Dairy Market: February prices start strong then slip
Cheese and butter started February with some strengthening.
Block Cheddar closed Friday, Feb. 1 at $1.50 per pound, the highest CME price since Oct. 30. It was up 11 cents on the week, reversing four weeks of decline, up 8 1/4-cents on the month, and 3 3/4-cents above a year ago.
The barrels finished at $1.30, up 18 cents on the week, a quarter-cent lower on the month, 2 1/2-cents below a year ago, and 20 cents below the blocks.
Monday’s block price backed down a penny and a quarter, then lost 3 cents Tuesday, falling to $1.4575, as traders await Wednesday’s Global Dairy Trade Auction.
The barrels inched back a quarter-cent Monday and lost a half-cent Tuesday, slipping to $1.2925, reducing the spread to 16 1/2-cents.
Extremely cold winter weather through the Midwest and Northeast last week caused the usual headaches on dairy farms. Dairy Market News says there were some hauling delays and plant closures but most contacts suggest contingency plans were in place and disturbances were minimal.
Milk production has been generally steady to strong, though contacts suggest that bottling plant closures, due to weather-related maintenance issues, pushed more milk into Class III production.
Western milk output reports point to a generally steady balance, though the frigid temperatures paid a visit to the Pacific Northwest this week.
Western cheese output remains at or near full capacity. Inventories are reported to be long, “but there seems to be a consensus that this may be a new norm.” Market participants are eager to get updated statistics on cheese production and inventories. They expect large cheese stocks in the warehouse, but are not sure how large and at what point inventories become burdensome.
The USDA is rescheduling its missed reports from the government shutdown. The December Cold Storage report was still not on the list.
Storage numbers are only part of the story, according to some contacts who report that “manufacturers are placing a bit more cheese into aging programs to extract greater value out of the cheese and deal with available milk. The action may move stock numbers higher, but it better meets consumer demand trends,” says DMN.
Cheese makers say domestic demand has been steady and the lower CME cheese prices has generated some interest in export markets.
Cash butter climbed to $2.2925 per pound last Wednesday, the highest CME price since Nov. 2. It closed Friday at $2.29, up 4 1/2-cents on the week, 7 1/4-cents above its Jan. 2 perch, and 17 1/2-cents above a year ago.
The butter was down three-quarters Monday and lost a half-cent Tuesday, dipping to $2.2775.
Cream remains abundant for Central butter producers who expect similar availability to last through February, according to DMN. Butter sales are a little lower than expected in some cases, but somewhat steady overall.
Western butter inventories remain abundant while prices are higher compared to last year, says DMN. Some butter vendors are reporting solid first quarter sales to the point where their sales are almost above current production. U.S. butter prices are competitive in the global market, so sellers hope that export demand will react to the prices.
Cash Grade A nonfat dry milk closed Friday at $1.0025 per pound, down a penny on the week, up 5 1/4-cents on the month, and 28 cents above a year ago.
Monday’s powder lost 1 1/4-cents and was down another penny Tuesday, falling to 98 cents per pound, lowest since January 7, 2019.
Dry whey also continued to weaken, closing Friday at 36 1/4-cents per pound, down 4 1/4-cents on the week, lowest price since May 23.
The whey inched a quarter-cent lower Monday but regained 1 3/4-cents Tuesday, climbing back to 37 3/4-cents per pound.
U.S. milk prices are beginning a slow rebound but have a long way back to profitability. The Agriculture Department announced the January Federal order Class III benchmark price at $13.96 per hundredweight, up 18 cents from December but 4 cents below January 2018. It equates to $1.20 per gallon, up from $1.18 in December and compares to $1.20 a year ago.
Monday’s Class III futures settlements portend a February price at $13.94; March, $14.23; and April at $14.51, with a peak at just $16.42 in September and October.
The January Class IV price is $15.48, up 39 cents from December, $2.35 above a year ago, and the highest Class IV price since September 2017.
USDA’s latest Dairy Products report shows more milk went to the cheese vat and less to the dryer in November.
November cheese output totaled 1.08 billion pounds, down 4.3 percent from October but up 1.0 percent from November 2017. Year-to-date output hit 11.8 billion pounds, up 2.5 percent from a year ago.
Italian cheese totaled 464.3 million pounds, down 2.2 percent from October but 1.6 percent above a year ago. Year to date (YTD) Italian is at 5.05 billion pounds, up 2.8 percent from a year ago. Mozzarella, at 363.2 million pounds, was up 3.3 percent from a year ago, with YTD at 4.7 billion pounds, up 2.3 percent.
American type cheese totaled 422.8 million pounds, down 3.5 percent from October but 2.2 percent above a year ago, with YTD at 4.7 billion pounds, up 2.3 percent.
Cheddar, the cheese traded at the CME, totaled 30.54 million pounds, down 3 million pounds from October but 7.9 million or 2.7 percent above a year ago, with YTD output at 3.4 billion pounds, up 0.7 percent.
U.S. churns produced 145.6 million pounds of butter, up 1.5 percent from October but 2.7 percent below a year ago. YTD is at 1.7 billion pounds, up 2.2 percent.
Dry whey totaled 74.7 million pounds, up 8.6 percent, with YTD at 933.5 million pounds, down 1.8 percent. Dry whey for human consumption totaled 73.0 million pounds, down 14.5 percent from October and 8.6 percent below a year ago. Stocks totaled 63.9 million pounds, down 11.4 percent from October and 35.1 percent below those a year ago.
Nonfat dry milk production totaled 130.5 million pounds, up 4.3 percent from October but 7.7 percent below a year ago. YTD output stands at 1.6 billion pounds, down 4.3 percent. Stocks climbed to 287.1 million pounds, up 35.1 million pounds or 13.8 percent from October but 29.9 million pounds or 9.4 percent below 2017 levels.
Skim milk powder totaled 30.4 million pounds, down 18.9 percent from October and 26.9 percent below a year ago. YTD skim is at 493.7 million pounds, up 2.9 percent from a year ago.
Milk-feed ratio slips
Lower prices on feed could not offset a drop in the U.S. All Milk price average and pulled the November milk-feed price ratio down after three monthly advances.
The latest Ag Prices report shows the November ratio at 2.18, down from 2.20 in October and down from 2.54 in November 2017.
The U.S. All-Milk price averaged $17.00 per hundredweight, down 40 cents from October and $1.20 below November 2017.
The national average corn price in November averaged $3.41 per bushel, unchanged from October but 26 cents per bushel above November 2017.
Soybeans averaged $8.37 per bushel, down 21 cents from October and 85 cents per bushel below a year ago.
Alfalfa hay averaged $178 per ton, down $3 from October but $25 per ton above a year ago.
The November cull price for beef and dairy combined averaged $52.70 per cwt., down $5.10 from October, $10.70 below November and $18.90 below the 2011 base average of $71.60 per cwt.