GDT auction reverses course

Butter’s woes continue and were a part of the downturn in Tuesday’s Global Dairy Trade auction.

The weighted average of products offered fell 2.6%, following a short-lived 2.7% “recovery” on July 16. That followed four previous declines. Sellers brought 77.1 million pounds of product to the market, up from 55.1 million in the last event and the highest since Dec. 18, 2018.

Just as all products offered in the last event were in the black, all were down this week, led by lactose, down 11.5% and buttermilk powder, down 5.6%. Neither traded in the last event.

Butter was down 5.5%, following a 1.7% gain last time and anhydrous milkfat was down 5.1%, after it also gained 1.7% last time. GDT Cheddar was down 2%, following a 3.3% rise, whole milk powder was off 1.7%, following a 3.6% rise, and skim milk powder was off 1.6%, following a 3.8% climb.

FC Stone equated the GDT 80% butterfat butter price to $1.8431 per pound U.S., down 10.7 cents from the July 16 event. CME butter closed Tuesday at $2.35. GDT Cheddar cheese equated to $1.7409 per pound, down 1.4 cents from the last event and compares to Tuesday’s CME’s block Cheddar at $1.8675. GDT skim milk powder averaged $1.1257 per pound, and compares to $1.1365 last time. Whole milk powder averaged $1.3787, down from $1.3944 last time. CME Grade A nonfat dry milk closed Tuesday at $1.0225 per pound.

Price roller coaster

Cheddar block cheese closed the first Friday of August at $1.82 per pound, down a half-cent on the week but 23 1/4-cents above a year ago. The barrels finished at $1.6925, down 2 3/4-cents and 21 3/4-cents above a year ago.

Monday saw the blocks jump 4 cents, then gain three-quarters Tuesday, hitting $1.8675. The barrels were down a quarter-cent Monday but were up 2 cents Tuesday, climbing to $1.71, an unsustainable 15 3/4-cents below the blocks.

FC Stone stated in its July 29 Early Morning Update that “dairy product demand seems to have slumped somewhat this month, but that doesn’t eliminate issues with milk production or cow culling on U.S. dairy farms.” It adds that U.S. milk production was flat versus last year through June but “dairy producers have done a great job of increasing component production, particularly fat, for several years now. Component production bumps U.S. milk production to 0.8% growth for the first six months of this year. Still that’s down from last year.”

Dairy Market News says most Midwest cheesemakers report that demand is meeting expectations but some say the early summer upticks have steadied somewhat. Cheese production has slowed as spot milk availability is dwindling. Cheese stocks are balanced regionally.

Western cheese output remains active with plenty of milk on hand. Cheese inventories are generally comfortable as steady end user and consumer demand has been able to offset production.

Spot butter, hurt from the higher than expected Cold Storage data, fell to $2.3275 per pound last Tuesday, regained some, then fell to close at $2.32, down a nickel on the week, 11 1/2-cents below the July 16 high, and dead even with a year ago.

Monday’s butter regained 2 3/4-cents, then inched up a quarter-cent Tuesday, to $2.35.

Regional butter makers are either not taking on cream from the spot market or are finding it in the West and paying freight costs. Churning therefore is slow or slowing. Butter sales are slower and more bulk butter has become available in recent weeks. Butter producers suggest buyers are waiting on potential price drops. Contacts suggest July’s cold storage data will be the yardstick for butter markets the rest of 2019.

The western butter market varies. Some processors report solid sales, others say demand has taken a step back. Butter output remains active, but decreased somewhat as more cream continues to move to ice cream plants. Butter stocks are plentiful.

Grade A nonfat dry milk closed Friday at $1.02 per pound, down a penny on the week but 19 1/4-cents above a year ago.

The powder inched a quarter-cent lower Monday but gained a half-cent Tuesday, crawling back to $1.0225 per pound.

Spot dry whey lost 1 1/4-cents last Monday, falling to 34 cents per pound, and stayed there the rest of the week, 9 1/2-cents below a year ago.

The whey was unchanged Monday and Tuesday.

Benchmark above 2018

The USDA announced the July benchmark Class III milk price at $17.55 per hundredweight, up $1.28 from June, $3.45 above July 2018, and the highest Class III since December 2014. It equates to $1.51 per gallon, up from $1.40 in June and $1.21 a year ago.

Monday’s Class III futures portended an August price at $17.44; September, $17.81; October, $17.78; November, $17.50; and December at $17.08. Looking ahead, the bottom for 2020 was $16.58 in February.

The seven-month Class III average stands at $15.58, up from $14.37 at this time a year ago and $16.02 in 2017.

The July Class IV price is $16.90, up 7 cents from June, $2.76 above a year ago, and the highest Class IV since November 2014. Its seven-month average is at $16.11, up from $13.73 a year ago and $15.30 in 2017.

Feed ratio slips

Higher feed prices and just a small gain in the All Milk Price resulted in another slip in the June milk feed price ratio. The USDA’s latest Ag Prices report puts it at 2.08, down from 2.10 in May but it is up from 1.98 in June 2018.

The U.S. All-Milk price averaged $18.10 per hundredweight (cwt), up a dime from May and $1.80 above June 2018. California’s All Milk price was 20 cents higher than Wisconsin’s.

The national average corn price averaged $3.98 per bushel, up a whopping 35 cents from May and follows an 11 cent jump in May. Corn was up 40 cents per bushel from June 2018.

Soybeans averaged $8.31 per bushel, up 29 cents from May, after dropping 26 cents in May, but is 1.24 per bushel below a year ago. Alfalfa hay averaged $193 per ton, down $11 from May but $12 per ton above a year ago.

The June cull price for beef and dairy combined averaged $65.90 per cwt., up 30 cents from May, 40 cents below June 2018 and $5.70 below the 2011 base average of $71.60 per cwt.

Milk cow replacements averaged $1,240 per head for the quarter in July, up $100 per head from April, but $80 below July 2018. Prices averaged $1,300 per head in California, up $200 from April and unchanged from a year ago. Wisconsin averaged $1,210 per head, up $80 from April but $40 below July 2018.

Butter still lags

The Aug. 1 Dairy Products report shows June total cheese output slipped to 1.07 billion pounds, down 3.3% from May but 0.6% above June 2018. Year-to-date output is at 6.48 billion pounds, up 0.8% from a year ago.

Italian cheese totaled 468.95 million pounds, down 1.3% from May but 4.0% above a year ago. YTD Italian stands at 2.8 billion pounds, up 2.9%.

Mozzarella output also jumped, hitting 375.8 million pounds, up 5.8% from a year ago, with YTD at 2.2 billion pounds, up 4.9%.

American type cheese totaled 426.5 million pounds, down 3.9% from May and 0.6% below a year ago, with YTD at 2.6 billion pounds, down 1.6%.

Cheddar output, the cheese traded at the CME, fell to just under 307 million pounds, down 14.7 million pounds or 4.6% from May and 5.9 million pounds or 1.9% below a year ago. YTD Cheddar is at 1.85 billion pounds, down 2.7%.

Butter output fell to 146.5 million pounds, down 14.4 million pounds or 8.9% from May but 4.4 million pounds or 3.1% above a year ago, ending fourth consecutive months that output was below a year ago. YTD butter is at 999.8 million pounds, down 1.9% from 2018.

Dry whey totaled 81.1 million pounds, up 2.0% from May but 6.3% below a year ago, with YTD at 468.1 million pounds, down 11.6%. Stocks totaled 68.1 million pounds, up 3.8% from May but 0.9% below those a year ago.

Nonfat dry milk production totaled 155.6 million pounds, down 8.8% from May but 2.2% above a year ago. YTD powder is at 981.8 million pounds, down 0.4% from 2018 Stocks moved higher to 288.7 million pounds, up 4.6 million pounds or 1.6% from May but were 14.6 million pounds or 4.8% below the 2018 level.

Skim milk powder soared to 44.4 million pounds, up 19.2 million or 76.2% from May but was 15 million or 25.3% below a year ago. YTD skim hit 236.7 million pounds, down 16.5% from a year ago.