Dairy market falls back
Cash dairy prices started October strong, then reversed. CME block Cheddar climbed to $1.7475 per pound last Monday, the highest price since Nov. 1, 2017, but closed Friday at $1.65, down 4 cents on the week and 11 cents below a year ago.
The barrels finished at $1.3675, down 1 1/2-cents on the week and 37 3/4-cents below a year ago. There were 21 cars of block traded on the week, following two weeks where none was traded, and 36 of barrel.
Direction reversed Monday, with the blocks regaining 3 cents and the barrels up three-quarters, only to see the blocks give back 2 1/2-cents Tuesday, slipping to $1.6550. The barrels rolled a penny and a half lower, to $1.36, 29 1/2-cents below the blocks.
FC Stone’s Dave Kurzawski warned in Monday’s Early Morning Update: “At current international prices of $1.57 per pound in New Zealand and $1.60 per pound in the EU, it’s going to be hard to win new export sales with U.S. blocks in the $1.60s or $1.70s.”
Dairy Market News reports that American-style cheese production is or has already increased, as heavier fourth quarter orders are beginning to come. Inventories are reportedly tight. Some pizza cheesemakers continue to see steady demand. Milk handlers are swamped with calls from cheesemakers and spot milk prices ranged from Class III to $1.50 over. But the market tone is “puzzled.” News from cheese producers is generally positive but many are perplexed regarding current prices, particularly the large block to barrel price gap and “how inextricable that chasm is with bearish market sentiment.”
Western demand remains strong. Intakes from retail and restaurants have increased and contributed to higher block prices. Mozzarella demand by pizza manufacturers is active and stocks are starting to tighten. Market players are still concerned with export sales, despite the trade news.
Export demand is mixed and some reports suggest that several global customers are looking for alternative buying opportunities. Cheese production is generally steady to increasing due to many plants running at or close to full capacity. Cheese stocks are sufficient. However, some industry players state that their inventories are fully committed for the rest of 2018.
Cash butter climbed to $2.3350 per pound last Tuesday, highest since Aug. 15, 2018, but closed Friday at $2.29, down 3 cents on the week and 5 cents below a year ago, with a hefty 50 cars trading hands last week.
The butter was down 3 cents Monday and lost a penny Tuesday, slipping to $2.25.
FC Stone’s Dave Kurzawski says, “Fundamentals, especially stocks to use, would suggest a butter market closer to $2.10 and approaching $2.00 towards the end of the year. However, sentiment in the market seems to be that there is still one more push higher left, before seasonally trending lower.”
“Butter producers are still going lighter on the churns,” says DMN, “as cream availability is slighter than some expected this time of year. Milkfat is reportedly slight, along with other components.”
Western butter output is brisk in preparation for the fall season and cream supplies are sufficient. Food service orders have remained strong and retail orders are building.
Grade A nonfat dry milk inched up to 88 cents per pound last Monday but closed Friday at 86 cents, down 1 1/2-cents but 3 1/2-cents above a year ago.
Monday saw the powder hold steady, then inch a quarter-cent lower Tuesday, to 85 3/4-cents.
Spot dry whey continued to reach new highs and closed Friday at 56 1/4-cents per pound, up 1 1/4-cents on the week.
It lost a half-cent Monday and stayed there Tuesday at 55 3/4-cents per pound.
Benchmark up $1.14
The September Federal order benchmark milk price jumped $1.14, to $16.09 per hundredweight, 27 cents below September 2017, 47 cents above California’s comparable 4b milk price, and is the highest Class III price since November 2017. It equates to $1.38 per gallon, up from $1.29 in August but down from $1.41 a year ago.
Monday’s Class III futures portended an October price at $15.84, November at $16.03, and December at $16.00 per cwt.
The nine-month Class III average stands at $14.62, down from $16.12 a year ago and compares to $14.38 in 2016.
The September Class IV price is $14.81, up 18 cents from August but $1.05 below a year ago. Its nine-month average hit $13.95, down from $15.51 a year ago and compares to $13.65 in 2016.
USDA’s latest Dairy Products report shows August cheese output totaled 1.08 billion pounds, down 0.7 percent from July but 2.8 percent above August 2017. Year-to-date output stands at 8.57 billion pounds, up 2.4 percent from this time a year ago. August was the 65th consecutive month that cheese output exceeded that of a year ago.
Italian cheese totaled 454 million pounds, down 2.1 percent from July but 3.9 percent above a year ago. Year to date (YTD) Italian is at 3.7 billion pounds, up 2.6 percent from a year ago. Mozzarella, at 356.2 million pounds, was up 6.1 percent from a year ago, with YTD at 2.85 billion pounds, up 3.3 percent.
American type cheese totaled 425.4 million pounds, down 3.5 percent from July but 2.7 percent above a year ago, with YTD at 3.46 billion pounds, up 2.3 percent. Cheddar, the cheese traded at the CME, totaled 304.4 million pounds, down 22 million pounds or 6.7 percent from July but 2.0 percent above a year ago, with YTD output at 2.5 billion pounds, up 0.7 percent.
U.S. churns produced 133.9 million pounds of butter, down 0.5 percent from July but 2.1 percent above a year ago. YTD is at 1.29 billion pounds, up 3.3 percent.
Yogurt output, at 395.2 million pounds, was off 0.3 percent from a year ago, with YTD output hitting 2.98 billion pounds, down 2.0 percent.
Dry whey for human consumption totaled 78.2 million pounds, down 13.4 percent from July and down 16 percent from a year ago. Stocks totaled 70.7 million pounds, down 5.8 percent from July but a whopping 27.9 percent below a year ago.
Nonfat dry milk production totaled 122.9 million pounds, down 14.8 percent from July and 10.1 percent below a year ago. YTD output stands at 1.2 billion pounds, down 1.2 percent. Stocks fell to 275.4 million pounds, down 42.1 million pounds or 13.3 percent from July and 37.5 million pounds or 12.0 percent below 2017.
Skim milk powder production totaled 47.6 million pounds, up 0.3 percent from July and 6.3 percent above a year ago. YTD skim is at 379.3 million pounds, down 1.0 percent from a year ago.