Markets looking at the thermometer
Cash dairy prices climbed last week as did temperatures, particularly in the West, and wildfires are burning in California and elsewhere.
CME block Cheddar closed Friday at $1.52 per pound, unchanged on the week but 23 1/2-cents below a year ago. The Cheddar barrels, after closing the previous week at $1.27, also finished Friday at $1.52, but that after an impressive 25 cent gain on the week, though still 3 1/2-cents below a year ago. Twelve cars of block exchanged hands on the week at the CME and 62 of barrel.
The blocks were unchanged Monday but the barrels rolled off a cliff, plunging 11 1/2-cents, as uncertainty remains in the minds of traders. Tuesday’s block price was down 2 cents, to $1.50, while the barrels inched up a quarter-cent to $1.4075, 9 1/4-cents below the blocks. Traders awaited Thursday afternoon’s June Dairy Products report.
FC Stone reports that “Replacements seem to be plentiful out there to keep our cow numbers up at the moment. The semi-annual cattle report showed milk replacement heifers at 4.2 million head, slightly above estimates but in line with year-ago levels.”
Some Midwestern cheese producers suggest that “slowing sales are an indication of rattled markets,” according to Dairy Market News, and buyers are taking the bare minimum, waiting out fluctuating markets. Milk supplies for Class III vary widely. Some cheese producers report ample supplies locally, while others are seeing thinning supplies and a number say they are not interested in spot milk regardless of the offer. Milk component levels are falling as well due to the heat, especially in California.
Western cheese manufacturers report that sales are back up, while others are not receiving as many requests as they were a few weeks ago. According to them, both domestic and international sales have slowed somewhat. The alteration of some of U.S. trade agreements remains a concern for many players, especially now that other countries are forging solid trade agreements with some of the U.S. main competitors.
Cheese production is active despite a drop in milk volumes. Inventories are plentiful and outpace demand but, as pizza season approaches and educational institutions begin to reopen, processors hope domestic sales will “reboot.”
Cash butter closed Friday at $2.2625 per pound, up 1 1/4-cents on the week but 45 3/4-cents below a year ago, with 22 cars trading spaces on the week.
Monday’s butter inched a quarter-cent higher, then added 4 1/2-cents Tuesday, jumping to $2.31 per pound, highest CME price in six weeks.
Some churns quiet
Contacts suggest that some Midwestern and southern Central churns are down for maintenance and updating. Cream loads from the West are more difficult to locate as temperatures increase and trucking options decrease. Butter supplies are readily available. Retail buying is reportedly steady, while food service and restaurant purchases are up from early in the year. The market tone is uncertain.
Western butter makers hope the combination of tighter cream supplies and strong demand from ice cream and other spoonable dairy manufacturers will help prevent butter inventories from growing into “an uncontrollable behemoth.” While the recent Cold Storage report shows that national butter stocks decreased in June, some contacts suggest inventories in the West are heavy and still growing.
Cash Grade A nonfat dry milk saw a Friday finish at 81 3/4-cents per pound, up 3 1/4-cents on the week but 4 1/4-cents below a year ago, with 16 sales reported for the week.
The powder eased back a quarter-cent Monday but was up 2 1/4-cents Tuesday, hitting 83 3/4-cents per pound, highest level since May 30, 2018.
The EU commission sold 2,408 metric tons of powder out of its intervention program last week, a significant decrease from previous tenders.
Dry whey finished Friday at a new high of 42 1/2-cents per pound, up a half-cent on the week, with 3 sales at the CME.
The whey was unchanged Monday and Tuesday.
A slightly higher U.S. All Milk price average and lower feed prices pushed the June milk-feed price ratio up for the first time in six months. The Agriculture Department’s latest Ag Prices report shows the June ratio at 1.98, up from 1.90 in May but down from 2.31 in June 2017.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51 percent corn, 8 percent soybeans and 41 percent alfalfa hay. In other words, one pound of milk today purchases 1.98 pounds of dairy feed containing that blend.
The U.S. All-Milk price averaged $16.30 per hundredweight, up a dime from May but a dollar below June 2017. Michigan was on the bottom, with $14.80, unchanged from May; California was at $15.63, down 3 cents from May; and Wisconsin was at $16.50, down 20 cents from May.
June corn averaged $3.58 per bushel, down 9 cents from May but is 15 cents per bushel above June 2017. Soybeans averaged $9.55 per bushel, down 29 cents from May but 45 cents per bushel above a year ago. Alfalfa hay averaged $181 per ton, down $8 from May but $27 per ton above a year ago.
Looking at the cow side of the ledger, the June cull price for beef and dairy combined averaged $66.30 per cwt., up a dime from May, $10.20 below June 2017 and $5.30 below the 2011 base average of $71.60 per cwt.
July’s Federal order Class II, III and Class IV milk prices and California’s July Class 4a and 4b milk prices are to be announced by their respective agencies on Wednesday.