Dairy Market: Prices looking for direction
Dairy prices were mixed in the shortened President’s Day holiday week. Cheddar block cheese closed Friday at $1.5950 per pound, up 1 1/2-cents on the week and 10 cents above a year ago.
The barrels saw a Friday close at $1.4050, 3 cents lower on the week and 5 1/2-cents below a year ago. 3 cars of block traded hands last week at the CME and 23 of barrel.
Monday’s block price inched a quarter-cent higher, then added a penny and a quarter Tuesday, hitting $1.61, highest CME price since Oct. 16.
The barrels were up a half-cent Monday and stayed there Tuesday at $1.41, an unsustainable 20 cents below the blocks.
Dairy Market News says pizza cheesemakers report sales were a little ahead of expectations while curd and barrel cheese producers are hopeful for some summer demand increases before production increases will be scheduled.
Milk remains plentiful and nearly all Class III spot loads were reported at flat to $2 under Class. Rural area cheesemakers remain concerned about smaller farms staying in business, stating that closures are not a matter of if, but when, for a growing number of sub-100 cow herds.
Western cheesemakers report strong domestic demand and in select international markets. Others say cheese interest is adequate but not great. There is plenty of milk to be made into cheese and vats are running at or near full capacity. Stocks are heavy so manufacturers do not want to build inventory, according to DMN.
Cash butter closed Friday at $2.26 per pound, up a penny on the week and 8 3/4- cents above a year ago, with 26 cars sold last week.
Monday’s spot price was up three-quarters but it gave back a quarter-cent Tuesday, slipping to $2.2650.
Butter analysts continue to point out the range-bound nature of the market since, and throughout much of, 2018. Demand is steady, while production continues actively to pack away inventories. Cream supplies are plentiful, reports DMN.
Western butter output is solid despite the cold weather. Milkfats and other milk components have decreased in the affected zones but cream is still readily available. Bulk butter stocks continue to build but are not overwhelming.
Grade A nonfat dry milk closed Friday at 99 3/4-cents per pound, up a penny on the week and 32 1/2-cents above a year ago with only 4 cars sold on the week.
The powder dropped a penny Monday and a quarter-cent Tuesday, sliding to 98 1/2-cents per pound.
Dry whey closed Friday a half-cent lower on the week at 34 3/4-cents per pound, on 38 cars sold.
The whey was down a half-cent Monday, then gained it back Tuesday, returning to Friday’s close.
December milk up
Increased output in milk per cow kept December production above December 2017, the 61st consecutive month that output topped the year before, according to the USDA’s latest report, delayed a month by the government shutdown.
Preliminary USDA data in the top 23 producing states shows output at 17.1 billion pounds, up 0.9 percent from 2017, with the 50-state total, at 18.16 billion pounds, up 0.5 percent. Revisions lowered the initial 50-state November estimate by 33 million pounds to 17.34 billion, up just 0.4 percent from 2017.
Preliminary data also shows 2018 milk output totaled 217.5 billion pounds, up 2 billion pounds or 0.9 percent from 2017, on 7,000 fewer cows. Average per cow output increased by 232 pounds or 1.0 percent from 2017, to 23,173 pounds.
December cow numbers in the 50 states totaled 9.35 million head, down 3,000 from November and 49,000 less than a year ago, sixth time that cow numbers were below a year ago since May 2016.
Output per cow averaged 1,942 pounds, up 21 pounds from the year before and the 38th consecutive month of gain.
California was up 56 million pounds or 1.7 percent from a year ago, thanks to a 45-pound gain per cow outweighing 11,000 fewer cows. Wisconsin was up 1.4 percent on a 35-pound gain per cow but cow numbers were down 5,000 head.
Idaho was up 4.9 percent, thanks to 14,000 more cows and a 50-pound gain per cow. New York was up 2.1 percent, on a 40-pound gain per cow and unchanged cow numbers. Pennsylvania was down for the 10th consecutive month, dropping 6.0 percent on 20,000 fewer cows and 40 pounds less per cow.
Minnesota was up 1.0 percent, on a 40-pound gain per cow offsetting 6,000 fewer cows.
Michigan was down for the 6th month in a row, off 0.2 percent, on 6,000 fewer cows though output per cow was up 25 pounds. New Mexico was down 2.8 percent, on a 15-pound drop per cow and 7,000 fewer cows milked.
Texas added 49 million pounds more in the tank than a year ago, a 4.8 percent increase, thanks to 27,000 more cows, though output per cow was down 10 pounds.
Vermont was down 0.9 percent, on 2,000 fewer cows but output per cow was up 10 pounds. Florida was down 7.2 percent on 8,000 fewer cows. Output per cow was down 10 pounds.
Washington state was up 4.9 percent on a 50-pound gain per cow and 6,000 additional cows milked.
The report is viewed as neutral to the market but harsh weather in key dairy regions will surely affect January and February output and perhaps send it below year ago levels.
Dec. 31 butter stocks totaled a surprising 179.3 million pounds, up a whopping 16.6 percent from November and 6.2 percent above December 2017, according to the delayed USDA Cold Storage report issued Feb. 22.
FC Stone dairy broker Dave Kurzawski says that’s a shocking 42 million pounds heavier than their pre-report expectations and over 1,000 truckloads but adds the caveat that “these numbers are more than 60 days old. If the number was incredibly burdensome we think the markets would have felt it already. This leads us to think revisions following a government shutdown are likely.” We will get the January report on March 7.
The U.S. had less cheese on hand than expected. American cheese stocks were up 7 percent from a year ago and Kurzawski says, “What’s a little odd is that the usual build from November to December was nonexistent.”
He points out that in 7 of the past 12 year’s stocks, we’ve had some by less than 5 million pounds, but not generally in what we would call aggressively weak market prices like we saw in December.”
“Ultimately, we want to see the December Dairy Products numbers to figure out whether it was better demand or slower production that knocked the numbers lower than we expected,” explained Kurzawski. “For now, the market seems well-supported around current levels.”
Milk-feed ratio down
A drop in the U.S. All Milk price average and higher feed prices across the board pulled the December milk-feed price ratio down again, adding pressure to already hurting bottom lines on America’s dairy farms.
The Agriculture Department’s latest Ag Prices report shows the December ratio at 2.04, down from 2.18 in November and down from 2.38 in December 2017.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 2.04 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $16.40 per hundredweight (cwt.), down 60 cents from November and 80 cents below November 2017.
New Mexico again showed the low at $14.70, followed by Kansas at $15.30. California, at $16.05, was down 39 cents from November; and Wisconsin was at $16.00, down 90 cents from November.
The national average corn price averaged $3.54 per bushel, up 13 cents from November and 31 cents per bushel above December 2017. Soybeans averaged $8.57 per bushel, up 20 cents from November but 73 cents per bushel below a year ago.
Alfalfa hay averaged $180 per ton, up $5 from November and $31 per ton above a year ago.
Looking at the cow side of the ledger; the December cull price for beef and dairy combined averaged $51.80 per cwt., down 90 cents from November, $10.20 below December 2017 and $19.80 below the 2011 base average of $71.60 per cwt.