Dairy prices held firm the week before the election except on butter. The Cheddar blocks saw a Halloween finish at $2.7825 per pound, up a penny on the week, the fifth week of gain, highest since July 15, and 62.75 cents above a year ago.
The barrels set a record high Friday, closing at $2.53 per pound, up 7.50 cents on the week. That was the 7th consecutive week of gain, besting the Sept. 22, 2014 record by 4 cents, and 20.50 cents above a year ago.
They also narrowed the gap but were at a still too high 25.25 cents below the blocks. Only 2 cars of block exchanged hands last week at the CME and 6 of barrel
The blocks backed down a quarter-cent Monday, first decline since Oct. 8, and an uncovered offer dropped them 4.50 cents Tuesday, to $2.7350, as we all awaited the evening’s election results.
The barrels were unchanged Monday but slipped a half-cent Tuesday, to $2.5250, 21 cents below the blocks.
USDA announces October Federal order Class milk prices on Wednesday. The October Class III settled Monday at $21.59 per hundredweight, November at $23.80, and December at $20.11. Thursday is the September Dairy Products report.
Cheesemakers reported skittishness on the buyer side last week to Dairy Market News, as buyers don’t want to get caught on the wrong end of a potential market drop. Plant managers are running busy schedules but reports continue of employees quarantining due to COVID-19 outbreaks.
Spot milk trading was very slow and spot prices continued to hover around Class. Cheese market tones have steadied but, as mentioned, there are questions of when they will face downward pressure after having risen most of the early fall season.
Western cheese output remains strong with some plants continuing to run above design capacity. Retail demand is solid but foodservice demand is mixed. Quick service restaurant sales are at or above previous year levels but demand from sit-down restaurants and institutions is still struggling.
Cheese inventories in the West are lower but buyers can find the cheese needed, albeit it at a higher price. Government purchases are still a primary driving force. Some buyers are hesitant to take cheese above their contractual obligations as the higher prices have increased their costs and, as a result, increased the cost of their end products. Export sales have become more difficult with the current prices, says DMN.
Butter continued its meltdown, falling to $1.3825 per pound last Wednesday, lowest since May 12. It rallied 4.75 cents Thursday but slipped back Friday to close at $1.39, 4.50 cents lower on the week and 69 cents below a year ago; 29 sales were reported last week.
Traders took the butter up 2 cents Monday and added 1.50 cents Tuesday, climbing to $1.4250.
Lockdowns, due to increasing COVID cases, are feared in the U.S. France and Germany have announced new lockdowns and StoneX reports that Chicago shuttered restaurants and bars starting Oct. 29 for the next few weeks. In-dining restaurants use a lot of butter so those sales are now threatened and it’s very doubtful that retail sales will make up the difference.
DMN reports that cream remains widely available for Midwest butter producers who report competitive cream prices from both local and Western sources.
Butter demand is seasonally hearty. Grocers are stocking shelves and plant managers are working to keep up. But, like cheesemakers in the region, there are COVID related setbacks regarding working staff. Expectations are for strong ordering for the next two weeks but butter market tones remain soft. Contacts also expect upticks in export markets, with domestic butter prices becoming competitive globally.
DMN says there is chatter in the West that machine time is tight and is sidetracking butter production. Contacts were surprised by the drops in the CME butter price so there is uncertainty as to where prices will stabilize. Inventory drawdowns are occurring, which supports price, but some manufacturers note that pulls need to occur continuously. Production rates vary, but are generally higher as manufacturers look to fill seasonally increasing sales.
Restaurant and foodservice outlets would typically be experiencing increased traffic flows at this time of year but distributors are not quite sure how much to purchase for the remainder of the year. Cream for churning is readily available, with loads moving across regions but the butter market undertone is unsettled, according to DMN.
Grade A nonfat dry milk saw some ups and downs last week but closed Friday at $1.1075 per pound, up a penny on the week but three-quarter-cents below a year ago on 32 sales.
Spot powder lost 1.25 cents Monday and gave up 2.50 cents Tuesday, dipping to $1.07, lowest since mid-September.
Dry whey finished Friday at an impressive 40 cents per pound, up 1.50 cents on the week and a healthy 11.75 cents above a year ago. Only 1 sale was reported last week at the CME.
The whey gained a penny, both Monday and Tuesday this week, and hit 42 cents per pound, highest since Jan. 22, 2019.
GDT drops 2.0%
The first Global Dairy Trade auction of November reversed direction after three consecutive gains, and saw its weighted average drop 2.0% Tuesday. Powder and anhydrous milkfat were responsible. Sellers brought 78.1 million pounds of product to the auction block, up from 76.4 million on October 20.
Skim milk powder led the losses, falling 4.4%, after inching 0.2% lower on Oct. 20. Whole milk powder was down 2.0%, after inching up 0.3%. Anhydrous milkfat was down 2.6%, following a 0.5% slippage. Cheddar was off 0.8%, after gaining 3.0% last time.
Butter led the two gains, up 3.9%, after a 3.3% rise last time, and buttermilk powder was up 1.2%, after not trading in the last event.
StoneX Group equated the GDT 80% butterfat butter price to $1.6913 per pound U.S., up 6.4 cents from the last event. CME butter closed Tuesday at a bargain $1.4250. GDT Cheddar cheese equated to $1.7172 per pound, down 0.8 cents, and compares to Tuesday’s CME block Cheddar at $2.7350.
GDT skim milk powder averaged $1.2348 per pound, down from $1.2933, and whole milk powder averaged $1.3539, down from $1.3776.
CME Grade A nonfat dry milk closed Friday at $1.07 per pound.
Milk ratio still falling
The “recovery” is taking a while to get to the farm. Another drop in the U.S. All Milk price, plus sharply higher corn and soybean prices, pulled the September milk feed price ratio to the lowest level since May. The USDA’s latest Ag Prices report shows the ratio at 2.28, down from 2.50 in August, and down from 2.34 in September 2019.
The index is based on the current milk price in relationship to feed prices for a dairy ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. In other words, one pound of milk could purchase 2.28 pounds of dairy feed of that blend in September.
The US All-Milk price averaged $17.90 per hundredweight, down 90 cents from August and $1.40 below September 2019.
California’s All Milk price fell to $18.70, down $1.30 from August but 10 cents above a year ago.
Wisconsin’s, at $17.70, was down $1.70 from August and $2.20 below a year ago.
The national average corn price averaged $3.41 per bushel, up 29 cents per bushel from August but 39 cents per bushel below September 2019.
Soybeans averaged $9.24 per bushel, up 58 cents from August and were 89 cents per bushel above a year ago.
Alfalfa hay averaged $171 per ton, down $1 from August and $8 per ton below a year ago.
Looking at the cow side of the ledger; the September cull price for beef and dairy combined averaged $66.60 per cwt., down $4.10 from August, $1.00 above September 2019, but $5 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,340 per head in October, up $30 per head from July and $30 per head above October 2019. They averaged $1,350 per head in California, unchanged from July and $50 per head below a year ago.
Wisconsin cows averaged $1,420 per head, up $70 from July and $150 per head above October 2019.
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