Dairy prices weaken

Cheese traders took the Cheddar blocks to $1.91 per pound last Tuesday, highest level since November 2016, but they closed Friday at $1.88, unchanged on the week but 21 cents above a year ago.

The barrels plunged to $1.6650 Thursday and stayed there Friday, a dime lower on the week and the lowest CME price since June 18, but still 6 1/2-cents above a year ago and a headache-producing 21 1/2-cents below the blocks. Eleven cars of block traded hands on the week and 32 of barrel.

Monday’s trading left the cheese at Friday’s close. The blocks inched down a quarter-cent Tuesday, to $1.8775. The barrels were up 1 1/2-cents, advancing to $1.68, reducing the spread to 19 3/4-cents.

This week is sparse on USDA reports so weather and politics will be the main drivers of the markets. Market tones last week were termed “somewhat unstable,” according to Dairy Market News, though Midwestern cheese producers reported another positive week for sales.

Curd producers suggest fair season has added a boost. Others had similar reports, with some planning ahead for holiday gift boxes and promotions. Still others report they are near the point of falling behind on orders. Cheese production remains steady week over week in the region.

Cheese export sales were good and unchanged from the prior week, according to Western contacts, but there is an increase in global competition. Domestic cheese consumption is contributing to the balancing of supplies.

FC Stone says, “The loss of export business is more than likely causing a shift from Mozzarella production to Cheddar production.” Cheddar is what is traded at the CME.

Butter saw a Friday close at $2.2275 per pound, 11 1/4-cents lower on the week and 3 1/4-cents below a year ago; 35 cars traded hands last week.

The butter lost 3 cents Monday, falling to $2.1975, lowest CME price since Dec. 24, 2018, but regained 1 1/4-cents Tuesday, climbing back to $2.21, with 19 loads finding new homes.

Central butter makers report that sales are “bettering expectations during this time of year.” Food service demand may have affected this uptick with schools purchasing for the upcoming semester.

Most schools are back in session in the West so butter sales are expected to increase in the coming weeks. Retail sales were better than the previous week but the milkfat content is lower and reducing cream availability. Cream inventories are enough for butter manufacturing and butter output is steady to a bit lower in the West, according to DMN. 

Grade A nonfat dry milk closed Friday at $1.0375 per pound, up three-quarters on the week and 16 3/4-cents above a year ago, on 29 cars exchanging hands on the week.

Monday’s powder inched up a quarter-cent, then gained 1 1/2-cents Tuesday, hitting $1.0475, highest since July 1. 10 loads exchanged hands on Monday and 16 on Tuesday.

FC Stone’s Aug. 19 Early Morning Update says, “U.S. nonfat dry milk has been weaker than expected: lower exports to Mexico is at least partly responsible. The U.S. is still the most expensive powder. Indonesia will place tariffs on EU dairy products potentially giving U.S. products an advantage there.”

Dry whey closed last week at 39 1/2-cents per pound, 3 cents higher but 8 1/2-cents below a year ago, with only 1 sale reported for the week at the CME.

The whey was unchanged Monday and Tuesday.

Butter aplenty

There was bearish news for butter prices last week as U.S. stocks grew atypically in July and topped those of a year ago, according to the USDA’s latest Cold Storage report. The data showed 329.8 million pounds in storage, up 3.5 million pounds or 1.1% from June and 11.4 million pounds or 3.6% above July 2018.

FC stone points out that only once in the past 10 years have butter stocks increased in July and that despite the fact that production is down 1.9% for the first 6 months of the year while commercial disappearance is up 1.2%.

American cheese stocks totaled 775.9 million pounds, down 10 million pounds or 1.3% from June, and 47.5 million or 5.8% below a year ago.

Stocks in the “other” category slipped to 560.9 million pounds, down 8.1 million pounds or 1.4% from June but were up 3.5 million or 0.6% from a year ago.

The total cheese inventory fell to 1.36 billion pounds, down 18.3 million pounds or 1.3% from June and 49 million pounds or 3.5% below that of July 2018.

FC Stone says, “We have less cheese in storage than normal and we don’t think it’s because buyers are necessarily ahead of the game this year. We’ve seen less protein in the milk components, and we started out the year making less cheese courtesy of the Class III/IV inversion while demand, specifically domestic demand, is good this year. Those dynamics are all coming out in the wash now.”

HighGround Dairy points out that this is the first time on record from the USDA that both May and June experienced a draw down in cheese stocks and that total cheese stocks showed the sharpest June to July decline on record.

Culling jumps

Dairy farmers culled more cows in July than they did in June and topped July 2018 numbers. The Agriculture Department’s latest Livestock Slaughter report shows an estimated 256,800 head were slaughtered under federal inspection, up 25,600 from June and 17,000 or 7.1% above a year ago. The seven-month cull count was at 1.89 million head, up 85,800 head or 4.7% from a year ago.

Class I down

The Agriculture Department announced the September Federal order Class I base milk price at $17.85 per hundredweight, down 4 cents from August but $3.00 above September 2018 and the highest September Class I price since 2014.

It equates to $1.53 per gallon, up from $1.28 a year ago. The nine-month Class I average stands at $16.51, up from $14.58 a year ago and $16.41 in 2017.

From: Capital Press

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