Cash dairy prices came under pressure the last week of January as traders weighed the week’s Milk Production and Cold Storage data.
The Cheddar blocks finished Friday at $1.5750 per pound, down 3.50 cents on the week, third week in a row of decline and the lowest since May 12, 2020, 4.25 cents below where they were on Jan. 4, and 34.50 cents below a year ago.
The barrels rolled to a $1.39 per pound finish, down a quarter-cent on the week, 9.25 cents below their Jan. 4 perch, 11 cents below a year ago, and 18.50 cents below the blocks.
There was no block cheese sold last week at the CME but 62 cars for the month of January, down from 109 in December; 21 cars of barrel exchanged hands last week, 98 cars for the month, up from 90 in December.
The first day of trading in February took the blocks up 0.75 cents on 4 trades, first positive move in three weeks. They ticked up another 0.75 cents Tuesday, as traders weighed the morning’s Global Dairy Trade auction and anticipated Thursday’s December Dairy Products report.
Two cars of block were sold Tuesday at $1.59. The barrels were unchanged both Monday and Tuesday.
Midwest cheese sales vary by type, according to Dairy Market News. Contacts reported stronger Cheddar sales to retail outlets, while some mozzarella producers reported softer interest. East Coast-based customers are definitely “hit and miss,” with restricted access to restaurants and other food service entities.
Midwest cheese production remains busy and a few plants reported that demand is hearty enough to outdo production capacity, but concerns elsewhere are for growing inventories which are expected to grow even more. There is plenty of milk in the Midwest and spot milk prices remain discounted, says DMN, but cheesemakers did receive fewer offers of milk week to week.
Western cheese manufacturers are working hard to process the ample supply of milk and find markets in which to move the cheese. Cheese inventories are also heavy. Market price volatility is “creating significant challenges to forecasting cheese needs,” says DMN, “and market participants do not want to get on the wrong end of a swing.”
Retail demand is holding but losing a little steam from the pre-winter holiday season and mozzarella demand is starting to slow as the football playoffs draw to a close. Cheese demand from fast-food chains is strong but foodservice sales are still way down.
Cheese sellers are holding out hope that shuttered restaurants in parts of the U.S. may soon be able to re-open, or open more fully, says DMN.
Cash butter, after jumping 11.25 cents the previous week, fell to a Friday close of $1.2450 per pound, 15.75 cents lower on the week, 65.50 cents below a year ago, and 15 cents below its Jan. 1 price; 18 cars sold last week and 63 on the month, down from 129 in December.
Monday’s butter was down 3.5 cents, hitting $1.21 per pound, lowest CME price since May 5, but spurred on by Tuesday’s GDT, the butter jumped 8.25 cents to $1.2925, with 9 loads exchanging hands.
Cream remains plentiful in the Midwest, says DMN, with cream offers aplenty from local and Western sources, though some “trucking hiccups” had occurred in getting cream from the West. Retail butter sales are strong, better than expected, according to some, but “the elephant in the room remains to be foodservice sales, or a lack thereof,” says DMN.
Western butter output is at seasonal levels but milk supplies remain heavy so the resulting cream is keeping plants running at full capacity. Retail butter sales are flat, following a brisk two day order cycle, after the recent Food Box announcement. Butter manufacturers anticipate that once the new crop deadline passes, the market should see some renewed interest, though the Cold Storage data won’t likely help matters any.
Grade A nonfat dry milk saw some ups and downs but closed the last Friday of January at $1.1725 per pound, unchanged on the week, 2.50 cents above where it was on Jan. 4, but 6.75 cents below a year ago. There were 37 cars sold last week and 140 on the month, up from 57 in December.
The week started with a 2 cent drop for the powder and another 1.50 cent decline Tuesday, dipping to $1.1375 per pound, lowest since Dec. 29.
Spot dry whey saw its first slippage since Dec. 31 last Tuesday, dropping 4.25 cents, then rallied and closed the week and the month at 53.50 cents per pound, down a half-cent on the week, 7 cents above its Jan. 4 post, and 17 cents above a year ago. There were 7 sales on the week and 15 for the month, up from 11 in December.
Monday’s and Tuesday’s whey was unchanged.
Global up 1.8%
Global dairy prices remain firm. Tuesday’s Global Dairy Trade auction saw its weighted average rise for the sixth consecutive session, though the gain was smaller, at 1.8%. That’s down from the 4.8% rise on Jan. 19 and compares to a 3.9% gain on Jan. 5 and a 4.7% drop on Feb. 4, 2020.
Gains were led Tuesday by buttermilk powder, up 10.7%. It did not trade in the last event. Butter was next, up 6.2%, following a 4.6% rise last time, but anhydrous milkfat was only up 1.3%, after leading the gains Jan. 19 with a 17.2% jump.
Lactose was up 3.8%, followed by GDT Cheddar, up 2.3%, after slipping 0.3% last time. Whole milk powder was also up 2.3%, following a 2.2% uptick, but skim milk powder was down 1.5%, only loss on the day, after jumping 7% last time.
What a contrast to U.S prices, especially on butter. StoneX Group equated the GDT 80% butterfat butter price to $2.2249 per pound U.S., up 13 cents from the last event. CME butter closed Tuesday at a huge bargain of $1.2925.
GDT Cheddar cheese equated to $1.8950 per pound, up 4.3 cents, and compares to Tuesday’s CME block Cheddar at $1.59. GDT skim milk powder averaged $1.4506 per pound, down from $1.4709, a 2 cent drop, but whole milk powder averaged $1.5685, up from $1.5333. CME Grade A nonfat dry milk closed Tuesday at $1.1375.
Margins tighten
Tight margins are returning to U.S. dairy farms as falling milk prices and rising feed costs take their toll. The USDA’s latest Ag Prices report shows the Dec. milk feed ratio at 2.18, down from 2.58 in Nov. and the lowest since May 2020, and compares to 2.57 in Dec. 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 2.18 pounds of dairy feed of that blend in December.
The US All-Milk price averaged $18.50 per cwt., down $2.80 from November and $2.20 below the December 2019 average.
California’s All Milk price fell to $19.20, down $3.80 from November and 60 cents below a year ago. Wisconsin’s, at $18.10, was down $4.60 from Nov. and $3.30 below a year ago.
The national average corn price averaged $3.97 per bushel, up 18 cents per bushel from November, which followed an 18 cent rise the month before, and a 21 cent rise in October. It was priced 26 cents per bushel above December 2019.
Soybeans averaged $10.50 per bushel, up 20 cents from November, which followed a 67 cent rise from October. Soybeans are $1.80 per bushel above a year ago.
Alfalfa hay averaged $169 per ton, up $2.00 from October but $3.00 per ton below a year ago.
Looking at the cow side of the ledger, the December cull price for beef and dairy combined averaged $58.10 per cwt., down $1.20 from November, after dropping 70 cents in November from October, and is $1.20 below December 2019 and $13.50 below the 2011 base average of $71.60 per cwt.
Milk cow replacements averaged $1,360 per head in January, up $20.00 per head from October and $60 per head above January 2020. They averaged $1,350 per head in California, unchanged from October but $50 per head below a year ago. Wisconsin cows averaged $1,470 per head, up $50 from October and $210 per head above January 2020.
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