Virus feeds uneasiness in dairy markets
The last week of February was short on USDA reports that the dairy markets regularly feed on but there was no end to the reports on coronavirus.
The financial markets came roaring back Monday, despite the additional deaths from the virus reported in Washington state, but fell Tuesday, while the Federal Reserve Bank cut interest rates Tuesday morning by 50 basis points.
FC Stone says central banks around the world are also lowering or expected to lower rates to help stimulate economies in the face of COVID-19.
Cash block Cheddar finished February at $1.7225 per pound, down 4.5 cents on the week, third consecutive week of decline, the lowest CME price since June 4, 2019, but was 11.25 cents above a year ago and 19.75 cents below where it stood on Feb. 3.
The barrels held all week at $1.59, 18 cents above a year ago, 13.5 cents above their Feb. 3 perch, but a still too large 13.25 cents below the blocks.
Only 3 cars of block traded hands last week, 31 on the month of February, down from 43 in January. There were 4 cars of barrel that found new homes last week, 80 for the month, down from 94 in January.
The blocks jumped 4.5 cents Monday but eased back a half-cent Tuesday, to $1.7625, as traders absorbed the GDT and anticipated Wednesday’s January Dairy Products report.
The barrels inched back a half-cent Monday and lost 4.75 cents Tuesday, dipping to $1.5375, expanding the spread to 22.5 cents.
Dairy Market News says Central region cheese markets are “shaky,” even though the historically large price gap between the CME block and barrel price has slimmed down.
Cheese production in the region is steady to slower, despite spot milk prices being at seasonal lows. Cheese makers are hesitant to add production while others are running seven-day workweeks.
Cheese sales range slow to steady, but DMN warned, “Even though cheese production is being limited by plant managers, the availability of milk is still leading to growing and available cheese inventories.”
Western contacts say domestic cheese demand is strong and steady. Customers are picking up shipments on a regular basis, though export demand is a bit mixed. There is interest from buyers but the coronavirus is creating an uneasy feeling within global markets, according to DMN.
Cheese inventories are growing and American cheese stored in Pacific region warehouses grew 8% between Dec. 31 and Jan. 31. Cheese makers are receiving plenteous quantities of milk and cheese plants, already at full capacity, do not want to further stress their systems.
Spot butter saw a fourth week of meltdown, dipping to $1.6950 per pound last Thursday, lowest CME price since March, 2015, but it rallied 3 cents Friday to close at $1.7250, 3 cents lower on the week, 18 cents below its Feb. 3 price, and 56.25 cents below a year ago. Sixty-five loads traded places last week and a whopping 231 loads for the month, up from 82 in January.
Monday’s butter pole vaulted 10.5 cents and tacked on another 3 cents Tuesday, hitting $1.86 per pound.
The Daily Dairy Report’s Sarina Sharp stated in the Feb. 21 Milk Producers Council newsletter that “spot butter is likely to feel a lot less pressure once March arrives and traders are no longer allowed to sell ‘old crop’ butter produced before Dec. 1, 2019. Brokers are likely rushing to dump older butter in Chicago while they still can. Once those sales dry up, the butter market is likely to regain at least some of the ground it has lost. Still, cream is plentiful and cheap, and there is an abundance of fresh butter to be had.”
DMN says that “butter markets are in rare form for recent years, as they are bearish.”
Contacts have moved the goalposts from $2 per pound plus, to $1.80 plus, to the projected low of $1.60 plus.
Butter demand is meeting seasonal expectations but butter makers say spring demand preparations are keeping churns busy, while supplies should be in good shape.
Western cream supplies are also plentiful and some participants believe there’s enough cream to keep regional churns running close to full capacity. Butter sales are soft in the retail sector but bulk demand has picked up as end-users and other buyers take advantage of the lower prices to load up inventories for usage later in the year. Some ice cream makers plan to start seasonal production early to benefit from the cost-effective cream, according to DMN.
Grade A nonfat dry milk plunged to its lowest level since Sept. 16, 2019, closing Friday at $1.0650 per pound, 10.5 cents lower on the week, 23.25 cents below its peak five weeks ago, but still 8 cents above a year ago. Twenty-eight cars were sold through the CME last week, 105 for the month, up from 92 in January.
CME powder was up 4.5 cents Monday and gained 3 cents Tuesday, climbing to $1.14 per pound.
CME dry whey fell to 33.75 cents per pound last Thursday but closed Friday at 34 cents, down 3 cents on the week and 2 cents below a year ago. There were 3 sales on the week and 8 for the month, down from 153 in January.
The whey was down a half-cent Monday and stayed there Tuesday at 33.50 cents per pound.
GDT down 1.2%
Tuesday’s Global Dairy Trade auction saw its weighted average of products offered slip 1.2%, following the 2.9% drop on Feb. 18 and 4.7% plunge on Feb. 4. While the slippage wasn’t as much as some expected, it was still down. A year ago, the first GDT’s weighted average for March was up 3.3% and was the seventh consecutive session of gain.
Buttermilk powder led the declines Tuesday, down 4.8%, followed by GDT Cheddar, down 4.7%, after gaining 5.3% in the last event. Skim milk powder was down 3.2%, after a 2.6% drop, and anhydrous milkfat was down 1.7%, following a 5.5% dive. Whole milk powder rounded out the losses, off 0.5%, after a 2.6% drop last time.
Lactose was up 5.7%. Butter was up 1.0%, after a 3.9% decline, and rennet casein inched 0.5% higher.
FC Stone equated the GDT 80% butterfat butter price to $1.8282 per pound U.S., up 1.8 cents from the last event. CME butter closed Tuesday at $1.86. GDT Cheddar cheese equated to $1.9437 per pound, down 10.9 cents, and compares to Tuesday’s CME block Cheddar at a bargain $1.7675.
GDT skim milk powder averaged $1.2460 per pound and compares to $1.2882 last time. Whole milk powder averaged $1.3389, down from $1.3455. CME Grade A nonfat dry milk closed Friday at $1.14 per pound.
Milk ratio down
A lower All Milk price and higher feed prices pulled the January milk feed price ratio down — the second month in a row of decline. The USDA’s latest Ag Prices report put the ratio at 2.41, down from 2.55 in December but it compares to 2.06 in January 2019.
The U.S. All-Milk price averaged $19.60 per hundredweight, down $1.10 from December but is $3 above January 2019. California’s All Milk price was $19.40, down 40 cents from December but $3.15 above a year ago. Wisconsin’s, at $19.40, was down $1.90 from December but $3.20 above a year ago.
The national average corn price averaged $3.79 per bushel, up 8 cents per bushel from December and 23 cents per bushel above January 2019. Soybeans averaged $8.84 per bushel, up 14 cents from December and 20 cents per bushel above a year ago. Alfalfa hay averaged $171 per ton, down $4 from December and $8.00 per ton below a year ago.
The January cull price for beef and dairy combined averaged $61.40 per cwt., up $2.10 from December, $7.20 above January 2019, but is $10.20 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,300 per head for the quarter in January, down $10.00 per head from October, but $160 per head above January 2019. They averaged $1,400 per head in California, unchanged from October but $300 above a year ago. Wisconsin cows averaged $1,260 per head, down $10 from October but $140 above January 2019.
From: Capital Press