “anything possible to squeeze out more milk” even if the farmers themselves are being squeezed by tight margins.