Cash dairy markets were mixed during the shortened Thanksgiving week.
Cheddar blocks closed last Wednesday at $1.68 per pound, up 3.50 cents on the week but 28.25 cents below a year ago.
The barrels finished at $1.4225, unchanged on the week but 82.50 cents below a year ago when they were priced 28.5 cents above the blocks. This year they were 25.75 cents below the blocks.
There were only 2 sales of block last week at the CME and 22 of barrel.
Traders took the blocks down 2 cents Monday and lopped off another 4 cents Tuesday, dropping to $1.62 per pound, as they absorbed the morning’s GDT and anticipated Thursday’s October Dairy Products report.
The barrels lost 0.75 cents Monday and 0.25 cents Tuesday, slipping to $1.4125, 20.75 cents below the blocks.
Midwest cheese producers continue to report COVID-19 related quarantines affecting staff, from production to the office, according to Dairy Market News.
Cheese output continues, with spot milk at “notably declining prices during the holiday week.” Cheese plant managers said they were receiving call after call from milk suppliers looking to find homes for milk during the holiday weekend.
Retail demand has picked up a little for some cheese producers, says DMN, but they say it’s more necessity-based purchasing, whereas most customers remain on the sidelines waiting to see how low prices go. “Cheese market tones continue to struggle to find their footing,” says DMN.
Western cheese markets also had a tone of uncertainty last week, according to DMN, as “block and barrel cash market prices have fallen to levels comparable to the other 2020 low watermarks in August and March.”
Some contacts believe this may prompt more buys, but others are wary and want to let the dust settle first. Demand within retail and pizza channels has remained solid, but food service demand is weak. Some market participants suggest buyers have their pipelines filled and are not looking to add to inventories. Cheese output is active with plenty of milk to contend with, says DMN.
Butter continued its meltdown, no thanks to last Monday’s October Cold Storage data, and fell to $1.31 per pound last Tuesday, lowest since May 8. But it rallied Wednesday, regaining a nickel, and closed at $1.36, up 1.50 cents on the week, but 63.75 cents below a year ago. A lot of butter found its way to Chicago in the three days, 73 loads to be exact and 44 on Wednesday alone.
The butter inched up 0.25 cents Monday, with 11 cars exchanging hands, then added 4.75 cents Tuesday on 9 trades, hitting $1.41, highest since Nov. 12.
Some butter plants allotted a day off for the Thanksgiving holiday while others were down through the weekend. Churning has been busy with plenty of cream at decreasing multiples.
Retail butter demand has been busy, says DMN, while foodservice demand “continues to struggle in these questionable times for restaurants, schools and the like.”
Western contacts expected lots of cream over the Thanksgiving weekend due to manufacturing facilities closing. DMN says, “As butter makers shift production to end-of-year holiday orders, the underlying focus is to manage surplus levels."
Grade A nonfat dry milk finished Wednesday at $1.0950 per pound, up a penny on the week, but 14.25 cents below a year ago, with 23 loads making their way to the CME.
Monday saw the powder up 1.50 cents and tack on 3.50 cents Tuesday, climbing to $1.1450, highest CME price since Feb. 21.
Dry whey ended at 43 cents per pound last week, down 0.75 cents on the week, but 7.75 cents above a year ago, with only 1 sale.
The whey was unchanged Monday but gained a penny Tuesday, hitting 44 cents per pound, highest since Jan. 22, 2019.
GDT up 4.3%
Market bulls got some fodder in December’s first Global Dairy Trade auction. The weighted average was up 4.3%, following the 1.8% rise on Nov. 17 and a 2.0% descent on Nov. 3.
All products showed strong gains, led by lactose, up 13.5%, after plunging 18.8% on Nov. 17. Whole milk powder was up 5%, after rising 1.8% last time, and skim milk powder was up 3.6%, following a 2.5% rise.
Butter was up 3.8%, after inching 0.4% higher, and anhydrous milkfat was up 2.6% following a 4.1% rise.
GDT Cheddar was up 2.4%, after dropping 3.5% last time, and buttermilk powder was up 1.3%.
StoneX Group equated the GDT 80% butterfat butter price to $1.7638 per pound U.S., up 6.5 cents from the last event. CME butter closed Tuesday at a bargain basement $1.41.
GDT Cheddar cheese equated to $1.6935 per pound, up 4.2 cents, and compares to Tuesday’s CME block Cheddar at $1.62.
GDT skim milk powder averaged $1.3103 per pound, up from $1.2696, and whole milk powder averaged $1.4435, up from $1.3774. CME Grade A nonfat dry milk closed Friday at $1.1450 per pound.
Dairy customers hurting
With Thanksgiving in the rear view mirror and Christmas and New Year in the windshield, the dairy industry wonders what is down the road for product prices and the resulting milk prices.
One of dairy’s biggest customers is the restaurant industry and foodservice, both of which were hit hard by the COVID pandemic. There have been encouraging improvements there since the outbreak. However, a second storm has returned, as COVID cases mount and government restrictions and lockdowns resume.
The Nov. 20 Dairy and Food Market Analyst reported that Census Bureau data showed restaurant sales were down 12% in October, which was better than the 14% decrease in September and 17% decline in August. Sales at limited-service establishments were also improving.
Speaking in the Nov. 30 "Dairy Radio Now" broadcast, DFMA editor and analyst Matt Gould said the pandemic put dairy demand on a roller-coaster. He reported that, prior to COVID, more than half of total cheese and butter consumption was attributed to restaurants, so shuttering them or limiting them has a disproportionate impact on dairy demand.
Blackbox Intelligence reports that comparable sales for the week ending Nov. 8 were the second worst experienced by the industry since late August, according to the DFMA, with fine dining and upscale casual restaurants experiencing the biggest sales drops. The company says “34 states saw their restaurant year–over–year comp sales worsen during the last 2 weeks.”
The hardest-hit states were Illinois, Maine, Michigan, Vermont, Colorado, Washington, Alaska, Wyoming, Massachusetts, Connecticut and New Hampshire.
When asked if increased retail sales might offset foodservice drops, Gould said retail sales have improved but they are not enough to offset the slowing in foodservice sales. Pizza outlets, quick-service and drive-thrus have done really well in this situation, he said, but the commodity that is most hurt by the pandemic is butter. Cheese is the least hurt, according to Gould.
The DFMA reported that the latest data show retail butter sales are up 17% and cheese is up 13%, but that won’t be enough. Plus, fluid milk sales are hurting, and were before COVID-19. School closures and virtual classroom settings have made things worse.
New York City’s public schools, the country’s largest school district, is closing its schools due to coronavirus, says the DFMA, and Education Week, which tracks U.S. schools, reports that the number of districts with full or partial closures has increased 43% in the last month.
While vaccines will soon be available, the questionable demand ahead from smaller holiday gatherings, and rising milk production spell "challenge." Export potential is also uncertain as foreign milk output is also climbing.
Milk-feed ratio up
A sharp jump in the U.S. All Milk price offset sharply higher corn and soybean prices to push the October milk-feed price ratio higher. The USDA’s latest Ag Prices report has the ratio at 2.50, up from 2.28 in September, and up from 2.42 in October 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 2.50 pounds of dairy feed of that blend in October.
The U.S. All-Milk price averaged $20.20 per hundredweight, up $2.30 from September and 20 cents above the October 2019 average.
California’s All Milk price jumped to $21.20, up $2.50 from September and $2.30 above a year ago.
Wisconsin’s, at $21.50, was up $3.80 from September and 80 cents above a year ago.
The national average corn price was $3.61 per bushel, up 21 cents per bushel from September but 24 cents per bushel below October 2019.
Soybeans averaged $9.63 per bushel, up 39 cents from September and $1.03 per bushel above a year ago.
Alfalfa hay averaged $171 per ton, unchanged from September but $6 per ton below a year ago.
Looking at the cow side of the ledger, the October cull price for beef and dairy combined averaged $60.00 per cwt., down $6.60 from September, 90 cents below October 2019 and $11.60 below the 2011 base average of $71.60 per cwt.
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