Tuesday, October 13, 2020

Cheese prices climb higher

 Cash block Cheddar cheese marched to $2.65 per pound last Tuesday but eased back Thursday, and closed Friday at $2.6475, up 3.75 cents on the week and 54.75 cents above a year ago.

The barrels closed at $2.0550, 10 cents higher on the week, after jumping 29.50 cents last week, 3.25 cents above a year ago. Seven cars of each traded hands last week at the CME.

The blocks jumped 4.50 cents Monday on an unfilled bid, and added 2.50 cents Tuesday on a trade to hit $2.7175, highest since July 15.

The barrels were up 5.50 cents Monday and gained 3 cents Tuesday, hitting $2.14, highest since July 31, but an unsustainable 57.75 cents below the blocks.

Midwest cheese demand reports were mostly positive last week, according to Dairy Market News. Customers are hesitant in light of current prices, but producers are confident customers will open the coffers soon, as supplies get low.

Western cheesemakers report lingering effects of selling forward into export markets last spring. Manufacturers are getting requests from buyers, looking for available cheese. Some are trying to fill commitments to government buying but “processors don’t have much wiggle room to supply extra loads of cheese.” Demand from export buyers has cooled due to the higher U.S. prices but that has not freed up cheese needed by all shoppers.

HighGround Dairy’s Oct. 5 "Morning Huddle" stated that its analysis of the government Food Box program shows that “Round Three purchases could absorb as much as 4-5% of U.S. milk production over a two-month period. The box includes 1 gallon of milk and 5 to 6 pounds of other dairy products, including cheese,” says HGD. “327,299 boxes have been invoiced in Round Three so far, but nearly 19 million have conditional approval.

“Longer term, bearish signals remain, but the timing is uncertain,” warned HGD. “Once government-induced food box buying is complete, cheese prices could move sharply lower. Stronger milk supply, questionable foodservice demand as outdoor dining becomes difficult in cold weather states, lack of consensus on a new stimulus bill to keep unemployed Americans spending money, and a large block plant in Michigan beginning production will converge to reduce prices.”

Spot butter fell to $1.3950 per pound last Thursday, lowest since May 12 and the lowest butter price in the world, but it finished Friday at $1.4125, down 9.75 cents on the week and 68.25 cents below a year ago; 38 cars found new homes last week.

The butter inched up a quarter-cent Monday and shot up 6 cents Tuesday, reaching $1.4750.

DMN says butter demand continues to edge up seasonally at retail. Food service demand has pushed higher week to week but is still below a year ago. Bulk butter demand is a little busier. Cream is less available but market tones remain “somewhat deflated,” says DMN.

Uneasiness in cities in the West, coupled with the effects of COVID continues to negatively impact dine-in restaurant sales and therefore butter demand. Fast food intakes are stable to trending up. Retail demand was unchanged from the previous week but, as the year-end holidays approach, manufacturers are reviewing their processing capacities and preparing for the hoped for seasonal demand increase.

Grade A nonfat dry milk closed Friday at $1.1250, up a quarter-cent on the week but 4 cents below a year ago, on 47 cars sold on the week, highest weekly total since mid-March.

The powder added a half-cent Monday and gained 0.75 cents Tuesday, shimmying up to $1.1375, highest since Sept. 30.

U.S. milk powder remains an attractive bargain for foreign buyers, according to the Daily Dairy Report’s Sarina Sharp. Writing in the Oct. 2 Milk Producers Council newsletter, Sharp says “the U.S. accounted for more than 10% of China’s skim milk powder imports in August, its third straight month with a relatively strong showing in a market that is often dominated by Oceania and Europe. Mexican buyers are stepping up purchases, too,” says Sharp.

Dry whey finished last week at 39.50 cents per pound, up a half-cent and 9.25 cents above a year ago, on three sales for the week at the CME.

The whey was unchanged Monday but backed down a quarter-cent Tuesday to 39.25 cents per pound.

More milk ahead

The Agriculture Department again raised its 2020 and 2021 milk production forecast from last month’s estimate in the latest World Agriculture Supply and Demand Estimates report. The department cited slightly higher cow numbers and a more rapid pace of growth in milk per cow for 2020 and raised the 2021 projection due to a larger dairy herd and higher milk per cow.

2020 production and marketings were estimated at 222.3 billion and 221.3 billion pounds, respectively, up 300 million pounds on both from their September estimate. If realized, 2020 production would be up 3.9 billion pounds or 1.8% from 2019.

2021 production and marketings were estimated at 225.5 billion and 224.5 billion pounds, respectively, up 100 million pounds on both. If realized, 2021 production would be up 3.2 billion pounds or 1.4% from 2020.

The Class III milk price forecast was raised, based on a higher cheese price forecast. The Class III is expected to average around $18.00 per hundredweight, up 75 cents from last month’s estimate and compares to $16.96 in 2019 and $14.61 in 2018. The 2021 average was projected at $17, up $1.00 from last month’s estimate.

The Class IV forecast was raised on a higher expected nonfat dry milk price more than offsetting a lower expected butter price. The Class IV will average around $13.50, up a dime from last month’s projection and compares to a $16.30 average in 2019 and $14.23 in 2018. The 2021 average was projected at $14.10, up 50 cents from a month ago.

Costs climbing

The annual Milk Cost of Production report, issued Oct. 1, showed total feed costs averaged $10.59 per cwt., up 63 cents or 6.3% from 2018. Purchased feed, at $7.20 per cwt., was up 44 cents or 6.5% from 2018. Total operating costs, including feed, bedding, marketing, fuel, electricity and repairs, averaged $13.92 per cwt., up 71 cents or 5.4% from 2018. Feed costs made up 76.1% of total costs in 2019, up from 75.4% in 2018.

Looking at present conditions, the Oct. 2 Dairy and Food Market Analyst reported that “Farm-level margins are holding up. Average revenue over feed cost totaled $10.97 per cwt. in the USA during August, up 92 cents per cwt. year over year,” but warned: “When average margins are above $8.00 per cwt. for six months or more, it has historically triggered expansions. Margins have exceeded that level since June after falling to a low of $5.59 per cwt in May. Keep in mind, these calculations do not include government payments, which have totaled an additional dollar per hundredweight or more this year.”

The DFMA added: “We are still hearing reports of cooperatives moving to make milk supply management programs permanent, particularly in the West.”

Regional differences remain dramatic, according to the DFMA. “Revenue-over-feed-cost in Arizona was the lowest in the country, at $8.14 per cwt. during August, according to our estimates. New Mexico was close behind at $8.18. In comparison, cheese-heavy South Dakota had the highest revenue-over-feed cost during August, estimated at $14.08, which was above Florida’s at $13.93.”

Referencing the COP report, the DFMA says “California was the lowest-cost-of-production state in 2019. Total operating costs, including feed, labor, and taxes hit $14.85 per cwt. Wisconsin was second at $15.26, and Ohio was third at $15.60. The highest-cost-of-production states in the report were Maine at $22.53; Vermont, at $21.05; and Illinois at $20.41,” according to the DFMA.




From: Capital Press

Wednesday Closing Dairy Market Update - Milk Production is Steadily Increasing

MILK Class III milk futures took a beating again today with the May contract falling to a new contract low. June and July contracts ...