More weakness in dairy markets

Most cash dairy prices headed south last week. The Cheddar blocks gained 3 cents Monday but reversed and closed Friday at $1.61 per pound, down 4 cents on the week and 9 cents below a year ago. The barrels finished at $1.36, down three-quarters and 31 3/4-cents below a year ago.

The blocks were unchanged Monday while the barrels rolled 2 1/4-cents lower. Tuesday saw the blocks pick up a penny, hitting $1.62, as traders weighed the morning’s GDT and anticipated Friday afternoon’s September Milk Production report. The barrels inched back a half-cent, to $1.3325, widening the spread to 28 3/4-cents.

Specialty cheese making is nearing its peak ahead of the fall and winter holiday season, reports Dairy Market News. Pizza cheese sales are steady to higher, after some pizza cheese plant managers reported a slight demand lull in late September and early October. The exorbitant price spread “has contacts questioning how things will fall in order for prices to find their more typical alignment.”

Western cheese makers are busy. While bottling and other processed dairy goods are pulling milk away from the vat, many cheese facilities are still running at or near full schedules. Inventories are heavy, but not necessarily burdensome.

Cash butter also started last week jumping 3 cents but it was downhill from there, closing Friday at $2.25 per pound, 4 cents lower on the week and 12 1/2-cents below a year ago, with 25 carloads trading places, versus 50 the previous week.

Monday’s butter jumped 4 cents, then gave back 2 cents, slipping to $2.27.

Cream reports are indicative of continued tightnesss for butter makers as churns remain somewhat quiet. Milk volumes, and notably component levels, are lower than expected for early fall. Butter sales remain healthy.

The Western market is mainly steady. Some contacts say they are receiving a few inquiries from international buyers but haven’t sold much.

Grade A nonfat dry milk saw a Friday close at 86 3/4-cents per pound, up three quarters on the week and 9 1/2-cents above a year ago.

Monday’s powder inched up a half-cent and stayed there Tuesday at 87 1/4-cents per pound.

Dry whey closed Friday at 56 1/4-cents per pound, unchanged on the week.

The whey was steady Monday but ticked up three-quarters Tuesday to a new high 57 cents per pound.

GDT lower

Increases in milkfat limited the loss in Tuesday’s Global Dairy Trade auction (GDT), where the weighted average of products offered slipped 0.3 percent, following the 1.9 percent descent Oct. 2.

Gains were led by butter and anhydrous milkfat, same products that led the declines last time. Butter was up 2.4 percent, following a 5.9 percent plunge. Anhydrous milkfat was up 1.0 percent, after dipping 4.4 percent. Lactose was up 1.5 percent.

Declines were led by Cheddar, down 1.8 percent, after falling 1.2 percent in the last event. Rennet casein was down 1.7 percent and whole milk powder was off 0.9 percent. Skim milk powder was virtually unchanged.

FC Stone equates the GDT 80 percent butterfat butter price to $1.8204 per pound U.S. CME butter closed Tuesday at $2.27. GDT Cheddar cheese equated to $1.5440 per pound and compares to Tuesday’s CME block Cheddar at $1.62. GDT skim milk powder averaged 89.66 cents per pound and whole milk powder averaged $1.2378. CME Grade A nonfat dry milk closed Tuesday at 87 1/4-cents per pound.

Milk output up

The Agriculture Department raised its 2018 and 2019 milk production estimates in the latest World Agricultural Supply and Demand Estimates report, due to a more rapid pace of growth in milk per cow and increased cow numbers for 2019.

2018 production and marketings were projected at 218.1 and 217.1 billion pounds respectively, up 300 million pounds from last month’s estimates. If realized, 2018 production would be up 2.6 billion pounds or 1.2 percent from 2017.

2019 production and marketings were estimated at 221.4 and 220.4 billion pounds respectively, up 400 million pounds on both. If realized, 2019 production would be up 3.3 billion pounds or 1.5 percent from 2018.

Butter and whey price forecasts for 2018 and 2019 were raised from the previous month on expected demand strength, but cheese forecasts were lowered on continued large supplies. The NDM price was unchanged.

The Class III milk price forecast was lowered for 2018; but higher 2019 whey prices are expected to more than offset declines in cheese prices, and the Class III price forecast was raised.

Look for the 2018 average to range $14.85-$14.95 per cwt., down from the 2017 average of $16.17 and compares to $14.87 in 2016. The 2019 average was projected at $15.30-$16.20, up from the $15.20-$16.20 expected a month ago.

The Class IV milk price was raised for both years due to higher forecast butter prices. The 2018 average is put at $14.15-$14.35, up from the $14-$14.30 expected last month and compares to $15.16 in 2017 and $13.77 in 2016. The 2019 average was projected at $14.35-$15.35 and compares to $14.30-$15.40 a month ago.

No win

Jerry Dryer, analyst and editor of the Dairy and Food Market Analyst newsletter, stated in the Oct. 15 Dairy Radio Now broadcast that U.S. dairy farmers “probably lost some ground” in the new U.S., Mexico, Canada trade agreement (USMCA).

Dryer said Mexican tariffs on U.S. cheese, put there in retaliation to U.S. tariffs on steel and aluminum, means our cheese is priced 25 percent higher than it would otherwise be priced and those tariffs may remain there until sometime in 2020 when all three countries approve the USMCA.

That gives New Zealand and the EU a price advantage over the U.S., Dryer argued. The EU in fact negotiated a trade deal with Mexico last summer and, while it may be awhile before it becomes effective, it gives them some access and New Zealand is “pounding on doors there,” he said, because the Mexican market is “very lucrative and we aren’t going to have it to ourselves anymore.”

As to Canada’s Class 6 and 7 pricing scheme, the USMCA “does away with it,” Dryer said, “but when you read the fine print, it wasn’t done away with.” He says the Canadians have plenty of time to come up with “some wiggle room, maybe an alternative to Class 6 and 7, so that door didn’t get closed” and, when it comes to access to their market, Dryer said we have limited access to it and it will be several years before we get it and it only amounts to about 1 percent of our production.

August fluid down

August fluid milk sales continue to show a troubled side of the dairy industry. The latest data shows August sales at 3.95 billion pounds, down 1.8 percent from August 2017.

Conventional product sales totaled 3.7 billion pounds, down 2.0 percent from a year ago; organic products, at 222 million pounds, were up 2.1 percent and represented about 5.6 percent of total sales for the month.

Whole milk sales totaled 1.3 billion pounds, up 1.4 percent from a year ago, up 1.8 percent year to date, and made up 32.5 percent of total fluid sales in the month and 31.9 percent for the year so far. Skim milk sales, at 304 million pounds, were down 10.9 percent from August 2017, down 9.7 percent year to date, and made up just 8.0 percent of total milk sales for the year so far.

Total packaged fluid milk sales in the eight month period climbed to just under 31 billion pounds, down 2.1 percent from the same period a year ago.

Conventional products year to date totaled 29.3 billion pounds, down 2.2 percent; organic products, at 1.7 billion pounds, were up 0.5 percent. Organic represented about 5.6 percent of total fluid milk sales January through August.


From: Capital Press

Featured Posts