Dairy prices look for direction
CME dairy prices started June Dairy Month looking for direction.
Block Cheddar slowly climbed to $1.7525 per pound by Friday, up 3 3/4-cents on the week and 11 3/4-cents above a year ago.
The barrels fell to $1.4850 last Tuesday, lowest price since March 13, and 25 1/2-cents below their May 7 $1.74 peak. They finished Friday at $1.5350, a half-cent lower on the week and 3 cents below a year ago. Ten cars of block were traded last week and 63 of barrel, highest weekly barrel total this year.
Monday saw the blocks jump 3 1/4-cents and then tack on a penny Tuesday, hitting $1.7950, the highest CME price since Feb. 2, 2017. The barrels were unchanged Monday but gained 1 3/4-cents Tuesday, inching to $1.5525, a unsustainable 24 1/4-cents below the blocks.
Dairy Market News reports that cheese orders are picking up “noticeably.” Milk suppliers say some cheesemakers are looking to take more milk for the near term. Milk supplies were comparatively snug and reported prices ranged from Class III to $1.50 under. The wide price spread between the blocks and barrels “puts plant managers in a predicament of booking milk in the near term,” according to DMN.
Western cheese makers have mixed views on demand. Specialty and value-added cheeses have strong buyer interest and overall domestic retail demand is steady.
However, shifts in consumer preferences from processed to natural cheeses continues to pressure barrel prices versus blocks. The spread is also creating challenges for Western barrel makers to purchase affordable milk.
“International cheese demand seemingly ebbs and flows with the perception of whether trade talks are going well or not,” says DMN.
FC Stone’s Dave Kurzawski said the “tighter than expected milk supplies” are “the main underling factor for the market” in the June 10 Dairy Radio Now broadcast.
Regarding the price spread, Kurzawski says, “We’ve come to expect a wider spread this time of year as excess loads of milk, normally discounted milk, gets made into barrel cheese. To be sure, that same story has played out this year as well. But the story differs in that the U.S., and to some degree the world, is just not awash in milk as we’ve seen the past few years.
We’ve seen a burst of barrel production over the past month or so courtesy of some otherwise concerning demand issues, weaker demand on Mozzarella in particular, not burdensome excesses of fresh milk.”
Butter closed last week at $2.3975 per pound, up 3 3/4-cents, three-quarter cents above a year ago, and a penny shy of the year’s high on May 27.
The butter lost a penny Monday but regained 1 3/4-cents Tuesday, climbing back to $2.4050.
Central region butter makers are still taking on cream while it remains financially viable.
Expectations lean to a tighter fall season than in previous years. The Dairy Products report’s production decreases “symbolize near-future trends,” according to some. Others warn that an increasing amount of imported milkfat will keep butter markets in check. Butter market tones are steady but some traders expect 2019 will present “a new, higher ceiling,” says DMN.
Western butter output is active. Cream inventories are tightening but still available.
Grade A nonfat dry milk closed Friday at $1.0550 per pound, unchanged on the week but 25 cents above a year ago.
The powder was unchanged Monday and Tuesday.
Spot dry whey saw a Friday finish at 36 1/2-cents per pound, up 1 1/4-cents on the week but 4 3/4-cents below a year ago.
The whey backed down three-quarters Monday and stayed there Tuesday at 35 3/4-cents per pound.
The Agriculture Department’s monthly benchmark milk price saw its third consecutive rise and reached the highest level in a year and a half. The May Federal order Class III price was announced at $16.38 per hundredweight, up 42 cents from April, $1.20 above May 2018, and the highest since November 2017.
Monday’s Class III futures settlements portend a June price at $16.30; July, $16.71; and August at $17.02, with a peak of $17.31 in September.
The May price equates to $1.41 per gallon, up from $1.37 in April and $1.31 a year ago. The Class III average stands at $15.05, up from $14.25 a year ago but compares to $16.05 in 2017. By the way, California’s 4b cheese milk price was $14.90 in May 2018.
The May Class IV price is $16.29, up 57 cents from April, $1.72 above a year ago, and the highest it has been since August 2017. Its five-month average stands at $15.81, up from $13.42 a year ago and compares to $14.92 in 2017.
The Agriculture Department again lowered its 2019 milk production estimate in the latest World Agricultural Supply and Demand Estimates (WASDE) report, blaming slower-than-anticipated growth in milk per cow and lower expected cow numbers.
The 2020 milk production forecast was reduced as higher expected feed costs are expected to weaken producer margins, limiting growth in the dairy cow herd and milk per cow next year.
2019 production and marketings are now estimated at 218.2 billion and 217.2 billion pounds, respectively, down 500 million pounds from last month’s estimate. If realized, 2019 production would be up just 600 million pounds or 0.3% from 2018.
2020 production and marketings are estimated at 221.9 and 220.9 billion pounds, respectively, down 800 million pounds on production from last month’s estimate and 700 million pounds lower on marketings. If realized, 2020 production would be up 3.7 billion pounds or 1.7% from 2019.
The 2019 Class III milk price forecast was reduced on lower expected cheese and whey prices. It’s expected to average around $15.90 per hundredweight, down 15 cents from last month’s projection but would be $1.29 above the 2018 average and compares to $16.17 in 2017. The 2020 average is put at $16.65, up a dime from last month’s estimate and would be 75 cents above what is expected for 2019.
The Class IV price forecast was raised on higher forecast butter and NDM prices. The 2019 average is expected at around $16.40, up 20 cents from last month’s projection and would be $2.17 above the 2018 average and compares with $15.16 in 2017. The 2020 Class IV average is now put at $16.85, up a nickel from a month ago and would be 45 cents above what’s expected for 2019.
Butter, powder lower
Preliminary data showed April’s 50-State milk output at 18.43 billion pounds, up just 0.1% from April 2018. That lowered the month’s butter and milk powder production, according to the April Dairy Products report.
Starting with cheese, total April output came in at 1.08 billion pounds, down 3.6% from March but 0.2% above April. Year-to-date cheese output is now at 4.29 billion pounds, up 0.3% from a year ago.
Italian cheese totaled 474.3 million pounds, down 4.2% from March but 2.9% above a year ago. YTD Italian stands at 1.9 billion pounds, up 2.4%. Mozzarella output jumped in April, totaling 372.7 million pounds, up 4.0% from a year ago, with YTD now at 1.5 billion pounds, up 4.7%.
American type cheese totaled 431.9 million pounds, down 1.9% from March and 2.8% below a year ago, with YTD at 1.7 billion pounds, down 2.3%.
Cheddar output was also down, the cheese traded at the CME. It totaled 308.5 million pounds, down 4 million pounds from March and 10.7 million or 3.3% below a year ago. YTD Cheddar hit 1.2 billion pounds, down 3.7% from 2018.
U.S. butter churns produced 166.7 million pounds, down 6.9 million pounds or 3.9% from March and 8.5 million pounds or 4.8% below a year ago. YTD butter output is at 694.5 million pounds, down 1.8% from 2018.
Dry whey totaled 74.0 million pounds, down 3.1% from March and 13.7% below a year ago, with YTD at 306.5 million pounds, down 14.2%. Stocks totaled 74.8 million pounds, up 8.9% from March but 10.5% below those a year ago.
Nonfat dry milk production totaled 165.0 million pounds, up 0.7% from March but 2.6% below a year ago. YTD powder is at 655.5 million pounds, down 1.3%. Stocks fell to 277.6 million pounds, down 12.4 million pounds or 4.3% from March but 4.3 million pounds or 1.6% above the 2018 level.
Skim milk powder totaled 45.0 million pounds, down 3.6% from March and 9.0% below a year ago. YTD skim hit 167.1 million, down 3.7% from a year ago.