The October Federal order Class III benchmark milk price vaulted $5.18, to $21.61 per hundredweight last week, the highest October price since 2014, with a little more to come, thanks in large part to Uncle Sam’s Farmers to Families Food Box program.
The November Class III futures contract settled Monday at $23.46 and December at $19.06, with January 2021 at $17.79
The 2020 Class III average moved to $17.89, up from $16.37 a year ago, and compares to $14.72 in 2018.
The October Class IV price is $13.47 per cwt., up 72 cents from September but $2.92 below a year ago.
The Class IV average stands at $13.52, down from $16.23 a year ago and $14.06 in 2018.
Cheese plummets
The loud crash you heard last week was Cheddar block cheese plunging 44 cents, to a Friday close of $2.3425 per pound, ending five consecutive weeks of gain, but still 32.75 cents above a year ago.
The barrels rolled from their record high of $2.53 per pound to a $2.3175 Friday close, down 21.25 cents on the week, ending seven weeks of gains, 1.25 cents below a year ago, but at a more typical 2.50 cents below the blocks.
There were only 2 cars of block traded last week at the CME and 14 of barrel.
The blocks lost a nickel Monday and stayed there Tuesday at $2.2925, lowest since Sept. 15.
The barrels plunged 10.75 cents Monday and held there Tuesday at $2.21, lowest since Oct. 16.
The big news this week was the media and some politicians pronouncing Joe Biden as the new president. The Trump campaign has filed numerous legal challenges to the vote totals and that may delay the final determination for several weeks. It took 37 days for the Bush-Gore race to be decided.
Perhaps the bigger news is that Pfizer has a viable COVID vaccine. Preliminary results showed over 90% prevention in the thousands of test volunteers. We will see, but the markets are liking it.
Meanwhile, Midwest cheese producers were seeking less milk and limiting production last week, according to Dairy Market News. Customers were buying hand-to-mouth and, with prices where they were, no one wanted to be holding extra stocks, expecting the prices to decline.
Western retail cheese demand has remained strong, but while government purchases and fast food outlets are moving good volumes, total foodservice is underperforming. Export sales have receded, due to the higher prices, and in some cases, manufacturers had to discount cheese to move it overseas. Parts of the nation face increasing COVID cases so marketers are concerned about further restrictions that could hamper recovery of the food service sector.
Spot butter climbed to $1.4375 per pound last Wednesday, but closed Friday at $1.43, up 4 cents on the week but 60.75 cents below a year ago, on 26 sales on the week.
Butter rallied Monday, gaining 3.25 cents, but petered out Tuesday and gave it all back, falling to Friday’s close.
Butter plant managers relay that cream availability is opening up from local and Western regions and that cream suppliers are setting Thanksgiving week deals. Butter makers say inventory is moving and churning remains busy. Retail demand has increased seasonally, but food service is doubtful to return to "normal" anytime soon. Market tones remain quiet and some believe they may remain somewhat mum into first quarter 2021.
The western butter supply is more than adequate and reflects a somewhat unstable market undertone. But, sources tell DMN, “the market is capable of seeing a domestic price surge, encouraged by strong retail demand that neutralizes the butter supply situation.” Stocks are in good shape and churning thrives at expected year-end holiday levels, plus customers are inquiring about first quarter 2021 purchases. Foodservice is fairly steady but below seasonal standards. Competitive U.S. butter in the global market “could potentially be the mechanism for a stronger domestic butter price,” says DMN.
Grade A nonfat dry milk finished the week 4.25 cents lower, closing at $1.0650 per pound, 14 cents below a year ago, with 13 cars finding new homes. Poor exports and a weak GDT were the likely culprits.
Monday’s powder inched a quarter-cent higher and then gained a penny Tuesday, hitting $1.0775.
Dry whey climbed to 42.25 cents per pound finish last week, highest since Jan. 22, 2019, and 14.75 cents above a year ago, with 3 sales reported on the week.
The whey was unchanged both Monday and Tuesday with unfilled bids left on the board.
More cheese
You’ll recall that September milk production totaled 18.0 billion pounds, up 2.3% from September 2019. The latest Dairy Products report shows where that milk went.
Total cheese output crept to 1.1 billion pounds, up 0.6% from August, but 1.1% above September 2019. Year to date total cheese output stands at 9.8 billion pounds, up 0.5% from a year ago.
Wisconsin produced 276.4 million pounds of the September total, up 0.7% from August but 1.4% below a year ago. California output, at 192.8 million pounds, was up 0.7% from August but 5.4% below a year ago. Idaho contributed 87.1 million pounds, up 7.0% from August and 4.1% above a year ago.
Italian type cheese totaled 462.8 million pounds, up 4.4% from August but 1.7% below a year ago. YTD Italian output is at 4.2 billion pounds, down 1.0%.
American type cheese totaled 432.5 million pounds, down 3.3% from August but 4.0% above a year ago. YTD American was at 3.97 billion pounds, up 1.8%.
Mozzarella output climbed to 365.8 million pounds, down 2.6% from a year ago, with YTD at 3.3 billion pounds, down 1.0% from 2019.
Cheddar, which is traded at the CME, fell to 306.1 million pounds, down 17.9 million pounds or 5.6% from August but was 22 million or a whopping 7.7% above September 2019. Year to date Cheddar is at 2.85 billion pounds, up 2.3%.
Churns produced 152.1 million pounds of butter, up 500,000 pounds or 0.3% from August, but was 7.8 million pounds or 5.4% above a year ago. YTD butter is at 1.6 billion pounds, up a hefty 6.5% from 2019.
Dry whey totaled 74.9 million pounds, down 4.9% from August and 17.3% below a year ago, with YTD at 730.6 million pounds, down 0.2%. Stocks totaled 74.9 million pounds, down 4.9% from August and 17.3% below a year ago.
Nonfat dry milk output fell to 124.3 million pounds, down 19.9 million pounds or 13.8% from August but 6.5 million or 5.5% above a year ago. YTD powder sits at 1.4 billion pounds, up 1.8% from 2019. Stocks fell to 233.2 million pounds, down 37.4 million or 13.8% from August, and 17.6 million or 7.0% below a year ago.
Skim milk powder output jumped to 72.5 million pounds, up 11.3 million pounds or 18.3% from August and 13.7 million pounds or 23.3% above a year ago. YTD skim milk powder is at 453.0 million pounds, up 10.6% from a year ago.
Production estimates up
The Agriculture Department raised its 2020 milk production forecast for the third consecutive month in this morning’s World Agricultural Supply and Demand Estimates report, citing stronger growth in milk per cow and higher expected dairy cow inventory. The 2021 estimate was also raised.
2020 production and marketings were estimated at 222.5 billion and 221.5 billion pounds, respectively, up 200 million pounds on both from their October estimate. If realized, 2020 production would be up 4.1 billion pounds or 1.9% from 2019.
2021 production and marketings were estimated at 225.9 billion and 224.9 billion pounds, respectively, up 400 million pounds on both. If realized, 2021 production would be up 3.4 billion pounds or 1.5% from 2020.
The 2020 Class III milk price forecast was raised on higher prices for cheese and whey. It is now projected to average $18.55 per cwt., up 55 cents from last month’s estimate, and compares to $16.96 in 2019. The 2021 average was projected at $17.25, up 25 cents from last month’s estimate.
The Class IV price forecast was unchanged from last month as the higher forecast nonfat dry milk price offsets the lower butter price. It remains at $13.50, down from $16.30 in 2019, and the 2021 Class IV average was put at $14.00, down a dime from last month’s projection.
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