GDT auction jumps 4.2 percent
The second Global Dairy Trade auction of 2019 got another boost in its weighted average of products offered, jumping 4.2 percent Tuesday, following the Jan. 2 gain of 2.8 percent.
It was the fourth consecutive session of gain.
All products, except rennet casein, were in the black, led by skim milk powder, up 10.3 percent, after it climbed 7.9 percent in the last event and 3.4 percent in the event before that. Lactose followed, up 7.9 percent. Butter was up 4.6 percent, after a 3.9 percent climb last time.
Cheddar was up 4.2 percent, following a 3.2 percent increase, and anhydrous milkfat was up 3.2 percent following a 3.9 percent gain.
Whole milk powder rounded up the gains with a 3.0 percent increase after it was up 1.2 percent in the last event. Rennet casein was down 1.4 percent.
FC Stone equates the GDT 80 percent butterfat butter price to $1.8860 per pound U.S., up 8.2 cents from the last session. CME butter closed Tuesday at $2.2575.
GDT Cheddar cheese equated to $1.5893 per pound, up 6 cents from the last event and compares to Tuesday’s CME block Cheddar at $1.4175. GDT skim milk powder averaged $1.0907 per pound, up from 99.82 cents last time and the first time it topped $1 per pound since June 20, 2017.
Whole milk powder averaged $1.2597, up from $1.2269. CME Grade A nonfat dry milk closed Tuesday at $1.0450 per pound.
Last week saw the CME block Cheddar fall to $1.37 per pound Wednesday, then rebound and close Friday at $1.41, down three-quarter cents on the week and 4 1/2-cents below a year ago. The barrels finished at $1.2450, down 5 3/4-cents but 2 3/4-cents above a year ago when they tumbled 17 1/4-cents. CME trading put 6 cars of block into new hands last week and 28 cars of barrel.
The blocks gained a penny and a quarter Monday, then gave back a half-cent Tuesday, parking at $1.4175 per pound. The barrels lost a penny and a half Monday and dropped 2 cents Tuesday, falling to $1.21, an unsustainable 20 3/4-cents below the blocks.
Dairy Market News reports that cheese production continues aplenty though the milk price narrative has changed. Last week’s spot milk prices ranged from $2 under to $1 over, whereas New Year’s Week prices were wholly discounted.
“Sales reports from most producers point to a bullish push,” says DMN, but “some expect schools and restaurants are simply refilling their stocks, and the uptick may be short-lived once establishments and schools are replenished.”
Cheese markets remain somewhat quiet and while some regional producers relay their inventories are balanced, nationally stores are heavy.
Western inventories remain abundant for the most part and “cheese sales are quiet to very active. More Mozzarella is clearing through retail channels for pizza manufacturing. Cheese exports to Asia are up while orders from Mexico are stable; however, supplies exceed current orders.”
Higher components in farm milk and plenty of milk in the West mean cheese productivity is growing, warns DMN, adding to current stocks and cheese outputs are likely to further increase in the near future, “so market players hope to see livelier spot trading activities in the forthcoming football season.”
Spot butter ended the week at $2.2575 per pound, up three-quarter cents, 9 3/4-cents above a year ago, and the highest since Nov. 21, 2018, with 11 cars sold last week.
The butter was unchanged Monday and Tuesday.
Post-holiday cream availability has Central churns fully engaged, says DMN, as producers work to build springtime inventories. Some producers suggest the amount of cream clearing into plants last week was higher than it has been in three years. Butter sales are somewhat steady.
Western butter inventories are in “build stage.” Butter makers are shifting into more bulk production but also have significant orders from retailers refilling store shelves. Demand appears to be seasonally strong. Milk components remain strong and there is plenty of cream for churning.
Lots of eyes are on the powder markets, which strengthened in the last four GDT auctions. CME Grade A nonfat dry milk closed Friday at $1.03 per pound, up 5 1/2-cents on the week, 36 1/4-cents above a year ago, and the first time it topped $1 per pound at the CME since January 2017.
Monday saw the powder gain 1 1/4-cents and inch a quarter-cent higher Tuesday, to $1.0450, highest CME price since Jan. 6, 2017.
FC Stone dairy broker, Dave Kurzawski, wrote in his Jan. 9 Early Morning Update that “if co-ops in the country have better returns from NFDM/butter production that will take some milk away from producing surplus cheese. Overall the past few years Class IV has continued to maintain discounts to Class III due to the weak NFDM market, but that may be changing after a multi-year bear market cycle.”
He adds that Mexico is back in the market and the past 12 months saw Mexico’s NFDM/SMP imports rise 9.1 percent at 344,820 metric tonnes. But Mexico re-exported close to 54,000 tons to Venezuela in the form of humanitarian aid, “so, most of the increase in SMP exports to Mexico in the past 2 years has been because of their aid to Venezuela, which is in economic and political turmoil.”
Dry whey saw little change, closing Friday at 49 1/2-cents per pound, up a half-cent on the week and the highest since Oct. 22, 2018, with three sales reported.
The whey was up a penny Monday and added a half-cent Tuesday, inching to 51 cents per pound, highest since Oct. 22, 2018.
Week two of 2019 became week three of the partial government shutdown and hope for an end was nowhere in sight.
The Agriculture Department’s monthly World Agricultural Supply and Demand Estimates report (WASDE), scheduled for Jan. 11 was the latest casualty. The report would have included the USDA’s latest estimates on U.S. milk production and milk prices as well as crop estimates. The last time this happened was October 2013 and the report was eventually canceled.
Not having projections from this month’s WASDE, Monday’s Class III futures settlements projected a 2019 Class III average at $15.84 per cwt., up from $14.61 in 2018 but compares to $16.17 in 2017.
Monthly U.S. trade data from the Bureau of Census, which was due to be released Jan. 8, was also not published and the Northeast Dairy Farmers Cooperative’s newsletter editor, Bob Gray, says, “There will be a delay in writing the new rules for the Dairy Margin Coverage Program. USDA loans and grants will not be processed as well.”
Other missed reports so far include the November Dairy Products report, weekly dairy slaughter data, and grain stocks data. Next will be the December Milk Production and Cold Storage reports scheduled for next week.