Dairy prices see ups and downs
Cash dairy prices saw some ups and downs last week as traders absorbed Tuesday’s Global Dairy Trade auction.
The Cheddar blocks climbed to $1.6025 per pound Monday, highest price since Nov. 28, 2017, but closed Friday at $1.57, up a penny on the week and 18 1/2-cents above a year ago when it bottomed out for the year at $1.3850.
The barrels climbed to $1.5150 Tuesday, highest since December 18, 2017, but finished at $1.4975, up 2 1/4-cents on the week and 9 3/4s above a year ago. Eight cars of block sold on the week at the CME and 25 cars of barrel.
The blocks were down 2 cents Monday and lost a penny Tuesday, slipping to $1.54. The barrels inched up a quarter-cent Monday and stayed there Tuesday at $1.50.
Dairy Market News reports that spot milk into Midwestern cheese plants is ranging $2 to $3 under class, with some as low as $5 under.
“Milk shipments were delayed early in the week, while mozzarella and provolone producers, currently reporting steady demand, are concerned about multiple winter storms affecting orders made by Eastern region customers. Hard Italian orders are trending up, while barrel producers report demand as middling.
Western cheese production is active as more milk is going to the vats, says DMN, and “the cheese market undertone seems unsettled.”
“Although some reports suggest solid domestic demand and lively export opportunities, supplies are still more substantial compared to sales,” DMN says. “Intense competition with the European Union in the international market is also not helping the U.S. Sellers are looking for possible ways to clear cheese out of storage. With most processing plants currently working at full capacity, manufacturers are worried about how they will manage milk supplies and cheese inventories during the spring flush.”
Cash butter climbed to $2.2325 on Tuesday, highest level since Jan. 5, 2018, but then reversed gears and saw a Friday close at $2.2050, up a half-cent on the week and 4 1/4-cents above a year ago. Twenty-three loads were sold on the week, down from 80 the previous week, representing over 3 million pounds.
The butter was unchanged Monday but gained a penny Tuesday, hitting $2.2150.
“Butter markets are making their mark on the entire dairy industry, as widespread analyses and reports promulgate the vitality of butter, particularly in relation to other dawdling dairy commodities,” says DMN. Contacts point to the CME new crop butter requirement as a “spur in the current uptrend in trades and prices.” Some Central analysts suggest that butter markets will cool shortly but a number expect butter to “maintain fairly steady price points between $2.00 and $2.25, pointing to bullish futures and increasing demand.”
Western butter makers report cream is ample and butter output is active. “Print butter demand is strong, as would be expected ahead of the spring holidays,” DMN says, but some processors suggest bulk butter demand is “somewhat lackluster for this time of year.”
“Some buyers are cautious, feeling that there will be enough butter available when the need arises, and possibly at more favorable prices,” says DMN. “End users are working hard to manage stocks closely, trying to get the butter needed for the short term into the warehouse, but being careful about longer term butter needs but contacts suggest there are good volumes on hand.
Spot Grade A nonfat dry milk fell to the record low 64 3/4-cents per pound set in December 2017 on Tuesday but rallied and closed Friday at 68 1/2-cents, 2 1/4-cents higher on the week but 12 1/2-cents below a year ago, on 10 sales.
The powder gained three-quarters Monday and a quarter-cent Tuesday, inching up to 69 1/2-cents per pound.
Dairy market price transparency took a leap forward this week as market participants were enabled to buy and sell physical loads of dry whey during a spot call just before the cheese. There were no sales but the dry whey gained a penny and a half Monday and added a quarter-cent Tuesday, hitting 26 1/4-cents per pound.
The Agriculture Department raised its 2018 milk production forecast in the latest World Agricultural Supply and Demand Estimates report (WASDE), based on more rapid growth in milk per cow in the first half of the year.
2018 production and marketings were projected at 219.0 billion and 218.0 billion pounds respectively, up 300 million pounds from last month. If realized, 2018 production would be up 3.5 billion pounds or 1.6 percent from 2017.
The 2018 imports on a fat and skim-solids basis were reduced on slower sales of a number of processed dairy products. Exports on fat basis were raised on increased cheese sales and exports on a skim-solids basis were raised on stronger sales of both cheese and whey products.
Annual product price forecasts for cheese and butter were raised from the previous month as recent prices have increased. However, continued large supplies of nonfat dry milk (NDM) are expected to pressure NDM prices, and the forecast was reduced. No change was made to the annual whey price forecast.
The Class III price was raised on the cheese price projection, while the Class IV price is down, as the lower NDM price more than offsets a higher butter price forecast.
The 2018 Class III milk price forecast is projected to range $14.30-$14.90 per cwt., up a dime on the low end from last month’s estimate. The Class III averaged $16.17 in 2017 and $14.87 in 2016.
The 2018 Class IV price is expected to range $13.25-$13.95 per cwt., down a dime on the low end and 20 cents lower on the high end, and compares to $15.16 in 2017 and $13.77 in 2016.